If Walmart is the bellweather corporation for the retail sector, then places like Dollar General and Dollar Tree are the bellweather for the consumer. And on Aug. 25 these two discount retailers showed their cards by lowering earnings estimates for the rest of the year, and are lowering prices on many staple products because they believe that ‘things are worse for the consumer due to hikes in rents and healthcare’.
If there was any confusion about how the lower half of the US consumer class is doing these days, it was quickly lifted following today’s distressing earnings calls of dollar store titans, Dollar General and Dollar Tree.
Discount retailer Dollar General said it was cutting prices on its most popular items such as bread, eggs and milk, intensifying a price war among already commoditized products with retail giant Wal-Mart Stores to win back falling market share. It shares fell the most on record, plunging by 18% after the company missed on revenue, blaming aggressive competition, lower food prices and reduction in SNAP, or food stamp, coverage in 20 key states.
Both Dollar General and Dollar Tree said pressures on their core lower-income shoppers contributed to the same-store sales misses that both retailers reported. On today’s conference call, Dollar General CEO Todd Vasos said that he was surprised to admit that while on the surface things are supposed to be getting better, the reality is vastly different for low-income US consumers:
I know that when we look at globally the overall U.S. population, it seems like things are getting better. But when you really start breaking it down and you look at that core consumer that we serve on the lower economic scale that’s out there, that demographic, things have not gotten any better for her, and arguably, they’re worse. And they’re worse, because rents are accelerating, healthcare is accelerating on her at a very, very rapid clip. – Zerohedge
As many people know, consumer spending equates to the bulk of the U.S.’s GDP makeup. And unfortunately the mainstream media, along with the Fed and the Obama administration, are prevaricating to the public that the consumer is strong and that the economy is good despite the fact that the bottom line GDP was just above recession levels for the first and second quarters, and that every real indicator is showing that consumer is pretty much tapped out from the rise in prices of necessities like housing, healthcare, and food.
It appears now that it is a race for the establishment to keep masking the truth from both the public and from Wall Street until the November elections where afterwards they can allow a true reporting of the state of the economy by releasing their vice-grip hold over information that already shows we are in a recession, and may have been in one for well over eight months. But the more that ground zero retailers like the Dollar stores continue to announce sales declines and report the true state of the consumer, the less power entities like the Fed and the media will have over individuals, and over controlling the markets through their rhetoric.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com,Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.