The company’s operating income had declined by almost 30 percent in the second quarter.
Dollar Tree announced a leadership transition as its chief executive stepped down amid a difficult business environment for the discount store franchise, which has seen hundreds of outlets shutting down nationwide.
“Rick Dreiling has stepped down from his position as chairman and chief executive officer, effective as of Nov. 3, 2024,” a Nov. 4
announcement from the company stated. The COO, Michael C. Creedon Jr., has been appointed as the interim CEO.
“With my health presenting some new challenges over the past two months, the time is right for me to step away and focus on myself and my family,” said Dreiling. “Having worked side-by-side with Mike, I am confident in his strong leadership, deep passion for our business and ability to create value.”
Dreiling assumed the
role of the chief executive in January 2023 when he replaced Mike Witynski, who had been CEO since 2020. At the time, Dollar Tree operated 16,293 stores.
On Nov. 1, Dollar Tree
shares closed at $66.60. On Nov. 4, coinciding with the announcement, shares jumped by almost 5 percent to a peak of $69.90, but have since come down, and were trading at $66.82 as of 10:42 a.m. ET on Nov. 5.
The company is currently trading more than 52 percent below its level at the start of the year.
For the company’s
half-year that ended on Aug. 3, it reported the shuttering of 696 stores, of which 657 were Family Dollar outlets. During the same period, 312 new stores were opened, of which 243 were Dollar Tree outlets.
In the second quarter of 2024, Dollar Tree
announced a 0.7 percent increase in net sales compared to the same period last year. However, its operating income crashed by 29.4 percent, and its operating margin declined by 110 basis points.
Selling, general, and administrative expenses accounted for 27.3 percent of total revenue, up from last year. The increase was primarily driven by factors such as higher depreciation expense from store investments and increased utility costs, the earnings release stated.
On a year-to-date basis, sales rose by 2.5 percent, operating income declined by 11.8 percent, and operating income margin was down by 60 basis points.
CFO Jeff Davis said the company was updating the full-year fiscal 2024 outlook “to reflect second-quarter results, including the general liability charge, a more conservative sales outlook at Dollar Tree for the balance of the year, and incremental start-up costs associated with the conversion of our recently acquired portfolio of 99 Cents Only Stores leases.”
Earlier in May, Dollar Tree
acquired rights for 170 leases of 99 Cents Only Stores across Arizona, California, Nevada, and Texas.
At the time, Dreiling
pointed to “immense pressures from a challenging macro-environment” for the disappointing performance.
The company’s third quarter results are
scheduled for Dec. 4.
Family Dollar Impact
Dollar Tree has been negatively impacted by the acquisition of the Family Dollar chain. The company
bought Family Dollar for $8.5 billion in 2015.
Last year, the corporation announced the closure of around 970 underperforming Family Dollar stores. During an earnings call this March, company executives said
challenges like inflation and reduced government benefits negatively affected the lower-income consumer base of Family Dollar.
In June, Dreiling
said the company was exploring “strategic alternatives” for Family Dollar, including a potential sale or other disposition of the business. Dollar Tree has not set a deadline or timetable for the completion of the process.
Virginia-based Dollar Tree is a
Fortune 200 corporation with more than 15,500 stores across the United States, and five Canadian provinces. With nearly 200,000 associates, the company operates under the Dollar Tree and Family Dollar brands.
In addition to Dollar Tree, multiple other retail outlets have announced store closures in recent months. Last month, 7-Eleven said it will
shut down 444 “underperforming stores” in a bid to manage cost and improve efficiency.
The company said it was seeking to ensure sustained business growth in the North American region given the “tough consumer spending environment, particularly among lower- and middle-income earners.”
Earlier in July, supermarket chain Stop & Shop also announced the
closure of 32 underperforming stores to create a “healthy base for the future growth” of the brand, according to a statement from the firm.
