Family Dollar will close nearly 1,000 stores

Family Dollar will close nearly 1,000 stores, a move executives say is the result of declining sales and economic headwinds.

Dollar Tree, which owns Family Dollar, said Wednesday it would close 600 Family Dollar locations this year and phase out another 370 when their leases expire. Family Dollar currently has approximately 8,000 stores.

The company said persistent inflation, theft and the end of the pandemic era added benefits from the federal government’s Supplemental Nutrition Assistance Program weighed on the company.

“Family Dollar is a victim of the macroeconomic environment,” Dollar Tree CEO Rick Dreiling told analysts on Wednesday.

These economic headwinds are being felt across the retail sector, but Family Dollar has suffered more than its peers.

Dollar Tree’s sales rose 6 percent last year. Dollar General, which reports its quarterly results on Thursday, reported a slight increase in sales last year and has done so expanded its footprint.

Dollar Tree bought Family Dollar in 2015 in an $8.5 billion deal that was seen as a lifeline for Family Dollar, which had struggled with its operations for years.

Family Dollar is being challenged with “retail basics” such as keeping the store clean and the shelves stocked, said Joe Feldman, an analyst at Telsey Advisory Group. The chain was fined more than $40 million by the US Department of Justice last month for distributing products from a rat-infested warehouse.

“It was a mess when they bought it,” Mr. Feldman said of the chain, “and it’s been a mess ever since.”

The Dollar Tree management team that closed the deal had trouble turning things around, said Peter Keith, an analyst at Piper Sandler. A newer leadership team — including Mr. Dreiling, who previously led Dollar General — has joined in the past two years with a new approach to solving Family Dollar’s problems.

Those executives said in November that Dollar Tree would overhaul its Family Dollar locations to trim underperforming stores. The company said the closures announced Wednesday would boost earnings per share this year, but it cut its 2026 profit target, sending the stock down 15 percent.

“That suggests this whole turnaround process is a bit more challenging than they expected,” Mr Keith said.