Dollar-Store Drama Continues
By Greg Lindenberg on Apr. 10, 2017GOODLETTSVILLE, Tenn. — In a move that has again stirred up drama in a retail channel that is competitive with convenience stores, Dollar General Corp. has confirmed its plans to acquire all 323 discount stores in 36 states from Dollar Express LLC, The Charlotte Observer reported.
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Family Dollar
The Charlotte, N.C.-based Dollar Express chain is made up of the former Family Dollar stores that New York-based private-equity firm Sycamore Partners acquired in late 2015 from discount retailers Dollar Tree Inc. and Family Dollar Stores Inc.
Those companies agreed to sell 330 Family Dollar stores to Sycamore Partners to settle Federal Trade Commission (FTC) charges that Dollar Tree’s proposed $9.2 billion acquisition of Family Dollar would likely be anticompetitive.
Family Dollar had rejected a takeover bid by rival discount retailer Dollar General.
Dollar Express
To add to the drama, ahead of the possible acquisition, Dollar Express is closing all 323 of its stores nationwide, according to a notice cited by the newspaper that the company filed with the North Carolina Department of Commerce.
The FTC required Sycamore Partners to obtain the agency's approval if it decided to sell all or almost all of the assets within three years of the sale. In its application, Sycamore Partners told the FTC that Dollar Express LLC, the company it formed to operate the divested stores, “can no longer operate as a viable standalone business” due to changes in competitive conditions since the purchase.
Sycamore Partners requested a shortening of the 30-day public comment period to allow Dollar Express to fulfill the majority of its commitments, including commitments to approximately 3,000 employees. According to the application, expedited review will reduce uncertainty for employees and customers, and help Dollar General to preserve the locations as dollar-store outlets. Dollar General will provide the greatest likelihood that the locations will continue as dollar stores, preserving consumer choice in the affected markets, the application said.
Dollar General
It is unclear what Dollar General’s plans are for the stores it is seeking to acquire, and whether it will hire the stores’ terminated employees. A spokesperson for Dollar General declined to comment to the Observer since the deal has not yet closed.
Dollar General rolled out its convenience-like DGX prototype in early 2017 for all new stores, relocations and remodels, it said. It features a “more customer-friendly shopping experience” and a “faster, more convenient checkout.”
Dollar General previously rolled out an upscale version dubbed DG Markets, as well as the Plus format, both of which offer a wider variety of groceries, perishables, frozen foods and merchandise selections than at a typical Dollar General store.
Dollar stores vs. C-stores
Dollar stores “benefit from economies of scale and greater efficiencies, which many c-store operators, especially single-store operators, have difficulty matching,” Billy Milam, president of Atlanta-based RaceTrac, told CSP magazine last year. He called dollar stores “sleeping giants.”
The dollar channel also outpaces convenience in sales, and is encroaching upon the tobacco and alcohol categories and experimenting with fuel.
Dollar General made a major leap into fuel retailing with the purchase of 41 former Wal-Mart Express stores in mid-2016.
Goodlettsville, Tenn.-based Dollar General offers products that are frequently used and replenished, such as food, snacks, health and beauty aids, cleaning supplies, basic apparel, housewares and seasonal items "at low everyday prices in convenient neighborhood locations." It has 13,429 stores in 44 states.