Iconic Discount Store to Close 1000 Amid Struggling Sales

Clear Facts

• Dollar Tree, Inc. and its subsidiary Family Dollar have announced the closure of approximately 1,000 stores over the next few years due to struggling sales.
• The company reported a net loss of $998.4 million for the 53 weeks ending February 3, 2024, despite an 8.0% increase in net sales to $30.6 billion and a 4.3% increase in gross profit to $9.31 billion.
• Store closures were decided after a review of locations to identify underperforming stores, with factors such as product cost inflation, unfavorable sales mix, elevated shrinkage, and high distribution and markdown costs negatively impacting gross margins.

Dollar Tree, Inc., and its subsidiary Family Dollar, have announced that they will be closing around 1,000 stores in the coming years. This decision comes in the wake of the companies’ failure to boost sales amidst struggling consumer spending.

Despite an 8.0% increase in net sales to $30.6 billion and a 4.3% increase in gross profit to $9.31 billion, the company reported a net loss of $998.4 million for the 53 weeks ending February 3, 2024. The brand plans to close 600 Family Dollar stores in the first half of this year, with an additional 30 Dollar Tree and 370 Family Dollar stores set to close as their respective leases end over the next few years.

Dollar Tree CEO, Rick Dreiling, expressed optimism despite the closures, stating, “We finished the year strong, with fourth quarter results reflecting positive traffic trends, market share gains, and adjusted margin improvement across both segments.” He added, “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. As we look forward in 2024, we are accelerating our multi-price rollout at Dollar Tree and taking decisive action to improve profitability and unlock value at Family Dollar.”

The decision to close stores was made following a comprehensive review of locations to identify which stores were underperforming in the current market conditions. Factors such as product cost inflation, an unfavorable sales mix, elevated shrinkage, and high distribution and markdown costs have negatively affected gross margins.

A Dollar Tree spokesperson explained, “As previously disclosed, in the fourth quarter of 2023 we initiated a comprehensive review of our store portfolio to identify and address underperforming stores and invest in improved store standards and growth.” They further emphasized the importance of Dollar Tree and Family Dollar stores to communities across the country, stating, “We owe it to those we serve to position all of our stores for success and meet the expectations of our valued customers and associates.”

As inflation continues to rise, consumers have been forced to shift their spending towards lower-margin essentials, leaving less room for high-margin discretionary goods typically sold at dollar stores. Additionally, Dollar Tree faces increased competition from Chinese online marketplace Temu, which also offers cheap discretionary goods.

Inflation remains high, recorded at 3.2% year-over-year in February, a significant deviation from the Federal Reserve’s 2% target. Since spiking at 9.1% in June 2022, inflation has failed to fall below 3%, causing concern among investors that price increases could continue to trend at 3% annually.

The effects of more expensive credit conditions due to hikes in the Fed’s federal funds rate are being felt by both consumers and businesses. Amid the high cost of credit, credit card debt has hit an all-time high, totaling $1.129 trillion in the fourth quarter of 2023, as Americans increasingly rely on financing to make ends meet.

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