Discount retail giant Dollar Tree will be ramping up its new store openings this year, planning as many as 650, nearly 200 more than the 455 stores it opened in 2022 as it looks to capitalize on shoppers trading down to hunt for bargains amid high inflation.
The Chesapeake, Virginia-based retailer, parent of its namesake chain and Family Dollar, outlined its expansion plans during its fiscal fourth-quarter earnings call on Wednesday. The company, which operates 16,340 stores in the U.S. and Canada, has been among the top U.S. retail lessees on an annual basis, according to CoStar data. As of the end of fiscal 2022 Dollar Tree said it occupied 132.1 million square feet of retail space.
Dollar General and other discount retailers such as Walmart and Target are all benefiting as medium- and higher-income shoppers increasingly turn to them to make purchases — particularly groceries — as they pinch pennies due to inflation. Some of those companies, like Target, are continuing to open new stores as the macroeconomic environment remains challenging and unpredictable.
Consumers who are making $80,000 a year "are trading down," Dollar Tree Chairman and CEO Rick Dreiling told Wall Street analysts.
In fiscal 2023 Dollar General officials said its store opening will be weighted toward the back end of the year versus 2022. Some 57% of the new stores this year will come in the second half of the year, compared with 48% in 2022.
In addition to the 600 to 650 store openings this year, Dollar Tree plans to renovate an estimated 1,000 stores and to take on "numerous distribution center projects," according to Chief Financial Officer Jeff Davis.
As of the end of the fourth quarter, Dollar Tree had a total of 16,340 stores for both its chains, up from 16,077 in the prior-year period. It opened 123 new stores, relocated 38 stores, and closed 77 stores in the quarter. It also completed 112 Family Dollar store renovations.
For the full year in 2022, it opened 464 new stores, relocated 120 stores, and closed 205 stores. The company said it also completed 796 Family Dollar store renovations.
In the quarter ending Jan. 28, Dollar Tree posted net sales of $7.72 billion, up 9% from the same year-ago period.
“Our sales performance shows that our third quarter sales momentum continued into the fourth quarter," Dreiling said in a statement. "The same-store sales growth of 8.7% at Dollar Tree and 5.8% at Family Dollar represented comp sales accelerations on a one-, two- and three-year stacked basis, and are evidence that the early transformation actions taken since last summer are already beginning to have a positive impact.”
Dollar Tree has been renovating its stores and also adding freezer and cooler sections so it can offer more types of foods.