Dollar Tree is considering selling its Family Dollar brand after recently announcing plans to close nearly 1,000 Family Dollar stores to revamp the struggling business. Over 500 locations were shut down in the fiscal first quarter.
The company acquired Family Dollar in 2015 for almost $9 billion, but the brand has struggled against competitors like Dollar General.
In a press release, Dollar Tree stated, “The unique needs of each banner at this time – transformation at Family Dollar and growth acceleration at Dollar Tree – lead us to the decision to conduct a thorough review of strategic alternatives for the Family Dollar business.”
The company is working with JPMorgan and Davis Polk & Wardwell advisors in its review but has not set a deadline for the sale process. Following the announcement, Dollar Tree’s shares dropped by 5%.
The update coincided with Dollar Tree’s fiscal first-quarter earnings report, which showed Family Dollar’s underperformance.
Same-store sales for Dollar Tree rose by 1.7%, while Family Dollar’s increased by only 0.1%. Enterprise sales grew by 1%, with total revenue rising to $7.63 billion, up from $7.32 billion a year earlier.
Net income for the three months ending May 4 was $300.1 million, or $1.38 per share, compared to $299 million, or $1.35 per share, a year earlier. Adjusting for one-time items, earnings were $1.43 per share.
Dollar Tree also reported losses of $117 million from a tornado that destroyed its distribution center in Marietta, Oklahoma.
Despite cost-cutting efforts, dollar stores are losing market share to value retailers like Walmart and e-commerce platforms like Temu. Shares of Dollar Tree have declined roughly 15% in 2024.
