Dollar General scooping up 323 former Family Dollar stores

Dive Brief:

Discount retailer Dollar General will acquire 323 Dollar Express stores from private equity owner Sycamore Partners, Dollar General and Dollar Express confirmed to Retail Dive on Tuesday.
The transaction is subject to customary closing conditions and approval by the Federal Trade Commission, according to the companies' emails to Retail Dive. Financial terms were not disclosed. As many as 100 corporate positions and 2,700 store jobs are at risk, and several of the Dollar Express stores will be liquidated, the Charlotte Observer reports. In addition, the Dollar Express website has already disappeared.
Dollar Express emerged in 2015 when Dollar Tree divested some 330 stores in 35 states in order to assuage Federal Trade Commission antitrust concerns related to Dollar Tree's $8.5 acquisition of rival Family Dollar.

Dive Insight:

Between healthy competition that has cut into margins, depressed food prices and cuts in many states’ food assistance programs, dollar stores have faced a series of challenges in recent quarters. Nevertheless, the category is among the healthiest in retail, attracting budget-minded middle income consumers as well as lower-income shoppers willing to trade brand names for bargains.

With e-commerce booming and many retailers closing stores, Dollar General recently confirmed a plan to open 1,000 new stores across the country, pushing its banner into more and more locations. The Dollar Express acquisition — a striking development considering how fiercely Dollar Tree and Dollar General battled to acquire rival Family Dollar — will enable Dollar General to accomplish some of its expansion goals without breaking ground (though many locations will be liquidated and others also shuttered, according to news reports), complete with a existing base of Family Dollar customers: Many of the 323 stores in question were never even converted to Dollar Express locations by Sycamore, according to reports.

Dollar General last month reported fourth quarter net sales increases of 13.7% to $6 billion, compared to $5.3 billion in the year-ago quarter, with same-store sales rising 1%. Dollar General's fiscal year net sales rose 7.9% to $22 billion, and fiscal year same-store sales increased 0.9%. The retailer also said it has earmarked about $70 million to hike store manager pay and training programs, among other initiatives.

The success and growth of dollar stores and discount retailers like Dollar General, Dollar General and Five Below present an increasing challenge to Wal-Mart, which has turned its focus to e-commerce. “This reminds me of Kmart at the time they were buying Borders Books, and losing money and losing focus. Wal-Mart then was building a better discount store and passed them by,” Nick Egelanian, president of retail real estate consulting firm SiteWorks, told Retail Dive last year. “Wal-Mart needs to be very careful about investing so much in the internet because of all the retailers building more stores. That market share is coming from Wal-Mart. They could be the next Kmart — and they’re the ones who put it to Kmart when they took their eye off the ball.”