Dollar Tree CEO Rick Dreiling made that announcement Wednesday (Nov. 29) after the company’s third-quarter earnings showed Family Dollar falling short of its expectations.
“Similar to what other retailers have reported, we experienced softening trends throughout the quarter, particularly in October, as lower-income consumers responded to the accumulated impact of inflation and reduced government benefits, we saw a notable pullback in spending, particularly in higher margin discretionary categories.”
With this in mind, Dreiling said the company is undertaking a review of its Family Dollar stores to address underperforming locations.
“This will involve, among other things, identifying stores as candidates for closure, re-bannering or relocation with the goal of assuring that each asset under the Family Dollar banner is delivering its full value for our shareholders on a sustainable basis,” he said.
Meanwhile, the company continues to see much of its growth coming from higher-income shoppers, said Chief Financial Officer Jeff Davis, who noted the company is attracting 4.3 million new customers per year.
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“A lot of those customers are in that income demographic of $125,000 or greater and we’re capturing that passing,” he said.
In June, PYMNTS examined dollar stores’ new attraction among more affluent consumers, noting that there is no longer a stigma attached to patronizing dollar stores.
This was evident as research PYMNTS at the time showed that 16% of individuals with higher incomes were experiencing difficulties in paying their bills. Another 34% were living paycheck to paycheck but had no problems in meeting their monthly financial obligations.
As for lower-income consumers, grocery shopping remains a challenge, with PYMNTS Intelligence data showing that 40% of these consumers have used split-pay plans in the last 12 months to fund everyday necessities like food or gasoline.
Lower-income consumers — those who make less than $50,000 per year — share some characteristics that substantially affect their spending capacity and credit decisions, according to a PYMNTS Intelligence study done in partnership with Sezzle.
“For instance, lower-income consumers have, on average, $78,000 in outstanding debt, and only 24% of these consumers are not living paycheck to paycheck,” PYMNTS wrote last week. “Thus, lower-income consumers tend to rely on credit cards and other payment methods to cover their daily expenses.”
