Family Dollar to Close Nearly 400 Stores Nationwide

Family Dollar will close 390 stores this year in hope that it will reverse its financial woes, the discount retailer announced Wednesday.

The chain targets low-income shoppers with a variety of items sold for under $10 at its more than 8,000 stores. Family Dollar is owned by the Dollar Tree, which operates its own chain of 7,000 other stores. While Family Dollar sells items under $10, all of Dollar Tree products sell for $1.

Dollar Tree bought Family Dollar in 2015 for $8.5 billion, hoping to grow its customer base, reduce costs and fend off bigger retailers like Dollar General and Walmart. However, Dollar Tree's stock price has fallen while Family Dollar struggled after the deal.

Dollar Tree outlined an aggressive plan for Family Dollar on Wednesday after Family Dollar posted another quarter of slow growth during the holidays. CNN Business reports that sales at Family Dollar stores open at least a year grew 1.4 percent during the holiday period compared to a year earlier, trailing Dollar Tree's 3.2 percent growth.

As part of its plan, Family Dollar will close nearly 400 stores in 2019 one top of the more than 120 it closed in 2018. It will also re-brand around 200 stores as Dollar Tree this year.

Other Family Dollars will keep the name, but will be stocked with $1 Dollar Tree merchandise and alcohol sections.

"We are confident we are taking the appropriate steps to reposition our Family Dollar brand," Dollar Tree CEO Gary Philbin said in a news release Wednesday. In the wake of Starboard's criticism, Dollar Tree also will begin testing higher-priced products at its stores.

The new plan for growth comes a few months after an activist investor proposed that the company start selling Dollar Tree merchandise for higher prices and to dump Family Dollar.

"Dollar Tree significantly overpaid for Family Dollar, and this business is proving to be a meaningful distraction," Jeffrey Smith, CEO of Starboard Value, wrote to the company in January, CNN reports. Starboard Value, which is best known for revitalizing Olive Garden's parent company Darden, reportedly owns roughly 1 percent of Dollar Tree.

"The underperformance at Family Dollar since the acquisition has persisted long enough," Smith said.

Discount competitor Dollar General has more than 15,000 stores across the country and the chain even wants to expand into more rural areas. Dollar General has also started to sell more groceries at its rural locations.