Is the bloom off the dollar stores?
After massive expansion over the past few years, including some 500 new stores in 2013, the company will undertake significant closures this year, Chairman and CEO Howard R. Levine said in its second quarter results release.
While reporting a total sales decline of 6.1 percent over the year-ago second quarter, and a comp-store drop of 2.8 percent, Family Dollar will close 370 older and less productive stores, and slow new store openings for fiscal 2015.
“New stores have always delivered the highest return on investment for Family Dollar, but our trends have been pressured,” by weather and competition, Levine said at the company's second quarter conference call. “We have reevaluated our site selection criteria and refined our real estate models.”
The company remains on track to open 525 stores this fiscal year, but now plans to open 350-400 new stores in fiscal 2015. That's still a healthy opening schedule, but the net new stores are still a sharp decline from recent years.
“It doesn't necessarily suggest that we are worried at this point about saturation in the marketplace. We still think that we have plenty of opportunities out there to open new stores,” said CFO Mary Winston. “We are refocusing our store investment on those that are going to deliver the highest return.”
But is this the beginning of a slowdown in a once-rapidly expanding sector?
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