Dollar Tree can't keep up with Bidenflation, changing consumer habits, and competition from other discount retailers — and will close nearly 1,000 of its Family Dollar locations around the country. The company announced the move this week following disappointing quarterly results.
Reuters reported Wednesday that the discount chain has been "struggling to deal with a shift in consumer spending to lower-margin essentials from higher-margin discretionary products like home decor, electronics and toys."
"The discount store chain said it would close about 600 Family Dollar stores in the first half of fiscal-year 2024 and 370 more over a period of a few years along with 30 Dollar Tree outlets, as their lease terms expire."
CEO Rick Dreiling told investors on the company's quarterly call, "We have initiated a comprehensive review of our Family Dollar portfolio to address underperforming stores that are not aligned with our transformative vision for the company."
Let me provide you with some perspective on what those changes mean, aside from Dreiling's buzzword-filled announcement that the company will shutter one out of every eight stores.
Those "higher margin discretionary products" you can find at Family Dollar include items like Family Dollar's $18 queen-size comforters, a $25 light-up Bluetooth speaker, and $6 Batman action figures. Even discount items like these are now out of reach for many Americans who have shifted their buying habits to even "lower-margin essentials" like food and gas.
The mainstream media keeps telling me the economy is booming, but Family Dollar can't cut it in an age when moms are forced to give up the $8 Maybelline Fit Me Concealer so they can put a couple more gallons of gas in the car to get to work in the morning.
It isn't like all of those lost Family Dollar sales simply disappeared into the ether. Some, maybe even most, went to competitors like Walmart. But the big tell here about the actual state of the economy is that discount shoppers didn't move up-market from Family Dollar to Target, but down-market from Family Dollar to Walmart and Dollar Tree.
Even Dollar Tree isn't what it used to be. Inflation forced the company to raise its famous dollar-for-everything price to $1.25 on most items back in 2021. Dollar Tree CEO Michael Witynski said at the time that "the additional price point [allows us] greater flexibility to manage the overall business, especially in a volatile, inflationary environment." But mostly it let the company generate enough revenue to keep growing. Those growth days, at least for the company's Family Dollar outlets, appear to be over.
The company's reluctance to raise prices further, even as inflation remains stubbornly high, shows that the hit to their bottom line would be worse if they alienated increasingly price-conscious shoppers.
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