NEW YORK (BLOOMBERG) -- Dollar Tree Inc. plans to close about 1,000 stores in a bid to improve profitability as the discount retailer battles a spate of litigation and other headwinds.
The company expects to shutter about 600 Family Dollar stores in the first half of fiscal 2024 and shut down an additional 370 Family Dollar and 30 Dollar Tree locations as their leases expire, according to a statement Wednesday. Dollar Tree said it expects a benefit of 15 cents a share to 2024 earnings from the store closures.
The shares fell as much as 9.8% in trading before US markets opened.
Dollar Tree, which operated more than 16,770 stores across 48 states and Canada as of last month, said last year that it would review its portfolio of Family Dollar stores to address underperformance. The chain has been beset by complaints of miserable working conditions, and fourth-quarter adjusted earnings of $2.55 a share included an impact of about 17 cents a share from general liability insurance claims.
Closing the stores appears to be “a prudent decision, but echoes the move to close 400 stores in 2019,” Bloomberg Intelligence analysts Jennifer Bartashus and Jibril Lawal said in a note. “Nearly $2 billion in assorted impairment charges suggests widespread efforts to improve operations have had mixed results and that the right formula remains elusive.”
The earnings for the quarter that ended in February missed analysts’ average estimate of $2.66 a share. Same-store sales rose 3%, more than Wall Street expected.