The decline in Dollar Tree and Dollar General stocks can be attributed to various factors.

Dollar stores are facing challenges in the modern U.S. economy.

During the Great Recession, dollar stores were some of the best performing stocks in the S&P 500, according to Piper Sandler managing director Peter Keith. However, in recent years, dollar stores have not experienced the same level of success.

The stock prices of both companies, which are known for their respective brands, have experienced a significant decline of approximately 50% in value this year.

The companies are grappling with a multifaceted set of issues, encompassing both economic and self-inflicted challenges.

High inflation is putting more pressure on low-income Americans, who make up around 60% of Dollar General's customer base. As a result, these shoppers are prioritizing essentials like food and household items over luxury goods, which tend to be less profitable.

In 2024, the job market has remained strong, preventing middle-income and upper middle-income Americans from having to shop at dollar stores.

In its Q2 2024 earnings call, Dollar General revealed that customers are increasingly relying on online storefronts, which dollar stores have struggled to successfully implement.

Keith stated that many traditional brick-and-mortar companies, such as Walmart, Home Depot, and Best Buy, made significant e-commerce and digital investments in just 12 to 18 months during the Covid pandemic, resulting in a significant improvement in their digital capabilities.

The retail giant has gained more than 60% in shares year to date, as it increases its hold on U.S. wallets.

Over the past decade, both Dollar Tree and Dollar General have been found to have multiple worker safety violations.

Why are dollar stores struggling? Watch the video to learn more.

-CNBC retail reporter Melissa Repko contributed to this story