Discount store Dollar Tree is selling off its Family Dollar subsidiary to investment companies, taking a massive loss in the process.
“The purchase price for Family Dollar, under the terms of the agreement, is $1,007.0 million, subject to customary closing adjustments.”
The transaction is expected to be completed in the second quarter of this year, provided certain closing conditions and regulatory approvals are met. After the sale, Family Dollar will remain headquartered in Chesapeake, Virginia, the statement said.
Dollar Tree acquired the store chain in 2015 for $8.5 billion. With Family Dollar being sold off for $1 billion, Dollar Tree is taking a massive loss on the transaction.
In 2023, Dollar Tree announced plans to shut down 970 underperforming Family Dollar stores. In March last year, executives said challenges such as rising prices and reduced government benefits negatively impacted Family Dollar’s lower-income consumer base.
Dollar Tree said in the recent statement that the decision to sell off Family Dollar was taken after a “thorough review of potential alternatives.”
Brigade is a global asset management company with more than $27 billion in assets under management, while Macellum is an investment company focusing on undervalued entities.
Mike Creedon, CEO of Dollar Tree, said the company has planned “significant” new store openings across the United States.
2024 Financial Results
On March 26, the company also published its fiscal year 2024 earnings report.Net sales during the year, which ended on Feb. 1, were $17.57 billion, up from $16.78 billion in the previous fiscal year. Net loss ballooned from $998 million to $3.03 billion during this period.
The company said it expects fiscal 2025 net sales to jump to a range of $18.5 billion to $19.1 billion.
Investors could be viewing the sale of Family Dollar as a positive, since Dollar Tree was negatively affected following the acquisition.
The company said it expects net proceeds from the $1 billion sale to be around $804 million. In addition, “the economic impact of tax benefits from losses on the sale” is expected to be roughly $350 billion.
Walmart CFO John David Rainey said that while the company foresees a “relatively stable macroeconomic environment,” there are still “uncertainties related to consumer behavior and global economic and geopolitical conditions.”
Other retailers such as Lowe’s, TJX Companies, and Home Depot have said they were concerned about how weakening consumer confidence and spending could affect their growth.
Meanwhile, Dollar Tree still has a long way to go to boost its stock value, which has crashed over the past year. Shares have fallen from around $126 to roughly $70 during this period, a decline of more than 44 percent.
