Ross Taylor/AP
Years of mismanagement and poor store conditions have hurt Family Dollar's brand.
New York
CNN
—
Family Dollar, a struggling discount chain that caters mostly to low-income customers in cities, will close about 1,000 stores.
Family Dollar will close 600 locations this year and 370 more over the next few years as store leases expire. Family Dollar has about 8,000 U.S. stores.
Dollar Tree, which owns Family Dollar, also said it will close 30 stores as leases expire.
Years of mismanagement and poor store conditions have hurt Family Dollar's brand. The company struggled as discount rivals such as Dollar General, Walmart and others grew. More recently, inflation has hurt Family Dollar customers and the chain's profits.
“Continued inflation and reduced government incentives continue to put pressure on low-income consumers, who comprise a significant portion of the household dollar,” CEO Rick Drieling said on a call with analysts on Wednesday.
The closure will improve the company's profitability. But they leave a void for Americans with already limited shopping choices. Family Dollar stores are often located in areas with few supermarkets, big box stores and other retail options.
Shares of Dollar Tree fell more than 13% to their lowest level of the year in early trading on Wednesday.
Understaffed and dangerous shops
Dollar Tree, which focuses more on middle-income shoppers in the suburbs, acquired Family Dollar in 2015 for $8.5 billion.
The combined company hopes that by joining forces, it can grow its customer base, cut costs and fend off big retailers like Dollar General, mainly in rural areas.
But Dollar Tree has struggled to consolidate Family Dollar and has closed hundreds of Family Dollar stores in recent years.
Dollar Tree was in worse shape than expected when Family Dollar Stores bought the business, analysts say. Although Family Dollar has renovated thousands of stores in recent years, many stores are still poorly maintained. Stores are often understaffed and boxes clog the aisles.
Family Dollar, Dollar Tree, Dollar General and other discount stores have long had theft problems, sometimes operating stores with few affected employees. Violent robberies and other crimes.
Dollar Tree employees have complained about unsafe working conditions, and OSHA criticized the company last year for its “consistent disregard for human safety,” suggesting that the company “sees that profits are more important than people.”
Family Dollar was hit with record fines this year for violating product safety standards after selling products full of live, dead and rotting rodents at a rat-infested warehouse in West Memphis.
The Justice Department said the $41.6 million fine was “the largest monetary criminal penalty ever in a food safety case.”
Last year, Dollar Tree announced a review of its entire portfolio of Family Dollar stores.
As Family Dollar struggled, rival Dollar General took off: Dollar General opened about 1,000 stores a year, making it the fastest-growing retailer in the United States. The company has around 18,000 stores.
