An exterior view of a Dollar Tree store in Bloomsburg, Pennsylvania.
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dollar tree announced Wednesday that it is considering selling its more grocery-focused Family Dollar brand.
The company had recently shared plans to close nearly 1,000 Family Dollar stores in an attempt to revamp the struggling business. The discounter closed more than 500 locations during its fiscal first quarter, it said Wednesday.
“We are already starting to see progress on this specific strategy in the simplified Family Dollar banner,” the company said in a press release. “The unique needs of each company 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.”
Dollar Tree bought Family Dollar in 2015 for nearly $9 billion. The company has been struggling ever since to compete against its main rival, general dollar.
The company has not set a definitive deadline or timeline for the sale review process and is working with advisors JPMorgan and Davis Polk & Wardwell on its review.
Dollar Tree shares fell about 5% on Wednesday.
The update came alongside Dollar Tree's fiscal first-quarter earnings report, in which Family Dollar lagged.
Same-store sales of the company's Dollar Tree brand rose 1.7%, while Family Dollar sales rose just 0.1%. Business sales increased 1%.
Revenue rose to $7.63 billion, up about 4% from $7.32 billion a year earlier.
The company said it expects second-quarter sales to range between $7.3 billion and $7.6 billion, with sales growth for the Dollar Tree brand between 2% and 4% and sales for the Family Dollar segment growing about flat.
Here's how the discounter fared in its fiscal first quarter compared to what Wall Street anticipated, according to a survey of analysts by LSEG:
- Earnings per share: $1.43 cents vs. $1.42 expected
- Revenue: $7.63 billion vs. $7.63 billion expected
The company's reported net income for the three months ended May 4 was $300.1 million, or 1.38 cents per share, compared with $299 million, or 1.35 dollars per share, from the previous year. Adjusting for one-time items, including the cost of store closures, the company reported earnings of $1.43 per share.
The company also mentioned that it had incurred losses totaling $117 million in early May, after a tornado destroyed the company's distribution center in Marietta, Oklahoma, on April 28. The facility suffered significant damage and the inventory at the facility as well as the facility itself are not salvageable, Dollar Tree said in the report.
The company said it expects the losses incurred to be offset by insurance recoveries.
The dollar store segment is facing tough times as low-end consumers recoil from higher costs. Although it appears that a shift toward cost-cutting efforts would have benefited dollar stores, discount stores are increasingly losing market share to value retailers like Walmart and e-commerce retailers like Temu.
Dollar Tree missed holiday quarter sales expectations in its fourth-quarter earnings report, while its biggest competitor general dollar exceeded estimates.
Dollar Tree has been in the midst of a broader turnaround effort since current CEO and former Dollar General CEO Richard Dreiling took the helm in early 2023.
The company's shares have declined approximately 15% in 2024.
