Pomerantz LLP announces that a class action lawsuit has been filed against Dollar General Corporation (“Dollar General” or the “Company”) and certain of its officers. The class action, filed in United States District Court, Middle District of Tennessee, Nashville Division, is on behalf of a class consisting of investors who purchased or otherwise acquired Dollar General Securities, seeking to recover compensable damages caused by defendants’ violations of the Securities Exchange Act of 1934.
Dollar General is one of the largest discount retailers in the United States, with the main merchandise category being consumables, which includes packaged foods, perishables, and snacks. As a discount retailer, Dollar General’s core customers are low- and fixed-income households, a significant percentage of which qualify for the federal food stamp benefits program (formally known as the Supplemental Nutrition Assistance Program or “SNAP”). Beginning in 1996, SNAP benefits were limited to no more than 3 months out of any 26 month period for unemployed individuals who are not disabled or raising minor children. Many states waived this limitation in the aftermath of the 2008 financial crisis. Given the improving condition of the U.S. economy, at least 20 states were planning to re-implement the limitation in 2016, which would go into effect in April at the beginning of the second fiscal quarter of 2016.
The complaint alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) the announced limitations on SNAP benefits would have a material impact on the Company’s financial performance as 56 percent of Dollar General Stores are located in states that re-implemented time limitations on SNAP benefits in 2016, (ii) in turn, the impact of SNAP reductions would be disproportionate to the percentage of the Company’s overall sales comprised of SNAP payments; (iii) consequently, the Company’s financial statements were overstated; and (iv) as a result of the foregoing, Dollar General’s public statements were materially false and misleading at all relevant times.
On December 1, 2016, Dollar General filed a quarterly report on Form 10-Q with the SEC, announcing the Company’s financial and operating results for the quarter ended October 28, 2016 (the “Q3 2016 10-Q”). The results announced in the Q3 2016 10-Q fell far short of market expectations, including a reduction in same-store sales, even though the Company had previously predicted annual same-store sales growth of 2-4%, and most analysts expected a quarterly increase in same-store sales of nearly 1%. The Company attributed its poor quarterly performance in large part to reductions in SNAP benefits, and finally admitted the true impact that SNAP reductions were having on its sales, stating that the benefit reductions “affect about 56% of our store base in the states that have reduced or eliminated the SNAP benefits. And those states that have had the reduction or elimination, they are approximately 100-basis-point worse in comp. That gives you a real good idea of how impactful those SNAP benefits reductions have been.”
On this news, Dollar General’s share price fell $3.84, or 4.96%, to close at $73.48 December 1, 2016.