Dollar General Sued Over Understaffed, Overpriced, “Slovenly And Uninviting” Stores

Dollar General has too many stores and too few employees, it purposely overcharges customers, its stores are a mess, with unsold products piling up – and it’s all part of a scheme to enrich the company’s executives at the expense of shoppers and shareholders.

Those accusations are being leveled by an institutional investor, in a federal lawsuit filed this week. The suit claims that the dollar store chain has misled investors into believing the retailer is in much better financial shape than it actually is, when in reality, shoppers are being cheated, employees are being overworked, shareholders are losing money, all while company executives are cashing in.

The Washtenaw County (Michigan) Employees’ Retirement System filed suit in Dollar General’s home state of Tennessee, accusing the retailer of engaging in “a fraudulent scheme designed to artificially inflate Dollar General’s reported revenue and profits,” boosting its stock price to unrealistic levels, and leaving investors holding the bag when share prices collapsed by nearly half over the past year.

By building thousands of new stores over the past decade, but leaving many of those stores “chronically understaffed,” employees have been placed in situations where their “assigned tasks could not possibly be completed,” the lawsuit alleges. As a result, stores have suffered a “buildup of unwanted inventory, the destruction and loss of tens of millions of dollars’ worth of store merchandise, the mispricing of items, and the systematic overcharging of Dollar General’s customers at checkout above the listed retail price.”

Several states in recent years have sued or fined Dollar General for pricing irregularities. Just last month, the retailer agreed to pay $1 million in fines and penalties to the state of Ohio, which had accused it of “deceptive pricing” by advertising one price at the shelf and charging a higher price at the register. And just last week, Dollar General agreed to pay more $850,000 to the state of Wisconsin to resolve similar claims. Yet another similar case is still pending in the state of Missouri, as are several complaints filed by Dollar General shoppers.

The investors’ lawsuit blames “chronic understaffing” for leaving employees without “sufficient time to update merchandise pricing.” But it also claims the overpriced products are no accident. It calls them part of a deliberate “campaign of systematically overcharging customers,” with the overcharges going “directly to the bottom line as profits.”

And pricing is only part of the problem, the plaintiffs go on. “Merchandise often arrived with no place to display it. Items were regularly lost, broken, or otherwise unsaleable. Items which were not selling at Dollar General steadily piled up. Stores became so crowded with disorganized merchandise that some were closed by fire marshals for being dangerously overpacked.” These practices, the lawsuit goes on, “resulted in a slovenly and uninviting shopping environment which dissuaded consumers from shopping at Dollar General.”

So while the company was opening more stores, boosting the bottom line with overpriced products, and painting a rosy picture to investors, the plaintiffs say Dollar General’s stock price soared, as “Dollar General and certain of its key executives sold hundreds of millions of dollars’ worth of Dollar General stock.” But when the retailer couldn’t hide its problems anymore, the stock price tumbled, “causing hundreds of millions of dollars in losses to Dollar General investors, who suffered economic harm as the truth about Dollar General, its operations, and its prospects began to be revealed.”

In addition to Dollar General’s “long-running overpricing scheme” that the plaintiffs say artificially increased the retailers’ profits, the lawsuit cites occasions where the retailer severely underprices items, to the detriment of its bottom line. Dollar General’s practice for items that are deemed unsaleable and destined for the dumpster, is to mark their price down to one cent and pull them from the shelves. But the same overworked employees who the plaintiffs say don’t have time to update prices at the shelves, also don’t have time to pull these “penny items” off the shelves before they end up in shoppers’ carts. These items, the lawsuit points out, “have become targets for bargain hunters,” who buy these unsaleable items for just a penny, depriving Dollar General of the ability to throw them out and write them off.

The plaintiffs are accusing Dollar General of securities fraud, and are seeking class-action status on behalf of all stockholders who purchased shares between May 2020 and August 2023.

So if you’ve ever felt you were overcharged at a Dollar General store, you may not be alone – just ask shareholders who say they paid far too much for Dollar General stock, and are now looking to the courts to make Dollar General pay the price.

Image source: Random Retail