Family Dollar to Close 1,000 Stores
The retail chain is struggling to stay profitable for a variety of reasons.
Family Dollar is closing nearly 1,000 stores over the next few years due to low profits and a poor outlook for retail stores in general. The discount chain is owned by parent company Dollar Tree, and according to a report by CNN Business, it announced the closures on Wednesday during a call with business analysts. Executives expect to close 600 stores this year and another 370 in the following years as their leases expire.
"Persistent inflation and reduced government benefits continue to pressure the lower-income consumers that comprise a sizable portion of Family Dollar's [customer base]," said CEO Rick Dreiling during the call. However, there are internal issues impacting the company as well – the government recently fined Family Dollar $40 million when regulators uncovered a rat infestation in a warehouse, which forced hundreds of stores to close temporarily. The harsh reality of working for these dollar stores was covered in a recent episode of Last Week Tonight with John Oliver, and CNN summarized the situation for Family Dollar as "years of mismanagement."
Dollar Tree will close nearly 1,000 stores, including 600 Family Dollar locations due to declining sales. This represents about 15% of Family Dollar stores. The company cites inflation and increased shoplifting as reasons.
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As for inflation, it has impacted Family Dollar in the same way as many other retailers, from direct competitor Dollar General to the broader swath of department stores like Walmart. Customers are simply left with less spending power and, as Dreiling pointed out, many are struggling because of the recent reduction in the Supplemental Nutrition Assistance Program, or SNAP.
Family Dollar has about 8,000 operation stores right now, so this closure will leave it with 7,000 still going. Executives hope that these cuts will improve the company's profitability, but it will also leave some communities with even fewer shopping options. The discount stores often thrive in places where customers can't reach a supermarket or a big box store as easily.
While Family Dollar struggles, its competitor Dollar General is reportedly thriving. The company has been opening new stores while other retailers are closing them, with about 18,000 operational locations at the time of this writing. However, Dollar General faces just as many controversial reports as Family Dollar, with employees sharing horror stories about harsh working conditions and unrealistic expectations online.