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US discount retailer Dollar Tree has agreed to abandon the business it bought for $8.5 billion a decade ago and sell the troubled family dollar chain for $1 billion.
Dollar Tree has signed an agreement with investor brigade capital and Macellum Capital, saying it accounts for around 45% of more than 16,000 stores in the US and Canada to sell its underperforming family dollars.
The deal marks the reversal of the dollar tree, announced on Wednesday along with quarter results. This fought against rival dollar generals in the sector in 2014 under previous management to win family dollars.
Dollar Tree’s store of the same name has a greater presence in middle class suburbs and tends to carry most of the discretionary items. Family Dollar stores are located primarily in less-appointed urban neighbourhoods and rural towns, offering a variety of packaged frozen foods and other household essentials. Over 40% of the chain’s customers are eligible for government financial support.
While family dollar sales may help ease some of Dollar Tree’s company-specific issues, discount retailers are fighting more widely, competing to strengthen competition with Big-Box chain Walmart, in addition to growing uncertainty about consumer sentiment and economic outlook.
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Discounted retailers have made active trade during the 2020 pandemic with food and essential items sales, riding the wave as inflation surged. But years of cumulative price increases have hit shoppers, and last year, general administration of the dollar issued a dark warning at the end of each month that low-income households are running out of money.
Stocks in Dollar Tree and Dollar General have fallen by more than 40% each over the past year.
Family dollar sales are scheduled to close in June, with Dollar Tree estimated net revenue of $84 million from the transaction. Brigade Capital was involved in a failed proposal last year to acquire department store operator Macy’s Private, but in recent years Maselum has been turning to Cole’s activists.
Mike Creedon, CEO of Dollar Tree, said the company “can be fully dedicated to Dollar Tree’s long-term growth, profitability and return on capital.”
Wednesday’s Dollar Tree presented its fourth quarter results reporting Family Dollar as a discontinued business. The company expects full-year 2025 net sales from continuing operations to range from $18.5 billion to $19.1 billion, or 3-5% of the previous year.
