Rat-Infested Warehouse Adds To Headaches For Retailer Family Dollar

Family Dollar's push for rapid growth may be coming back to bite it, as more rats have been spotted at a vermin-plagued warehouse that sparked multiple lawsuits, inquiries and recalls.

Rampant rodent infestations led the deep discount chain to announce in May it would permanently close its nearly 30-year-old West Memphis, Arkansas, warehouse. Now, according to Bloomberg, the rats are back and the company's headaches aren't going away.

In February, the Food and Drug Administration issued a recall for human and animal food, cosmetics, medical devices and other products from Family Dollar in several Southern states. The company is still under investigation by the FDA in addition to facing lawsuits from customers and the Arkansas attorney general over health and safety concerns caused by the rats.

After fumigating the West Memphis facility, more than 1,000 dead rats were removed, but employees complain the problem has persisted.

Family Dollar workers at the 850K SF West Memphis warehouse, which is expected to close in October, are still seeing rats and droppings. Workers have joined customers and the Arkansas attorney general in suing the company, saying that Family Dollar has ignored workers' directives for a healthy and safe environment for the sake of profit.

“All they cared about was getting the products out, which meant more money for them,” Family Dollar employee David Hernandez told Bloomberg.

New York hedge fund Mantle Ridge, which bought a 5.7% stake in Family Dollar in November, has pushed for management changes, and the company has changed its board as a result, including a new chairman, Rick Dreiling, who says the company will target higher earnings and better working conditions.

“We are committed to providing every associate in every Dollar Tree facility with a safe and healthy work environment,” a Family Dollar spokesperson told Bloomberg.

Parent company Dollar Tree joins other deep discount retailers like Dollar General in publicly taking on poor work conditions amid rapid growth exacerbated by the pandemic.

Dollar Tree announced previously it would open as many as 1,100 stores in 2022, and the retailer has launched new combination stores, which include several of its brands under one roof. It has also opened more upscale stores.

Despite its issues at the West Memphis warehouse, investors have been undeterred. Amid other changes, like a price hike to $1.25 for most items, Dollar Tree's shares rose 50% since Mantle Ridge bought its stake, and the company is now valued over $38B.

But the company lost $34.1M in the fourth quarter of 2021 in inventory and other costs due to the rat-fueled recall, and the company continued to lose money into Q2 2022.