Due to its inability to compete with other cheap shops, bidenflation, and shifting consumer behavior, Dollar Tree plans to liquidate around 1,000 of its Family Dollar stores nationwide. This week, the corporation made the announcement in response to its dismal quarterly performance.
“Struggling to deal with a shift in consumer spending from higher-margin discretionary items like home décor, technology, and toys to lower-margin staples,” Reuters said on Wednesday.
“The bargain retail company said that, due to their lease expiring, it will close around 600 Family Dollar locations in the first half of fiscal year 2024 and 370 more over a few years, together with 30 Dollar Tree outlets.”
“We have launched a comprehensive evaluation of our Family Dollar portfolio to address underperforming locations that are not aligned with our transformative strategy for the company,” CEO Rick Dreiling said to investors during the firm’s quarterly call.
Apart from Dreiling’s hyperbolic statement that the corporation will close one in every eight stores, allow me to offer you some context for those adjustments.
“Higher margin discretionary products” at Family Dollar include things like $6 Batman action figurines, $25 light-up Bluetooth speakers, and $18 queen-size comforters. For many Americans, who have changed their purchasing patterns to include even “lower-margin staples” like food and gasoline, even bargain things like these are now out of their grasp.
The economy is doing well, the mainstream media tells me, yet Family Dollar is struggling in a time when mothers have to forgo the $8 Maybelline Fit Me Concealer in order to fill up the car with more petrol and get to work in the morning.
Not like all those missed Family Dollar purchases just vanished out of existence. Perhaps the majority of them went to Walmart and other competitors. The most significant indicator of the real status of the economy, however, is the fact that cheap customers moved from Family Dollar to Walmart and Dollar Tree rather than upmarket to Target.
Not even Dollar Tree is the same as it once was. The firm had to increase its well-known dollar-for-everything price to $1.25 on the majority of products back in 2021 due to inflation. “The extra pricing point [allows us] better freedom to manage the whole business, especially in a volatile, inflationary climate,” Dollar Tree CEO Michael Witynski stated at the time. Mostly, though, it enabled the business to make enough money to maintain its expansion. At least for the company’s Family Dollar stores, those expansion days seem to be behind them.
The company’s unwillingness to increase prices despite persistently rising inflation indicates that they would suffer a greater financial loss if they alienated customers who are becoming more cost-conscious.
Author: Steven Sinclaire
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