Dollar stores getting crushed sends ominous signal about US economy: Consumers are 'tapped out,' expert warns

Dollar stores struggling signals bad news for the U.S. economy, RFD-TV's Scott Shellady warned on Tuesday.

"It's one of those things you just can't ignore as much as a lot of people would like to," Shellady told FOX Business' Stuart Varney as he floated the possibility of an upcoming recession.

"When you think about it, their target market is $30,000 to $45,000 earnings per year. Those people have basically stopped going or at least not spending what they used to spend. Even the CFO of Darden Restaurants, which is the Olive Garden, they've said that they've seen a decent amount of revenues, but it's from people that make over $200,000; their target market [is] between $70,000 and $80,000 a year. As far as what their customers are, they've dropped off the face of the earth."

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Stores like Dollar General, Family Dollar and Dollar Tree have taken hits lately, with the latter of the three struggling to meet expectations despite selling most discounted items at $1.25 apiece. 

Dollar Tree's shares tumbled last week after the company revised its annual outlook, with the change being attributed to pressure on its lower and middle income customers.

Dollar General Chief executive Todd Vasos commented on the company's financial troubles by highlighting lower-income customers, the core target, who "feel financially constrained." 

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Shellady similarly warned that the consumer is "tapped out." 

"They have no more money stored and that could lead to something bigger down the road," he said.

"I'm not trying to be a Debbie Downer or Chicken Little, [saying] 'The sky is falling; because there's going to be some opportunity for the markets when and if that does happen… but you can't ignore the fact that Mom and Pop on Main Street are really hurting. I think a lot of people do ignore that fact."

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