Once upon a time it was practically guaranteed that no matter what was happening with the economy, the 99¢ or $1 stores would not be affected.
After all, if regular stores were too expensive for cash-strapped Americans, many would no doubt turn to stores like Family Dollar for cheap essentials.
This belief was shattered by the news that Family Dollar would be closing down 370 stores. The move to close hundreds of stores and lay-off thousands of workers is said to coincide with the slashing of prices nationwide.
What went wrong for the seemingly invincible dollar store chain? The closings and lowered prices are due to a six percent loss in revenue over the past year.
According to Family Dollar Chairman and CEO Howard Levine, the retailer’s financial woes could be blamed on poor weather. The harsh winter and excessive snowfall is said to have led to closed stores, disrupted deliveries, and greater than anticipated maintenance costs.
Disappointed #FamilyDollar will be cutting jobs & closing 370 stores. Where will I get candy for my office desk now? http://t.co/7ttL1Z2iOA
— Jim Blair (@MrMarketingPhD) April 10, 2014
#FamilyDollar is closing 370 stores. I feel so sorry for all those who are going to suffer because of this. I'll… http://t.co/qQIb3vQsEx
— It Works by Alicia (@brownbaggirl) April 10, 2014
The problem with this explanation is that it only accounts for winter weather within recent months. Since revenue losses go back to the latter part of 2013, it’s hard to use weather as the entire reason for a drop in profits.
The big question is why customers aren’t shopping at dollar stores as much as they did during to and even prior to the recession.
Some analysts believe that weakening dollar store profits (competitors Dollar General and Dollar Tree also saw losses) mean that the American economy has potentially strengthened quite a bit. After all, if dollar stores are suffering, surely American shoppers are taking their dollars to more expensive stores?
Regardless of whether or not this is the case, Family Dollar’s plans for expansion have been dealt a sizable blow. The chain opened 500 new stores in 2013. Instead of opening an additional 500 stores in 2014, it’s being reported that Family Dollar will cut back to about 350 or 400 new stores.
Image via Wikimedia Commons
