Variety store chain Dollar Tree has announced plans to close 1,000 Family Dollar stores due to inflation and retail theft.
Dollar Tree CEO Rick Dreiling confirmed the impending store closures on March 13. About 600 Family Dollar stores will be closed in the first half of 2024, while roughly 370 Family Dollar stores will shutter permanently in the coming years. Dreiling also noted that 30 Dollar Tree stores will be included in the second batch of closures – amounting to 1,000 locations shuttered.
"Family Dollar is a victim of the macro environment out there," said Dreiling, who was the former CEO of rival chain Dollar General. He also cited still-rising levels of inventory loss and theft as additional reasons for the closures. Dollar Tree hired Dreiling in 2023 to lead the latest turnaround effort, according to the Wall Street Journal (WSJ).
The Dollar Tree CEO also mentioned that the stores are under-performing and consume the bulk of district managers' time. He projected that the company will miss out on about $730 million in revenue annually as a result of the closures.
"While the discount brands sound similar, Family Dollar locations are more concentrated in urban areas and sell groceries, cleaning products and other items at various price points," the WSJ explained. "[Meanwhile], Dollar Tree stores are mostly in suburban locations and cater to middle-income households browsing for knickknacks. Dollar Tree historically sold most items at $1, though in recent years it has added $3 and $5 items."
The outlet added that Dollar Tree "has struggled with indigestion of Family Dollar" since acquiring its rival in 2015 for almost $9 billion. It has been under pressure from several activist investors to improve operations.
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Executives have responded to the call for several years now, attempting to renovate some of the Family Dollar locations to boost performance. But this wasn't the first time Dollar Tree ended up closing some of its rival's stores. In 2019, Dollar Tree moved to close 600 Family Dollar locations.
McDonald's also feeling the pinch
According to Dreiling, the company would focus on opening more stores under the Dollar Tree banner. He added that the Dollar Tree chain is gaining more customers, especially people making more than $125,000 annually. The Dollar Tree banner is where the company has been expanding its product offering and charging prices higher than the chain has historically. (Related: Americans relying more and more on DOLLAR STORES as inflation worsens.)
"The mass store closure makes a reversal for a business that … had been hoping to make it convenient to shop at their stores and gain scale to compete with Walmart, Amazon and other national retailers," the WSJ remarked.
"Dollar Tree's earnings in the holiday quarter were wiped out by more than $2 billion in charges tied to a review of the company's portfolio of stores. The company reported a loss of $1.71 billion for the three months ended Feb. 3, compared with a profit of $452.2 million a year earlier. For the current quarter and fiscal [year] 2024, executives forecast earnings below what analysts are expecting."
But it's not just Dollar Tree that's feeling the effects of inflation. Executives at fast food giant McDonald's have also observed a reduction in visitors, most of them cash-strapped, patronizing the Golden Arches in 2024. Instead of dining out at restaurants, lower-income customers are spending their savings at groceries and eating at home.
"Some of those consumers are just choosing to eat at home more often," said McDonald's Chief Financial Officer Ian Borden during a March 13 investor conference. The fast-food giant is responding with promotions such as bundle deals costing $4 or less across most of its U.S. locations. McDonald's plans to put more marketing behind those deals to try and keep lower-income consumers coming in.
Watch Next News Network's Gary Franchi talk about Dollar Tree now charging $1.25 for its items due to Bidenflation below.
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