CHESAPEAKE, VA. — In its fourth-quarter fiscal 2023 results released today, Dollar Tree Inc. (NASDAQ: DLTR) announced that it plans to close approximately 970 underperforming Family Dollar stores. In addition, Chesapeake-based Dollar Tree identified approximately 30 underperforming Dollar Tree stores for closure.
Roughly 600 Family Dollar stores are slated to close in the first half of fiscal 2024, with about 370 Family Dollar locations and the 30 Dollar Tree locations set for closure at the end of each store’s current lease term.
Years of mismanagement and poor conditions in stores have hurt Family Dollar’s brand, reports CNN. The discount chain is known for catering to low-income customers predominately in cities. Dollar Tree, which focuses more on middle-income shoppers in suburbs, bought Family Dollar in 2015 for $8.5 billion.
While Family Dollar has struggled, rival Dollar General has opened about 1,000 stores per year, making it the fastest-growing retailer in the United States, according to CNN. Dollar General’s portfolio totals around 18,000 stores.
For the quarter that ended Feb. 3, Dollar Tree reported a net loss of $1.71 billion compared with a profit of $452.2 million during the same period last year. Part of the loss is attributed to “a comprehensive store portfolio optimization review” conducted during the quarter. This process involved identifying stores for closure, relocation or re-bannering based on an evaluation of current market conditions and individual store performance. Dollar Tree incurred $594.4 million of charges in connection with the store portfolio optimization review.
In addition, the retailer had a $950 million trade-name impairment charge and a $1 billion goodwill impairment charge during the quarter. (According to Investopedia, an impairment charge is a process used by businesses to write off worthless goodwill. These are assets whose value drops or is lost completely, rendering them completely worthless.)
“Our core operating performance was strong in the fourth quarter, despite some unanticipated developments related to general liability claims,” says Jeff Davis, CFO of Dollar Tree.
The company posted quarterly net sales of $8.63 billion. Its fiscal 2024 net sales outlook ranges from $31 billion to $32 billion. Analysts expected $8.67 billion in quarterly sales and a 2024 forecast of $31.65 billion, according to CNBC.
Dollar stores have struggled to deal with consumers shifting their spending toward lower-margin essentials while reducing their spending on higher-margin discretionary products like home décor, electronics and toys, reports CNBC. These stores also face stiff competition from Walmart and Chinese e-commerce platform Temu.
Following the release of the fourth-quarter results this morning, Dollar Tree’s stock price decreased from $149.85 to $129 per share. A year ago, the company’s stock price stood at $142.29 per share.
Operating both Dollar Tree and Family Dollar brands, Dollar Tree maintains a portfolio of about 15,115 stores throughout 48 states and Canada.
— Kristin Harlow