Dollar Tree To Close Tons Of Stores

Consumable products are having a sales surge, but it's not enough to float Family Dollar.

Though some discount stores like ALDI are seeing an uptick in business due to the economic challenges many shoppers are facing right now, there's one surprising chain that's struggling more than we knew. Supermarket News reports that Dollar Tree has announced the upcoming closure of 1,000 stores in the first half of this year, 600 of which are under the Family Dollar brand and 400 of which are Dollar Tree locations. Despite the company's dismal outlook, however, there's one category that is selling so well that Dollar Tree is struggling to keep up with demand.

Dollar Tree shoppers reach for consumable goods

Though the closure of 1,000 stores might be dismal for Dollar Tree (the news predictably tanked its stock prices), CEO Rick Dreiling did say during a recent earnings call that one strategic business move has resonated with customers.

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An initiative called "More Choices" expands upon Dollar Tree's traditional $1 framework and offers refrigerated and frozen groceries at $3, $4, and $5 price tiers. This multi-price strategy kicked off in 2023 and is now live at 6,500 stores. This doesn't mean that prices have increased on the existing inventory; instead, it's an expansion of what's available to shoppers at various price points. The chain also added 17,000 cooler doors to its locations in 2023 to accommodate a growing demand for refrigerated and frozen products.

"The Dollar Tree multi-price-point strategy is doing significantly better than we thought it would do," said Dreiling on the call. "The customer acceptance has been off the chart, to be frank. Our biggest problem right now is getting enough merchandise into the stores fast enough, so the consumer can respond."

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Sales for consumable goods were up by 10.8% in Q4 2023 at Dollar Tree stores. And with those kinds of numbers, you're probably wondering why Dollar Tree needs to close so many stores right now. Part of the issue is that the pandemic-era increase in Supplemental Nutrition Assistance Program (SNAP) benefits came to an end last year, limiting what shoppers had the ability to buy and putting a dent in Dollar Tree's overall business.

"Categories like apparel, home decor, electronics, and general merchandise remain weak as lower-income consumers continue to be very deliberate about their spending," Dreiling said on the call. If someone's already making concessions to afford food, they might decide that the assorted gadgets and wall decorations available at the dollar store might have to wait until times get better—which is bad for Dollar Tree's overall business. But people have to eat, and the company's success with consumables is a not-so-subtle sign of the times.

 

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