Family Dollar has announced it will cut jobs and close 370 under-performing stores, while permanently lowering prices on about 1,000 basic items, as it tries to reverse sagging sales and earnings. The local impact of that decision is yet to be seen.
Family Dollar Inc., which operates 8,100 stores, has not provided details on how many jobs it would cut. The company notes on its website that there are about 50,000 “team members” who work at the stores. Company officials said the store closings and job cuts should reduce annual operating expenses by $40 million to $45 million, starting with the third quarter this fiscal year.
“Family Dollar is taking decisive action to better position the company to succeed in an adverse operating environment,” said Bryn R. Winburn, public and media relations manager with Family Dollar told The Independent. “The company recently conducted a comprehensive review to identify measures to provide customers with more value, increase operational efficiency and improve financial performance.”
As part of that review, Family Dollar made the decision to close approximately 370 stores across the country.
There are four Family Dollar locations in Sampson County, including in Clinton, Garland, Harrells and Newton Grove. The Clinton and Garland locations have opened within the past fiscal year. Additionally, there are also Family Dollar locations in Kenansville, Mount Olive, Warsaw, Faison and Stedman.
The decision on which stores will be shuttered has not yet been announced.
“The company is working to finalize the store closure plan and will disclose information on impacted locations at the appropriate time,” Winburn stated.
The Matthews, N.C., company also said it will slow new store openings beginning in fiscal 2015. It now anticipates opening 350 to 400 new stores, whereas in the 2014 fiscal year it added about 525 stores.
Family Dollar Chairman and CEO Howard Levine told investors on a call late last week that poor weather led to numerous store closings, disruptions in merchandise deliveries and higher-than-expected utility and maintenance expenses. Shoppers’ financial constraints and a discount-driven holiday season also played a role, he said.
Family Dollar reported that net income dropped to $90.9 million, or 80 cents per share, from $140.1 million, or $1.21 per share, a year earlier. Revenue fell to $2.72 billion from $2.89 billion. Analysts surveyed by FactSet expected earnings of 90 cents per share on revenue of $2.77 billion.
Revenue at stores open at least a year dropped 3.8 percent, worse than the 2.8 percent drop it had in the fourth quarter.
“Our second quarter results did not meet our expectations,” Levine stated. “The 2013 holiday season was challenged by a more promotional competitive environment and a more financially constrained consumer. In addition, like many retailers, our second quarter results were significantly impacted by severe winter weather, which resulted in numerous store closings, disrupted merchandise deliveries and higher than expected utility and store maintenance expenses.”
Levine and other company officials said on the call that possible renovations and relocations were looked at for those under-performing stores before coming to the conclusion that closing them would be the best option.
The group of stores to be closed had sub-par performance, sales at about half the company-wide average, over the span of several years, Levine said. Specifying further, the company’s CEO described those stores scheduled to close “older, generally smaller stores.”
“It did not make sense to keep these stores open,” he said.
Clinton and Garland do not fit that “older” description, as they each opened in the past several months, while the Family Dollar in Harrells was opened in 2010.
The 370 stores are expected to be shut down within the next six months.
Levine said the price cuts, store closings and job eliminations are part of actions it is taking immediately to lift its performance during a review of the business.
“While this business review is ongoing, we are taking immediate, strategic actions to improve our performance,” Levine stated. “We are confident that these steps will position Family Dollar to deliver stronger returns for our shareholders.”
Family Dollar and other chains packed in customers and expanded rapidly by catering to cash-strapped people during the Great Recession. However, there is a shift afoot.
Dollar chains and other low-price stores are seeing an increasing divide between low-income people who are facing more constraints on spending power and the higher-income households benefiting from improving housing values and stock market.
Wal-Mart reported in February its fourth consecutive quarter of declines in revenue at stores open at least a year. Dollar General, the nation’s largest dollar-store chain with about 11,100 locations, offered a weak profit outlook last month after reporting weak fourth-quarter sales. And Dollar Tree, which operates nearly 5,000 locations, missed profit expectations for the holiday quarter in February.
Family Dollar has stumbled even more than its rivals because it has made mistakes in pricing, merchandising and the locations of its stores, analysts say.
Founded in 1959 in Charlotte by entrepreneur, Leon Levine, the company’s stock went public in 1970. In 2008, the stock finished as the top performer on the S&P 500 and the company boasted $8.5 billion in sales and more than $388 million in earnings in 2011.
Levine said he wants the company to get back to that.
“Our mission is to deliver compelling, everyday values for our customers, and executing on this promise requires an unwavering commitment to being a low-cost operator,” Levine said. “We are taking a number of important steps through our immediate strategic actions to improve our operational efficiency and deliver better financial return.”
From staff and wire reports. Chris Berendt can be reached at 910-592-8137 ext. 121 or via email at email@example.com.