If you're a retailer in 2024, you're probably doing pretty well or pretty poorly.
And there really is no middle ground.
Related: Key Rivals of Coca-Cola and Pepsi in Trouble Over Misleading Claims
If you are in the business of brand name labels at discount prices and operate outside of shopping malls, for example, the chances of survival are greater right now.
Brands like TJX Cos. (TJX) which operates TJ Maxx, Marshall's, HomeGoods and Sierra, among others, are currently flying high, benefiting from consumer enthusiasm for deals.
Others, however, are not doing so well. With many goods and services costing more than they did just a year ago (and in some cases a month ago), many shoppers are becoming more picky about their purchases. This means opting for a big box store that offers cheap bulk supplies, like Costco. (COST) or Walmart (WMT) , or stop purchases completely. In some cases, these actions go hand in hand.
More budget-conscious customers mean there are fewer profits for the shot as a whole, which in turn means retail categories will see some losers, those who feel the pressure more than they might in less difficult economic times.
This group includes some more specialized retailers, such as Joann Fabric, Party City and Rue 21.
Image source: Shutterstock
A popular retailer struggles with a new market
It may not be surprising to learn that a specialty craft and fabric store is struggling right now.
It's more surprising to hear about Dollar Tree's recent struggles. (DLTR) which has experienced something of a decline in 2024.
The dollar discounter said in March it would close nearly 1,000 stores across the United States in an effort to stem losses at underperforming outlets.
Related: Beloved budget retailer suddenly closes hundreds of stores
“Persistent inflation and reduced government benefits continue to put pressure on low-income consumers who make up a sizable portion of Family Dollar's customer base,” Dollar Tree CEO Rick Dreiling explained in March during a call with analysts. .
Management revealed plans to close about 600 stores in the first half. Beyond that, 370 additional Family Dollar and 30 Dollar Tree locations will close as their leases expire in the coming years.
More retail:
- Ulta CEO Sounds Alarm About Growing Problem
- Lululemon launches a one-of-a-kind product
- Target store introduces new policy for those over 18 years of age
- amazon launches a cool new subscription product
In the first quarter, which was reported on June 5, Dollar Tree reported $7.63 billion in revenue, missing the $7.67 billion Wall Street expected. Average ticket prices fell 1.1% as consumers sought to curb spending.
Dollar Tree seeks to spin off its brand
Dollar Tree operates two key brands: Dollar Tree, its flagship operation, and Family Dollar.
And while both brands have struggled in recent months, Family Dollar appears to be the weaker of the two.
In the first quarter, Family Dollar's comparable-store sales were little changed, while Dollar Tree's rose 1.7%.
On Wednesday, June 5, Dreiling said the company was exploring a spinoff of its underperforming brand.
“The unique needs of each brand at this time (transformation at Family Dollar and acceleration of growth at Dollar Tree) lead us to the decision to conduct a comprehensive review of strategic alternatives for the Family Dollar business,” he said.
“Our goal is to position the Dollar Tree and Family Dollar brands to progress further and faster, and determine whether the undivided attention of a dedicated team will benefit both, while creating value for Dollar Tree shareholders and other stakeholders.”
The company added that it was considering multiple options for Family Dollar, including “a possible sale, spin-off or other disposition of the business.”
Dollar Tree currently operates about 16,400 stores in the U.S. Nearly half (8,000) of them are Family Dollar stores.
He has not set an official deadline or timeline for making a decision. It's unclear if there is even one interested buyer in Family Dollar at this time.
Related: A veteran fund manager picks his favorite stocks for 2024
