Family Dollar has vowed to close stores, cut jobs, and slash prices, in an effort to remain competitive. Company officials said the changes are expected to save more than $45 million by the beginning of the third quarter.
Chief Executive Howard Levine said profits fell nearly 35 percent in the second quarter, which ended on March 1. He blames the brutal winter, slow economy, and tough competition from other discount chains:
“The 2013 holiday season was challenged by a more promotional competitive environment and a more financially constrained consumer… like many retailers, our second quarter results were significantly impacted by severe winter weather.”
As reported by Reuters, Family Dollar plans to close a total of 370 stores throughout the United States. Levine said the closures are limited to stores that are considered to be “weak performing.”
Although nearly 400 stores will be closed, they are being replaced by “350 to 400 new stores” in 2015. Historically, the company opened an average of 500 new stores every year.
The reorganization plan also includes the elimination of numerous corporate jobs. Company officials said Family Dollar will cut nearly 10 percent of their corporate workforce.
Company officials also announced that they will be slashing prices on nearly 1,000 items. Although sales of tobacco products and frozen foods have remained strong, consumables, home products, electronics, apparel, and seasonal items, took a hit.
Family Dollar has faced strong competition from similar discount retailers, including Dollar General and Dollar Tree. Wall Street Journal reports that Dollar General plans to open 700 new stores before the end of the year. Dollar Tree will open nearly 400.
Wal-Mart will likely add to the competition with 325 new Express stores. The smaller stores will provide customers with a convenient option, as opposed to their larger stores.
As the economy remains weak, low-income families often rely on discount stores for household products, cleaning supplies, and health and beauty items. Family Dollar and Dollar General both offer a wide range of products at discounted prices. In contrast, Dollar Tree stores carry fewer items. However, all merchandise is priced at $1 or less.
Family Dollar was founded by Leon Levine in 1959. The first store was located in Charlotte, North Carolina. Levin said his company was founded on the principle “the customers are the boss, and you need to keep them happy.”
According to the company website, there are currently more than 8,000 Family Dollar stores nationwide.
As Family Dollar attempts to reorganize, the company will close numerous locations and reduce their workforce by 10 percent. However, as they plan to lower prices, the news may be good for consumers.
[Image via JB Levy]