Dollar Tree Acquires 99 Cents Only Stores after Bankruptcy Filing
Dollar Tree revealed on Wednesday that they have acquired leases for a total of 170 stores that were previously part of the 99 Cents Only chain, which had gone bankrupt in April and shut down all 370 of its locations in states like Arizona, California, Nevada, and Texas. Once fall arrives, Dollar Tree plans to reopen these stores, featuring their own products and brand.
Both chains significantly differ from one another: 99 Cents Only was a regional retailer specializing in groceries, while Dollar Tree, a national company mainly found in suburban areas, predominantly carries discretionary merchandise such as party supplies and home goods. In 2021, Dollar Tree was the last among dollar store chains to increase their prices from $1 to $1.25 and higher.
Dollar Tree also owns Family Dollar, generally situated in urban areas. The past few years have been challenging for Family Dollar as it underperformed compared to both Dollar Tree and other discount chains. It has been announced that Family Dollar will be shutting down 975 stores.
The acquisition of 99 Cents Only leases, rescued from bankruptcy, provides Dollar Tree with a more inexpensive option for expansion compared to building new stores. This also allows Dollar Tree to expand its reach further westward.
In a note to clients on Wednesday, Michael Montani, an analyst at Evercore IRI, wrote that the management opted to acquire these locations because they believe they're excellent and somewhat limited in availability. However, Dollar Tree might face a challenge with the size of these 99 Cents Only stores, which averages around 20,000 square feet - more than double the typical size of dollar store locations.
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The acquisition of 99 Cents Only stores allows Dollar Tree to enter new markets and offer more variety in their merchandise. Due to the larger store sizes, Dollar Tree may need to reconsider their product layout and assortment strategy.
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