Dollar Tree outlined plans Wednesday to shutter nearly 1,000 Family Dollar stores nationwide, as the discount retailer faces mounting competition for consumers feeling the inflationary sting of essentials such as groceries.
The stores to be shuttered — about 12 percent of current Family Dollar locations — racked up a net loss of “approximately $730 million on an annual run rate basis,” chief executive Richard Dreiling told investors Wednesday. “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 announcement comes after Dollar Tree reported a $1.7 billion net loss. It acquired Family Dollar in 2015 for $8.5 billion, and has struggled to boost the brand to meet its flagship stores’ appeal, said Neil Saunders, managing director of the analytics company GlobalData.
“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,” he said in a statement. “Its core shoppers are not particularly loyal and tend to use it out of convenience more than anything else.”
The chain has fallen behind in the grocery segment — a driver for consumers looking for cheap, quality products. Dollar stores offer a limited selection of products, focusing on popular brands and products with a shorter shelf life than a traditional supermarket. Many food manufacturers sell specially made products, usually in smaller sizes, to meet the price demands of these retailers.
Dollar Tree’s chief competitor, Dollar General, recently announced plans to sell fresh fruits and vegetables at more than 5,000 stores, about a quarter of its locations. The chain has been expanding rapidly: From 2019 through 2023, it added 3,700 locations, pushing its store count past 19,700.
Dreiling said Dollar Tree is expanding its multi-price-point strategy in the food aisles, and has “substantially completed the rollout of $3, $4, and $5 frozen and refrigerated items, which are now available in more than 6,500 stores.” He did not specify if the same strategy was being applied at Family Dollar stores.
The company’s general merchandise categories are also facing mounting competition from Chinese e-commerce websites. Consumers can buy equally cheap housewares, accessories and decor from Shein and Temu from the comfort of their own homes.
The announcement comes after Dollar Tree agreed to a record $41.6 million fine with the Justice Department for storing food, drugs, medical devices and cosmetics sold at Family Dollar in a rat-infested warehouse.
