Discount variety chain Dollar Tree will close nearly 1000 stores in the next few years.
1000 Stores Closing
Dollar Tree has announced that it will close to 1,000 Family Dollar and Dollar Tree stores after reviewing its performance in the 2023 fiscal year.
In a press release announced on Wednesday, the company cited a “comprehensive store portfolio optimization review” that pinpointed necessary closures after significant underperformance last year. The review involved “identifying stores for closure, relocation, or re-bannering based on an evaluation of current market conditions and individual store performance, among other factors.”
Failure to Meet Targets
It also acknowledged the chain’s underperformance, including the failure to meet sales targets in 2023. Since announcing the news, Dollar Tree shares dropped by 14.2%.
“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,” the statement continued.
The company plans to close approximately 600 Family Dollar Stores across the first half of 2024, followed by the closure of 370 Family Dollar and 30 Dollar Tree stores over the next few years.
These closures will account for nearly 12% of all Family Dollar stores. However, location details of store closures have not been released so far.
17000 Stores, 2 Countries
Up until February 2024, Dollar Tree has operated close to 17,000 stores across the U.S. and Canada. Dollar Tree, which has been one of the leading discount variety stores in the U.S. for more than 30 years, purchased the Family Dollar brand almost a decade ago.
Since winning its bidding war against major competitor Dollar General in 2015, it has struggled to successfully bring the chain under its wing.
Many experts, including Neil Saunders, who is the managing director of data analytics company GlobalData, have viewed the acquisition by Dollar Tree as a massive decade-long failure.
The Inherited Mess
“This dramatic cull is the coup de grace in the rather botched acquisition of the Family Dollar chain, which has caused Dollar Tree nothing but hassle since it was completed back in 2015,” Saunders wrote in a public statement.
“Basically, almost 10 years on, Dollar Tree is still sifting through the mess it inherited and has not been able to completely turn around,” he continued.
Their failed acquisition of Family Dollar was just one of several significant problems faced by the U.S. chain in recent years. The best known was a major rat infestation that cost them tens of millions.
Up until January 2022, the company had been shipping products to its outlet stores out of a rat-infested distribution center in Arkansas. The company was charged with one misdemeanor count and made to pay $41.6 million in court. They later revealed that Dollar Tree also lost up to $34 million in recalled products due to the infestation.
OSHA Slams Dollar Tree
The Occupational Safety and Health Administration (OSHA) also issued a damning statement on the situation, accusing the company of ‘continued disregard for human safety’ which suggested an “attitude that profits matter more than people.”
What’s more, their biggest competitor Dollar General is seeing significant growth, adding over 4,000 new stores in the last five years, and introducing fresh produce to their product list.
Discount Stores on the Rise
Due to the increasing cost of living and household debt, discount variety stores are becoming more popular with lower and middle-income earners. According to a January study published in the American Journal of Public Health, dollar stores are the fastest-growing food retailers in the country.
“Dollar stores play an increasingly important role in household food purchases, yet research on them is lacking,” said Wenhui Feng, a professor of healthcare policy at Tufts University who co-authored the paper.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.