U.S. affordable chain retailer “99 Cents Only” declared bankruptcy in April, shutting down all its stores spread across four states. On Wednesday, May 29th, Dollar Tree announced that it had acquired the lease for 170 former “99 Cents Only” stores and would begin reopening these stores starting in the fall, selling its own products under its own brand.
“99 Cents Only” used to operate 371 stores in Arizona, California, Nevada, and Texas. According to CNN, while these two stores have significant differences, Dollar Tree’s announcement on Wednesday marked a sign of consolidation in the retail industry.
Founded in California by Dave Gold in 1982, “99 Cents Only” operated for over 40 years in the four states as a regional chain store selling groceries. On the other hand, Dollar Tree is a nationwide company primarily opening stores in suburbs, offering non-essential daily goods such as party supplies and household items.
Dollar Tree was once the last one-dollar chain store selling all products at $1 but then raised its prices to $1.25 or more in 2021. The company also owns “Family Dollar,” mainly located in urban areas. In recent years, the performance of “Family Dollar” has been inferior to Dollar Tree and other discount chain stores, leading to the closure of 975 stores.
Acquiring the lease rights of the bankrupt “99 Cents Only” provides Dollar Tree with a more cost-effective way to grow than opening new stores and helps this Virginia-based chain store expand its influence on the West Coast.
“The management believes that these locations have good fundamentals and relatively scarce supply, so they exploited the weaknesses of their competitors,” wrote Evercore IRI analyst Michael Montani in a report to clients on Wednesday.
One challenge that Dollar Tree may face is the size of the “99 Cents Only” stores, with an average area of about 20,000 square feet, more than double the typical size of a one-dollar store chain.