Charlotte-based Dollar Express is closing all of its 323 stores nationwide, according to a notice this week to state officials, the latest blow for employees who were surprised last week by the retail chain’s proposed sale to Dollar General.
Nearly 2,800 employees – including 110 in the Charlotte corporate office – are losing their jobs ahead of the deal, which still needs approval from federal regulators. The Observer reported earlier this week that the jobs were in jeopardy.
As a standalone company, the retailer owned by New York private equity group Sycamore Partners lasted less than 18 months. Analysts said the company may have found itself on a bumpy road from the start, especially in the face of giant competitors like Dollar General and Family Dollar. In a federal filing, the company said without a sale, it no longer had a viable future.
Dollar Express said in its notice to the N.C. Commerce Department that it made the “difficult decision” to close all of its stores, as well as its corporate office, by June 30. Store-level Dollar Express employees nationwide this week also received letters from the company notifying them of the closure.
“The company’s decision is certainly not a reflection on the store team, and we appreciate your efforts to make the store successful,” reads the letter from Dean Williamson, head of human resources at Dollar Express. The letter adds that Dollar Express has “a need for your services until the store closes.”
It’s unclear what Dollar General’s plans are for the stores it’s acquiring, and whether it will hire on the stores’ terminated employees. A spokesman for Dollar General declined to comment since the deal is not yet closed.
One Dollar Express employee told the Observer he relocated his wife and two young kids to manage a store in New York. The termination, he said, was unexpected. “My wife is devastated. We’re trying to figure out how we’re going to pay the rent,” said the employee, who asked not to be named for fear of reprisal.
Dollar Express is the discount chain that quietly came to life in an office park off East Independence Boulevard. It was the first dollar-store concept from Sycamore Partners, whose portfolio includes Belk and specialty retailers such as Hot Topic.
Dollar Express was composed of 323 Family Dollar stores, which Sycamore bought from Dollar Tree to satisfy antitrust concerns amid Dollar Tree’s acquisition of Matthews-based Family Dollar. Before it decided to sell to Tennessee-based Dollar General, Sycamore was about to re-banner the stores from Family Dollars into Dollar Expresses.
In its application to the Federal Trade Commission seeking approval of the Dollar General deal, Sycamore Partners said Dollar Express “can no longer operate as a viable standalone business” due to “changes in competitive conditions since the purchase,” according to the FTC website.
Experts say the idea to launch Dollar Express as a new discount concept of its own may have been a troubled one from the start.
“From Sycamore’s standpoint, they probably realized it’s virtually impossible to compete with Family Dollar and Dollar General,” said Brian Yarbrough, a research analyst at Edward Jones.
Both Family Dollar and Dollar General sell a variety of items and national brands for $10 and under, making them close competitors. Dollar Express executives last year told the Observer the chain’s offerings would be similar to Family Dollar’s, with an array of low-priced goods like cleaning products, groceries, toiletries and small gifts.
Furthermore, Family Dollar (under parent company Dollar Tree) and Dollar General have a vast distribution network that would dwarf a new, much smaller competitor, Yarbrough noted. Dollar Express would also be introducing a new name into a market already dominated by the much bigger Family Dollar and Dollar General, he said.
“There’s no brand recognition,” Yarbrough said of Dollar Express. “How do you bring customers in? It was a tough one from the start, I think.”
David Balto, a Washington-based antitrust attorney at the David Balto Law Offices who has also worked at the FTC, does not think the FTC will approve the sale of former Family Dollar stores to its closest competitor.
If the FTC rejects the sale, Balto said, it might not bode well for other retailers considering acquisitions that also have competitive overlap, such as Walgreens and Rite Aid.
“The evidence is becoming increasingly clear – it’s really difficult to effectively divest retail assets to fully restore competition,” Balto said.
It’s unclear whether Dollar General plans to rehire any of the employees from the Dollar Express stores that are closing. There are two in Charlotte – one 1437 E. Sugar Creek Road, and another at 5300 South Blvd.
Dollar General announced plans earlier this year to add 1,000 new stores and create more than 10,000 new jobs nationwide. Those jobs could be going to fill the acquired Dollar Express stores, Balto noted.
FTC is asking for public comments on the deal through April 20.