Family Dollar, the struggling discount chain that caters to low-income customers predominantly in cities, said Wednesday it will close nearly 1,000 stores.
Years of mismanagement and poor conditions in stores have hurt Family Dollar’s brand. Family Dollar, which Dollar Tree owns, was recently fined more than $40 million for a rat infestation at a warehouse that forced hundreds of stores to temporarily close.
Decades-high inflation has hit shoppers hard, and a general consumer pullback has impacted Family Dollar customers and the chain’s profits, exacerbating its battle with discount competitors such as Dollar General, Walmart and others.
In addition, the reduction in benefits for the Supplemental Nutrition Assistance Program, or SNAP, has left struggling families with as much as $250 less per month. Discount stores and consumer goods companies say they have felt the impact of that loss.
“Persistent inflation and reduced government benefits continue to pressure the lower-income consumers that comprise a sizable portion of Family Dollar’s” customer base, CEO Rick Dreiling said Wednesday on a call with analysts.
Family Dollar will close 600 locations this year and 370 stores over the next several years as store leases expire. Family Dollar has around 8,000 US stores. Dollar Tree also said it will close 30 stores as leases expire.
The closures will improve the company’s profitability. But they are likely to leave a void for Americans with already limited shopping choices. Family Dollar stores are often in areas with few supermarkets, big box stores and other retail options.
Shares of Dollar Tree sank more than 13% to their lowest level this year in early trading Wednesday.
Discount retail has been one of the bright spots in the industry, dating back to the Great Recession, when the economic downturn and high unemployment meant Americans hunkered down, forcing retailers to slash prices to survive.
Years of bargain hunting has conditioned shoppers to look for discounts instead of paying full price, a mentality that remains to this day.
So, while thousands of department stores, speciality stores in malls and other retailers have closed, discount companies ranging from Walmart to Dollar General to TJ Maxx have grown.
These companies have focused on appealing to the shrinking middle class and lower-wage shoppers searching for low prices. As many shoppers have been squeezed by the highest level of inflation in decades, discount chains have improved their position.
