After 42 years of business, top bargain outlet 99 Cents Only filed for bankruptcy and sold its outlets to Dollar Tree. Consequently, over 170 of its previously closed stores could now open as Dollar Tree outlets.
Let’s find out what made the popular store end up in the red and fade away so sadly.
Chapter 11 Bankruptcy
In April, 99 Cents Only filed for Chapter 11 Bankruptcy. This form of bankruptcy filing, also called a “reorganization,” allows the company or individual in distress to devise a plan to recover financially.
Part of the bargain the outlet came up with involved leasing off major assets. In this case, Dollar Tree, which showed interest in partaking in the plan, came to the rescue.
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Dollar Tree Gains Occupancy Rights
After reviewing the proposal, the United States Bankruptcy Court approved the plan, transferring designation rights for the outlets. Over 170 stores, including furniture, fixtures, and equipment, have changed hands from 99 Cents Only to Dollar Tree.
For 99 Only Cent stores, it has released all 371 locations in Arizona, California, Nevada, and Texas.
Dollar Tree Also Acquired Intellectual Property Rights
Also included in Dollar Tree’s shopping cart are the intellectual property rights for 99 Cents Only. As a result of this acquisition, Dollar Tree can decide to operate the locations as “99 Cents Only” stores.
In addition, if they decide to continue with the “99 Cents Only” brand name, possessing the rights empowers Dollar Tree to open more 99 Cents Only stores if they so desire.
“An Attractive Opportunity”
In a Dollar Tree news release, its Chief Operating Officer, Michael Creedon Jr., spoke about the company’s motivation for their involvement in the exciting deal.
“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,” the statement read.
…And a Cheaper Option
Dollar Tree had one more consideration: cost. Acquiring the leased-out locations would save them a significant chunk of the cost of building new stores.
Also analyzing the move, financial analyst Michael Montani wrote that the “management felt that these locations are fundamentally good and in relatively short supply, so they took advantage of competitor weakness.”
A Remarkable Expansion
The news release also revealed the extent of Dollar Tree’s influence. The retailer already had 16,000 stores spread across 48 states in the country as well as 5 Canadian Provinces.
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The recent acquisition will help the company promote the Dollar Tree brand through “high-quality real estate assets in premium retail centers” and reach more consumers and communities.
The Decision Paid Off Pretty Early
The developments have been a major plus for Dollar Tree Inc. Ever since its involvement in the deal, the discount variety store hasn’t regretted the decision. Since the news broke, its shares have enjoyed a 2% boost.
Interestingly, Dollar Tree had posted losses in the last quarter of 2023. As a result, it announced plans to close down 1000 locations. “The takeover of 99 Cents Only stores has produced a massive reversal of fortunes,” the statement read.
A Hostile Economy
As expected, the ravaging inflation contributed to the exit of 99 Cents Only stores. According to Mike Simoncic, the interim CEO, other factors that hastened the company’s decline include shifting consumer demands and the “unprecedented impact left by the COVID-19 pandemic.”
He also blamed the company’s departure on rising theft and store damage cases.
A Message to Customers and Staff
In parting remarks, Simoncic reached out to both customers and company staff, who have stood by the brand since it first opened its stores in 1982. In return, the store kept its promise to customers by selling its goods at 99 cents or less for as long as possible.
“We deeply appreciate the dedicated employees, customers, partners, and communities who have collectively supported 99 Cents Only Stores for decades,” Simoncic said.
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Dollar Tree Has Raised Its Prices
Meanwhile, in March, Dollar Tree announced its prices would increase to $7. Precisely, it is moving up its price cap from the previous $5 it set in June 2023.
“This year, across 3,000 stores, we expect to expand our multi-price assortment by over 300 items at price points ranging from $1.50 to $7,” said Dollar Tree CEO Rick Dreiling. The company raised its base price from $1.25 to the current $1.50 in 2021.
Dollar Tree Still Isn’t Free From Challenges
Beyond the heightened applause generated from the acquisition of 99 Cents Only stores, the brand is battling its own challenges. Dollar Tree also owns Family Dollar, another discount chain nationwide.
Unfortunately, Family Dollar hasn’t been faring as well as Dollar Tree. The chain has had to shut down 975 stores to stay afloat.
Another Reason to Be Hopeful
Dreiling was also excited to announce that the store is gaining more acceptance from more financially buoyant customers. He reported that the chain’s fastest-growing demographic was customers who earned $125,000 or more.
Things are looking up again for the company, and as the new stores open up for business this fall, there is every reason to be hopeful for new heights.
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