Bengaluru: Discount retailers Dollar Tree Inc and Dollar General Corp reported quarterly sales below estimates, hurt by a drop in food prices, growing competition and the impact on their low-income customer base from a reduction of food stamp coverage by several US states.

Shares of Dollar Tree, the biggest US discount chain operator, were down 7.5 per cent on Thursday, while those of Dollar General were down 12.6 per cent.

Some states changed in April the criteria for the Supplemental Nutrition Assistance Programme (SNAP), formerly known as food stamp programme, making thousands of households ineligible for benefits.

“Retail food deflation and a reduction in both SNAP participation rates and benefit levels, coupled with unseasonably mild spring weather, proved to be stronger-than-expected headwinds to our business,” Dollar General chief executive Todd Vasos said in a statement.

Though Dollar Tree said the impact from changes to food stamps was small, the company’s acquisition of larger rival Family Dollar last year has increased its exposure to the programme meant for lower-income people.

Dollar Tree, which traditionally caters to middle-income consumers, attributed the “challenging retail environment” to consumers being pressured by higher rent and health care costs.

Family Dollar President Gary Philbin said the division’s customers were still under pressure “Sure at Family Dollar food stamp penetration runs higher than Dollar Tree,” he said.

Retail giant Wal-Mart Stores Inc has been doubling down on competition by reducing prices on items such as food.

Wal-Mart reported better-than-expected sales last week and said sales were strong for grocery items.

However, Dollar Tree chief financial officer Kevin Wampler downplayed any impact from competition. “I can’t tell you (competition) is an issue anymore for us than it usually is.” A drop in grocery prices has been driving traffic to retailers as customers choose to cook more at home than eat out, but has pressured margins at these retailers.

Dollar Tree also cut its full-year sales forecast to $20.69 billion-$20.87 billion from $20.79 billion-$21.08 billion.

The company’s net sales rose 66 per cent to $5 billion in the second quarter ended July 30, helped by the Family Dollar deal, but missed the average analyst estimate of $5.09 billion, according to Thomson Reuters I/B/E/S.

Dollar Tree reported a net income of $170.2 million, or 72 cents per share, in the second quarter ended July 30, compared with a net loss a year earlier.

Dollar General’s net sales rose 5.8 per cent to $5.39 billion, but missed the average analyst estimate of $5.5 billion, according to Thomson Reuters I/B/E/S.