If you were unaware, Family Dollar is struggling. The dollar store locations, which are owned by parent company Dollar Tree, have failed to be a lucrative investment for the discount retailer. Instead, they are draining cash from the seller at an unprecedented rate. In an effort to turn things around and make the new acquisition profitable, Dollar Tree has decided to start selling alcoholic beverages in about 1,000 Family Dollar locations – so it won’t be as family oriented as the name implies.
Dollar Tree, which is based out of Chesapeake, Virginia, decided at the end of May that they’ be changing the direction of Family Dollar. Because they are desperate to have the locations turn a profit, they’re going to start stocking them full of booze to appease the shoppers craving for such drinks. Not only will alcohol be available in many Family Dollar locations – maybe even those near you – they will also expand the freezer and cooler sections of the stores at more than 400 locations.
Besides the decision to sell booze and liquor at their Family Dollar locations, Dollar Tree also decided to close almost 400 stores in the chain throughout this year. In a usual year, they may close as many as 75 locations, so this is quite substantially larger and a bad sign for business.
When Dollar Tree took ownership over Family Dollar in 2015, they expected the acquisition to make them a lot of money. But the opposite has proven true. Instead of helping Dollar Tree turn a profit, their finances have dragged. Same-store sales of Family Dollar rose about 0.1 percent in 2018 and just 0.4 percent in 2017, which is hardly an improvement. Those failed numbers prompted the dollar store corporation to change their plan and start selling booze at Family Dollar locations.
The sales results sparked an idea in activist investor Starboard Value. They wanted to see a massive change to make sales better. That’s why some 1,000 Family Dollar stores will be renovated, and others will start selling an expanded selection of party goods and Dollar Tree-branded merchandise. Another two hundred locations will be rebranded to Dollar Tree.
“In our view, Family Dollar remains a drag on performance, and its transformation will continue to absorb both management time and company capital for the remainder of this year and beyond,” GlobalData Retailer managing director Neil Saunders wrote about the chain. “Fortunately, the steps being taken to improve performance at Family Dollar appear to be working.”
That’s a good sign. Because Dollar Tree is taking a proactive approach, Family Dollar might not go away entirely. Instead, it could still be found in a neighborhood near you – except with a cold supply of alcoholic beverages ready for consumption.
Dollar Tree is also making some changes to its namesake store. It will test to see if offering items that are more than a dollar will be good for business or not. Time will tell if shoppers prefer Dollar Tree remain a true dollar store or if they are more interested in getting things at a good value.
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