Dollar Tree to close 1,000 stores after ‘botched’ Family Dollar takeover
Dollar Tree will close nearly 1,000 stores and swung to a surprise fourthquarter loss as the discount retailer took a related $1.07bn goodwill impairment charge.
Shares tumbled 15% before the opening bell on Wednesday.
Dollar Tree plans to close about 600 Family Dollar stores in the first half of this year and 370 Family Dollar and 30 Dollar Tree stores over the next several years.
Dollar Tree acquired Family Dollar for more than $8bn almost a decade ago after a bidding war with rival Dollar General, but it has had difficulty absorbing the chain.
“This dramatic cull is the coup de grace in the rather botched acquisition of the Family Dollar chain, which has caused Dollar Tree nothing but hassle since it was completed back in 2015,” wrote Neil Saunders, managing director of GlobalData. “Basically, almost 10 years on, Dollar Tree is still sifting through the mess it inherited and has not been able to completely turn around,” Saunders said.
Saunders said in an emailed statement that nearly 12% of current Family Dollar stores will be closing over the next three years.
For the three months ended 3 February, Dollar Tree lost $1.71bn, or $7.85 a share. A year earlier the Chesapeake, Virginia, company earned $452.2m, or $2.04 a share.
Stripping out certain items, earnings were $2.55 a share, which is still short of the per-share earnings of $2.67 expected on Wall Street, according to a survey by Zacks Investment Research.
Revenue climbed to $8.64bn from $7.72bn, a bit below Wall Street’s estimate of $8.67bn.
Dollar Tree has been attracting consumers that have been stung by inflation as they seek to cut spending. During the quarter, sales at Dollar Tree stores open at least a year climbed 6.3%, with traffic up 7.1%. While more shoppers were heading to stores, they were closely watching how much they spent, with average ticket down 0.7%.
At Family Dollar, sales at stores open at least a year slipped 1.2%. Traffic edged up 0.7%, but average ticket fell 2%.