More than 1,000 Family Dollar stores have closed since 2023
Dollar Tree stock (NASDAQ:DLTR) popped more than 8% in early morning trading Wednesday after the budget retail chain announced the sale of its Family Dollar stores.
The struggling stores, which were acquired by Dollar Tree in 2015 for $8 billion, are being sold to a pair of private equity groups for around $1 billion.
Dollar Tree initially announced that it was evaluating Family Dollar’s future. More than 1,000 Family Dollar stores have since closed.
Announcing the sale in a press release, the company said the sale “best unlocks value for Dollar Tree shareholders and positions Family Dollar for future success”.
A worsening economic climate and dwindling consumer spending has posed a significant challenge to Dollar Tree lately, with the group’s stock price down by close to 43% in the past calendar year.
But the Family Dollar sale appears to have inspired confidence in Dollar Tree investors, with shares enjoying an 8% uplift in the first few hours of trading on Wednesday.
Positive financial outlook for Dollar Tree
Investors may also have been buoyed by Dollar Tree’s Q4 earnings, which were announced alongside the private equity sale on Wednesday.
The firm reported EPS of $2.29 for the quarter, beating analyst estimates by $0.10. It also expects net sales growth for fiscal 2025 to be in the region of 3-5%.
Q4 2024 revenue came in at $5 billion, versus consensus estimates of $8.24 billion. However, the retail chain will hope that the Family Dollar sale will adress this and help to generate future growth.
“We will continue to grow and optimize our Dollar Tree business to maximize value for Dollar Tree associates, customers, and shareholders,” said Mike Creedon, Dollar Tree CEO in an official company statement.
Creedon added that the firm will target “expanded assortment, significant planned new store openings across the United States, and transactions that advance our growth strategy”.
