The head of Dollar Tree has announced plans to close nearly 1,000 stores across the US.
Some experts believe government policies are to blame for the upcoming shutdowns of the discount retail chain.
Dollar Tree to Close 1,000 Stores Soon
Dollar Tree, which owns Family Dollar, has announced it will close about 1,000 stores in the next few years.
In March, the company revealed plans to shut down these stores after Family Dollar, which it bought almost ten years ago, drastically dropped in value.
Dollar Tree is set to close approximately 600 Family Dollar stores in the first half of this year. Later, they plan to close another 370 Family Dollar stores and 30 Dollar Tree stores over the coming years.
Rick Dreiling, the chairman and CEO of Dollar Tree, outlined plans to close several stores in a recent press release. During a March earnings call, Dreiling described the current market conditions as a "very challenging macro environment."
"We have started a thorough review of our Family Dollar stores to identify and address those that are not performing well and don't fit with our plans for the company," Dreiling added.
The discount store chain also noted that rising costs of living and inflation are impacting its sales.
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Dollar Tree Struggles Amid Economic and Regulatory Challenges
USA Today reports that Dollar Tree has been significantly affected by reductions in government benefits for the Supplemental Nutrition Assistance Program (SNAP). This has left many families with up to $250 less to spend each month, tightening household budgets.
Additionally, last year, the Department of Labor reached a settlement with Dollar Tree and Family Dollar to resolve numerous safety issues across thousands of their stores. The agreement required the retailer to undertake a nationwide assessment to identify and correct the root causes of repeated safety violations, including blocked exits, inaccessible fire extinguishers, electrical panels, and improper material storage.
Dollar Tree's acquisition of Family Dollar nearly a decade ago followed a competitive $8 billion bidding war with Dollar General. Industry experts anticipated the recent decision to close about 1,000 stores.
Brett Hollenbeck, an associate professor at UCLA's Anderson School of Management, remarked, "It might be a necessary adjustment after so much growth."
The rapid expansion of dollar stores such as Dollar General, Family Dollar, and Dollar Tree has been flagged by the Institute for Local Self-Reliance. In a recent report, the institute criticized the aggressive expansion tactics of these chains, highlighting their harmful effects on communities and calling for regulatory action.
However, Lauren Chenarides, an assistant professor at Colorado State University, believes that the expansion of dollar stores will likely continue. "I think we'll continue to see dollar stores expand," she commented to USA Today, indicating a robust growth trajectory despite existing challenges.
According to the Associated Press, Dollar Tree has been drawing in customers who are trying to cut their spending due to inflation. Meanwhile, Family Dollar employees have voiced concerns over future store closures, attributing them to increasing theft at their locations.
This quarter, Dollar Tree reported a 6.3% increase in sales at stores open for at least a year, with customer visits rising by 7.1%. Despite the increased foot traffic, the amount each shopper spent on average dipped by 0.7%, indicating that customers are cautious with their spending.
On the other hand, Family Dollar saw a slight decline in comparable store sales, dropping by 1.2%. While traffic increased slightly by 0.7%, the average amount spent per customer fell by 2%.
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