Dollar Tree said it was exploring options, including a potential sale or spinoff of its Family Dollar banner, as the retailer looks to restructure its business amid stiff competition and strained consumer spending.
The Chesapeake, Virginia-based retailer, like its peer Dollar General, has been grappling with weak demand as rivals Walmart, Target and Chinese e-commerce platform Temu are also offering products at lower price points to attract inflation-hit customers.
Family Dollar, which Dollar Tree bought for $8.5 billion (€7.8 billion) in 2015, has been the main under performer for the company.
Dollar Tree had said in November last year it was going to review the business, and outlined plans earlier in 2024 to shutter 970 of its Family Dollar stores.
Store Closure
The company said it would close an additional 150 stores by the end of fiscal 2024.
"The unique needs of each banner at this time ... lead us to the decision to conduct a thorough review of strategic alternatives for the Family Dollar business," said CEO Richard Dreiling.
The Family Dollar banner operates 8,359 stores and 10 distribution centres, as of 3 February. Overall, Dollar Tree operates more than 16,000 stores.
The Family Dollar banner has particularly seen its core lower-income customers come under pressure due to reduced government benefits and higher borrowing costs in the last few months.
Reduced Customer Spending
The retailer has also seen sales take a hit from reduced customer spending on more profitable products like electronics and furnishings since 2022. In an attempt to revive demand, it has also introduced products at price points such as $3 and $5.
Dollar Tree currently has a market capitalisation of $26 billion (€23.9 billion), according to LSEG data.
It has raked in about $31 billion (€28.5 billion) in annual revenue, of which Family Dollar accounted for 45%.
The Wall Street Journal first reported the news on Wednesday (5 June 2024).
The retailer also said it expects adjusted profit for fiscal 2024 to be between $6.50 and $7 per share, compared with LSEG estimates of $6.89.
Shares of Dollar Tree were down about 3% in premarket trading.
