Discount variety store Dollar Tree, Inc. and its subsidiary Family Dollar announced Wednesday that they will close around 1,000 stores over the next several years after failing to turn sales around as consumer spending struggles.
The company reported a net loss of $998.4 million for the 53 weeks ending February 3, 2024, despite net sales increasing 8.0% to $30.6 billion and gross profit increasing 4.3% to $9.31 billion, according to the company’s fourth quarter results. The brand will close 600 Family Dollar stores in the first half of this year and will close around 30 Dollar Tree and another 370 Family Dollar stores at the conclusion of the respective location leases over the next few years. (RELATED: Family Dollar Pleads Guilty To Storing Goods In Rodent-Infested Warehouse, Agrees To Pay Historic Fine)
“We finished the year strong, with fourth quarter results reflecting positive traffic trends, market share gains, and adjusted margin improvement across both segments,” Rick Dreiling, Dollar Tree CEO, said in the release. “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 store closures were determined following a review of locations to identify which stores’ performance was suffering amid current market conditions, according to the release. Gross margins were negatively affected by product cost inflation, an unfavorable sales mix, elevated shrinkage and high distribution and markdown costs.
“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,” a Dollar Tree spokesperson told the Daily Caller News Foundation. “Family Dollar and Dollar Tree stores are important to thousands of communities across this country. 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 overall prices rise, consumers have had to shift their spending towards lower-margin essentials rather than buying high-margin discretionary goods like those sold at dollar stores, according to Reuters. Dollar Tree is also facing steeper competition from Chinese online marketplace Temu, which also aims to offer cheap discretionary goods.
⚠️BREAKING:
*DOLLAR TREE SHARES PLUNGE 15% AFTER Q4 EARNINGS MISS, PLANS TO CLOSE 900 STORES $DLTR pic.twitter.com/ucRsjzHQus
— Investing.com (@Investingcom) March 13, 2024
Inflation has continued to remain elevated, coming in at 3.2% year-over-year in February, far from the Federal Reserve’s 2% target. Inflation has so far failed to recede below 3% since it spiked at 9.1% in June 2022 under President Joe Biden, worrying investors that price increases could continue to trend at 3% annually.
Both consumers and businesses are also feeling the effects of more expensive credit conditions due to hikes in the Fed’s federal funds rate, which has been set to a range of 5.25% and 5.50%, to combat high inflation. 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 look to financing to make ends meet.
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