Shortly after 1pm ET, the shares of Dollar General and Dollar Tree tumbled after it was unveiled that President Donald Trump's budget was proposing to effectively abandon food stamps, slashing the program's traditional cash payments and substituting them with packages of "100% American grown food" for recipients. According to Bloomberg, this would represent "one of the biggest shakeups of the US food stamp program in its five decade history."
The reason why deep discount dollar chains were sold off on the news is because they are particularly vulnerable to changes in the food stamp program as they largely cater to less affluent shoppers:
according to Gordon Haskett Research Advisors, Dollar General and Dollar Tree have signaled that food stamps account for roughly 5 percent of sales. Shares of Dollar Tree fell as much as 3.7% to $103.68, while Dollar General was down 5% to $93.48, the declines wiping out gains by the two companies in 2018.
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