Dollar Tree on Wednesday said it plans to close 1,000 stores, including 600 Family Dollar locations that are slated to close in the first half of fiscal 2024.
The planned closures resulted in fourth-quarter charges totaling more than $2 billion, the company said in reporting results for fiscal 2023.
The company, which was formed through the merger of Dollar Tree and Family Dollar in 2015, had previously announced plans to undertake a review of its store portfolio. In addition to the 600 Family Dollar stores slated to close in the coming months, the company said it would close about 370 Family Dollar and 30 Dollar Tree stores during the next several years at the end of each store’s current lease term.
The store-closure news, combined with weaker-than-expected fourth-quarter results, sent the company’s stock plunging in double digits on Wednesday.
The company reported a net loss of $1.71 billion for the 14-week fourth quarter, which ended Feb. 3, and a net loss of $998.4 million for the fiscal year. The company said it incurred $594.4 million of charges in connection with the store portfolio review, plus a goodwill impairment charge of $1.07 billion and a trade name intangible asset impairment charge of $950 million.
Revenues for the quarter totaled $8.64 billion, an increase of 11.9% over the year-ago fourth quarter. Revenues for the full year were up 8%, to $30.6 billion. Both the most recent fourth quarter and year included an extra week.
Systemwide same-store sales for the quarter were up 3%, including a gain of 6.3% at Dollar Tree and a decline of 1.2% at Family Dollar. For the full year, same-store sales were up 4.6% overall, including 5.8% at Dollar Tree and 3.2% at Family Dollar.
Multiple price points gain traction
Despite the ongoing struggles at the Family Dollar banner, the company said it was seeing some encouraging results from certain initiatives, including the rollout of multiple price points at Dollar Tree and the installation of more coolers for refrigerated and frozen foods.
“The Dollar Tree multi-price-point strategy is doing significantly better than we thought it would do,” said Rick Dreiling, chairman and CEO, in a conference call with analysts. “The customer acceptance has been off the chart, to be frank. Our biggest problem right now is getting enough merchandise into the stores fast enough, so the consumer can respond.”
The initiative, called “More Choices,” includes the rollout of frozen and refrigerated items at $3, $4, and $5 price points, which have now been added at 6,500 stores.
The program is also expanding, Drieling said, citing plans to eventually offer multiple price points in eight out of every 10 freezer doors in a typical store, up from three out of 10 today.
In addition, he said the company added 17,000 cooler doors to its Family Dollar stores in 2023, which was 1,000 more than it had planned. That brought its average to 26 refrigerated and frozen cooler doors per store, which is approaching its goal of 30 per store.
Consumables drive sales growth
The focus on consumable products is reflected in sales growth, the company said.
Comp-store sales for consumables were up 10.8% in the fourth quarter at the Dollar Tree banner, as the company captured market share, Dreiling said. Unit volume in consumables was up 8%, he said, citing data from NIQ (formerly Nielsen), while the overall market was down 1.5%. He attributed the growth to the retailer’s ability to attract new and higher-income customers.
“We’ve made the consumables mix more relevant, and add to that the emphasis that we have placed on private brands,” said Dreiling, who is a former longtime Safeway executive and is also the former CEO of Dollar General.
He added that the consumables offering at Dollar Tree “harkens back to my old days as a grocer.”
The struggles at Family Dollar have been due at least in part to cutbacks in Supplemental Nutrition Assistance Program (SNAP) benefits, Dreiling said. Comp-store sales of consumables were down 2.2% sequentially at the Family Dollar banner, and comp-store sales of discretionary products were down 12%.
“Categories like apparel, home decor, electronics, and general merchandise remain weak as lower-income consumers continue to be very deliberate about their spending,” he said.