Dollar Store Bubble Bursting? Family Dollar Closing 370 Stores, Cutting Prices

(Steven Depolo)

Once upon a time, dollar stores were living the high life, enjoying increased revenue and making plans for expansion. Okay, that was just a year ago, but still, a lot can change in a year. And that’s definitely the case for Family Dollar, whose recent revenue drop has executives taking some pretty serious action.

Following a poor financial performance so far this year, Family Dollar announced that it will close 370 stores, reduce staff, and lower the prices on more than 1,000 items, Forbes reports.

The news is in stark contrast to the company’s previous plans to expand its foothold on bargain retail in the United States.

Last year, Family Dollar management announced it planned to triple the number of retail spaces for a total of 23,000 stores. At the same time, the stores added more brand name items and put in additional refrigerated displays for groceries to increase their appeal to consumers.

Now, officials with the company say they plan to slow their expansion pace to just 350 to 400 new stores. The chain opened 500 new stores in 2013 and planned to do the same in 2014.

Perhaps Family Dollar took their growth and the misguided belief that consumers could always find the best prices at their stores a little too seriously.

Thursday’s announcement seems to fall in line with the idea that dollar stores continued to expand at their own peril; a notion Consumerist reported last year.

Local dollar stores experienced a period of high patronage during the recession when consumers traded in shopping trips to big box retailers for those at discount joints. Companies, such as Family Dollar and Dollar General, took their popularity as a sign that consumers needed more stores, and a dollar store bubble was born.

The big question during the period of rapid discount retailer growth was whether or not there would be a demand for these stores once they’re all opened?

Unfortunately, Family Dollars’ move to cut stores, staff and prices might just give us our answer.

Family Dollar Closing 370 Stores And Lowering Prices After Revenue Falls 6% [Forbes]

by Ashlee Kieler via Consumerist