Dollar Tree has made the strategic decision to divest its Family Dollar business as it seeks to address significant financial losses under new management.
The discount retailer announced during its fourth-quarter earnings report on Wednesday that it has reached an agreement to sell Family Dollar to private equity firms Brigade Capital Management and Macellum Capital Management for approximately $1 billion.
This transaction is anticipated to be completed within 90 days, and the Family Dollar headquarters will remain located in Chesapeake, Virginia.
DOLLAR TREE TO CLOSE AROUND 1K FAMILY DOLLAR STORES
The sale price represents a small fraction of the $9 billion Dollar Tree originally spent to acquire Family Dollar in 2015, when it outbid Dollar General for the brand.
Mike Creedon, who assumed the role of CEO in December 2024, indicated that the divestiture of Family Dollar will enable Dollar Tree to “fully dedicate ourselves to Dollar Tree’s long-term growth, profitability, and returns on capital.”
“This marks a significant milestone in our multi-year transformation journey aimed at realizing our full potential,” Creedon noted. He emphasized that the company intends to focus on optimizing and expanding the Dollar Tree business.
The plan for growth involves an “expanded assortment, substantial new store openings nationwide, and strategic initiatives that support our development strategy,” he explained.
In December, Dollar Tree raised its full-year sales forecast following a positive earnings report that exceeded Wall Street’s expectations, despite recent challenges stemming from the departure of its CFO. The company introduced Stewart Glendinning as the new CFO earlier this month, with previous experience in managing enterprise-wide transformation efforts, including assessing strategic options for the Family Dollar division.
Dollar Tree has been facing a series of financial challenges, including consecutive quarters of losses as consumer demand slowed. While the company initially benefited from increased foot traffic amid rising costs for consumers, competition from major retailers such as Walmart and Target, as well as fast-fashion brands like Temu and Shein, has impacted its ability to maintain sales.
To address these issues, Dollar Tree has initiated a downsizing of its operations, particularly focusing on the Family Dollar brand, which has struggled with declining same-store sales following an unexpected recall of over-the-counter drugs and medical devices in multiple states in 2023.
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As part of its restructuring efforts, the company announced it would shut down approximately 1,000 locations, including 600 Family Dollar stores, throughout the first half of 2024. Additionally, plans have been revealed for further closures, with 370 Family Dollar stores and 30 Dollar Tree locations slated to shut down once their respective leases expire over the coming years.
Year-to-date, Dollar Tree shares have decreased by more than 40%.
JPMorgan Securities LLC and Davis Polk & Wardwell LLP are providing advisory services to Dollar Tree, while Jefferies LLC serves as the lead financial adviser for Brigade and Macellum. RBC Capital Markets is additionally involved in the Family Dollar acquisition, with legal counsel from Paul, Weiss, Rifkind, Wharton & Garrison LLP, and financing facilitated by Wells Fargo, RBC Capital Markets, and WhiteHawk Capital Partners.
