If your local Family Dollar doesn’t seem to be in very good shape, it may not be a Family Dollar for long. The retailer’s owners say they’re taking a close look at each store in the chain to decide which locations to keep, and which to move, rebrand or close altogether.
“We have initiated a comprehensive review of our Family Dollar portfolio to address underperforming stores that are not aligned with our transformative vision for the company,” Rick Dreiling, CEO of Family Dollar’s parent company Dollar Tree, told investors last week. “This will involve, among other things, identifying stores as candidates for closure, rebannering (to Dollar Tree), or relocation, with the goal of ensuring that each asset under the Family Dollar banner is delivering its full value for our shareholders on a sustainable basis.”
Dollar Tree has been working to improve Family Dollar’s stores, product selection and financial performance since acquiring the rival dollar store chain back in 2015. But this is the first time executives have discussed a large-scale review that could end with throwing in the towel on locations that are beyond fixing.
After more than a year’s work refreshing stores, “improving and expanding our product assortment,” introducing more store-brand items and focusing on affordability, “our pricing in Family Dollar is as good as it’s ever been,” Dreiling said. But it’s still not good enough for increasingly price-sensitive shoppers.
“Our lower-income customers at Family Dollar have been especially pressured by reductions in government SNAP benefits,” Dreiling explained. They were also “negatively affected by lower tax refunds this year.” And, of course, inflation is taking a toll on their budgets. “We saw a notable pullback in spending, particularly in higher-margin discretionary categories,” and Family Dollar’s financial performance this past quarter suffered as a result.
So “we remain focused on the factors that we can control, and we’ll continue to navigate as best we can around those that we don’t,” Dreiling went on. And what the company can control is deciding whether some Family Dollar locations are worth saving. “We are weighing right now, what is the proper mix between Family Dollar and Dollar Tree,” since the latter is doing much better than the former.
Despite raising base prices to $1.25 a couple of years ago, and adding more items priced even higher, Dollar Tree is attracting more shoppers and doing so more profitably. While Family Dollar opened more than 300 new stores over the past year and welcomed more than two million new shoppers, Dollar Tree opened about the same number of new stores and attracted twice as many new shoppers, more than four million. And “most of our new customers over the past year have household incomes over $125,000,” Dreiling said, as higher-income shoppers looking to save money are saving it – and spending it – at Dollar Tree. “The Dollar Trees become very profitable very fast, and it appears that we’ve broadened the demographic appeal of that brand,” Dreiling said. “A well-run Dollar Tree is a pretty powerful retail format. And it’s a format that a lot of people would shop in.”
But Dollar Tree is a “thrill of the treasure hunt” kind of store, where you never really know what you’re going to find. Family Dollar is more of a traditional retail store, “where there’s an expectation of what has to be in that store, and it’s got to be there every time I come in to get it.”
And it would help if it’s in a decent store with decent prices. “We are offering a better value proposition in Family Dollar than it has ever had,” Dreiling insisted. But some Family Dollar stores are simply not well-run and not in attractive locations. Dreiling didn’t offer any exact figures, but the “comprehensive review” is likely to end with a number of Family Dollar stores closing, some moving to new locations, and some being converted to the better-performing Dollar Tree brand.
While the company may be ready to give up on some Family Dollar stores, it’s not giving up on the chain altogether. “I am a strong believer in the Family Dollar brand and what it means to our customers and associates in thousands of communities across the country,” Dreiling said. The chainwide review will help “fortify our base, strengthen our brand and allow Family Dollar to achieve its full growth potential.”
With many shoppers still suffering financially, “there’s no doubt there’s pressure on that consumer,” Dreiling said. “But I’ve always said the lower-income consumer has the ability to figure it out.”
And shoppers, employees and investors are hoping that, after more than eight years of trying to fix Family Dollar, the company will soon “figure it out,” too.
Image source: Paul Sableman 
The slogan they got on the front shape up or shutdown. Is saying it correct. Every time I go to one of those store they got some kind of problem. they close because they don’t have no one to work. they close too early sometime, they don’t open up on time sometimes. Those stores is run like a person on Crack.