Family Dollar will close nearly 1,000 stores, a move its executives say is a result of declining sales and economic headwinds.
Dollar Tree, which owns Family Dollar, said Wednesday that it would close 600 Family Dollar locations this year and phase out 370 more when their leases expire. Family Dollar currently has about 8,000 stores.
The company said stubborn inflation, theft and the end of pandemic-era additional benefits from the federal government’s Supplemental Nutrition Assistance Program were weighing on the company.
“Family Dollar is a victim of the macro environment out there,” Dollar Tree’s chief executive, Rick Dreiling, told analysts on Wednesday.
Those economic headwinds have been felt throughout the retail sector, but Family Dollar has suffered more than its peers.
Dollar Tree’s sales increased 6 percent last year. Dollar General, which will report its quarterly earnings on Thursday, last year reported a slight increase in sales and has 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 has been challenged with “the basics of retail” like 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 U.S. Justice Department last month for distributing products from a rat-infested warehouse.
“It was a mess when they acquired 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 spinning things around, said Peter Keith, an analyst at Piper Sandler. A newer leadership team — including Mr. Dreiling, who previously led Dollar General — has joined over the past two years with a new approach to fixing Family Dollar’s issues.
Those executives said in November that Dollar Tree would review its Family Dollar locations, looking to trim underperforming stores. The company said the closings announced on Wednesday would increase its earnings per share this year, but it lowered its earnings target for 2026, news that sent its stock down 15 percent.
“That suggests that this whole turnaround process is a bit more challenging than they were expecting,” Mr. Keith said.
