Dollar Tree, Inc., a discount retail giant, is reportedly considering selling its subsidiary, Family Dollar Stores LLC, according to the Wall Street Journal, who cited sources acquainted with the situation.
The news triggered a nearly 3 percent rise in Dollar Tree's shares during pre-market trading on the Nasdaq, bringing the price to $123.73.
The company has engaged financial advisers to conduct a strategic review of its Family Dollar business, exploring potential options including a sale or spinoff. An announcement regarding these plans is anticipated when the company reports its first-quarter results later today.
Sources indicate that the Chesapeake, Virginia-based retailer has enlisted bankers from JPMorgan to assist with this strategic review.
In mid-March, Dollar Tree declared its intention to shutter around 970 underperforming Family Dollar locations, with approximately 600 closures scheduled for the first half of the year, as part of a broader store portfolio optimization review. The remaining Family Dollar stores, along with about 30 Dollar Tree locations, are expected to close progressively over the next several years as their current leases expire.
The comprehensive store portfolio optimization involves identifying stores for closure, relocation, or rebranding.
Rick Dreiling, Chairman and CEO, stated that these strategic measures aim to fortify the Family Dollar brand and position it to realize its full potential.
Dollar Tree has also emphasized an increased focus on launching more Dollar Tree stores compared to previous years due to their robust returns and performance. The majority of new store openings in the fiscal year 2024 are projected to be Dollar Tree locations.
Despite having experienced revenue growth, the company reported a significant net loss in its fourth quarter, contrasting with a profit from the previous year. The store closure decision was based on an assessment of current market conditions and individual store performance among other factors.
In late February, Family Dollar faced a $41.675 million fine from the U.S. Department of Justice after pleading guilty to storing consumer products, including food and drugs, in rodent-infested conditions at a warehouse in West Memphis, Arkansas. This penalty was identified as the largest-ever monetary criminal fine in a food safety case by the DOJ.
Additionally, in February 2022, Family Dollar issued a recall for all drugs, medical devices, cosmetics, and both human and animal food products sold since January 1, 2021, in 404 stores serviced by the affected warehouse.
As of February 3, Dollar Tree was operating 16,774 stores under the banners of Dollar Tree, Family Dollar, and Dollar Tree Canada.
