In yet more worrisome economic news, Family Dollar, the discount chain owned by Dollar Tree that focuses on catering to low-income customers in urban locations, announced on Wednesday, March 13 that it will close nearly 1000 stores. The closures come amidst not only poor management of Family Dollar and Dollar Tree, but also SNAP benefit reductions and rampant inflation issues.
According to Dollar Tree’s Wednesday statement, it will close 600 of the Family Dollar locations in the first half of its 2024 fiscal year. Then, after that massive slew of closures, another 370 Family Dollar locations and 30 Dollar Tree locations will close over the next few years as the leases for those facilities draw to closes and enable it to cut its losses without breaking a lease. Family Dollar currently has about 8,000 US stores.
Explaining the reason for the closure during the Wednesday analyst call, CEO Rick Dreiling pointed to the inflation and welfare benefit issues as reason for store closures, saying, “Persistent inflation and reduced government benefits continue to pressure the lower-income consumers that comprise a sizable portion of Family Dollar’s [consumer base].”
Inflation has been persistently high during the Biden Presidency and benefits for the Supplemental Nutrition Assistance Program, or SNAP, have indeed been slashed, leaving some of Family Dollar’s customer base in a problematic financial situation. The cuts left the family with as much as $250 less per month, which has hit the sales at discount stores like Family Dollar, those chains claim.
Other issues have impacted Family Dollar as well, however. For example, the company recently got hammered by a $42 million settlement over a warehouse rat infestation in Arkansas. That situation and its results caused a mass, temporary closure of hundreds of stores.
Further, poor management led to Dollar Tree’s far too rapid growth in the early and mid 2010s, including purchasing Family Dollar in 2015. That overexpansion, particularly the ill-fated Family Dollar purchase, has led to it now needing to reign in costs by closing stores.
Additionally, industry analyst Neil Saunders argued that Family Dollar proved unable to best other discount retailers in the discount grocery battle. According to Saunders, the closures are a sign of defeat on that front. He said the closure decision “is effectively Family Dollar running up the white flag of surrender in the value grocery battle.”
He added that Family Dollar stores remain behind the industry, writing, “Despite some recent investments in price and attempts to make stores more pleasant places to shop, Family Dollar remains a laggard in the value segment.”
Dollar Tree as a company has remained in a bad financial position due to all those problems and more, such as shrinkage (theft), suffering a massive operating loss of $882 million in the 2023 fiscal year that ended on February 3, 2024. Family Dollar’s results proved particularly disappointing, hence the massive slew of store closures.
Featured image credit: By Michael Rivera – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=30694168
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