Family Dollar to Scale Back

Family Dollar store front

Family Dollar to Scale Back
| Published April 13, 2014 |

By Thursday Review staff

The economy has been sending mixed signals of late. Employment appears to be up again, at least based on the always fluid numbers reported by agencies which track unemployment figures. Wall Street has had a few record-setting days and weeks, but it has also fallen off a few small cliffs this year. Just this week the tech sector had its worst day in years. And after a rough winter which was largely responsible for a slump in retail sales, as well as a major decline in both new cars sales and home sales (not to mention home construction, which took one of its worst beatings in a decade) the experts are now predicting that real estate and home building can finally bounce back with the spring thaw.

But the major retailers have had a rough stretch. This week, discount retailer Family Dollar, which operates over 8000 stores across the United States, announced it will close at least 370 stores this year, along with the accompanying reduction in its workforce. Family Dollar did not say how many employees would be cut, but some industry analysts suggest that the 370 store figure could result in a minimum loss of 1500 jobs, and perhaps more.

In its statements to the media, Family Dollar offered the somewhat optimistic concession that it plans to move ahead with some long-range plans to open new stores in prime, high growth locations during the next 12 to 18 months. Obviously some employees might have the option to transfer within their region or elsewhere.

Family Dollar, which is based in North Carolina, said that the stores slated for closure are underperforming retail locations, but CEO Howard Levine indicated that extremely poor winter weather had a traumatic effect on sales nationwide, especially in those areas most impacted by heavy snowfalls, ice and subzero temperatures. Levine also said that transportation, delivery and other logistical factors had a devastating impact on stores located in those states where ice and snow shut down roads and rail lines, and where much higher than normal energy costs undermined store profits.

Family Dollar, according to ABC News, may have also suffered from both poorly deployed locations, as well as overexpansion during the Great Recession.

Several major retailers experienced disappointing sales over the holidays and during the first quarter. Troubled retailer JC Penney announced a few months ago that it will close up to 33 stores and lay off as many as 2000 employees. Radio Shack, which has seen its sales decline steadily over the last few years, will close nearly 1000 stores nationwide, coupling the downsizing with a concerted effort to upgrade its image and its product line. Sears and Kmart also saw greatly diminished sales, both during the critical holiday season, as well as in the early months of this year. Office supply giant Staples also said it plans to close at least 225 stores between now and the end of 2015.

And retail giant Target may have suffered the most when it was revealed that a massive security breach allowed hackers to gain access to the credit card information of tens of millions of shoppers. Target had its worst three month period in years and is in the process of layoffs this month.

During the harsh winter, which featured several Polar Vortex weather patterns—conditions which brought extreme cold, ice, and record-breaking snow to 45 states—retail analysts and economists worried that a weather-induced mini-recession might result, especially when consumers received those large home heating bills in the weeks and months that followed. Car sales and real estate also felt the pinch, as millions of Americans were unable or unwilling to venture outside. Further, many households are now adjusting to a sharp increase in food and grocery prices—a result of both severe winter conditions and a drought in California.

The good news is that many analysts and economists now say there are hopeful signs that spring will finally unleash a pent-up desire for spending by consumers.

Still other business analysts say that because of the rough winter, online sales benefitted directly. Amazon had its best holiday season yet. Family Dollar, like many retailers, has seen its share of total sales slip as online shopping options make it easier for customers to make purchases from home.

Related Thursday Review articles:

Staples to Close 12% of Stores; R. Alan Clanton; Thursday Review; Friday, March 7, 2014.

Home Construction & Home Sales Down; Thursday Review; Tuesday, March 25, 2014.

Radio Shack’s Image Deficit; Thursday Review; Tuesday, March 4, 2014.