Discount store chain Dollar Tree will shut about 970 Family Dollar stores and a number of Dollar Tree locations following a comprehensive review of current market conditions and individual shop performance.
The retailer plans to close some 600 Family Dollar stores in the first half of the current fiscal year. In addition, about 370 Family Dollar and 30 Dollar Tree stores will close over the next several years at the end of each store’s current lease term.
The decision came as the company swung to a net loss of $998.4 million in the fiscal year ended February 3.
Dollar Tree acquired Family Dollar in 2015 for $8.5 billion and has been struggling to boost the brand’s appeal.
“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. Its core shoppers are not particularly loyal and tend to use it out of convenience more than anything else,” GlobalData MD Neil Saunders said.
“Over recent years, rates of shopping around have increased; and we believe that they will only increase further in the years ahead as other chains like Walmart, Aldi, and Dollar General continue to expand. Against this backdrop, Family Dollar does not want to invest in markets where it cannot win and is not particularly profitable.”
Meanwhile, the company’s annual revenue increased 8.0 per cent to $30.62 billion. Dollar Tree net sales grew 8.9 per cent to $16.77 billion while Family Dollar net sales rose 7.0 per cent to $13.81 billion.
The firm ended the year with 641 new store openings, 219 of which took place in the fourth quarter.
“While we are still in the early stages of our transformation journey, I am proud of what our team accomplished in 2023 and see a long runway of growth ahead of us,” Dollar Tree chairman and CEO Rick Dreiling.
“As we look forward to 2024, we are accelerating our multi-price rollout at Dollar Tree and taking decisive action to improve profitability and unlock value at Family Dollar.”
For this fiscal year, the company forecasts consolidated net sales to range from $31 billion to $32 billion.
It also expects to deliver a low-to-mid-single digit comparable store net sales increase, with a mid-single-digit increase in the Dollar Tree segment and a low-single-digit increase in the Family Dollar segment.
“The first half of the fiscal may see profits crimped by the store closure costs, but in the second half there will be some benefit as the drag from unperforming and unprofitable locations is eliminated,” Saunders said.
“While Dollar Tree has made the right decision in getting its house in order, it will need to demonstrate that the remaining parts of its business are firmly on the front foot.”
