As June’s Pride Month festivities were nearing a conclusion, Tractor Supply released a statement that put LGBTQ+ rights proponents on alert.

The farm-focused retailer said it would stop sponsoring events such as pride celebrations and eliminate roles tied to diversity initiatives. Also on its list of actions: Tractor Supply would no longer submit data to the LGBTQ+ group Human Rights Campaign for its annual Corporate Equality Index.

With that move, Tractor Supply became the first domino to fall as companies began pulling out of the Corporate Equality Index. In the following months, businesses ranging from Ford to Lowe’s also announced they would stop submitting data for the index, a two-decade-old benchmark widely considered a gold standard for evaluating companies’ policies and benefits for LGBTQ+ employees.

The latest came on Nov. 25, when Walmart — the largest retailer and private employer in the U.S. — said it would stop sharing data with the HRC. Walmart said it had conversations with Robby Starbuck, the director-turned-conservative activist, ahead of its announcement.

Starbuck has been a public advocate for this shift, launching campaigns centered on companies he believes have run afoul with corporate diversity work. He told CNBC in an interview that he is ramping up these actions and would be homing in on retailers for the holiday season.

While Starbuck has targeted DEI initiatives more broadly, not just LGBTQ+ policies, the Human Rights Campaign has found its index at the center of a politically charged battle. The shift also pushed some allied groups and LGBTQ+-identifying consumers to speak out.

For Tractor Supply and some others, it marked a staunch turn in policy. Just two years ago, the retailer had boasted publicly that it earned a top rating from the HRC. On that same day in 2022, Molson Coors published a press release stating it had received a perfect score for the 19th straight year.

CNBC reached out to every company mentioned in this article; each company either did not provide further comment beyond public statements or did not respond to requests for details on what drove the changes.

“We’re very proud and honored to be recognized by the HRC with a 100 percent ranking for our LGBTQ workplace equality practices and policies,” Dave Osswald, chief people and diversity officer for Molson subsidiary MillerCoors, said in the 2022 release. “No matter the recognition though, we know we can never stop working to ensure a welcoming and inclusive environment.”

In the past two years, experts say, the rising concern around how the federal judiciary could rule on cases tied to diversity work has pushed companies to rethink related internal policies. Continued pressure from right-wing activists to do away with initiatives such as supplier quotas and carbon goals has turned up the heat, they said. 

The tide change among some of America’s most well-known brands on this index is the latest instance of white-collar diversity efforts becoming a political flashpoint. Multiple business professors told CNBC that it adds to a broader picture of corporate America backtracking on this work less than half a decade after the numerous promises made in the wake of George Floyd’s murder.

“These companies that are making these really public statements, like Lowe’s or Ford Motor companies of the world, are really making an unforced error,” said New York University Law professor Kenji Yoshino.

For several companies, withdrawal from participation in the index comes after years of involvement and previous promotion of their scores.

Take Jack Daniel’s parent Brown-Forman, which said in August that it would no longer submit data for the index — four months after being named in Forbes’ “2024 America’s Best Employers for Diversity” list.

The company mentioned that it earned a 100% score for 12 straight years in its 2023 annual report. Brown-Forman also created in 2022 an initiative aimed at increasing the number of salaried employees in the U.S. who identify as LGBTQ+.

Ford, meanwhile, said in a leaked internal memo to employees in August that it would stop participating in the index and other best workplace rankings. Ford published a press release in 2017 centered on its perfect rating, and touted it was the first automaker to receive a 100% score — an achievement the Detroit-based company maintained every year since 2004.

“Ford remains committed to supporting diversity and inclusion because we believe it makes our company stronger,” Meeta Huggins, Ford’s then-chief diversity officer, said in the 2017 statement.

Lowe’s, too, said in August that it would end participation in the index’s survey, along with sponsorships for community events such as parades and fairs. Three years ago, the home improvement retailer posted on its LinkedIn page that it earned a 100% score for the second straight year.

“Lowe’s dedication to diversity and inclusion grows from the steadfast values of our associates and extends to every corner of our company,” the company said in the post.

Walmart leadership also once applauded its place atop the HRC’s ranking. Human resources chief Donna Morris posted on X in 2022 that she was “proud” of the Arkansas-based company for its recognition as a top workplace for the sixth straight year.

Harley-Davidson and Toyota are also on the growing list of companies declining to provide data for the ranking system going forward.

The HRC’s index, which launched in 2002, rates companies on factors such as the equitability of their benefits and their corporate social responsibility efforts. In addition to a survey sent to companies, the HRC also reviews tax filings, legal cases and news reports when evaluating firms.

Business and law experts don’t point to one silver bullet that catalyzed this change in sentiment. Instead, they see both rising political pressure and legal concerns at play.

First, right-wing pressure online has become increasingly hard to ignore, said Stephanie Creary, an assistant professor at the University of Pennsylvania’s Wharton School. Public shaming of companies for their diversity practices was happening long before Starbuck began pressing the issue, Creary said.

“This has become politicized,” Creary said. “It was not a tool, either way, that was leveraged by people running for office in quite the way that it is now.”

Creary said the internet gives people who don’t support LGBTQ+ rights easy access through the index to businesses that they may want to protest against. This backlash has turned what was once seen as a “reputation enhancer” into something that a handful of companies no longer view as worth touching, she said.

NYU’s Yoshino said recent legal rulings and cases have already put companies, universities and other organizations on edge.

Yoshino pointed specifically to the Supreme Court’s ruling on affirmative action in June 2023, which ruled that policies at Harvard University and the University of North Carolina that gave weight to a would-be student’s race are unconstitutional. The court’s majority opinion said the schools’ affirmative action programs “unavoidably employ race in a negative manner, involve racial stereotyping, and lack meaningful end points.”

“The Supreme Court gave us such a clear window into how it was thinking about race and discrimination in that case,” Yoshino said. “It’s only a matter of time before that way of thinking will trickle over into statutes that do affect the private sector.”

However, he said, “There’s no universe in which giving your data with regard to the number of LGBT people within your ranks, or your support for LGBT rights, or your inclusion of LGBT individuals is going to run afoul of the law.”

Ultimately, this plays into a bigger trend of companies backtracking on diversity promises made after Floyd’s murder by a police officer galvanized racial equity efforts in 2020, said Adina Sterling, an associate professor at Columbia Business School.

When companies pull out of the index or walk back other diversity efforts, it suggests that they were never genuinely interested in the work to begin with, Sterling said. Rather, many corporations were only trying to win goodwill in a moment when diversity was considered a favorable topic in corporate America, she said.

“It’s almost like a rubber band: Organizations frequently will snap back into the state that they were in previously,” Sterling said. “I wish it weren’t that way, and I don’t think it has to be that way.”

While some companies have tried to frame their statements as unrelated to Starbuck’s activism, he told CNBC there are typically conversations between him and executives after he begins researching their businesses.

Companies have responded to Starbuck’s campaigns and general pressure around corporate diversity programs in different ways. Some, including Tractor Supply and Harley-Davidson, released public statements. Ford, on the other hand, sent an internal memo to employees that was obtained and shared online by Starbuck. Several companies have pointed out that they were already in the process of rejiggering their diversity efforts before Starbuck began applying public pressure.

Starbuck started with an emphasis on companies, such as Tractor Supply, that have mainly conservative-leaning customers, but he is broadening his focus. He also hopes to hire more researchers to investigate employee claims. Starbuck said his team initially “stopped counting” after receiving 5,000 complaints from whistleblowers within companies who believe their employers have gone too far on diversity efforts.

Starbuck said he felt inclined to do this work because he believes certain corporate diversity policies have become “blatantly illegal and violates our existing civil rights laws.” Starbuck said he doesn’t argue against the validity of laws ensuring equal protection of employees from marginalized backgrounds, but he said some companies’ current initiatives have created instances of what he sees as discrimination against white people.

“If you’re a public company and you’re expected to serve everybody, you’ve got to fundamentally operate differently,” Starbuck said in an interview. “I think we’ve just veered far off course.”

Starbuck said he sees the incoming Trump administration doing “a lot of good” on this front.

The HRC and other groups are fighting back against what they see as a public disregard for LGBTQ+ issues. The group has pointed repeatedly to data showing consumers were more likely to support businesses that affirmed this community. Four out of five LGBTQ+ consumers, the group said, are opting to boycott companies that are rolling back initiatives. More than half will urge others to do so also.

It’s a group that makes a sizable contribution to the American economy. Data from LGBT Capital clocked purchasing power from the community in the U.S. at $1.4 trillion annually. That’s roughly equivalent to the entire gross domestic products of Mexico and Spain, according to Worldometer.

“Consumers are two times more likely to want to buy from brands that support the community,” HRC President Kelley Robinson told CNBC in an on-air interview. “This is, bottom line, the best thing to do for businesses, and that’s why I think that we’re seeing so much energy from employees, from consumers and from shareholders starting to push back on these decisions.”

Robinson told CNBC that companies withdrawing their participation would have their scores slashed as a result. Prior to Walmart’s announcement, each company saw a 25-point deduction on their scores, out of 100. The HRC confirmed to CNBC that Walmart’s score is currently under review.

She also emphasized that corporations can be rated regardless of whether they submit data. Additionally, the HRC has been quick to point out that overall participation in the index is rising. The HRC was joined by several other civil rights groups on a co-written letter to Fortune 1,000 companies calling on them to recommit to diversity, equity and inclusion, or DEI, efforts.

“These capitulations weaken businesses and the American economy more broadly,” said the letter from HRC and more than a dozen organizations, including the NAACP and UnidosUS. “These shortsighted decisions make our workplaces less safe and less inclusive for hard-working Americans.”

Several dozen Democrats in Congress also wrote a letter to Fortune 1,000 businesses asking them to embrace DEI. This letter did not explicitly name the HRC index, but an accompanying press release clarified that it was written in response to companies “succumbing to a conservative media campaign.”

Starbuck, on the other hand, said his work has made “companies acutely aware that the HRC is not the powerful influencer that they believed they were.” He said in a post on X that the changes at Walmart specifically were his “biggest win yet” and should send “shockwaves throughout corporate America.” Starbuck also recently shared a meme of a grim reaper walking up to doors with the names of companies deemed “woke” on them.

Still, some smaller organizations and individuals have thrown their support to the HRC. After Tractor Supply’s June announcement, the Tennessee Pride Chamber removed the company as a member. Tractor Supply was nominated for the organization’s corporate partner of the year award in 2024 and had been slated to sponsor a networking event for the group the following month.

“These are not partisan issues, but a matter of human rights and sustainable business practice,” the Tennessee Pride Chamber said in a press release.

Tennessee Pride had just a few hours’ notice from a contact within Tractor Supply that the company’s statement was coming, according to executive director Stephanie Mahnke. She said she had previously been made aware by Tractor Supply representatives that there were some safety concerns tied to the event they were hosting, so they were preparing to enhance security.

“We were completely caught off guard,” Mahnke said.

After, Mahnke said other companies quickly stepped up to fill the void left by Tractor Supply in running the July event. In conversations, Tennessee Pride members still appear committed to the organization and its values — with the caveat they are being quieter around DEI issues, given the environment, she said.

For former Tractor Supply customer Ashe Taylor-Austin, the retailer’s announcement pushed them to look elsewhere when purchasing supplies for their horse. Taylor-Austin said they were grateful to have alternatives, knowing LGBTQ+ shoppers in more rural areas likely wouldn’t. 

“When we got the news about Tractor Supply, I immediately started shopping around,” said Taylor-Austin, who switched to buying from a small business. “Once you do that and you show, I guess, who you are, then I believe it.”

Tesla CEO Elon Musk lost his bid to get his 2018 CEO pay package reinstated on Monday when a Delaware judge upheld her prior ruling that the compensation plan was improperly granted.

The package, worth about $56 billion, was the largest compensation plan in U.S. history for a public company executive. Tesla said in a post on X, that it plans to appeal the ruling, which Musk, in a separate post on his social media site, called “absolute corruption.”

In January, Chancellor Kathaleen McCormick voided the pay plan, ruling that Musk had individually “controlled Tesla” and dictated the terms of his compensation to a board that didn’t fairly negotiate. She called the process leading to approval of that pay plan “deeply flawed.”

Following the opinion, Tesla conducted a shareholder vote in June 2024 at its annual meeting in Austin, Texas, asking investors to “ratify” Musk’s 2018 CEO pay plan. Musk’s attorneys attempted to sway the judge to reverse her opinion after the trial, leaning on the results of that vote.

McCormick wrote in her opinion on Monday that, “Even if a stockholder vote could have a ratifying effect, it could not do so here.” She added that, “Were the court to condone the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable.” 

As part of Monday’s opinion, McCormick approved a $345 million attorney fee award for the lawyers who successfully sued on behalf of Tesla shareholders in order to void Musk’s pay plan.

“We are pleased with Chancellor McCormick’s ruling, which declined Tesla’s invitation to inject continued uncertainty into Court proceedings and thank the Chancellor and her staff for their extraordinary hard work in overseeing this complex case,” attorneys from Bernstein, Litowitz, Berger & Grossmann, the firm representing the plaintiff, said in a statement.

Following the January decision, Musk had lashed out at the Delaware court posting on X, “Never incorporate your company in the state of Delaware.” Tesla then held a shareholder vote to reincorporate in Texas, and officially shifted its state of incorporation there.

Musk has also moved the state of incorporation for his defense contractor company SpaceX to Texas from Delaware.

Despite the legal setback, Musk has seen his net worth jump considerably in recent weeks. Excluding all of the options wrapped up in the pay package, Musk is more than $43 billion richer since Donald Trump’s election victory last month. Tesla shares have soared 42% in the four weeks since the election on optimism that Musk’s coziness with the incoming president will lead to policies favorable to his companies.  

The Tesla stock Musk still holds is worth close to $150 billion based on Monday’s closing price. That alone, not including his SpaceX stake, would put him among the world’s wealthiest people. Equilar estimates that at today’s stock price Musk’s 2018 package would have risen to be worth $101.4 billion.

Art Cashin, UBS’ director of floor operations at the New York Stock Exchange and a man The Washington Post called “Wall Street’s version of Walter Cronkite,” has died. He was 83 and had been a regular on CNBC for more than 25 years.

In the intensely competitive and often vicious world of stock market commentary, Cashin was that rarest of creatures: a man respected by all, bulls and bears, liberals and conservatives alike. He seemed to have almost no enemies.

He was a great drinker and raconteur, a teller of stories.

For decades, he assembled a group of like-minded friends every day after trading halted, first at the bar at the NYSE luncheon club, then across the street at Bobby Van’s Steakhouse, where the group came to be known as the “Friends of Fermentation.” His drink was Dewar’s, always on the rocks.

Cashin’s success was attributable to a combination of charm, wit, intelligence, and a stubborn insistence on refusing to adopt many of the conveniences of the modern world. He was a link to an NYSE tradition. Every year, on Christmas Eve and New Year’s Eve, he led the singing of the 1905 song “Wait ’Till the Sun Shines, Nellie.”

Cashin refused to use credit cards and paid for everything, particularly his voluminous bar bills, with cash, saying he cherished his anonymity. He never learned to use a computer–his notes were hand-written and then sent to his assistant. For years, he used an obsolete flip phone that he rarely answered.

His desk was piled high with papers he had accumulated over the decades. At times, it resembled a recycling facility.

Cashin’s suits were usually rumpled and his ties were always obsolete.

However, neither his appearance nor his attitude was haphazard. It was part of a persona that was carefully constructed over more than 50 years on Wall Street.

Arthur D. Cashin Jr. was born in Jersey City, New Jersey, in 1941. His parents were superintendents of an apartment building. His business career began in 1959 at Thomson McKinnon, a brokerage firm, when he was 17 and still in high school. Cashin had been obliged to join the workforce when his father died unexpectedly that year.

In 1964, at age 23, he became a member of the NYSE and a partner of P.R. Herzig & Co.

At that time, the vast majority of all trading took place on the NYSE floor. Cashin’s early memories revolve around the noise of thousands of brokers shouting at each other. He claimed to be able to tell if the market was moving up or down by the pitch of the screaming, because sellers sounded panicky. “And so if the pitch of the noise was high, I would know the sellers were headed my way. Or if it was a rumble, I would know that it was probably buyers coming,” he said in a 2018 interview.

In the mid-1970s, disgusted by the corruption in his hometown of Jersey City, Cashin ran for mayor. “I think I ran 12th in a field of five,” he said. “But once they discovered I was honest, there wasn’t much chance I was going to get elected.”

He returned to Wall Street. In 1980, he joined PaineWebber and managed its floor operation, continuing to do so after PaineWebber was bought by UBS in 2000.

Then came 2001.

Cashin would often recall what it was like to escape from Ground Zero on Sept. 11, 2001, after terrorists crashed two jetliners into the World Trade Center towers, killing more than 2,600 people in the heart of the nation’s financial center.

“Many of us got out that Tuesday walking through streets onto which ash, smoke and business envelopes fell snow-like, blocking both your view and your breathing,” he wrote in a commentary 13 days later. “Yet when a stranger was met, they were invited to join the convoy and offered a spare wet cloth (carried in pockets) through which to breathe as they walked. When we reached the East River (Brooklyn side of Manhattan), there was a volunteer group of tugboats, fishing boats and mini-ferries that looked like the evacuation of Dunkirk. No charge. No money. Just — “May I help you!” No one got anyone’s name. No thank you cards will be sent. But Americans — even New York Americans — who freely give to strangers but argue with neighbors were suddenly one group. In the days since, as we wander via new strange ways back to Wall Street, we all internalize the survivor’s quandary. We are lucky to be alive — but why us.”

After the Sept. 11 attacks, Cashin chaired the NYSE “Fallen Heroes Fund,” which provided millions of dollars to the families of first responders killed in the line of duty.

Though he was a respected market historian, he was most renowned as a storyteller for the stock market. He was a meticulous observer of fundamental and technical trading patterns but never let data get in the way of explaining the market in a folksy manner that made it accessible to even casual observers. He often spoke of Wall Street as a community of people with many different opinions. In his world, the bulls and bears would fight it out every day, as if it were all a John Wayne Western: “The bulls are circling the wagons, trying to defend the highs” was a common refrain.

His daily market commentary, Cashin’s Comments, was distributed to clients continuously for more than 40 years and was widely read on Wall Street. It invariably began with an analysis of an important event that occurred on that date (“On this date in 1918, the worldwide flu epidemic went into high gear in the U.S.”), and after a brief history lesson tied that event to the day’s market events (“Pre-opening Wednesday morning, U.S. stock futures looked like they might be coming down with the flu. Several earnings reports were less than glowing and some of the outlooks were cloudy”).

He was a keen observer of human behavior, a behavioral psychologist long before the word was coined. He had seen his fellow humans panic time after time, and had seen the effects of succumbing to the initial desire to sell immediately without thinking. “It tells me that people have a tendency to overreact — and to not think things through carefully,” he said. “And you break up, again, into two sets of people, those who look with some suspicion at events, and others who say, ‘Oh, I’ve got to react to that.’ Those who react immediately rarely do well. Those who are somewhat suspect, they do much better.”

He had two great loves in his life: his family and the New York Stock Exchange. In the age of computerized trading, the fabled NYSE trading floor still survives, though in greatly diminished form. When it was closed during the Covid pandemic, he said he was “disappointed … but it was understandable.” 

Cashin was philosophical when asked about the rise of electronic trading, which has slowly but surely eroded the influence of that floor. “I miss those magnificent days when your spirit hung on the fact that you were good for your word or you’re outta here,” he once said at Bobby Van’s, but admitted that electronic trading had improved the speed and accuracy of trading, particularly recordkeeping.

Among his many friends, he will perhaps be best remembered for his modesty. He seemed genuinely puzzled about his popularity. “People have an interest in — in Arthur Cashin. I can’t fully understand why,” he said.

And when The Washington Post ran a long profile of his career in 2019, calling him Wall Street’s version of CBS newsman Cronkite, he quipped: “I think I owe an apology to Walter Cronkite.”

In lieu of flowers, the family kindly requests donations be made to the Arthur D. Cashin Jr. Memorial Scholarship at Xavier High School. Contributions may be sent to Xavier High School, 30 West 16th Street, New York, NY 10011.

— CNBC’s Martin Steinberg contributed to this report.

As shoppers look for value, dollar stores might seem to be logical destinations. But that penny-pinching mentality hasn’t been enough to lift sales for Dollar Tree and Dollar General.

Shares of the deep discounters have plunged so far in 2024. The retailers have each cut their full-year forecasts because of weaker-than-expected sales. And both have had leadership shakeups: Dollar General and its former CEO Jeff Owens parted ways in October 2023, and Dollar Tree CEO Rick Dreiling stepped down Nov. 4. Dollar Tree is also exploring selling off Family Dollar, its more grocery-focused brand.

Those results are a sharp turnabout for the dollar stores, which were once Wall Street darlings. The struggles have put scrutiny on the two retailers, which will report quarterly earnings this week.

Peter Keith, a retail analyst for Piper Sandler, said a challenging mix of factors hurt the retailers. Lower-income customers, who tend to shop at the chains, are most vulnerable to economic changes such as inflation. Razor-thin operating models, such as lean staffing and low hourly pay, contributed to sloppy aisles and a poor customer experience, he said. And competition grew fiercer, as legacy retailers such as Walmart made significant investments in e-commerce to keep up with consumers’ changing habits during the pandemic, he said.

“Dollar stores inherently are sort of convenient because they have a lot of locations, but they don’t have very strong digital offerings,” he said. “And I think that’s become a disadvantage in the current environment.”

Shares of Dollar Tree and Dollar General have both fallen more than 40% this year, while the S&P 500 has gained more than 26% during the same period.

For decades, dollar stores have drawn in shoppers by offering a wide array of items at simple prices and smaller sizes that fit a constrained household budget. Yet each of the dollar store banners has a different spin on strategy and assortment.

Dollar Tree is made up of two store brands, its namesake and Family Dollar. Dollar Tree sells a lot of seasonal and discretionary items, such as party supplies and toys, at stores in suburban strip malls.

Family Dollar, which Dollar Tree acquired in 2015 for nearly $9 billion, is found in more urban areas and sells more food and household staples. Family Dollar has been the weaker part of Dollar Tree. The company plans to close about 1,000 Family Dollar stores and is exploring a potential sale of the business.

Dollar General focuses primarily on rural customers. It historically sought out small towns or residential areas where shoppers otherwise had to drive a long distance to get to a grocery store or a Walmart. In recent years, it’s debuted a new store concept, Popshelf, which sells more discretionary merchandise aimed at middle- and upper-income shoppers, such as makeup, candles and throw pillows.

Though they deployed different strategies, both chains relied on store openings to fuel sales growth. The two retailers are the largest in the U.S. by store count. Dollar Tree has more than 16,000 stores, while Dollar General has nearly 20,000 locations across the U.S. Between the two brands, there is more than one dollar store for every 10,000 people in the U.S.

They have many more stores than their rivals: Walmart has roughly 4,600 stores, and Target has nearly 2,000 locations across the country.

Yet high inflation has tested their business models. About 60% of Dollar General’s overall sales come from households with an annual income of less than $30,000 per year, CEO Todd Vasos said at Goldman Sachs’ retail conference in September.

Those frequent customers tend to feel the pinch first during challenging economic times.

Vasos said in September that Dollar General saw “a pretty drastic slowdown” in the middle of the three-month period that ended Aug. 2. He said the drop-off “happened across every region, every division that we had, almost the same amount” — including its newest stores.

And the past two years of high inflation have played out differently than in the Great Recession, Piper Sandler’s Keith said. During the roughly 2007-to-2009 period, middle- and upper-income households started shopping more at the dollar stores to stretch their budgets further.

This time around, unemployment has remained low, and other value-focused retailers, including Walmart, have attracted those middle- and upper-income shoppers, Keith said.

In the most recent fiscal quarter, most of Walmart’s market share gains came from households with annual incomes of over $100,000, CFO John David Rainey said.

Warehouse clubs such as Costco and Walmart-owned Sam’s Club, online players such as Amazon and Temu, and private label-focused grocers Aldi and Trader Joe’s are also competing for — and sometimes stealing away the business of — price-conscious shoppers.

Dollar General has acknowledged stiffer competition. “The guys in Bentonville [the Arkansas home of Walmart’s headquarters] took a little bit larger piece” of the retailer’s middle-income customers, Vasos said at the September conference.

On Dollar Tree’s earnings call in early September, Chief Operating Officer Mike Creedon, who was recently named interim CEO, said the retailer had to cut its full-year outlook to reflect “how the challenging macro environment continues to pressure our customers.”

He said Family Dollar’s core customer, who is lower income, “remains weak.” Yet he said Dollar Tree, a chain that draws a more diverse mix of customers, noticed a pullback from shoppers across middle and upper incomes in the recent quarter, as the toll of inflation, high interest rates and economic pressures mounted.

Discretionary merchandise items, which tend to be more profitable than food or household essentials, were some of the worst sellers at Family Dollar in the most recent quarter, as shoppers bought fewer home decor, seasonal and beauty products, Creedon said on the earnings call.

But some of the challenges for the dollar stores are more self-inflicted.

Both companies have faced backlash on social media and agreed to pay millions of dollars in fines to federal regulators for the conditions of stores and warehouses, including cluttered aisles and blocked fire exits. Dollar General in July reached a settlement with the U.S. Department of Labor to pay $12 million in penalties for workplace safety concerns, on top of more than $21 million in fines from the federal Occupational Safety and Health Administration since 2017.

Dollar Tree agreed to improve worker safety in a 2023 settlement with federal regulators after it had racked up more than $13.1 million in OSHA fines since 2017. In February, it pleaded guilty and agreed to pay nearly $42 million after inspectors found live and dead rodents in an Arkansas warehouse that stored food, drugs and cosmetics.

Those safety violations can scare away customers who see those news headlines and notice when employees seem overworked and shelves are sloppy, Keith said.

“No one wants to shop in what looks like a kind of a dirty, messy environment,” he said.

Some of those problems date back to the Covid pandemic, said Alasdair James, who was Dollar Tree’s chief customer officer from early 2021 to early 2022. As the government paid out stimulus funds and the Covid virus spread, retailers struggled to fill jobs at their stores.

Some Dollar Tree locations wound up with a single worker who was left to juggle all the duties, from checking people out to stocking shelves — resulting in messy stores that turned off shoppers, he said.

Plus, vendors and consumer packaged goods companies prioritized big-box stores during the pandemic by making the more typical bulk sizes of items rather than the downsized, budget-friendly sizes sold by dollar stores, James said.

He said those out-of-stocks and poorly staffed stores drove customers to rivals.

Dollar Tree has also shaken up its pricing approach. During the pandemic, the retailer raised the price of most of its items to $1.25, and it has rolled out merchandise at higher price points, including $3, $5 and $7.

In a statement, a Dollar Tree spokesperson said the “multi-price expansion at Dollar Tree, which we believe will be a long-term growth driver, continues to resonate with our customers.” He described the retailer as “a solution for families who may be feeling the financial strain of inflation,” including families who don’t live near a grocery store or pharmacy.

Both companies also face a new risk under the administration of President-elect Donald Trump. Trump has pledged to roll out additional tariffs on imports from China, a source of many goods sold at the dollar stores.

Dollar General declined to comment about the company’s challenges.

It recently touted one strategy aimed at attracting more visits from holiday shoppers, though. Dollar General is promoting a “24 Days of Savings” event in December, where it offers a deal on a featured item each day. The promotions, such as discounted holiday mugs or 12-ounce packs of bacon, are only available in stores.

— CNBC’s Ryan Baker contributed to this story.