CNN
After years of prolific growth, US dollar stores have hit a downturn.
Dollar Tree (DLTR) shares plunged 20% Wednesday after the company cut its outlook for the rest of the year, citing “immense pressures” on its low- and middle-income customer base. Dollar Tree also owns the long-struggling Family Dollar chain.
The stock slump came on the heels of Dollar General (DG) slashing its full-year forecast, sending shares to their worst day on record last week.
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Dollar General and Dollar Tree have been the fastest-growing retailers by new store openings in recent years, capitalizing on factors such as entrenched poverty in many areas of the country, a shrinking middle class and rival retailers’ store closures. Investors drove the companies’ stock up, assuming that dollar stores were protected from broader economic challenges because customers flock there to save money when times are tough.
But that theory is buckling.
While dollar stores once expanded to reach a growing number of financially strapped Americans, they underestimated just how financially strapped many Americans would become.
The companies have hit trouble as low-income customers struggle to afford basic necessities and dial back their spending, strategic mistakes haunt their business and competition from Walmart and other chains increases.
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