Economic policies sacrifice poor Americans

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The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Lauren Silva Laughlin

NEW YORK, June 2 (Reuters Breakingviews) -Dollar General DG.N, the ultra-low-cost retailer with 19,000 stores reaching 75% of the U.S. population, has never been a comfortable reflection of the American consumer. It’s getting even worse. The company’s share price took a nearly 20% dive on Thursday after it cut back its forecast for the year. Chief Executive Jeffery Owen blamed changes to food stamps, tax refunds, and higher prices. That underscores troubling consequences of current U.S. economic policy: the poor are being sacrificed.

Over the past two decades, dollar stores have upended how the cross section of the United States shops. In smaller towns, Dollar General and competitors including Dollar Tree DLTR.O offer cheap and accessible groceries. Walmart WMT.N aside, it often is the only place to shop.

These stores differ from the $400 billion superstore competitor in ways that reflect important aspects of the economy. Often people use dollar stores to buy single items– a roll of toilet paper or a bag of chips, say, rather than a bulk stack which is cheaper per unit but requires a larger payment upfront. If a person living paycheck-to-paycheck has even less cash, they’ll have to shop at a dollar store and be ever more discerning.

That has happened: carts are getting smaller. People are spending less because of cuts to a $95 supplement to the food stamp program and tax rebates for children, two pandemic-era supports which have been rolled back.Higher food prices, which the company pegs rose around 20%, are crimping wallets rapidly.

Not all retailers are posting the same result. Lululemon Athletica LULU.O shares surged on Friday morning after it raised its outlook for the year. Nordstrom JWN.N posted a surprise profit on Thursday, with the company noting that the high-end customer was “resilient." Shoppers snapped up Ralph Lauren’s RL.N pricy sweaters, giving it solid results last week. Those stores aren’t premium luxury, necessarily. But with pants that run close to $120 a pop, Lulu’s yoga-inspired items are certainly discretionary, and appeal to well-off consumers.

In the past week, U.S. Congress has continued to roll back policies that would help Americans with less to go around. On Thursday, the Senate voted down President Joe Biden’s proposal for student loan relief. Stipulations in the debt ceiling bill, now passed by both chambers, seek to make access to food stamps even harder. As poorer Americans struggle to find the extra $1, everyone else eats cake.

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On June 1, Dollar General cut its sales and profit forecast for the year, sending shares down as much as 20% in after-hours trading. The company expects fiscal 2023 same-store sales to rise between 1% and 2%, compared with its prior outlook of 3% to 3.5%.

Lululemon Athletica’s shares jumped 14% in early trading on June 2 after it lifted its full-year outlook. On May 31, retailer Nordstrom posted a surprise profit. The company’s CEO Erik Nordstrom remarked that the high-end customer was “resilient."

Graphic: Let them eat cake

Editing by Jennifer Saba and Sharon Lam


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