Dollar Tree, the discount retailer, announced on Wednesday that it plans to close nearly 1,000 stores in the coming years. The closures will affect both its namesake general discount stores and its subsidiary chain, Family Dollar. Family Dollar will see 600 locations shut down in the first half of 2024, with an additional 370 stores closing over the next several years as leases expire. Dollar Tree itself will also be closing 30 stores as leases expire.
The decision to close these stores comes after Dollar Tree reported a net loss of $1.71 billion, or $7.85 per share, in the fourth quarter of 2023. This loss is a stark contrast to the year-ago profit of $452.2 million, or $2.04 per share. The company also took a $594.4 million charge for a portfolio optimization review and incurred a goodwill impairment charge of $1.07 billion, as well as $950 million in other asset impairment charges in the reported quarter.
The struggles faced by Dollar Tree and Family Dollar are attributed to changing consumer spending habits, with more people favoring e-commerce platforms like Temu, a Chinese app offering everyday items for as low as 99 cents. Dollar Tree, which operates over 16,700 stores, including more than 8,400 Family Dollar locations, has been reviewing its Family Dollar business to potentially shut down underperforming stores in order to return to growth.
Family Dollar has also faced health and safety concerns, including selling contaminated cinnamon with high levels of lead and goods from a rodent-infested warehouse. The company pleaded guilty to these offenses and will pay a record $41.7 million in fines to the federal government.
The announcement of the store closures led to a 15% drop in Dollar Tree's shares before the opening bell on Wednesday. Analysts believe that the acquisition of Family Dollar in 2015 has been a source of trouble for Dollar Tree, with Neil Saunders, managing director of GlobalData, calling it a "botched acquisition." He noted that Family Dollar does not want to invest in markets where it cannot win and is not profitable.
Overall, Dollar Tree expects 2024 sales between $31 billion and $32 billion, falling slightly below Wall Street estimates. Representatives for Dollar Tree did not immediately respond to requests for comment on the store closures and financial losses.
