Business

Family Dollar to close nearly 1,000 stores

Family Dollar will close nearly 1,000 stores, a move its executives say is the result of declining sales and economic headwinds.

Dollar Tree, which owns Family Dollar, announced Wednesday that it will close 600 Family Dollar locations this year and phase out 370 more as their leases expire. Family Dollar currently has approximately 8,000 stores.

The company said stubborn inflation, theft and the end of pandemic-era supplemental benefits from the federal government's Supplemental Nutrition Assistance Program were weighing on the company.

“Family Dollar is a victim of the macroeconomic environment,” Dollar Tree Chief Executive Officer Rick Dreiling told analysts Wednesday.

These economic headwinds were felt throughout the retail industry, but Family Dollar suffered more than its peers.

Dollar Tree sales increased 6 percent last year. Dollar General, which will report quarterly results on Thursday, reported a slight increase in sales last year and expanded its footprint.

Dollar Tree bought Family Dollar in 2015 in an $8.5 billion deal this was seen as a lifeline for Family Dollar, which had been struggling with its operations for years.

Family Dollar struggled with “the basics of retailing,” like keeping the store clean and the shelves stocked, said Joe Feldman, an analyst at Telsey Advisory Group. The channel was fined more than $40 million by the U.S. Department of Justice last month to distribute products from a rat-infested warehouse.

“It was a disaster when they acquired it,” Mr. Feldman said of the chain, “and it’s been a disaster ever since.”

The Dollar Tree management team that made the deal struggled to turn things around, said Peter Keith, an analyst at Piper Sandler. A new management team — including Mr. Dreiling, who previously led Dollar General — came on board over the past two years with a new approach to solving Family Dollar's problems.

Those executives said in November that Dollar Tree would overhaul its Family Dollar locations, seeking to remove underperforming stores. The company said the closings announced Wednesday would boost its earnings per share this year, but it lowered its profit target for 2026, news that sent its shares down 15 percent.

“It suggests that this whole turnaround process is a little more difficult than expected,” Mr. Keith said.

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