Dollar Tree is exploring the sale of its Family Dollar business, reported Reuters. With the Family Dollar banner of the business struggling, the company is looking to restructure especially as inflation continues to plague consumer and corporate finances.
“The retailer, like its peer Dollar General, has been grappling with weak discretionary demand as shoppers focus more on less-profitable consumables. It is facing stiff competition from rivals Walmart, Target and Chinese e-commerce platform Temu, which are also offering lower-priced products to attract budget-stretched Americans,” wrote Reuters.
According to an exclusive Wall Street Journal article, “Dollar Tree also reported first-quarter results showing it was hurt, in part, by a softer Easter season—typically a time of higher demand. Same-store sales at Dollar Tree rose 1.7%, while Family Dollar was up just 0.1% in the period.”
Dollar Tree has retained JPMorgan Chase to lead the review, WSJ reported, though the dollar store said that it has no set timeline in mind and there may not be any deal.
Earlier this year, Family Dollar announced plans to close 1,000 stores—600 locations in the first half of 2024 and 370 stores over the next several years as store leases expire. Dollar Tree said it would close an additional 30 Dollar Tree stores this year as leases expire. Before the announcement, Dollar Tree operated 8,359 Family Dollar stores, according to Reuters.
Dollar Tree bought Family Dollar in 2015 for $8.5 billion, and hoped that “by joining forces, it could grow its customer base, reduce costs and fend off bigger retailers like Dollar General and Walmart. But Dollar Tree has struggled to integrate Family Dollar.”
The stores were already in poor condition at the time of acquisition, reported CNN, and even after renovating thousands of stores, many stores were poorly maintained and had trouble recovering.
"Many of these stores had been under-invested for years, and the capital investment required to fix them could not deliver an acceptable rate of return," said CEO Richard Dreiling.