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The
retailer, like its peer Dollar General, has been grappling with
weak discretionary demand as shoppers focus more on
less-profitable consumables. It is facing stiff competition from
rivals Walmart, Target and Chinese e-commerce platform Temu,
which are also offering lower-priced products to attract
budget-stretched customers.
Family Dollar, which Dollar Tree bought for $8.5 billion in
2015, has been the main underperformer for the company, as its
core lower-income customers have come under pressure due to
reduced government benefits and higher borrowing costs.
"The unique needs of each banner at this time ... lead us to the
decision to conduct a thorough review of strategic alternatives
for the Family Dollar business," said CEO Richard Dreiling.
Dollar Tree earlier this year had outlined plans to shutter 970
of its Family Dollar stores.
The company said on Wednesday it would close an additional 150
stores by the end of fiscal 2024.
It has not set a deadline or definitive timetable for the
completion of the review process and noted there can be no
assurance that the process will result in any transaction.
The Family Dollar banner operates 8,359 stores and 10
distribution centers, as of Feb. 3. Overall, Dollar Tree
operates more than 16,000 stores.
J.P. Morgan Securities LLC is the financial adviser in this
review.
Dollar Tree had raked in about $31 billion in revenue for fiscal
2023, of which Family Dollar accounted for 45%.
The Wall Street Journal first reported the news on Wednesday.
Shares of Dollar Tree were down about 3% in premarket trading,
after the company forecast annual profit that lagged analysts'
estimate.
It expects adjusted profit for fiscal 2024 to be between $6.50
and $7 per share, the midpoint of which is below LSEG estimates
of $6.89.
The company said its outlook reflects the increased
transportation costs related to the loss of a distribution
center in Oklahoma due to a tornado.
(Reporting by Ananya Mariam Rajesh and Granth Vanaik in
Bengaluru; Editing by Shilpi Majumdar)
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