From Family Dollar to Dollar Tree Inc., rebranding in works

Associated Press

NEW YORK

Dollar Tree Inc. is closing up to 390 Family Dollar stores this year and rebranding about 200 others under the Dollar Tree name.

The company also slashed the value of its struggling Family Dollar chain, booking a $2.73 billion charge in its fiscal fourth quarter. That led to a massive loss in the latest fiscal fourth quarter.

The company closed 84 Family Dollar stores in the fourth quarter, 37 more than planned. The company has said it will renovate at least 1,000 stores this year and said it’s open to testing new prices at Dollar Tree, where most items are at a dollar or less. Family Dollar sells most items for under $10.

Dollar Tree Inc. in Chesapeake, Va., acquired Family Dollar in 2015 for almost $9 billion. The move was expected to bolster business and better compete with chains such as Walmart and Dollar General Corp. But Family Dollar, hurt by unkempt stores and uninspiring assortments, has struggled and pulled down its parent company’s earnings. The company is under a lot of pressure from activist shareholder Starboard Value Hedge Fund to sell Family Dollar or expand prices at Dollar Tree stores.

In the latest fourth quarter, Family Dollar reported a 1.4 percent sales increase at stores open at least a year. Dollar Tree had a 3.2 percent increase for that figure.

While prices are lower at Dollar Tree, Neil Saunders, managing director of GlobalData Retail, said Family Dollar has a more urban customer with a lower income than the average Dollar Tree shopper. .

“Dollar Tree has a much broader customer base, which includes more affluent shoppers,” Saunders wrote. “There are a lot more discretionary purchases made at Dollar Tree, despite the fact all products are a dollar or under. Visits to a Dollar Tree are not always made out of necessity. A lot of people go there out of curiosity and to see what’s on offer.”

Dollar Tree said it’s seeking rent concessions on the potential 390 stores they want closed. It closes about 75 stores annually. The company had 15,237 stores in 48 states and five Canadian provinces as of Feb. 2. Shares rose more than 4 percent to $99.53 in trading.