Troubled Times For Dollar Stores, And They Aren't Even Dollar Stores Anymore
During the last week of September the term "dollar store" took another step toward being as antiquated as "five and dime." The last holdout among the major chains selling only at a dollar price point, Dollar Tree, announced it is adding $1.25 and $1.50 merchandise at some stores.
Other dollar store chains long ago gave up strict adherence to the dollar in their names. These days the largest chain, Dollar General, sells items priced between $1 and $10, as does Family Dollar, a brand owned by Dollar Tree.
The move toward higher price points among dollar stores reflects some of the turbulence the retail segment is now experiencing.
The latter stage of the coronavirus pandemic has been unexpectedly hard on dollar stores, as the logistics of getting cheap merchandise across oceans has been tied in knots and dollar-adjacent retailers are having a harder time finding people willing to work in pandemic-facing jobs that don't pay much.
After the first quarter of 2021, for example, Dollar Tree assumed its regular ocean carriers would fulfill 85% of their contractual commitments. Now the company is projecting that its regular carriers will fulfill only 60% to 65% of their commitments, Dollar Tree President and CEO Michael Witynski said on the company's most recent earnings call in late August.
"This shortfall is caused by a variety of factors such as equipment shortages, equipment situated in [the] wrong location, significant backlogs and delays in both China and U.S. ports, outbreaks of Covid causing labor shortages or closure of entire terminals, and the lingering effects of the Suez Canal blockage," Witynski said.
Dollar stores are also suffering from worker shortages, just as much as the rest of the service economy. In some cases, there have been highly publicized dollar store closures as workers quit en masse.
In August in Nebraska, all the employees at a Family Dollar walked out at the same time, temporarily closing the store. Employees at other brands have similarly quit this year, posting notes at the stores to air their complaints about low pay and poor working conditions.
The turbulence is a dramatic turnaround for the dollar store business, which, aided by the pandemic, did very well in 2020. That spurred the sector's growth into this year — about 1 in every 3 stores announced during the early days of the pandemic set to open this year is a dollar store, The New York Times reports, citing Coresight Research.
Word of the price point change boosted Dollar Tree stock for a few days, with shares up 12.9% over the last week in September, though prices edged down on Friday. Year-to-date, however, Dollar Tree shares are down about 10.7%.
