Dollar Tree continues to make news, but not for its promotions or incredible deals. This time, the large retailer is considering selling one of its commercial divisions acquired almost 10 years ago: Family Dollar. ¿What motivates this sale And why is it happening after the announcement of the closure of almost 1,000 branches in the coming months?
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It seems like these are crucial days for Dollar Tree management. According to the SoloDinero portal, the low-cost object sales chain would be thinking of putting Family Dollar, the company’s extension brand, on sale before the end of 2024.
As we well know, at the beginning of 2024, the company previously known as Only $1.00 unexpectedly announced the decision to close some Family Dollar locations. The reasons were clear: figures in the red, million-dollar fines for non-compliance with standards, disastrous management and the low spending of its recurring consumers.
WILL DOLLAR TREE SELL FAMILY DOLLAR DUE TO CRISIS?
In case you don’t know, Dollar Tree has been fighting against the positioning of companies like Walmart, Target or Costco in the region. However, the retailer’s deficit is that its competition’s prices did not vary, despite the percentage increase in inflation.
It was on Wednesday, June 5, when Dollar Tree announced the decision to take into account new paths to stay in the green before the closure of 1,000 branches statewide. According to its most recent statement, the company managed to close more than 500 stores in its first fiscal quarter of 2024.
“We are already beginning to see progress in this strategy aimed at streamlining Family Dollar,” the company stated in a press release. “The unique needs of each brand at this time – transformation at Family Dollar and acceleration of growth at Dollar Tree – led us to the decision to conduct a comprehensive review of strategic alternatives for the Family Dollar business.”
So how many millions would the sale amount to? According to the Telemundo portal, Dollar Tree has not set an estimated amount to carry out said process, but it is estimated that the sale review process is being consulted by different advisors from JPMorgan and Davis Polk & Wardwell.
FIGURES IN RED AND CRISIS: THE PRESENT OF DOLLAR TREE IN NUMBERS
The current situation of Dollar Tree suggests that the sale of Family Dollar and the closure of stores is nothing more than a step to safeguard its financial stability. According to the latest reports, the retailer’s shares fell 5% last Wednesday.
This update was carried out with Dollar Tree’s fiscal first quarter achievements and earnings report, in which Family Dollar was completely behind.
Meanwhile, sales at the company’s Dollar Tree stores rose 1.7%, while Family Dollar sales only rose 0.1%. In total, the company’s sales increased by 1%.
Crunching the numbers, Dollar Tree’s revenue came in at $7.64 billion, up 4% from last year’s $7.32 billion.
The company expects second-quarter sales to be between $7.3 billion and $7.6 billion, with Dollar Tree sales increasing between 2% and 4%, and Family Dollar sales virtually unchanged.
Let us remember that Dollar Tree acquired Family Dollar in 2015 for almost US$9 billion. Since then, the company experienced growth in the early years and focused its efforts on competing against Dollar General, its main competitor.
