Did Dollar General Shoot Itself in the Foot?

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The Flash Crash breeds uncertainty.Not only have shares of Dollar General tumbled, but shares of Family Dollar Stores (NYSE:FDO) have also dropped, closing down 8.36 percent on Tuesday.

Shares of Dollar Tree (NASDAQ:DLTR) also fell as much as 4.4 percent in the afternoon.

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“I think the customer is fatigued, they’re tired, they’re scared,” said Dollar General chairman and CEO on a conference call. Reuters reports that the company is seeing a more prominent paycheck cycle, where it generates more sales immediately after shoppers receive paychecks, and slumps in between. This is an indication that economic headwinds are taxing consumers who are increasingly living paycheck-to-paycheck.

One of the core components of our CHEAT SHEET investing framework explains that companies riding macro trends tend to outperform those that don’t. In this case, discount retailers previously riding high because of the poor economy are now struggling against it.

The holiday season also isn’t entirely good news for the discount retailers. If consumers are strapped for cash, then they are more likely to blow their holiday budgets on the highly competitive discounts being offered on big-ticket items. The stock price seems to be readying itself for a less-than-spectacular end of the year.

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