Family Dollar’s ‘scheme to kill’ Charlotte retailer cost thousan - | WBTV Charlotte

Family Dollar’s ‘scheme to kill’ Charlotte retailer cost thousands of jobs, suit says

(Robert Lahser | The Charlotte Observer) (Robert Lahser | The Charlotte Observer)

CHARLOTTE, NC (Katherine Peralta and Rick Rothacker/The Charlotte Observer) - In the latest twist in a long-running dollar-store drama, the Charlotte-based retailer Dollar Express is suing Family Dollar and parent company Dollar Tree for setting out to “kill Dollar Express” and ultimately putting the new chain out of business.

Dollar Express is the chain started by private equity group Sycamore Partners when it bought more than 320 stores from Matthews-based Family Dollar in 2015. Family Dollar had to sell the stores for antitrust reasons when it was acquired by Virginia-based Dollar Tree.

In its suit, Dollar Express alleges that Dollar Tree and Family Dollar sabotaged the chain of stores that it sold to Dollar Express by hiring and promoting unqualified workers and opening new Family Dollar-branded stores in close proximity to Dollar Express stores – using Dollar Express’s confidential information.

In late March, Sycamore made the surprising move to lay off Dollar Express’ employees and sell the stores to Tennessee-based Dollar General because it could “no longer operate as a viable standalone business.” The suit filed Thursday in Delaware Chancery Court is the first time Dollar Express has laid out its reasons for abandoning the new retail venture less than 18 months after it started.

The legal dispute between the companies actually began Thursday morning with an opening volley from Dollar Tree. The Virginia-based retailer filed suit against Dollar Express under seal in Delaware for “non-payment of goods and services provided and other matters,” according to Dollar Tree spokesman Randy Guiler. The suit will likely be unsealed sometime next week, he added.

In its suit filed hours later in the same court, Dollar Express said it had been trying to start a viable business but was thwarted by a “scheme to kill Dollar Express” by Family Dollar and Dollar Tree. As a result of Dollar Express shutting down, nearly 3,000 workers – including 110 in the Charlotte corporate office – are losing their jobs.

“Dollar Express saw these stores as an exciting platform opportunity to create a nationwide discount retailer, and its plan was to grow by opening numerous Dollar Express-branded stores throughout the country,” the suit states.

Instead, the company is now winding down all 323 stores and seeking damages from the company that it acquired them from.

“Had Dollar Express known defendants’ true intentions, Dollar Express never would have purchased the stores,” the suit reads. “Similarly, defendants’ false representations enabled them to obtain the pre-merger approvals from the (Federal Trade Commission) required to consummate the merger.”

‘Widespread’ damage

The dollar-store takeover drama dates back to 2014, when Dollar Tree made a bid to buy Family Dollar. Dollar General followed with its own offer for the discount retailer, but Dollar Tree ultimately prevailed, buying Family Dollar for about $9.1 billion in July 2015.

Before the deal closed, Family Dollar agreed to offload some of its stores to New York-based Sycamore Partners in order to receive FTC approval for its sale to Dollar Tree. Sycamore, a private equity firm that specializes in buying retailers, acquired Charlotte-based Belk in 2015.

Since buying the Family Dollar stores, Sycamore had quietly built up Dollar Express’s headquarters in a nondescript office park off East Independence Boulevard with retail industry veterans such as CEO Bruce Efird, an Albemarle native and former CEO of Fred’s, a Tennessee discount retailer. Other corporate employees had been brought in with their families from as far as away as California.

In its suit, Dollar Express says the damage sustained by the company has been “widespread,” including lost sales and profits, lost investments in establishing a standalone business, diverted shoppers and supplier penalties.

In one example, according to the complaint, Family Dollar approved opening a new store in Memphis, Tenn., across the street from a profitable Dollar Express location in an effort to reclaim customers and “deprive such stores of their profitability.”

Knowing that it would have to divest stores, Family Dollar diverted some of its managers to stores it was keeping – “leaving behind managers at Dollar Express stores who ‘didn’t make the cut,’” the suit says. Family Dollar also “poached” employees from Dollar Express locations, causing significant turnover, according to the suit.

The complaint accuses Dollar Tree and Family Dollar of breach of contract, fraud, unfair competition and deceptive trade practices, among other allegations. The conduct goes beyond Dollar Express, “causing significant harm to competition, local communities, employees and consumers,” the suit states.

Dollar Express seeks damages to be determined at trial, including punitive damages, the suit says.

In its quarterly earnings report Thursday, Dollar General said that it plans to convert the Family Dollar-branded stores it is acquiring from Dollar Express into its own Dollar General-branded stores by the end of November.

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