Family Dollar to Close Underperforming Stores While Embarking on Major Renovation

CHESAPEAKE, Va. — Dollar Tree Inc. plans to close as many as 390 underperforming locations and convert approximately 300 Family Dollar stores to the Dollar Tree brand during its fiscal year 2019.

The retailer stated that the need to shutter more than its "normal" number of around 75 locations stems from an inability "to obtain material rent concessions from landlords" of the properties, reported Convenience Store News sister publication Progressive Grocer.

New and renovated Family Dollar stores will convert to an updated model known as "H2." The prototype model "has significantly improved merchandise offerings, including Dollar Tree $1 merchandise, throughout the store," the company said. "H2 has produced increased traffic and provided an average comparable-store sales lift in excess of 10 percent over control stores. H2 performs well in a variety of locations, and especially in locations where Family Dollar has in the past been the most challenged."

The retailer plans to renovate a minimum of 1,000 Family Dollar stores in 2019 and ramp up its renovation schedule over the next few years.

"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," Dollar Tree stated.

Dollar Tree President and CEO Gary Philbin commented on strong sales from the Family Dollar banner during a recent fourth-quarter and full-year sales earnings call.

"Sales for the quarter were strong. 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 noted.

Companywide, Dollar Tree closed 84 underperforming stores during the fourth quarter of 2018, 37 more than originally planned for the year, and closed 10 Dollar Tree locations. It also opened 143 stores, expanded or relocated 14 stores, and opened five Dollar Tree locations that were converted from the Family Dollar banner.

Dollar Tree completed its acquisition of Family Dollar in July 2015, as Convenience Store News previously reported.

"Since the merger, we have prepaid $4.3 billion dollars of debt, captured significant synergies in both brands, and fully integrated most systems, functions and departments across banners," Philbin said. "By July, we will complete the most important phase: unifying our headquarters under one roof in Virginia.

"With these improvements behind us coupled with an investment grade debt rating and expected operating cash flow, before capital expenditures, of approximately $2 billion in 2019, we are in an ideal spot to accelerate our initiatives to position the Family Dollar and Dollar Tree banners for success," he added.

Dollar Tree operates 15,237 stores across 48 states and five Canadian provinces under the Dollar Tree, Family Dollar and Dollar Tree Canada banners.

Convenience Store News and Progressive Grocer are properties of EnsembleIQ.