Dollar Tree is exploring different options to reorganize its business, including possible sale or separation of its Family Dollar branddue to constant inflation that continues to affect consumer spending.
Dollar Tree, like its competitor Dollar General, has struggled with lower demand for non-essential products as shoppers focus more on buying everyday goods, which are less profitable.
Additionally, it faces stiff competition from rivals such as Walmart, Target and Chinese e-commerce platform Temu, which also offer products at lower prices to appeal to Americans on limited budgets.
Family Dollar, which Dollar Tree bought in 2015, has been its biggest underperformer. Earlier this year, the company had outlined plans to close 970 of its Family Dollar stores.
As of Feb. 3, the company operated 8,359 stores under the Family Dollar brand and announced it would close an additional 150 stores by the end of fiscal 2024.
“Many of these stores have been underinvested for years, and the capital investment required to repair them could not offer an acceptable rate of return,” said CEO Richard Dreiling.
The company has not established a definitive deadline for the completion of the evaluation process to determine whether it will finally sell Family Dollar or not.
“Dollar Tree would not get not even close to $8.5 billion that originally paid for the acquisition of Family Dollar,” said Neil Saunders, CEO of GlobalData.
“It is clear to everyone in the market that Family Dollar is a chain that needs a lot of work and investment, a fact that will also reduce the number of interested parties,” Saunders added.
JP Morgan Securities LLC is the financial advisor in this process.
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