Dollar Tree will bring hundreds of 99 Cents Only stores back from the dead


For nearly three years, consumers have been struggling under the weight of inflation, and now shoppers have had enough sticker shock. 

Across the country, consumers in nearly every Federal Reserve district are pushing back against further price increases, the central bank said in its Beige Book survey of regional business contacts. That's putting companies in a bind. Retailers said they are having to resort to discounts to entice price-conscious customers, and with input costs still elevated, profit margins are getting squeezed. 

"Overall outlooks grew somewhat more pessimistic amid reports of rising uncertainty and greater downside risks," said the report, which regularly assesses economic conditions and was released on Wednesday. 

Business owners have consistently cited inflation as their most pressing problem, but now stubbornly high prices may prove even more troublesome if entrepreneurs have little to no ability to pass along their inflated expenses to consumers.

In the Cleveland district, "one business services contact said that passing along cost increases had become more difficult as customers were more closely managing their costs," the Beige Book noted. In the Philadelphia district, businesses "reported that consumers continued to spend less on each trip as they continue to adjust to higher prices" with local customers being especially price sensitive. 

Businesses throughout the Minneapolis district told the central bank that price-skittish consumers were enough of a problem to dampen their outlook for the summer. A winery and restaurant in Minnesota reported patrons were spending less on average, saying, "Guests are being very careful with their money. We see less of our regulars and [more] moderate spending." One restaurant and hotel owner in Montana told the Federal Reserve it "was trying to avoid passing further cost increases to customers" because "at some point, they will say, 'I am not paying $20 for a hamburger.'"

With consumers becoming more cost-conscious, businesses are having to become more nimble about their price-setting practices. In the Kansas City district, "many contacts reported being willing to change selling prices more frequently compared to last year to protect margins when possible," the Beige Book said.

The Beige Book is not the only report that has raised this concern. Last month, the National Association for Business Economics came to similar conclusions in its Business Conditions Survey, which found fewer companies were passing cost increases onto their customers. To stave off a customer backlash, businesses are swallowing these expenses themselves--leading fewer to expect their profit margins to increase over the next three months.

lifeline has emerged for some 99 Cents Only stores.

Dollar Tree said it has purchased 170 locations of the deep discount retailer across Arizona, California, Nevada, and Texas.

“As we continue to execute on our accelerated growth strategy for the Dollar Tree brand, this was an attractive opportunity to secure leases in priority markets where we see strong profitable growth potential,” said Michael Creedon, Jr., Dollar Tree’s chief operating officer, in a statement.

Creedon said that the purchase of 99 Cents Only Stores complements Dollar Tree’s existing footprint and will help it grow the company’s brand across the western U.S.

Dollar Tree said it plans to “welcome customers from 99 Cents Only Stores” as early as this fall. The chain once boasted 371 U.S. locations.

As part of the purchase, Dollar Tree said that it also has acquired the “North American Intellectual Property of 99 Cents Only Stores,” which includes “select on-site furniture, fixtures, and equipment.”

The deal was completed in two transactions in May and was approved by the U.S. Bankruptcy Court for the District of Delaware.

In early April, 99 Cents Only Stores said that it was going out of business after it could not come up with a solution that would allow it to continue operating. The decision was forced by numerous factors, according to Mike Simoncic, its CEO at the time, who pointed to a global pandemic, changes in consumer demand, and inflationary pressures as key reasons it had to cease operations.

Just days later, the bargain retailer said it would file for Chapter 11 bankruptcy protection. 

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