Rat infestation at Family Dollar distribution center costs $34M

Rats! They can be costly.

Driving the news: A rodent infestation at a Family Dollar distribution center in Arkansas cost $34 million after it triggered a voluminous product recall over contamination concerns, owner Dollar Tree reported Wednesday.

• From March 29 through Sept. 17, 2021, maintenance officials at the distribution center captured more than 2,300 rodents, according to the FDA.
• More than 1,100 dead rats were “harvested” after a January 2022 fumigation at the West Memphis, Arkansas, facility.

Details: An FDA inspection document obtained by Axios reveals that inspectors discovered:

• Rat "carcasses on the conveyer belt."
• Rats “climbing up rack scaffolding and through a pallet containing potato chips in cardboard cases.”
• Droppings “too numerous to count” near food, including Jell-O packages, cans of herring and an open bag of popcorn.
• “A putrid odor" in a room that had been cleared.
• “Rodent nesting materials” and “significant gnawings,” including bags of products that had been chewed open.
• Live rats scurrying across the floor.
• Dead birds and “active ant hills.”

Of note: After the FDA inspections, Family Dollar issued a recall Feb. 18 for a wide range of products shipped to 404 stores, including drugs, medical devices, cosmetics, dietary supplements and food.

• Affected stores included locations in Alabama, Arkansas, Louisiana, Missouri, Mississippi and Tennessee.
• “No one should be subjected to products stored in the kind of unacceptable conditions that we found in this Family Dollar distribution facility," Judith McMeekin, the FDA's associate commissioner for regulatory affairs, said in a statement. "These conditions appear to be violations of federal law that could put families’ health at risk. We will continue to work to protect consumers.”

What they’re saying: A Dollar Tree spokesperson did not immediately respond to a request seeking comment on Wednesday.

• "The Company is taking this matter extremely seriously," Dollar Tree said Wednesday in an SEC filing, and "is cooperating fully with the FDA."
• Dollar Tree is facing several lawsuits seeking class-action status over the matter.
• The $34 million bill included "inventory markdowns and related costs," Dollar Tree said in the filing, noting that "reputational damage, lost sales," and additional investigations or lawsuits are possible.

What we’re watching: Whether the infestation is a sign of broader problems at Family Dollar.

• “Aside from the hygiene implications and negative consumer perception, we find the situation concerning as we think it points to a wider sloppiness in the Family Dollar operation and a willingness to cut corners – something that Dollar Tree never really seems to have got to grips with since it acquired the business,” GlobalData retail analyst Neil Saunders wrote Wednesday.