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Sunday, July 14, 2024

Dollar Tree may put Family Dollar up for sale

Dollar Tree, the discount retailer that bought Charlotte’s Family Dollar for $8.5 billion in 2015, said Wednesday it’s exploring alternatives for the chain, including a sale.

“We have not made any prejudgments regarding the eventual outcome of this process, especially given the wide range of potential outcomes,” CEO Rick Dreiling told analysts today. Dollar Tree is based in Chesapeake, Virginia.

“There is a lot of work to be done and we do not intend to provide any further updates unless and until the Board has approved a specific course of action or determined that further disclosures are appropriate or necessary,” he added.

Family Dollar opened its first store in Charlotte in 1961 and had 50 stores in Charlotte by the end of the 1960s. It grew to more than 7,000 stores in 44 states by 2011. It ended 2023 with 8,359 Family Dollar stores, but closed 513 in the first quarter of its fiscal year.

After pressure from activist investor Carl Icahn, the company agreed to be sold to Dollar Tree, rejecting a higher offer from rival Dollar General. The company’s headquarters in Matthews closed in 2018, displacing 700 employees.

Dollar Tree has struggled to improve Family Dollar’s performance, even as its core business has shown strong growth. Dollar Tree stores now charge $1.25 per item, after raising prices last year. Family Dollar offers a variety of prices, similar to Dollar General’s straegy.

In 2019, Dollar Tree announced plans to close 390 stores, renovate 1,000 of them, and rebrand 200 Family Dollar stores under the Dollar Tree name.

Last year, the company announced plans to close 970 underperforming Family Dollar stores. “We are already beginning to see progress in this targeted strategy in the streamlined Family Dollar banner,” said Dreiling in a prepared statement.

Dollar Tree ended 2023 with approximately 1,200 combo stores – both a Dollar Tree and a Family Dollar at the same location – with plans to add hundreds more in the coming years.

In the first three months of this year, Family Dollar’s same store sales grew just 0.1% while Dollar Tree same store sales grew 1.7%. Total sales increased slightly to $3.46 bilioni in the quarter, while operating income more than quadrupled to $36.9 million.

In the last fiscal year, Family Dollar reported revenue of $13.8 billion and an operating loss of $2.7 billion.

The company retained J.P. Morgan Securities as its financial adviser and Davis Polk & Wardwell as its legal adviser to assist in this review. Both New York-based firms were involved in Dollar Tree’s acquisition of Family Dollar.

Chris Roush
Chris Roush
Chris Roush is executive editor of Business North Carolina. He can be reached at croush@businessnc.com.

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