Sales challenges resulting from reductions in federal food stamp benefits and product price deflation worsened during the third quarter, officials of Dollar General said Thursday, leading to quarterly sales, margins and earnings that were below expectations.
The Goodlettsville, Tenn.-based discounter said same-store sales in the period, which ended Oct. 28, decreased by 0.1% as store traffic decreased despite investments in lower prices that brought margins down. Net earnings of $235 million were down by 7.1% from the same period last year, while total sales increased by 5% to $5.3 billion, sparked mainly by new stores.
Sales and earnings per share fell below Wall Street expectations, and were in contrast to positive results over a similar period posted last week by rival Dollar Tree.
In a statement, Dollar General CEO Todd Vasos said the margin investments would take time to benefit same-store sales.
“In addition,” he added, “we saw an acceleration in headwinds from average unit retail price deflation and reductions in SNAP benefits in the 2016 third quarter as compared to the 2016 second quarter. We are focused on efforts to drive traffic in our stores and to control the factors we can control as we look to overcome the issues impacting our results, many of which we believe are macroeconomic and transitory in nature.”
As previously reported, improving economic conditions for lower-income shoppers has been a mixed blessing for retailers that serve that demographic. Figures from the USDA, which administers the federal Supplemental Nutritional Assistance Program (SNAP), indicate that both the number of participants in the program and the average monthly benefit afforded them have seen steady monthly declines since October of 2013 in response to improving overall conditions.
In addition, many states this year reinstated limits that had been extended for certain SNAP participants during the recession. That could result in as many as 1 million fewer SNAP recipients this year, according to the Center on Budget and Policy Priorities.
