Approximately 1,000 Family Dollar and Dollar Tree stores are scheduled to be closed after “botched” business decisions and a “surprise fourth-quarter loss,” with the company’s shares taking a tumble.
Dollar Tree outbid competitor Dollar General to buy Family Dollar for over $8 billion in 2015, but the merger has failed to produce good results.
Company executives announced to investors Wednesday that about 600 Family Dollar stores will be shut down in the first half of this year, with an additional 370 Family Dollars 30 Dollar Trees to follow in the coming years.
“This dramatic cull is the coup de grâce 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,” said Neil Saunders, managing director of GlobalData, in a statement obtained by the Washington Post.
“Basically, almost ten years on, Dollar Tree is still sifting through the mess it inherited and has not been able to completely turn around.”
The soon-to-be-closed locations account for around 12 percent of Family Dollar stores, and have caused Dollar Tree to lose “approximately $730 million on an annual run rate basis,” chief executive Richard Dreiling told shareholders.
A Wednesday press release from Dollar Tree detailed the company’s finances through the fourth quarter of FY2023, saying the decisions to close stores came after a “portfolio optimization review.”
“We took a thoughtful and deliberate approach to address underperforming stores by considering each individual store’s performance, local operating environment, and our broader need for scale and operating efficiencies across the portfolio,” Dreiling explained.
The report showed a “surprise fourth-quarter loss,” reported WDIV Local 4, which further broke down the company’s earnings:
Shares of Dollar Tree tumbled 14 percent at the opening bell Wednesday.
For the three months ended Feb. 3, Dollar Tree lost $1.71 billion, or $7.85 per share. A year earlier the Chesapeake, Virginia, company earned $452.2 million, or $2.04 per share.
Stripping out certain items, earnings were $2.55 per 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.
The company’s shortfallings come less than three years after Dollar Tree was forced to raise prices on common items from $1.00 to $1.25 as inflation grew, Breitbart News reported in November 2021.
