Dollar Tree has announced plans to close nearly 1,000 stores and reported a surprise fourth-quarter loss, taking a $1.07bn goodwill impairment charge related to its struggling Family Dollar chain. The discount retailer will shut about 600 Family Dollar stores in the first half of this year, with an additional 370 Family Dollar and 30 Dollar Tree locations closing over the next several years.
The closures mark the latest fallout from Dollar Tree's $8bn-plus acquisition of Family Dollar nearly a decade ago, following a bidding war with rival Dollar General. Neil Saunders, managing director of GlobalData, described the move as “the coup de grace in the rather botched acquisition”, noting that the chain has caused “nothing but hassle” since the deal closed in 2015. “Basically, almost 10 years on, Dollar Tree is still sifting through the mess it inherited and has not been able to completely turn around,” Saunders said.
For the three months ended 3 February, Dollar Tree posted a net loss of $1.71bn, or $7.85 per share, compared with a profit of $452.2m, or $2.04 per share, a year earlier. Adjusted earnings of $2.55 per share fell short of Wall Street's estimate of $2.67. Revenue rose to $8.64bn from $7.72bn, slightly below the expected $8.67bn.
Inflation has driven more budget-conscious shoppers to Dollar Tree, with same-store sales at its namesake chain climbing 6.3% and traffic up 7.1%. However, average spending per visit dipped 0.7%. At Family Dollar, same-store sales slipped 1.2% despite a 0.7% traffic increase, as average ticket fell 2%.
