We've seen a number of major brands face mass closures this year. Bed Bath & Beyond shuttered all of its stores in the spring, and Rite Aid has been closing hundreds of locations across the U.S. after filing for bankruptcy. The next retailer who might soon have far fewer locations? Family Dollar, whose parent company Dollar Tree is considering cuts. Read on to learn why Family Dollar could be seeing mass closures soon.
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Dollar Tree missed its most recent financial estimates.
ShutterstockIn a Nov. 29 press release, Dollar Tree, Inc. (the parent company of Family Dollar) revealed the financial results for its third quarter in the 2023 fiscal year. Despite a 5.4 percent increase in overall consolidated net sales, the retail giant actually missed its third-quarter estimates and trimmed its annual sales forecast as a result, Reuters reported.
The company now expects its fiscal 2023 consolidated net sales to fall between $30.5 billion and $30.7 billion, despite previously estimating that it would reach between $30.6 billion to $30.9 billion, according to the news outlet.
"Similar to other retailers you've heard from this earnings season, we are seeing more macro pressures than we did earlier in the year, particularly among our lower income consumers," Dollar Tree, Inc. CEO Rick Dreiling said during a Nov. 29 earnings call.
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The company said it's reviewing its Family Dollar business.
Nolichuckyjake / ShutterstockFamily Dollar's results were especially worrisome for parent company Dollar Tree, Inc. The retailer ended the quarter with a 2 percent increase in same-store net sales, failing to meet the company's expectations of a 4.07 percent increase, per Reuters. In comparison, the Dollar Tree brand saw a 5.4 percent growth in same-store sales for the same quarter.
"Family Dollar fell short of our quarter three comp expectations," Dreiling confirmed during the call.
As a result, the company has "initiated a comprehensive review" of its Family Dollar business, according to the CEO.
This could mean closures down the line.
Carolyn Franks / ShutterstockAccording to Dreiling, Dollar Tree, Inc. is looking to "address underperforming stores that are not aligned with our transformative vision for the company." Dollar Tree may decide to pare down some of its Family Dollar locations, whether shuttering them completely or rebranding them.
"This will involve, among other things, identifying stores as candidates for closure, re-bannering or relocation with the goal of assuring that each asset under the Family Dollar banner is delivering its full value for our shareholders on a sustainable basis," Dreiling said during the call.
He added, "We believe being thoughtful about our store portfolio will help enhance our results. To maximize value creation, we need to periodically re-evaluate our portfolio in terms of current market conditions, individual store performance, and overall portfolio considerations."
Dollar Tree is still a "strong believer" in its Family Dollar business.
ShutterstockDollar Tree, Inc. acquired Family Dollar back in 2015, and Dreiling wanted to make it clear that the company isn't looking to abandon it completely. Instead, the CEO said he looks at the potential for closures as "reallocating assets" to where they might be more productive for Dollar Tree.
"I am a strong believer in the Family Dollar brand and what it means to our customers and associates in thousands of communities across the country," Dreiling said. "Going forward, we need to ensure that the Family Dollar portfolio is well positioned for success and meets the financial and operating objectives of our organization and the expectations of our valued customers and associates. We believe that this action will fortify our base, strengthen our brand, and allow Family Dollar to achieve its full growth potential."
