Family Dollar is closing 370 U.S. stores and will open fewer new ones.
After booming during the recession and its aftermath, Family Dollar
could feel the pinch of Americans feeling richer, some say.
By Patrik Jonsson
ATLANTA — By the looks of things, Family Dollar — a mainstay American
dollar store franchise — has been doing bangup business: From rural
Rutledge, Ga., to high-end neighborhoods here in the Atlanta metro
area, newly built storefronts have been opening in rapid succession.
It’s that expansion that made the news that Family Dollar is now
suddenly retrenching by closing 370 stores so surprising. The
announcement illuminates, at least to some economic analysts, the
changing attitudes of the American consumer and how that impacts the
big money behind cheap deodorant and chips.
The dollar store business — dominated by Family Dollar, Dollar
General, and Dollar Tree — added 5,700 stores since 2009, expanding
the five-and-dime footprint in American communities by a stunning 30
percent. But on news of Family Dollar’s problems, investors have now
largely hit the brakes.
“Almost none of the analysts covering Family Dollar recommend buying”
its stock, writes Bloomberg News in an analysis.
That turnarnound in investor sentiment may suggest a rumble of change
in the American economy. After a half-decade of economic headwinds,
Americans are, bit by bit, feeling richer as household worth has hit
5.1 percent annual growth. That, in turn, means more Americans may be
eschewing the cut-rate merchandisers in favor of Walmart or even the
“The current recovery period has been characterized by slower growth
in household asset values than in previous recoveries, and until
recently, muted growth in house prices,” writes LaVaughn Henry of the
Cleveland Federal Reserve in a February analysis. “However, despite
consumers being somewhat constrained in their ability to draw from
expanding income and wealth sources during the recovery, the growth in
their consumption remains stronger than one might expect.”
Others doubt that trend is really what’s at work in the dollar store
segment. Americans are saving more than before the recession, and food
stamp spending continues to rise, suggesting that the bargain lot
business is still a good one, writes John Aziz in The Week.
“While the economy is recovering as a whole, times are still very
tough for a lot of people — including most of those who make up dollar
stores’ target audience,” writes Mr. Aziz.
Family Dollar blamed the harsh winter for its disappointing returns,
with profits down by 14 percent. But analysts say hefty local
competition from other ultra-discounters and just regular discounters
like Target and Walmart is what may really be at play.
“The saturated low-end marketplace makes it even more important for
each retail chain to run a tight ship,” writes Bloomberg’s Tara
Lachapelle. “The company with the best management Ö is the one that
can afford to offer the lowest price.”
To that end, Family Dollar, which is valued at not such a
bargain-basement $6.4 billion, isn’t giving up. Its strategy going