You know the economy is bad when this deep discount store is shutting down locations

Photo by Lisa Fotios from pexels

Major retailers are shutting down all their marginal locations.  In some cases, it is due to crime; in some cases, it is the changing job market.

Discount general merchandise stores are becoming a go-to place for many shoppers who are trying to stretch their budgets.

But when these deep discounts are not enough to keep customers and this deep discount store starts closing locations, you know the economy is in trouble.

Family Dollar closing nationwide

Dollar Tree is the parent company of Family Dollar stores, and its CEO says they are closing nearly 1,000 stores, blaming the closures on factors like market conditions and store performance.

According to its fourth-quarter earnings report, the company plans to close 600 Family Dollar stores in the first half of 2024 and another 370 locations will close over the next few years once their leases expire.

An additional 30 Dollar Tree store locations will also close over that same period.

Dollar Tree has owned the Family Dollar brand since 2015 and has a total of 16,744 stores nationwide between the two brands.

Amid the closure announcement, shares of Dollar Tree fell as much as 13% as the company also posted its financial results, which fell short of analysts’ expectations.

The company had a net loss of more than $1.7 billion for the fourth quarter or $7.85 per share.

During a previous earnings call in December, Dollar Tree CEO Rick Dreiling said the company’s Family Dollar stores had softer same-store sales due to unexpected costs from a recall.

The recall involved over-the-counter medications and medical devices that were “stored outside of labeled temperature requirements by Family Dollar and inadvertently shipped” to some of its stores.

Some of the items included pain relievers, mouthwash, vitamins, cold medicine, moisturizer, and others that were sold in 23 states from June 1 through October 4, 2023.

“To this end, we have initiated a comprehensive review of our Family Dollar portfolio to address underperforming stores that are not aligned with our transformative vision for the company,” Dreiling said during the December call.

More trouble for Family Dollar

During the December earnings call, Dreiling said the review would include identifying stores for potential closure, re-bannering, or relocation.

He said the goal was to make sure “that each asset under the Family Dollar banner is delivering its full value” for shareholders.

But slumping sales and the massive recall weren’t the only problems Family Dollar has faced.

Many years of mismanagement and unsanitary conditions in some stores have also hurt the brand.

The company was recently fined more than $40 million after a rat infestation was discovered at a warehouse, forcing hundreds of locations to temporarily close.

Many consumers are also pulling back on spending, particularly those with lower incomes.

On the most recent call, Dreiling emphasized some of the reasons why so many Family Dollar stores will be closing.

“Persistent inflation and reduced government benefits continue to pressure the lower-income consumers that comprise a sizable portion of Family Dollar’s” customer base, he said.

Informed American will keep you up-to-date on any developments to this ongoing story.