In a bold move signaling tougher times ahead for budget shoppers, Family Dollar, a subsidiary of the thriving Dollar Tree, has announced a significant reduction in its retail footprint, planning to shutter upwards of 1,000 stores in the coming years.
The announcement comes as a one-two punch with Dollar Tree also revealing plans to close several of its locations by year’s end.
According to CEO Rick Dreiling, the driving force behind these closures is the relentless bite of inflation and a dwindling stream of government aid, which are squeezing the wallets of Family Dollar’s core clientele—those on the lower rungs of the economic ladder.
“Persistent inflation and reduced government benefits continue to pressure the lower-income consumers that comprise a sizable portion of Family Dollar’s customer base,” Dreiling detailed in a Wednesday analyst call.
Breaking down the numbers, Family Dollar aims to turn the lights off at 600 of its stores in 2024, with another 370 set to close as their leases run out over the following years. Boasting a network of over 8,000 stores across the U.S., Family Dollar primarily serves the urban low-income demographic. Dollar Tree, not immune to the harsh economic climate, is also set to bid farewell to 30 locations upon lease expiration.
The backdrop to these closures is an economic squeeze felt across the retail sector, with historic inflation levels causing consumers to tighten their belts—a scenario that has directly impacted Family Dollar’s bottom line and its ability to stay competitive against giants like Walmart and Dollar General, among others.
Compounding the issue, the chain has been hit by cuts to the Supplemental Nutrition Assistance Program (SNAP) benefits, an essential lifeline for many of Family Dollar’s shoppers, as admitted by company executives.
But the challenges don’t end with the macroeconomic environment. Internal missteps have also dogged Dollar General, including a recent $40 million fine related to a rat infestation at one of its warehouses, a debacle that forced the temporary closure of several stores.
Despite the buoyant performance of discount retailers over the past decade, a trend bolstered by consumer frugality in the aftermath of the 2008 financial crisis, Dollar General has been playing catch-up since its acquisition by Dollar Tree in 2015. Dollar Tree, which generally targets suburban markets, has enjoyed greater success.
The news of the impending store closures sent Dollar Tree’s stock tumbling over 13 percent on Wednesday, marking a new low for the year. This stark downturn underscores the mounting pressures and challenges facing the discount retail segment, particularly those serving America’s financially strained households.