Dollar Tree Inc. said Wednesday that it plans to close hundreds of its Family Dollar stores this year. Dollar Tree bought Family Dollar about three years ago, but the Family Dollar chain has struggled to increase sales, Dollar Tree said in its financial earnings report on March 6, 2019. Credit: Christopher Bouchard | Aroostook Republican

Dollar Tree said Wednesday that it plans to close as many as 390 Family Dollar stores and convert another 200 to Dollar Tree stores this year.

In its financial report issued this morning, Dollar Tree did not disclose which stores will be affected. There are 60 Family Dollar stores throughout Maine, according to the company’s website. Both companies are based in Chesapeake, Virginia.

“We have not shared a listing of stores that will, or may, close,” Dollar Tree spokesperson Kayleigh Painter wrote in an email to the Bangor Daily News. Painter said the changes in fiscal year 2019 include renovating 1,000 stores.

“We also plan to open 350 new Dollar Tree and 200 new Family Dollar stores,” Painter said.

Dollar Tree completed its $8.5 billion purchase of Family Dollar in July of 2015. At the time the two discount store chains had more than 13,000 stores.

Painter said that as of Feb. 2, 2019, the company operated 8,236 Family Dollar and 7,001 Dollar Tree stores in the United States and Canada.

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Dollar Tree closed 84 underperforming Family Dollar stores in the fourth quarter of 2018, which ended on Feb. 2, 2019. That’s 37 more than it originally planned for the year.

“In fiscal 2019, the company is seeking to obtain material rent concessions from landlords on underperforming stores,” the company said in its financial report. “Without such concessions, the company expects to accelerate its pace of store closings to as many as 390 stores in fiscal 2019.”

That compares to the company’s normal pace of closing about 75 stores per year.

Dollar Tree has been testing a new model internally for both new and renovated Family Dollar stores. Known as “H2,” it improves merchandise offerings, including $1 merchandise.

Dollar Tree said H2 has increased store traffic and increased sales more than 10 percent compared to the control stores it used for comparison.

“H2 performs well in a variety of locations, and especially in locations where Family Dollar has in the past been the most challenged,” the company said in its financial report. “The company plans to renovate at least 1,000 of these stores this year and will pursue an accelerated renovation schedule in future years.”

Despite the closings and conversions, Dollar Tree President and CEO Gary Philbin was positive about the future of both store brands.

“Our results demonstrate the increasing strength of the Dollar Tree brand, and accelerated progress on the Family Dollar turnaround, as Family Dollar delivered its strongest quarterly same-store sales growth of the year,” he said in a statement.

Philbin said that since the merger of the two companies, Dollar Tree prepaid $4.3 billion of debt, captured significant synergies in both brands and fully integrated most systems, functions and departments.

By July, the two store chains will be unified in the Virginia headquarters.

“With these improvements behind us coupled with an investment grade debt rating and expected operating cash flow, before capital expenditures, of approximately $2 billion in 2019, we are in an ideal spot to accelerate our initiatives to position the Family Dollar and Dollar Tree banners for success,” he said.

The discount stores also plan to install adult beverages in approximately 1,000 stores and expand freezers and coolers in about 400 stores.

Consolidated net sales for the 13-week fourth quarter of 2018 were $6.21 billion compared to $6.36 billion in the prior year’s fourth quarter, which included 14 weeks.

Gross profit for the quarter was $1.91 billion compared to $2.10 billion in the prior year’s 14-week quarter.

Consolidated net sales for the 52-week fiscal 2018 increased 2.6 percent to $22.82 billion from $22.25 billion in the 53-week fiscal 2017.

Gross profit decreased by $74.4 million to $6.95 billion in fiscal 2018 compared to $7.02 billion in the prior year’s 53-week period.