Discount retail company Family Dollar Stores Inc. announced Thursday morning that they are planning to close 370 of its 8,1000 stores and cut jobs. There will also be a permanent price cut on over 1,000 items. The company, which is based in Matthews, North Carolina, is taking action to try and help its business.
The discount retail chain also mentioned early Thursday that their earnings are faltering, with the net income dropping 35 percent to $90.9 million for the second fiscal quarter, which had ended on March 1. As a comparison, last year at the same time, the chain had earned $140.1 million.
Chairman and CEO Howard Levine of the company has released a statement saying that they are taking immediate, strategic action to try and pull the company up before it falls further down. The company is also wanting to slow down the opening of new stores at the beginning of the fiscal year in 2015. Currently, there are plans on opening around 350-400 stores, compared to this fiscal year which opened 525 stores.
Family Dollar is not the only discount retailer dealing with economic troubles. Its competitor Dollar General, which has 11,100 stores, reported a weak fourth-quarter performance. Another dollar-store chain, Dollar Tree, which operates 5,000 locations, missed expectations for profit in February. The news is a great deviation from a few years ago, when the Great Recession had hit and consumers without much money to spend packed the discount stores in search of low prices and great deals.
Some of the issues that have been arising with discount retail chains are the fact that customers in the low-income bracket are facing more constraints on spending while those in the higher-income are enjoying the improvement of house values and the stock market. The cold winter that overwhelmed the Northeast and Midwest also hiked utility bills and the price of food, placing even more of a constraint on low-income families.
“The poor weather has definitely not helped,” Levine has said. “It was the direct result of many stores needing to close. Merchandise was also unable to be delivered and expenses for maintenance and utilities were much higher than we had originally thought.”
The concept of Family Dollar was conceived in 1958 to Leon Levine, a 21-year old entrepreneur who had grown up helping in the family’s retail store in North Carolina. In 1959, he opened the first Family Dollar in Charlotte. The business grew to include more stores over the following years, cementing Family Dollar as a known company for providing items at a cheap price. Leon retired in 2003 and his son Howard took over the company as Chairman and CEO.
Howard Levine has stated that the company’s closing of 370 stores, along with job and price cuts, is to be enacted immediately to try and help financial performance as Family Dollar Inc. reviews its business and makes necessary changes.
The company has said that they wish to shift focus back to low prices and $1 items as it had been known for, instead of on temporary promotions as it had been doing recently. Despite the fact that Family Dollar had said they were closing 370 stores and making price cuts, it has not been said exactly how many jobs were to be eliminated.
By Jessica Cooley