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Tough economic times for consumers usually mean good times for discount stores, but that’s not the case for Dollar Tree and its roster of stores.
The discount chain plans to shut down 1,000 underperforming locations as it continues to battle a bevy of issues ranging from inflation to worker safety violations.
- During its Q4 earnings call Wednesday, the company said it’ll close roughly 600 Family Dollar stores in the first half of 2024 and will allow the leases of 400 more Family Dollar and Dollar Tree locations to expire.
- Those struggles came along with mixed Q4 results that saw net losses of $1.7 billion compared to more than $450 million in profits a year earlier. Net sales in Q4, however, did jump to $8.6 billion, but the company expects that to drop off in Q1 to $7.6 billion–$7.9 billion.
“Family Dollar is a victim of the macro environment out there,” CEO Rick Dreiling told investors. “If you think about the increase in shrink, which I thought would have moderated if anything by now, but it is continuing to accelerate, and then, the pressure on the mix.”
Zoom out: Dreiling reassured investors that the company’s problems aren’t structural, “and I continue to believe that a well-run and well-located Family Dollar store is a powerful retail force.” But some of the company’s issues predate the most recent quarter.
- Last August, the company agreed to a settlement with the Department of Labor to address hazards including “blocked exits, unsafe storage of materials and improper access to fire extinguishers and electric panels,” per the AP.
- And last month, the Department of Justice found Family Dollar liable for keeping products in “insanitary” conditions at a now-closed distribution center in West Memphis, Arkansas, and forced the company to pay a $41.7 million criminal penalty.
As for the larger economic picture, Dreiling said, “persistent inflation and reduced government benefits continued to pressure the lower-income consumers that comprise a sizable portion of Family Dollar’s customer base,” pointing to “categories like apparel, home decor, electronics, and general merchandise.”