Growing SNAP participation has been a significant tailwind for dollar stores over the last 5-years – that is likely to change by year-end. For this and other factors, we've been growing incrementally more bearish on both DG and FDO.
Since 2007, Supplemental Nutritional Assistance Program (SNAP) - aka the federal Food Stamp Program participation rates have jumped 6pts to a 30-year peak at 15%. However, more notable is the slowing rate of participation growth. In fact, given the current rate of average sequential deceleration over the last 12-months of ~0.6%, SNAP participation growth will turn negative starting January 2013. Not good for the dollar store players (DG, FDO, DLTR) that are sitting at peak margins.