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Chicago & Midwest  + Downtown  + Retail  | 

Dollar Tree and Family Dollar Just Turned the Investment Market on Its Head

By Michael Mintz and Ryan Wewerka

Family Dollar and Dollar Tree stores have seen staggering returns over the past several years, particularly during the pandemic when they announced more than 600 new store openings and, according to 2020 Annual Report, reported sales exceeding $25 billion for the first time. Following Dollar Tree’s acquisition of Family Dollar in 2015, the integration process saw challenges, but given the aforementioned growth and an exciting new concept that has shown promising results, the future looks bright for the discount store giant.

In 2019, Dollar Tree came up with a visionary hybrid concept. They introduced the Family Dollar and Dollar Tree combination store. The concept combines, under one roof, the characteristics that people love about each: Family Dollar’s great value and selection; and Dollar Tree’s ‘thrill of the hunt’ items.

In 2020, Dollar Tree trialed 50 of these next generation stores. According to Dollar Tree chief executive Michael Witynski, “The combination stores are more productive, produce higher gross margins, are better leveraging stores costs. Our goal is to have formats that leverage the best of Dollar Tree and Family Dollar brands to serve customers in all types of geographic markets.” Given the rapid ascension, Dollar Tree has identified 3,000+ markets for future growth. This accountment has been met with great enthusiasm by the triple-net and 1031 investment communities.

NEW CONCEPT INSIGHTS:

  • Store size 10,500 square feet (1,000 square feet larger than the typical Family Dollar prototype to accommodate the additional $1 products)
  • New strategic store format targeted for small towns and rural communities with populations of 3,000 to 4,000
  • Same-store sales for trial stores have shown them to be “more productive, produce higher gross margins, and, in aggregate, have delivered […] sales lifts of greater than 20%”*

In February of 2021, Dollar Tree received an upgrade of its investment-grade credit rating from BBB- to BBB. Standard & Poor’s credits the upgrade to Dollar Tree’s resilient performance throughout 2020’s government-imposed shutdowns.

“With their new concept combined with an upgraded credit rating, Dollar Tree Inc. is operating with recession resistant, essential service product perfectly suited for investors seeking low risk real estate,” says Michael Mintz, VP of investment sales, InCommercial Property Group.

Michael Mintz and Ryan Wewerka of InCommercial Property Group have been actively selling and analyzing these hybrid concepts nationwide on behalf of buyers and developers. InCommercial Property Group is based in Chicago and is a real estate brokerage firm and fund manager.

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