Image source: The Motley Fool. 

What happened

Shares of Dollar Tree, Inc. (DLTR -0.47%) closed out 2016 on a sour note, sliding 13% according to data from S&P Global Market Intelligence. The stock gave back gains from November and tumbled on December 22 as a disappointing personal income report came out that day.

DLTR Chart

DLTR data by YCharts

So what

The stock lost 5.7% on Dec. 22 as the Bureau of Economic Analysis said personal income increased just 0.1% in November, the key month leading up to and including part of the holiday shopping season, and real disposable personal income actually fell. Peer Dollar General also gave back several points that day.

Early reports indicated that was the big winner of the holiday season, a development that could spell trouble for Dollar Tree as it has, including its Family Dollar banner, more brick-and-mortar stores than any other retailer with more than 14,000 locations.

Now what

Dollar Tree's most recent earnings report was solid as the company reported a 1.7% same-store sales increase, and dollar stores have been big winners since the recession. However, there are signs of trouble as Wal-Mart has been fighting to take back share, and Amazon reportedly signed up millions of lower-income households during the holidays, the demographic that dollar stores target.

The two dollar chains may also be saturating the country as there is nearly one dollar store for every 10,000 Americans now, and with the rise of e-commerce it may become unprofitable to open new ones. Considering those challenges, the stock may continue to suffer in 2017.