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Dollar General and Dollar Tree Inc. have different outlooks on the economy

A MARTÍNEZ, HOST:

Nearly a thousand Family Dollar and Dollar Tree stores will close in the next few years. The parent company said this week it's because of declining sales and economic headwinds. It lost more than $1.5 billion last quarter. But competitor Dollar General says it will open 800 new stores this year alone. They say they're doing fine because customers are doing better financially. All right, so what's really going on? Stephan Bisaha of the Gulf States Newsroom in Birmingham, Ala., is here to explain. So two different stories about the economy from two different retailers dealing in really low-priced goods. Stephan, what gives?

STEPHAN BISAHA, BYLINE: Well, we should probably focus on the parts of their stories that match first. And they both blame inflation for actually hurting their sales. They blame thefts, as well. Where Family Dollar's parent company differs is they say cuts in government spending on things like food stamps - that's been hurting customers. While Dollar General - they're painting this more rosy picture for customers saying they're willing to spend more on discretionary spending, not just consumables like milk and canned goods. Really, more than anything, this comes down to the fact that even though they're both dollar stores, Dollar General has just been the much better-run brand for a good while now.

MARTÍNEZ: Yeah, they're both, though, facing the same economy. I mean, so why is Family Dollar closing hundreds of stores and Dollar General opening hundreds of stores?

BISAHA: Well, Family Dollar has this long history of problems, from poor management to health concerns, which - not to say that Dollar General doesn't also have those issues, but it seems to be much worse at Family Dollar. As an example, Family Dollar was just fined $40 million recently for this rat-infested warehouse that possibly contaminated food and medicine back in 2022. The Justice Department called it the largest food safety fine in history. Analysts also say the brand hasn't been too careful about where it opens stores. So it's got a lot of locations that are just losing money because they're in bad spots, and those are the stores that are closing.

MARTÍNEZ: Where are those?

BISAHA: I mean, they're just, like, off of - not on a good highway location.

MARTÍNEZ: Ah, OK.

BISAHA: They're coming off - like, Dollar General has been much better about, like, picking the prime real estate in a town than Family Dollar has.

MARTÍNEZ: OK, I see. Now, it sounds like Family Dollar's challenges are more about problems inside the company than maybe an economic downturn because Dollar General says things are going great for them.

BISAHA: Yeah, again, sales aren't exactly where investors want, but they're still doing pretty good at Dollar General. They got plans to open plenty more stores. In fact, they just opened their 20,000th store. And even Family Dollar's company - they're still planning on opening more stores even as it closes ones that aren't making a profit. You combine both companies, and they got more locations than Walmart, McDonald's and Starbucks combined. And again, that growth isn't slowing down anytime soon, at least for Dollar General. I mean, they predict there's room for more than 13,000 more stores in the long run.

MARTÍNEZ: Yeah, so that sounds like plenty of customer demand for dollar stores.

BISAHA: Yeah. An analyst I spoke to said he still sees a lot of growth in the future for dollar stores, again, specifically Dollar General. And lots of customers - they're still in love with these brands, like Jodi George in Birmingham. She says they're important.

JODI GEORGE: It doesn't matter what side of town I'm on, whether I'm going out of town. There's always a dollar store on each side of town, in each corner, here, there. So I don't think there's ever too many of them. And I think that it's a good thing for people who are on limited budgets or just can go get what they need.

MARTÍNEZ: All right. That's NPR's Stephan Bisaha. Stephan, thanks a lot.

BISAHA: Yeah, thanks for having me.

(SOUNDBITE OF FEVERKIN'S "SILHOUETTE") Transcript provided by NPR, Copyright NPR.

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Stephan Bisaha