Goodbye, only 99 cents. Hello, Dollar Tree.
Dollar Tree announced Wednesday that it has acquired leases for 170 99 Cents Only stores emerging from bankruptcy in Arizona, California, Nevada and Texas. Dollar Tree will reopen those stores starting this fall with its own products under its brand.
99 Cents Only filed for bankruptcy in April and closed all of its 370 stores.
The two chains are very different and the announcement is a sign of consolidation in the retail industry.
99 Cents Only was a regional chain and sold groceries. Dollar Tree, a nationwide company with mostly suburban locations, offers mostly convenience items such as party supplies and home goods. Dollar Tree was the last dollar store chain to sell everything for $1 before raising prices to $1.25 and up in 2021.
Dollar Tree also owns Family Dollar, which is primarily based in cities. Family Dollar has underperformed Dollar Tree and other discount chains in recent years and is closing 975 stores.
By taking over 99 Cents Only's leases out of bankruptcy, Dollar Tree can grow more cost-effectively than by building new stores. It also helps the Virginia-based chain expand its reach on the West Coast.
“Management believed these locations were fundamentally good and relatively scarce, so they took advantage of competitive weakness,” Michael Montani, an analyst at Evercore IRI, wrote in a note to clients on Wednesday.
One challenge for Dollar Tree could be the size of its 99-cent-only stores.
99 Cents Only stores average 20,000 square feet in size, more than twice the size of a typical dollar store chain.
(The-CNN-Wire & 2024 Cable News Network, Inc., a Time Warner company. All rights reserved.)
