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Dollar Tree Axing Almost 400 Stores, Reports $2.3B Loss

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Discount retailer Dollar Tree Inc. is planning to close 390 of its Family Dollar locations in the coming year after a disappointing close to 2018.

Family Dollar

Dollar Tree also reported a $2.3B net loss during the fourth quarter, or $9.66/share. For the most recent fiscal year, the company reported a net loss of almost $1.6B, or $6.66/share.

The company acquired Family Dollar for $8.5B in 2015, and integrating those stores seems to have given Dollar Tree indigestion. The brand's normal annual rate of closures is about 75 stores, but it has opened hundreds more in recent years

"The Family Dollar acquisition has not been the success it was billed to be ... Basically, Dollar Tree bought a business that was ill and is now having to pay to make it better," GlobalData Retail Managing Director Neil Saunders told Retail Dive.

Dollar Tree execs disagree with that characterization.

"Given the results we’re seeing from our store optimization initiative, we are confident that it will allow [us] to drive substantial improvement in the quality of performance of the Family Dollar portfolio," CEO Gary Philbin said during the company's conference call Wednesday.

Over the next fiscal year, Philbin said, the company will complete at least 1,000 store renovations and 200 re-banners from Family Dollar to Dollar Tree. 

As for the closures ahead, he said they represented underperforming stores, as well as stores suffering because of age, layout, poor location, unfavorable lease terms or other factors.

The closures are a marked contrast to the plans of the company's main rival in the dollar-store sector, Dollar General, which says it will open almost 1,000 new stores this year, including more with produce offerings.

Dollar General is taking advantage of the bifurcation of retail into upper and lower segments as U.S. income inequality becomes more stark. The dollar-store sector gains (on average) two and half stores for every store that midmarket retailers close.

Besides fallout from the merger, another reason Dollar Tree has hit a rough patch is new tariffs on Chinese goods. Dollar Tree imports 42% of its products, most of them from China, and the new tariffs have affected about 10% of the store’s inventory, USA Today reports.