((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
(Updated shares at market open in paragraph 11) by Granth Vanaik and Ananya Mariam Rajesh
Dollar Tree DLTR.O said on Wednesday it was exploring options, including a potential sale or spinoff of its Family Dollar banner, as it seeks to restructure its business amid persistently high inflation that continues to weigh on consumer spending.
The distributor, like its counterpart Dollar General
DG.N , faced weak discretionary demand as consumers focused more on less profitable consumer products. It faces strong competition from rivals Walmart WMT.N, Target
TGT.N and Chinese e-commerce platform Temu, which also offer low-cost products to attract Americans on a tight budget.
Family Dollar, which Dollar Tree bought in 2015, was its biggest bad student. Earlier this year, the company outlined plans to close 970 of its Family Dollar stores.
The company operates 8,359 stores under the Family Dollar brand as of February 3. It said it would close an additional 150 stores by the end of the 2024 financial year.
“Many of these stores have been underinvested for years, and the investments needed to repair them could not provide an acceptable rate of return,” said CEO Richard Dreiling.
The company has not set a definitive deadline or timetable for the completion of the review process and noted that there is no guarantee that the process will result in a transaction.
“Dollar Tree wouldn’t come close to getting the $8.5 billion it initially paid (for the Family Dollar acquisition),” said Neil Saunders, chief executive of GlobalData.
“It is clear to all market participants that Family Dollar is a chain that needs a lot of work and investment, which will also reduce the number of interested parties,” Mr Saunders added.
JP Morgan Securities LLC is the advisory bank.
The Wall Street Journal first reported the news on Wednesday.
Dollar Tree shares rose about 1% in volatile trading.
Dollar Tree also said Wednesday that it expects fiscal 2024 adjusted earnings in the range of $6.50 to $7 per share, the midpoint of which is below LSEG’s estimates of $6.89.
The company said its outlook reflects increased transportation costs related to the loss of a distribution center in Oklahoma due to a tornado.
Overall same-store sales rose 1% in the first quarter, below estimates.
