Family Dollar and 99 Cents Only announce store closures and going out of business due to inflation and shoplifting, but analysts point to years of strategic mistakes and underinvestment as the main causes of their troubles.
Both companies said inflation and shoplifting have contributed to their troubles. While inflation has pressured the companies' low-income customer base and shoplifting has squeezed their profits, those factors alone can't explain their difficulties.
99 Cents Only, a chain on the West Coast and Texas, has also suffered from missteps, including stores that were too large and inefficient to run. Dollar Tree is mostly suburban, and caters to middle-income shoppers with party supplies and knickknacks. It acquired Family Dollar - which sells more basic foods and household essentials - to grow with lower-income customers in urban and rural areas.
Family Dollar stores were in worse condition than Dollar Tree management expected, and early strategies to improve sales, such as selling beer, fell short. Even though Family Dollar has renovated thousands of stores in recent years, many stores are still poorly maintained, analysts say. Family Dollar was hit with a record $41.6 million fine by the Justice Department this year for violating product safety standards after selling items that were stocked in a rat-infested warehouse in West Memphis filled with live, dead and decaying rodents.
The company has more than 370 stores in California, Nevada, Arizona and Texas - 265 of which are in California. It was taken private in 2011 in a $1.6 billion leveraged buyout, and the company took on even more debt in the following years to stay afloat.
Retail Store Closures Going Out Of Business Inflation Shoplifting Strategic Mistakes Underinvestment
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