Dollar Tree said yesterday that it will close 1,000 stores – most of them Family Dollar units – over the next few years, a decision that Axios describes as “a reversal of the retailer’s rapid expansion, which included its 2015 acquisition of Family Dollar.”
Six hundred Family Dollar stores are slated to close before the end of the year, the company said. And then, roughly 370 Family Dollar and 30 Dollar Tree stores will close over the next several years as their leases expire.
Axios writes that this is yet another setback for the company: “In 2022, the company shuttered a Family Dollar distribution facility in Arkansas that had become infested with rats, triggering a massive recall. The infestation led to the facility’s closure and steep losses, though the company recently said it was cleaning up the site and reopening it.
“The company agreed in February to pay nearly $42 million in penalties in a settlement with the Justice Department.
“The retailer has since announced sweeping changes to its executive suite and operations, including supply chain investments. But the company still posted an operating loss of $882 million in the fiscal year ended Feb. 3 as it continues to deal with disappointing results at Family Dollar.”
“We took a thoughtful and deliberate approach to address underperforming stores by considering each individual store’s performance, local operating environment, and our broader need for scale and operating efficiencies across the portfolio,” Dollar Tree CEO Rick Dreiling said yesterday.
There are 8,415 Dollar Tree and 8,359 Family Dollar stores, according to documents filed with the US Securities and Exchange Commission (SEC). That means the company is closing about six percent of its total fleet.
KC’s View:
Rats all over America are currently on Zillow, looking for new places to live.
Compare this to Aldi, which last week announced that it would be opening 800 new stores in the next few years. One company’s trajectory is up, and the other is down.
The interesting thing is that Dollar Tree at the same time as it is shutting stores may be abandoning its core value proposition.
Bloomberg reports that Dollar Tree “plans to expand its price range, including products that cost $7.
“Dollar Tree is implementing a ‘multi-price’ strategy in which it will sell a greater variety of products with the aim of winning over new customers. Over the past year, the retailer has sold groceries that cost $3 to $5. Those goods will be complemented this year by 300 items that cost up to $7 across 3,000 stores”
“This expanded assortment will offer Dollar Tree shoppers a wider range of choices across a variety of categories,” including food, pet care and personal care, CEO Dreiling told analysts.
Or, it could disenfranchise its core shoppers, sending them off to Dollar Tree, Aldi or other discount formats.
The question is whether all these moves will be enough to stop the bleeding, or they represent band-aids insufficient to the task at hand.
Me, I’d bet on the latter. And that even the rats will desert a sinking ship.
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