Mar 7, 2019 - Economy

Dollar Tree's misplaced bet on Family Dollar

In this image, shoppers walk through the parking lot away from a Family Dollar store.

Photo: Paul Hennessy/NurPhoto via Getty Images

Some 4 years ago, 2 discount retail kings — Dollar Tree and Dollar General — were fighting over who would absorb the third dollar store giant, Family Dollar. Dollar Tree won out.

Driving the news: But today, lagging sales at Family Dollar are actually dragging Dollar Tree down, reports the Wall Street Journal.

The big picture: As we've reported, discounters have long profited from the rise of income inequality in the U.S. And with a recession likely in the near future, the dollar store business will keep ballooning, Louis Hyman, a business historian at Cornell, tells Axios.

  • Still, Family Dollar has not been able to keep up. While Dollar Tree and Dollar General are sprucing up their shops and adding fresh produce options to lure customers, Family Dollar remains shabby.
  • Since Dollar Tree acquired the chain, its stock price has surged by 20% — a formidable jump but small compared to Dollar General's 50% increase in the same time period.
  • To tackle the gap, Dollar Tree is shuttering 400 Family Dollar stores and turning another 200 into Dollar Trees after renovations.

Be smart: For Dollar Tree, which owns 15,000 stores across the country, that's a drop in the bucket. But, to add context, 400 stores is almost equal to the total of the Whole Foods chain.

Go deeper: How dollar stores thrive in distressed pockets of rural America

Go deeper