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Dollar Tree (DLTR) plans to close 1,000 stores, leaving shoppers looking for new budget destinations.
Stores that already compete with dollar store chains may receive additional traffic. Dollar Tree announced Wednesday that it plans to close 600 Family Dollar stores in the first half of fiscal 2024, and an additional 370 Family Dollar stores and 30 Dollar Tree stores once their current leases end.
Neil Saunders, managing director of retail at GlobalData, told Yahoo Finance that a variety of chains could benefit. “In some places it’s Walmart (WMT), in others it’s Dollar General.” Meanwhile, discount grocers like Aldi and other local options could also become new go-tos.
Dollar Tree itself may be able to retain some customers. “There will probably be some repossession… [the closed stores] It could be near another Family Dollar store, or it might be near a Dollar Tree store where they can receive a percentage of the sales,” said Joe Feldman, managing director at Telsey Advisory Group. told Yahoo Finance.
According to Placer.ai, many discount retailers have seen an increase in foot traffic in recent years as food and household goods become increasingly expensive. Customer traffic at discount stores and 100-yen stores has increased 7.1% so far this year, but Family Dollar has seen only a slight increase of 0.5%, the smallest of all chains.
Dollar Tree CEO Richard Dreyling said on an earnings call that store closures could cost the company $730 million in annual revenue, which would reduce the impact of other strong performers. He said it would give businesses an opportunity to get a piece of the pie.
But Sanders said the stores targeted for closure are likely to be smaller, so “it probably won’t be a huge benefit.”
Feldman said 80% of items sold at Family Dollar in 2023 were consumables, so stores offering low-priced groceries are likely to be the strongest competitors for new customers. .
Dollar Tree sells a lot of household goods, which could limit the number of customers who used to shop at Family Dollar. But the chain is making inroads, attracting customers from all income groups. Most of the 3.4 million new customers the company added in 2023 have household incomes of $125,000 or more, Dreyling said.
The loss of Family Dollar stores will be felt most acutely by consumers in food deserts who rely on them for their daily shopping.
“Many people use [Family Dollar] Because it’s convenient. Because we’re a local store, you can get the supplies you need right away. So when these stores close, it can be very frustrating for people in the area as they may have to travel even further. ” Sanders said.
This can also be troublesome for landlords, he added.
“Landlord [are] “We are once again a potential loser in all of this because if we can’t fill the vacancies, we could be left with vacancies,” he said.
Dollar Tree stock is down 8% since the beginning of the year following the announced closures, while Dollar General stock is up more than 10%.
This comes after Dollar Tree reported another disappointing quarter. In the fourth quarter, the company posted sales and earnings that fell short of Wall Street expectations, with a net loss of $1.7 billion, compared with net income of $452 million in the same period a year earlier. The company’s loss for fiscal year 2023 was $998 million, and its 2022 profit was $1.6 billion.
Dollar General, on the other hand, beat revenue expectations, posting fourth-quarter sales of $9.86 billion versus expectations of $9.78 billion. The company also predicted that same-store sales for the first quarter would exceed expectations.
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter @brooke di palma Or email bdipalma@yahoofinance.com.
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