By Nathaniel Meyersohn | CNN
New York — Family Dollar, the struggling discount chain that caters to low-income customers predominantly in cities, will close about 1,000 stores.
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, which owns Family Dollar, also said it will close 30 stores as leases expire.
Years of mismanagement and poor conditions in stores have hurt Family Dollar’s brand. The company has struggled as discount competitors such as Dollar General, Walmart and others grew. More recently, inflation has hit Family Dollar customers and the chain’s profits.
“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.
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.
Understaffed and dangerous stores
Dollar Tree, which focuses more on middle-income shoppers in suburbs, bought Family Dollar in 2015 for $8.5 billion.
The combined company hoped that by joining forces, it could grow its customer base, reduce costs and fend off bigger retailers like Dollar General, which is mainly in rural areas.
But Dollar Tree has struggled to integrate Family Dollar and has closed hundreds of Family Dollar stores in recent years.
Family Dollar stores were in worse condition than Dollar Tree expected when it acquired 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 block aisles.
Family Dollar, Dollar Tree, Dollar General and other discount stores have had longstanding theft issues, operating stores with just a handful of employees who have at times been victims of violent robberies and other crimes.
Dollar Tree employees have complained about unsafe working conditions, and OSHA last year criticized the company for a “continued disregard for human safety” that “suggests the company thinks profits matter more than people.”
Family Dollar was hit with a record fine this year for violating product safety standards after selling items that were stocked in a rat-infested warehouse in West Memphis filled with live, dead and decaying rodents.
The $41.6 million fine was “the largest-ever monetary criminal penalty in a food safety case,” the Justice Department said.
Last year, Dollar Tree announced it would review its entire portfolio of Family Dollar stores to identify underperforming locations.
As Family Dollar struggled, rival Dollar General boomed: Dollar General has opened about 1,000 stores a year, making it the fastest-growing retailer in the United States. The company has around 18,000 stores.
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