An exterior view of a Dollar Tree store in Bloomsburg, Pennsylvania.
Paul Weaver | Sopa Images | Lightrocket | Getty Images
Money Tree announced Wednesday that it’s considering a sale of its more grocery-focused Family Dollar brand.
The company recently announced plans to shut nearly 1,000 Family Dollar stores in an effort to revive the ailing business. The discounter closed greater than 500 stores in the primary quarter of its fiscal yr, it said on Wednesday.
“We are already seeing progress on this targeted strategy under the optimized Family Dollar banner,” the corporate said said in a press release. “The unique needs of each banner at this time – transformation at Family Dollar and growth acceleration at Dollar Tree – led us to decide to conduct a thorough review of strategic alternatives for the Family Dollar business.”
Dollar Tree bought Family Dollar in 2015 for nearly $9 billion. Since then, the corporate has struggled to compete against its biggest rival. Dollar-General.
The company has not set a deadline or definitive timeline for the review technique of the sale and is working with advisors from JPMorgan and Davis Polk & Wardwell in its review.
Dollar Tree shares fell about 2% in trading Wednesday morning.
The update got here as Dollar Tree released its first-quarter earnings report, during which Family Dollar lagged.
Dollar Tree brand comparable-store sales rose 1.7 percent, while Family Dollar sales rose just 0.1 percent. Enterprise sales rose 1 percent.
Revenue increased to $7.63 billion, a rise of about 4% from $7.32 billion a yr earlier.
The company expects second-quarter sales to be within the range of $7.3 billion to $7.6 billion, with Dollar Tree’s sales growth between two and 4 percent and sales within the Family Dollar segment roughly flat.
The discounter has in its first fiscal quarter in comparison with Wall Street expectations based on an analyst survey conducted by LSEG:
- Earnings per share: 1.43 cents in comparison with expected 1.42 cents
- Revenue: $7.63 billion versus expected $7.63 billion
The company’s net income for the three-month period ended May 4 was $300.1 million, or 1.38 cents per share, compared with $299 million, or $1.35 per share, a yr earlier. Adjusted for one-time items, including the associated fee of store closures, the corporate reported earnings of $1.43 per share.
The company also mentioned that it suffered losses totaling $117 million in early May after a tornado destroyed the corporate’s distribution center in Marietta, Oklahoma, on April 28. The facility was significantly damaged and inventory and the power itself were beyond salvage, Dollar Tree’s report said.
The company expects that the losses incurred may be covered by insurance compensation.
The dollar store segment goes through tough times as lower-end consumers balk at higher prices. Although a shift toward cost-cutting measures appears to have benefited dollar stores, discounters are increasingly losing market share to low-cost retailers similar to Walmart and e-commerce retailers like Temu.
Dollar Tree fell wanting expectations for holiday quarter sales in its fourth-quarter earnings report, while its important competitor Dollar-General exceeded estimates.
Dollar Tree has been within the midst of a broader turnaround since current CEO and former Dollar General CEO Richard Dreiling took the helm in early 2023.
The company’s shares are down about 15% in 2024.
