Dive Brief:

• Dollar Tree temporarily closed more than 400 of its Family Dollar stores after Food and Drug Administration regulators flagged an Arkansas distribution center as rodent-infested in February. The closures fueled a YoY dip in same-store sales for the Family Dollar segment, executives said on a May earnings call.
• Family Dollar issued a voluntary recall on Feb. 18 of products stored and shipped from its West Memphis, Arkansas, facility since Jan. 1, 2021 due to the presence of rodents and potential Salmonella contamination stemming from the infestation. Stores in six states closed temporarily "to permit the removal and destruction of inventory subject to the Recall," Dollar Tree said in its quarterly report. Those stores have since reopened.
• The 30-year-old distribution center will be permanently closing as it is "no longer part of our go forward strategy," President and CEO Mike Witynski said on an earnings call last week. "We are relocating stores to other DCs to fulfill the store deliveries and have sufficient capacity to serve all stores in our remaining fleet of distribution centers," Witynski said. 

Dive Insight:

Family Dollar issued the recall after a Food and Drug Administration inspection of the Arkansas distribution center began in January following a consumer complaint. This set in motion findings that would lead to the temporary closure of hundreds of stores and the permanent closure of the troubled facility.

"Conditions observed during the inspection included live rodents, dead rodents in various states of decay, rodent feces and urine, evidence of gnawing, nesting and rodent odors throughout the facility, dead birds and bird droppings, and products stored in conditions that did not protect against contamination," according to an FDA news release. "More than 1,100 dead rodents were recovered from the facility following a fumigation at the facility in January 2022."

The recall stemming from the distribution center's issues covered several categories of items purchased at Family Dollar stores in Alabama, Arkansas, Louisiana, Mississippi, Missouri and Tennessee. Family Dollar notified affected stores to quarantine and discontinue the sale of any affected product, per its recall announcement. Product types covered by the recall include drugs, medical devices, cosmetic, dietary supplements and human and animal food products.

“No one should be subjected to products stored in the kind of unacceptable conditions that we found in this Family Dollar distribution facility," said Judith McMeekin, associate commissioner for regulatory affairs in the FDA's Office of Regulatory Affairs, in a statement. "These conditions appear to be violations of federal law that could put families’ health at risk."

Family Dollar stopped product distribution within days of the FDA inspection team's arrival. The company closed the facility "for extensive cleaning" following the FDA's inspection, per Dollar Tree's quarterly report.

Internal company records, however, showed a history of infestation at the facility, according to the FDA release, with more than 2,300 rodents collected between March 29 and Sept. 17, 2021.

On May 18, Dollar Tree announced the facility's permanent closure, after determining it was no longer able to effectively serve the needs of stores and customers, Dollar Tree Vice President of Investor Relations Randy Guiler said in an email to Supply Chain Dive.

The facility will stop shipping to stores before the end of June. Inventory transfers to other distribution centers will be completed in August before its closure by the end of October, according to Guiler.

Approximately 300 employees will be impacted, and the company is offering outplacement services and employee assistance programs for those who lost their jobs, Guiler said.

The temporary closure of affected stores caused the Family Dollar segment's comparable store net sales to drop 2% YoY. All the stores affected by the recall have since been reopened, Witynski said. Family Dollar had 8,074 stores as of April 30, along with 11 distribution centers.

As of Feb. 18, the company was not aware of any consumer complaints or reports of illness in connection to the recall, according to its recall announcement. But Dollar Tree's quarterly report said that since then, it has received multiple class action complaints, a federal grand jury subpoena and a lawsuit filed by Arkansas' attorney general in connection to the conditions at the Arkansas distribution center.