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Dollar stores do battle for dominance

If a dollar saved is two dollars earned, what happens when one buck store buys out another? Three of the nation's largest discount general merchandise retail stores - Dollar Tree Stores Inc., Family Dollar Stores Inc., and Dollar General Corp. - tried to buy each other out over the last year.

Christel DiVincenzo of Havertown shops at the Dollar Tree in Broomall. The 11,000-square-foot site generates the largest volume in sales among the 150 Dollar Trees in the Philadelphia region, management says. ( BEN MIKESELL / Staff Photographer )
Christel DiVincenzo of Havertown shops at the Dollar Tree in Broomall. The 11,000-square-foot site generates the largest volume in sales among the 150 Dollar Trees in the Philadelphia region, management says. ( BEN MIKESELL / Staff Photographer )Read more

If a dollar saved is two dollars earned, what happens when one buck store buys out another?

Three of the nation's largest discount general merchandise retail stores - Dollar Tree Stores Inc., Family Dollar Stores Inc., and Dollar General Corp. - tried to buy each other out over the last year.

The struggle for greenbacks among the dollar stores got downright ugly.

In the end, Dollar Tree prevailed in its bid to acquire Family Dollar after smoothing out anti-competitive concerns with the Federal Trade Commission and Pennsylvania Attorney General Kathleen Kane, among others, earlier this month. The $9.2 billion deal closed on July 6.

Opponents of the deal argued that consumers should have as many choices as possible to buy the greatest goods at the lowest prices. It's healthy competition.

Merging two of the country's largest value discount retailers, they say, would limit choice.

It can get confusing, so try to keep up. There is Dollar Tree, which typically prices all merchandise for $1 - except greeting cards which are two for a buck.

Meanwhile, Family Dollar and Dollar General offer additional goods for higher prices. These stores tend to be smaller and sell items such as household products, apparel, accessories and seasonal items, generally for under $10.

Dollar General - the store with the no-frills yellow sign - tried to make a last-ditch offer last fall to buy Family Dollar, which would have scuttled the deal that Family Dollar already agreed to with Dollar Tree. Family Dollar's board of directors rejected the Dollar General offer, fearing that antitrust regulators would block the deal.

But Jaz Floyd, a musician from North Philadelphia, said she didn't fault Dollar General for trying.

"If it makes the prices lower for the consumer, why not?" she asked while leaving the Dollar General at 501 Spring Garden St. last week.

Dollar Tree and Family Dollar both operated hundreds of stores in Pennsylvania and New Jersey. Dollar Tree is headquartered in Chesapeake, Va., and operated more than 5,400 stores nationwide. Family Dollar, of Matthews, N.C., owned more than 8,000 stores.

For the merger to go forward, Dollar Tree was required by the FTC to sell 330 Family Dollars stores, and they are being sold to Sycamore Partners, a private equity firm in New York. The sold stores are to remain deep-discount retailers rebranded as Dollar Express stores. They include five Family Dollar stores in Philadelphia, and others in Upper Darby, Yeadon, Lansdowne, Levittown, Morrisville and Allentown.

Kane announced on July 6 the terms of a multistate settlement stemming from a lawsuit filed by 17 states, including Pennsylvania, that challenged the merger. Among the terms was requiring 19 Family Dollar stores in the state to be sold to a competitor.

"We wanted to ensure there would be competition in these areas," she said, "and that consumers were being offered the best prices and merchandise. Kane said Dollar Tree is also required to notify the Pennsylvania Attorney General's office of future acquisitions, store relocations, or closings in the state.

Guy Berger, an economist at RBS Securities Inc. in Stamford, Conn., said in a recent report that there was a reason dollar stores were thriving after the recession. The median weekly income for U.S. workers has risen 22 percent, but there is a 3.1 percent net decrease when inflation is factored in.

In other words, consumers are stretching every dollar.

Anthony Chukumba, senior retail and consumer group analyst at equity research BB&T Capital Markets in New York, said people who sampled dollar stores during the recession, when they had less income to spend, grew to like them. He saw only "upsides" to the merger:

"I certainly don't see any lessening of competition because the two never competed head-to-head. They become a larger entity that can use that to leverage suppliers. The result will be lower prices for consumers."

At the Dollar Tree in Broomall one recent day, there was a steady stream of customers all day, including Christel DiVincenzo, 39.

The stay-at-home mom from Havertown filled up her cart with plastic containers with lids to organize her home hall closet. At the checkout, she ended up spending $55 and left with six bags.

She returned a day later to purchase party supplies for her 8-year old daughter and 4-year old son, and a baby shower.

The Broomall Dollar Tree measures 11,000 square feet and, thanks to regulars such as DiVincenzo, generates the largest volume in sales among 150 Dollar Trees in the Philadelphia region, including South Jersey, according to store management.

"This one's the best," DiVincenzo said. "You can get name-brand stuff that you would get at other stores for way more."

For example, a 24-ounce bottle of Hunt's Ketchup was selling for $1 at Dollar Tree last week. It was priced at $1.69 at Giant supermarkets and $1.49 at ShopRite. Nail polish cost $1 while a comparable brand was $3.19 at CVS.

Shopper John Rovaine, 57, of Lansdowne, who lives near both a Dollar Tree and a Family Dollar, said the merger was a good thing.

"I think they're a little pricier," Rovaine said of Family Dollar, while he was at a Dollar Tree cash register. "You can come here, and everything's a dollar.

"And every dollar counts."