Dollar Tree has begun a formal review of “strategic alternatives” for the company’s Family Dollar business segment, which could include a potential sale, spin off or another disposition of the business, according to a statement released by Dollar Tree.
Statement from Dollar Tree Chairman and CEO Rick Dreiling:
“Dollar Tree has been on a multi-year journey to help the company fully achieve its potential. Last year, we announced a comprehensive review of the Family Dollar portfolio, including the planned closure of approximately 970 underperforming Family Dollar stores to focus on enhanced investments in remaining Family Dollar stores that present favorable opportunities for long-term growth and transformation, with more attractive returns on capital. We are already beginning to see progress in this targeted strategy in the streamlined Family Dollar banner. At the same time, we continue to aggressively grow the Dollar Tree banner through compelling initiatives like our expanded multi-price offerings, significant planned new store openings across the U.S. and accretive transactions like our recent successful bid to acquire up to 170 stores from 99 Cents Only. The unique needs of each banner at this time — transformation at Family Dollar and growth acceleration at Dollar Tree — lead us to the decision to conduct a thorough review of strategic alternatives for the Family Dollar business. Our goal is to position both the Dollar Tree and Family Dollar banners to progress further and faster, and to determine whether the exclusive attention of a dedicated team will benefit both, while creating value for Dollar Tree shareholders and other stakeholders.”
Dollar Tree has not set a deadline or definitive timetable for the completion of the strategic alternatives review process, and there can be no assurance that this process will result in any transaction or particular outcome.
The company has noted that it does not intend to comment further unless and until the board has approved a specific course of action or the company has otherwise determined that further disclosure is “appropriate or necessary.”
Dollar Tree has retained J.P. Morgan Securities as its financial advisor and Davis Polk & Wardwell as its legal advisor to assist in the review.
An Ongoing Process
In March of this year, Dollar Tree announced its decision to shutter nearly 1,000 locations — 970 of which are Family Dollar stores.
The company planned to close the first 600 by the end of the first half of fiscal 2024, with the remainder closing in the next several years.
“During the fourth quarter of fiscal 2023, the company announced that it had initiated a comprehensive store portfolio optimization review which involved identifying stores for closure, relocation or re-bannering based on an evaluation of current market conditions and individual store performance, among other factors,” the company stated at the time of the announcement. “As a result of this review, we plan on closing approximately 600 Family Dollar stores in the first half of fiscal 2024. Additionally, approximately 370 Family Dollar and 30 Dollar Tree stores will close over the next several years at the end of each store’s current lease term.”
The announcement came as a part of Dollar Tree’s Q4 and fiscal 2023 results report, where the brand revealed a net loss of $1.71 billion for the fourth quarter, which ended Feb. 3.
Dollar Tree/Family Dollar Merger
Dollar Tree completed the acquisition of Family Dollar in 2015. Through the acquisition, the company increased its operating footprint to 13,000 stores across 48 states and five Canadian provinces.
The $8.5 billion deal mandated that Family Dollar sell 330 of its stores to a private equity firm called Sycamore Partners within 150 days of closing the deal.
Cost-cutting measures implemented by Dollar Tree resulted in layoffs for some of the 1,300 workers at Family Dollar’s headquarters, with Dollar Tree attempting to cut annual expenses by $300 million in the three years following the deal.
Today, the company operates over 16,000 stores and employs more than 200,000 people, including employment at its 25 distribution centers.
