CHESAPEAKE, Va. – Citing tariffs and increased operating costs, national discount retailer Dollar Tree, which the parent company for Family Dollar, announced it had closed 84 under-performing Family Dollar locations in the fourth quarter of last year, and announced plans to close nearly 400 this year. The announcement came in the company’s 2018 fourth-quarter earnings report released last week.
As of Feb, 2, the Company operated 7,001 Dollar Trees and 8,236 Family Dollars. There is one of each in Great Bend, but the fate of these and other stores remains unknown.
“We have not shared a listing of stores that will, or may, close,” said Kayleigh M. Painter, investor and media relations manager, for Dollar Tree.
In this fiscal year, Family Dollar real estate initiatives include 1,000 store renovations, 200 re-banners (Family Dollar stores to Dollar Tree), and closing as many as 390 Family Dollar stores, Painter said. The chain also plans to open 550 new stores (350 Dollar Trees and 200 Family Dollars).
Dollar Tree, a Fortune 200 Company, operated 15,237 stores across 48 states and five Canadian provinces as of Feb. 2. Stores operate under the brands of Dollar Tree, Family Dollar, and Dollar Tree Canada.
“Sales for the quarter were strong,” said Gary Philbin, president and chief executive officer. “Our results demonstrate the increasing strength of the Dollar Tree brand, and accelerated progress on the Family Dollar turnaround, as Family Dollar delivered its strongest quarterly same-store sales growth of the year.”
He said the company was confident and has good momentum going into 2019. “Our merchants at both banners have delivered a 2019 plan that we believe overcomes most of the effect of tariffs at the 25 percent level, and provides opportunity for margin improvements if tariffs are not increased.”
The retailer moved “aggressively in the fourth quarter to optimize Family Dollar’s performance,” he said.
The company is seeking material rent concessions from landlords on under-performing stores. Without such concessions, the Company expects to accelerate its pace of store closings to as many as 390 stores in fiscal 2019 (compared to the banner’s normal annual closing cadence of approximately 75 stores), Philbin said.
Additionally, the Company plans to install adult beverages in approximately 1,000 stores and expand freezers and coolers in approximately 400 stores.
Quarterly results
Same-store sales increased 2.4 percent in the quarter. Same-store sales for the Dollar Tree banner increased 3.2 percent while store sales for the Family Dollar banner increased 1.4 percent, the statement notes.
Gross profit for the quarter was $1.91 billion, compared to $2.10 billion in the prior year’s 14-week quarter. As a percentage of sales, gross margin decreased to 30.8 percent compared to 33 percent in the prior year.
The decline was driven primarily by higher markdowns, and domestic freight, distribution costs and occupancy costs.
Looking at the year as a whole, net sales for the 52-week fiscal 2018 increased 2.6 percent to $22.82 billion from $22.25 billion in the 53-week fiscal 2017. Same-store sales increased 1.7 percent. Sales for the Dollar Tree banner increased 3.3 percent and increased for the Family Dollar banner increased 0.1 percent.
Gross profit decreased by $74.4 million to $6.95 billion in fiscal 2018 compared to $7.02 billion in the prior year’s 53-week period. As a percentage of sales, gross margin decreased to 30.4 percent from 31.6 percent in the prior year.
The actions taken in 2019 under the Store Optimization Program alone are expected to provide a comparable store sales lift of up to 1.5 percent once they have been implemented by the end of fiscal 2019.
“Our Dollar Tree business has continued to perform extremely well,” Philbin said. “It’s a concept our customers love, as validated by our streak of 44 consecutive quarters of (comparative) sales growth.”
He believes the company is taking the appropriate steps to reposition the Family Dollar brand for “increasing profitability as business initiatives gain traction in the back half of fiscal 2019.” “Improving the consistency of execution and optimizing our real estate portfolio will contribute to a meaningful improvement in our shoppers’ in-store experience and store traffic,” he said. “We believe we are well-positioned to capture the significant opportunity ahead of us as we focus on creating and driving value for our shareholders.”
