Operators of 99 Cents Only Stores announced late Thursday that they are closing all 371 stores.
The announcement comes on the heels of news that approximately 600 Family Dollar stores are scheduled to close this year. An additional 400 stores under the Family Dollar and Dollar Tree banners are scheduled to close in the next few years as their leases expire.
“The last few weeks have been tough for 100-yen stores,” said Kennedy Smith, a senior fellow at the Institute for Local Independence, an advocacy group that criticizes big retailers.
Despite the large number of store closures, experts who spoke to USA TODAY say the closures do not mean the end of dollar stores, despite backlash from critics. said. Here's why:
Why are so many 100 yen shops closing?
The dollar store format has exploded over the past decade, with companies like Dollar General and Dollar Tree adding thousands of stores as customers seek lower-cost options.
However, economic conditions have changed in recent years. Dollar stores say they have been hit by inflation, cuts in Supplemental Nutrition Assistance Program (SNAP) benefits and inventory losses. “It's a very challenging macro environment,” Dollar Tree CEO Rick Dreyling said in a March earnings call.
Management errors have also occurred at some stores.
Last year, the U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) entered into a company-wide settlement agreement with Dollar Tree and Family Dollar after violations were “repeatedly cited at multiple stores.” (Dollar Tree acquired Family Dollar in 2015.)
And in February, Family Dollar agreed to pay a $41.6 million penalty for storing food, medicine and other products in a rat-infested warehouse in Arkansas for years.
Dollar store chain closings:99 Cents Only Stores makes 'very difficult decision' to close all 371 stores, CEO says
Currently, the combined company has closed just under 6% of its stores. Chief Executive Officer Dreyling said in March that the company would target unprofitable locations that “do not appear to have a long-term future.”
Still, “the fact that maybe a few hundred or a thousand stores are closing doesn't mean this format is going away,” says Brett Hollenbeck, an associate professor at UCLA's Anderson School of Management. I have grown a lot. ”
As for 99 Cents Only, Hollenbeck said its size likely hurt business. The company's total store count is less than 2% of Dollar General's.
“As a result, we would have much weaker economies of scale than our competitors, (and) our ability to purchase and distribute inventory and compete on price,” he said.
Why is Dollar General growing?
Meanwhile, Dollar General, which recently announced the opening of its 20,000th store and plans to open 800 more this year, appears to be in a better position.
Unlike some of its competitors, Dollar General tends to focus on rural areas where there is less competition and real estate costs are low. CEO Todd Vasos said in December that the company would put more emphasis on such stores this year, with more than 80% of new stores planned in rural areas.
“I think it's just a better-run company,” Hollenbeck added. “They did a better job logistically and kept the stores in good condition.”
This is just one sign that the dollar store format isn't going away anytime soon, even if certain players close up shop.
“Dollar stores will continue to expand,” said Lauren Chenaris, an assistant professor in the Department of Agricultural and Resource Economics at Colorado State University. “These expansion plans are not necessarily being canceled.”
Battle with the dollar store
While dollar store supporters say they bring affordable necessities to low-income neighborhoods, others have welcomed news of store closures in recent weeks.
Many communities have worked to stop the expansion of dollar stores. A report released last year by the Institute for Local Self-Reliance lists more than 70 cities and towns that have blocked new dollar store projects and 50 that have enacted laws to limit their expansion.
These actions come as critics accuse Dollar Store of restricting access to healthy foods, a claim that Dollar Store representatives dispute.
“There's going to be more resistance from the community,” Smith said. “And now, with so many dollar stores closed, communities have an opportunity to find healthier ways to get that revenue back and create food options for their communities.”
