The Real Estate of Bankrupt Retailers 99 Cents Only and Party City Has Been Key To Store Growth For Dollar Tree
~1/4 of new Dollar Tree stores in 2024 resulted from its acquisition of ~170 former 99 Cents Only stores that were closed in bankruptcy and ~148 new openings in 2025 may be in former Party City stores
The big news of the day from Dollar Tree DLTR 0.00%↑ was the announcement that it is selling the Family Dollar chain for $1 BB.
But Dollar Tree also opened 650 new stores in 2024 — with a key assist from the bankrupt retailer 99 Cents Only.
99 Cents Only closed all 370 of its stores in 2024 after the 42-year old retailer filed for bankruptcy and liquidated.
The failure of 99 Cents Only, however, ended up being a great opportunity for Dollar Tree to pick up additional real estate and market share.
Dollar Tree paid ~$13 MM for ~170 of 99 Cents Only’s store leases at a bankruptcy auction in May 2024.
Within a month the bankruptcy court approved the sale and Dollar Tree instantly obtained possession of the sites.
Dollar Tree then moved quickly to set up shop in the real estate
85 of the former 99 Cents Only locations were rebranded and opened as Dollar Tree stores within 3 months of the lease acquisitions.
The remaining 1/2 of acquired locations opened by the end of the year.
Dollar Tree found the 99 Cents Only real estate attractive for several reasons.
Despite its financial struggles, 99 Cents Only generated approximately $2.1 BB in revenue during 2023 and much of the store base was profitable on a ‘4 wall’ basis.
This allowed for Dollar Tree — which has a similar product offering and customer base — to capture a large portion of these lost sales.
In fact, Dollar Tree moved aggressively to rebrand the sites and open for business so that — in the words of its CEO — that it “didn’t let a customer forget about us.”
The longer the stores were closed, the more opportunity customers had to change their shopping habits and go to other stores.
As a result, many of the former 99 Cents Only stores were re-opened in as little as 30-60 days — and all were open within 6 months of acquisition.
Additionally, the 99 Cents Only acquisition was a unique real estate opportunity.
Likely nowhere else would Dollar Tree find hundreds of seasoned and “move-in-ready” retail sites that could be had without the delays and uncertainties that come from negotiating one-off leases with landlords.
Finally, the 99 Cents Only stores were concentrated in just 4 states with ~70% of locations in California, a lucrative and high-barrier-to-entry market where Dollar Tree had been underpenetrated relative to its competitors.
To be sure, the 99 Cents Only real estate was not a perfect fit for Dollar Tree; most were sized between 10,000 and 25,000 square feet, significantly larger than the Dollar Tree prototype.
In fact Dollar Tree CEO Michael Creedon noted that “opening two 99 Cents Only stores or converting them is the equivalent of opening three Dollar Trees.”
Even after the 99 Cents only conversions and the Family Dollar divestment, Dollar Tree is still accelerating new store growth.
Dollar Tree executives are targeting the opening of several hundred new stores in 2025.
And like last year they may also get an assist from the real estate left behind by a failed retailer.
Just last month Dollar Tree acquired the designation rights for 148 leases for stores that Party City closed this year while in bankruptcy.
It will not be a surprise if most of these former Party City stores are converted to Dollar Tree sites by mid-year 2025.
