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  1. Home
  2. / Investing
  3. / Consumer Discretionary

Trump's Massive Proposed Budget Cuts Could Pummel a Sector Loved by the Poor

Budget cuts could often prove painful.
By BRIAN SOZZI May 23, 2017 | 07:56 AM EDT
Stocks quotes in this article: TSLA, GM, DLTR, DG, WMT, AAPL

Dollar stores such as Dollar Tree (DLTR) and Dollar General (DG) could get the shaft, should Trump's food stamp cuts get passed.

President Trump is proposing $193 billion worth of cuts to the food stamps program, known as the "supplemental nutrition assistance program", over the next decade in the budget he will deliver to lawmakers on Tuesday. That represents nearly 25% of the budget for the program, which supports 22.3 million low-income households, or about 45 million people. If the most recent cuts to food stamps were any indication, less money in the hands of low-income households could weigh on the dollar stores that often dominate where this population group lives.

Food stamp enrollment began to plunge last year, as several states ended benefits earlier than they were required under initiatives put in place by the Obama administration. 

With less money in their pockets, dollar store customers shifted their focus on buying low-margin food as opposed to purchases of less importance (which are often higher margin). To try and entice low-income shoppers, Dollar Tree started to offer more products priced at $1. As for Dollar General, it flat out lowered prices in key parts of the store to drum up business. Even then, Dollar General saw sales challenges persist. 

 

You don't suppose it's grass fed beef? �������� #merica #dollarstore #quality #finemeats #dealoftheday #getitwhileyoucan

A post shared by Orr Photography (@orrboborr) on May 22, 2017 at 11:48am PDT

"The cuts in SNAP benefits [food stamps] have affected 56% of our store base -- so we have started to lower prices as our consumers need us right now," Dollar General CEO Todd Vasos told analysts on a conference call late last year. Vasos added that Dollar General stores in states with the food stamp cuts saw their same-store sales in the third quarter lag the company average by 100 basis points.

Dollar General's Chief Financial Officer John Garratt said on that same call, "Clearly our consumers' budgets are being pinched, the SNAP reductions have taken a toll on their spending."
 
Wildcard: people moving off of food stamps find work, and then splurge once month at Walmart ( WMT) while maintaining their spending levels at the dollar stores. 

Read This Or Lose Out

The latest on the bombing in Manchester: TheStreet has a fine team of veteran journalists positioned in the U.K. that have been all over the news on the bombing in Manchester. Here is the latest on this heinous, appalling crime.  

President Trump says what most are thinking: Love him or hate him, President Trump has had a few good days touring the Middle East. He has signed lucrative deals and has avoided major gaffes in protocol with heads of state. Stock prices have bounced back since last week's vicious selloff, as a result. One could argue Trump scored a few more points on Tuesday by calling the U.K. bomber -- and others like him -- "evil loser" terrorists.  

Tara Palmeri, White House Correspondent at Politico, is a great follow on Twitter for all things Trump and politics.

per pool @POTUS: "Our society can have no tolerance for this continuation of bloodshed..This wicked ideology must be obliterated #manchester

— Tara Palmeri (@tarapalmeri) May 23, 2017

.@potus calls terrorists in #Manchester attack "losers" not monsters -- "because they would like that term"

— Tara Palmeri (@tarapalmeri) May 23, 2017

Elon is a tough critic of himself: Visionary leaders are often brutally hard on themselves. Case in point: Tesla (TSLA) founder and CEO Elon Musk. TheStreet reports why Musk called himself an "idiot" on Twitter Monday evening.

On the plus side, an all-wheel drive Model 3 could be in the works for 2018. As a sidebar, I drove my first-ever electric car last weekend (pictures below) in General Motors' (GM) new Chevy Bolt. If you have one of these cars, please send what you like/don't like to my email brian.sozzi@thestreet.com. Although cute, the Bolt wasn't exactly my cup of tea (disclosure: car nut). 

The Bolt is kind of cute.
The Bolt is kind of cute.

The Bolt's interior is friendly, but no frills.
The Bolt's interior is friendly, but no frills.

"The Juice" could soon be loose: O.J. Simpson, 70, could be released this year on parole after spending nearly a decade behind bars, reports USA Today. Simpson's parole hearing is scheduled for July and as no surprise, it will be live-streamed. If Simpson is granted parole, he could be a free man in October. 

Expect to see The Juice on with Matt Lauer by early November...

And in today's fun Apple news: Apple's (AAPL) market cap of about $803 billion is 38% larger than the real GDP of Chicago, which clocked in at $581 billion in 2016., points out MarketWatch. 

Listen, as TheStreet said months ago (see video from February below) Apple is going to be worth over a $1 trillion. If only I was still pitching stocks...

Apple is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AAPL? Learn more now.

-------------------

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TAGS: Investing | U.S. Equity | Consumer Discretionary | Consumer Staples | Markets | Consumer | Economy | E-Commerce | Stocks

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