Dollar Tree is moving to 99-cent-only stores

(CNN) — Goodbye, only 99 cents. Hello Dollar Tree.

Dollar Tree announced Wednesday that it has secured leases for 170 of its 99 Cents stores remaining from bankruptcy in Arizona, California, Nevada and Texas. Dollar Tree will reopen these stores with its own products under its own brand starting in the fall.

99 Cents Only filed for bankruptcy in April and closed its 370 locations.

The two chains are very different and the announcement is seen as a sign of consolidation in the retail sector.

99 Cents Only was a regional chain and sold groceries. Dollar Tree, a national company with primarily suburban locations, offers discretionary products such as vacation items and household items. Dollar Tree was the last dollar store chain to continue selling everything for $1 before raising prices in 2021 to $1.25 or more.

Dollar Tree also owns Family Dollar, which is primarily based in cities. Family Dollar has underperformed Dollar Tree and other discount chains in recent years, closing 975 stores.

Taking out just 99-cent leases after bankruptcy gives Dollar Tree a cheaper way to grow rather than building new stores and helps the Virginia-based chain expand its reach on the West Coast.

“Management viewed these locations as particularly good and relatively rare, so they took advantage of weak competition,” Evercore IRI analyst Michael Montagne wrote in a note to clients on Wednesday.

One challenge facing Dollar Tree is the volume of 99-cent-only stores.

99-cent stores are just over 20,000 square feet (1,850 square meters), more than twice the size of a typical dollar store chain.