Discount retail chain Dollar Tree, Inc. said it is planning to close around 970 underperforming stores of its unit Family Dollar Stores LLC as part of its comprehensive store portfolio optimization review. The planned store closures also include around 30 Dollar Tree stores.
According to Rick Dreiling, Chairman and Chief Executive Officer, the decisive steps will strengthen the Family Dollar brand and better position it to achieve its full potential.
Meanwhile, the company said it is placing a greater emphasis on opening more Dollar Trees than historically done in the past due to the returns and performance, and the vast majority of new store openings in fiscal 2024 will be Dollar Trees.
While reporting a hefty net loss in its fourth quarter compared to a last year profit, despite revenue growth, the company said the store closure decision was taken based on an evaluation of current market conditions and individual store performance, among other factors. The latest quarter results were hit by, among other things, $594.4 million of charges in connection with the store portfolio review.
The company plans to close around 600 Family Dollar stores in the first half of fiscal 2024. In addition, over the next several years, around 370 Family Dollar and 30 Dollar Tree stores will close at the end of each store’s current lease term.
Collectively, the company estimates that net sales loss from the stores that are intended to be closed this year is approximately 730 million on an annual run rate basis.
Dollar Tree’s comprehensive store portfolio optimization review involved identifying stores for closure, relocation, or re-bannering.
During the company’s fourth-quarter earnings call, Dreiling said, “We took a thoughtful and deliberate approach to address underperforming stores by considering each individual store’s performance, local operating environment, and our broader need for scale and operating efficiencies across the portfolio…. We believe rationalizing these unprofitable locations will help to unlock meaningful value at the enterprise level.”
Further, in real estate, the company opened 641 new stores in 2023, which was at the high end of target of 600 to 650. Selling square footage increased 3.6 percent, which was ahead of target.
According to Dreiling, sales per square foot, transactions, and units are among the most important benchmarks in retail, and the company is seeing growth across all three, and momentum is building across the business.
As of February 3, Dollar Tree operated 16,774 stores under the brands of Dollar Tree, Family Dollar, and Dollar Tree Canada.
In late February, Family Dollar was fined $41.675 million by the U.S. Department of Justice after pleading guilty to holding consumer products including food and drugs in rodent-infested warehouse in West Memphis, Arkansas. It was the largest-ever monetary criminal penalty in a food safety case, the DOJ then noted.
Family Dollar in February 2022 had recalled all drugs, medical devices, cosmetics, and human and animal food products sold since January 1, 2021 in the 404 stores that had been serviced by the warehouse.