Posted on 04/11/2024 2:41:10 PM PDT by george76
Here's a look at what's gone wrong at both chains..
These are tough times for two big US dollar store chains. In the past month, Family Dollar said it will close nearly 1,000 stores and 99 Cents Only said it will go out of business.
Both companies said inflation and shoplifting have contributed to their troubles. While inflation has pressured the companies' low-income customer base and shoplifting has squeezed their profits, those factors alone can't explain their difficulties.
Years of strategic mistakes and underinvestment have plagued Family Dollar and 99 Cents Only, retail analysts say. Both brands were acquired by other companies and faltered under their new owners.
Family Dollar has around 8,000 stores mostly in cities, and the chain has struggled since Dollar Tree bought it in 2015 for $8.5 billion. Dollar Tree believed acquiring Family Dollar would help it compete against larger rivals. But it misjudged the deal.
Since the "botched acquisition," Family Dollar "has caused Dollar Tree nothing but hassle," Neil Saunders, managing director of GlobalData, said in a recent note to clients. "Basically, almost ten years on, Dollar Tree is still sifting through the mess it inherited and has not been able to completely turn around."
99 Cents Only, a chain on the West Coast and Texas, has also suffered from missteps, including stores that were too large and inefficient to run.
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Family Dollar will close 600 locations this year, and 370 stores over the next several years as store leases expire. These locations are unprofitable for the company
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Family Dollar's woes date back more than a decade. Messy stores, high prices and over-expansion plagued the company
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In 2014, activist investors- including Carl Icahn and Nelson Peltz - pushed Family Dollar to sell itself. A year later, Dollar Tree bought the company.
At the time, Dollar Tree was smaller than Family Dollar. While Dollar Tree and Family Dollar share similar names, they have different strategies.
Dollar Tree is mostly suburban, and caters to middle-income shoppers with party supplies and knickknacks. It acquired Family Dollar - which sells more basic foods and household essentials - to grow with lower-income customers in urban and rural areas.
The combined company hoped that by joining forces it could grow its customer base, reduce costs and fend off bigger retailers like Dollar General, which is located primarily in rural areas.
But analysts say the match between the two different chains was a poor fit, and Dollar Tree has struggled to manage the larger Family Dollar store base.
"When Dollar Tree bought Family Dollar, they didn't really know what they were doing," D'Arezzo said. "They didn't know how to run Family Dollar."
Family Dollar stores were in worse condition than Dollar Tree management expected, and early strategies to improve sales, such as selling beer, fell short.
Many Family Dollar stores were located too close to each other and cannibalized each other's own sales, too, D'Arezzo said.
"Family Dollar's sales have been sputtering, hurt by neglected stores, poor product selection and unhappy workers," The Wall Street Journal reported in 2018. Family Dollar "needs more work than the company originally thought."
A year later, an activist investor pushed for a sale of the "underperforming" Family Dollar business, and Family Dollar announced it would close 390 stores.
Even though Family Dollar has renovated thousands of stores in recent years, many stores are still poorly maintained, analysts say. Family Dollar was hit with a record $41.6 million fine by the Justice Department this year for violating product safety standards after selling items that were stocked in a rat-infested warehouse in West Memphis filled with live, dead and decaying rodents.
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99 Cents Only said that it filed for bankruptcy because "the last several years have presented significant and lasting challenges" in retail, including the impact of the pandemic, inflation and rising shoplifting.
But 99 Cents Only's challenges stem back further. The retail chain has not been profitable since 2015.
The company has more than 370 stores in California, Nevada, Arizona and Texas - 265 of which are in California. It was taken private in 2011 in a $1.6 billion leveraged buyout, and the company took on even more debt in the following years to stay afloat.
At the time of the deal, 99 Cents Only had the second-highest profit margin and the most sales per square foot among its rivals
Dollar General seems to be doing fine. The one close to my house is convenient and always busy.
Didn’t these used to be called 5 & 10 cent stores a few decades ago?
Not Biden’s fault. Not the big city DA’s faults. It’s the fault of the stores themselves. Got it?
ABC bad reporting.
Since Dollar Tree and Family Dollar merged they have been building new stores from the ground up with both brands in a side. I’ve seen them in rural areas.
Thus they “close” the two older individual stores.
And they now have the DG Markets. I haven’t been in one, but they have more fresh foods.
Must be someplace else because I know of at least 3 new ones being built.
That would be great!
this story hasn’t made sense to me since it first started circulating. The few I’ve seen around the country are located in areas where there are no walmarts around, so they’re the only game in the area. thought it was a great strategy.
0’Bidenomics did it, not “themselves”.
Woolworths /Murphys/McCrorys
i miss them all
I don’t have a single complaint about any of the dollar-type stores around me. The stores are clean, the employees are friendly, and the prices are reasonable.
But then again, I have no idea about how much shoplifting is going on in those stores.
It is the stores fault GIVE ME A DAMN BREAK!!!
A lot of people use the dollar stores here to stretch their food dollar as the prices are so much better. That’s probably the incentive for the DOJ whacking them with a $41 million dollar BS fine for a victimless crime. Either that or the DOJ is out to lawfare them because their merchandise out on shelves is disproportionately tempting/targeting “justice impacted individuals” in the hood.
other things are not good buys either....
however, if you wanted some cheap disposable utensils they got them...or clear plastic tongs...or plastic or shiny plastic serving platters....
the big mistake was increasing prices....even a quarter more was too much....
I’ve heard reports that DG has been overcharging customers by charging more than the price listed on the item. Don’t know how that could have happened, but I agree in that there is one close to my area and it’s very convenient.
I’m starting to see it more and more on social media - blame the business, even small businesses. “If they can’t figure out how to make money, then they deserve to close.”
They have no clue about life. None.
Family Dollar was basically a rural based chain like DG until the early 2000s when they aggressively went into the urban market. Initially, this worked well for them. They became the urban source for many of the low cost basics WalMart sold. Walmart never attempted the urban market. As with every other retailer in urban areas, the explosion of black retail theft destroyed the market.
Go into the urban market now and you will find the only stores left are wine/tobacco/lottery/bodega snack operations ran by Arab immigrants. It is truly a miserable situation brought about by lax law enforcement and terrible urban black mores.
I shop in a DG all the time.
Think about it...they were all-in on the Juicy Fruit/MAGA hat garbage...
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