Dollar Tree on Wednesday said it is selling Family Dollar for $1 billion to a pair of private equity firms, a decade after it bought the discount chain for more than $8 billion.
In a statement, Dollar Tree said private equity firms Brigade Capital Management and Macellum Capital Management will purchase Family Dollar, with the discount chain slated to remain headquartered in Chesapeake, Virginia.
Although both Dollar Tree and Family Dollar cater to low-income shoppers, Family Dollar locations struggled to gain traction, prompting the parent company last year to announce plans to shutter about 1,000 locations. Family Dollar also faces fierce competition from Walmart and other large retailers, while a rat-infested warehouse spurred a slew of negative headlines.
Dollar Tree has said that many Family Dollar customers were extremely price-conscious, while the chain was also hurt by rising shoplifting incidents, hurting its bottom line.
“Dollar Tree has struggled for over a decade to make the business work,” said Neil Saunders, an analyst at GlobalData, in an email. “Its efforts have been hampered by supply-chain issues, poor store locations, a proposition that isn’t value-centric enough and a host of other operational problems.”
He added, “Basically, Dollar Tree bit off far more than it could chew.”
Dollar Tree had for months been exploring strategic options for Family Dollar, and it said Wednesday that the sale will allow it to focus on its core business.
“This is a major milestone in our multi-year transformation journey to help us fully achieve our potential,” Dollar Tree CEO Mike Creedon said in a statement.
In recent months, Dollar Tree has had little room to maneuver, particularly in the months leading up to the sale. Americans have been tightened their spending, even at bargain chains, as consumer confidence in the economy slides.
Shares of Dollar Tree rose $2.11, or 3.1%, to $69.25 in premarket trading.
contributed to this report.
