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
No. The “five and tens” were better stores — actual department stores. They were nothing like dollar stores. The dining counter at Woolworth’s had excellent food!
Dollar General and Dollar Tree have decent greeting cards.
Dollar General has the best selection of Temptations cat treats (I know y’all are interested in that - LOL!).
If fan of Dollar Tree for body washes and shampoos for kids and vacations. I am shocked that brand name body washes are now like $9 and for $1.25 I find something that I like the scent I’d just as much.
I remember during the pandemic even the BJ’s Warehouse would have prices on the shelf but it would ring it differently at the register. PITA as they would make me go and get a photo of the price tag, or wait 10 minutes to find an employee to slowly walk to the other end of the store to find the price. I also don’t go there as much as it’s an inconvenience to wait for their incompetence.
Decades ago I worked for a big conglomerate with hundreds of retail outlets.
We did the financial analysis—and it was financial and very straightforward.
We did not ask the “why” questions—we just crunched the numbers.
The 5% of the stores with the lowest profitability (usually losses) were closed each year.
Easy Peasy—no need to overthink it.
STAY CLASSY!!
I’m at my Dollar Tree every other day!! LOVE IT!!
We have a Dollar General not far from us. I stop in
there regularly to get a bag of ice and Ice Cream.
“Dollar General seems to be doing fine.”
Wall Street seems to disagree with you. My DG stock has been a dog over the last year or so.
They used to sell overstock. You could get a $6 tube of toothpaste for a $1 at Dollar Tree.
Now, manufacturers are making product for the DT.
I stopped in a month ago to buy some cling wrap. Most boxes had little product. Same thing with paper pads. They used to sell a 3 pack. Now they split them into 3 individual pads. The savings isn't there anymore.
Pretty good description of the one I visit.
Dollar Tree just built a building and combined the local Family Dollar. Old Family Dollar building is vacant now
Dollar-fifty Tree
The Dollar General near me is also doing fine, but, their PRICES are NOT much different than Walmart and Kroger.. in many cases they are slightly higher comparatively speaking
I'm NOT complaining.. just saying "if you can't make a PROFIT then you can's afford to stay in business.
Kresges...
There are seven Dollar Trees in a 15-mile radius for me, and I hit each of them when I’m in each area. Each manager does things slightly differently. I rarely go to Family Dollar or Dollar General — they just don’t have the same appeal.
I grew especially fond of Dollar General in 2020 as all the other retailers were mask Nazis but the DG had a big sign out front, “If masks make you feel uncomfortable, do not wear them”.
Breathe free!
I have remained loyal to them ever since.
I found a way to make Walmart correct their price tags. The staff kept promising to fix the price tags, but they never did. They claimed they were understaffed. Months later, the price tags still weren’t corrected. So, I decided to perform some community service and “help” the staff. I started removing the incorrect price tags myself, crumpling them up, and pushing them to the back of the shelves. Soon afterward, the correct price tags would appear. I guess when the clerks are stocking a shelf, they notice the price tag is missing, and they must print a new one.
I’ve studiously avoided Family Dollar and Dollar Tree because I didn’t want to feel unfaithful to good ol’ Dollar General.
I was told this was because the chains were started by ex-spouses. The ex-husband would invest in traffic surveys, local market potential, stuff, and build a store after extensive research. Then the ex-wife would then build the competition right across the street.
Same with Lowes and Home Depot. Bitter divorces that expanded shopping choices for us.
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