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By Juveria Tabassum
(Reuters) -Dollar Tree said on Wednesday that a group of private-equity investors would acquire its Family Dollar business for about $1 billion, bringing an end to its nearly year-long search for potential buyers for the troubled discount-store chain.
The 66-year-old business, which Dollar Tree bought in 2015 for about $9 billion, has been grappling with competition from big-box retailers such as Walmart and online retailers, including Amazon, Shein and Temu.
"It is truly 'addition by subtraction' as Family Dollar had been a consistent weight on topline performance, margin rate, and management time," Evercore analyst Michael Montani said.
The Family Dollar chain struggled with sales of higher-margin discretionary items such as home decor and apparel, as consumers pared back spending due to inflation.
Shares of Dollar Tree jumped as much as 6% in premarket trading on offloading the business to Brigade Capital Management and Macellum Capital Management, before paring some gains following the company's comment on cost pressures.
Dollar Tree said it expected a roughly $20 million per month impact from President Donald Trump's fresh tariffs on Canada, China and Mexico imposed in March.
Excluding sales from the Family Dollar banner, the company posted net sales of $5 billion for the quarter ended February 1, a marginal rise from $4.96 billion reported a year ago.
"Dollar Tree's comparable sales performance has been inconsistent at best despite the company's efforts to aggressively remodel stores and roll out multi price points," said Mari Shor, senior equities analyst at Columbia Threadneedle Investments.
"The outlook for 3% to 5% growth in comparable sales seems aggressive in this macro environment," Shor added.
Dollar Tree expects 2025 net sales from continuing operations to be between $18.5 billion and $19.1 billion.
The current inflationary environment is prompting consumers across the board, including in the middle- and higher-income groups, to shop at the discount chain, company executives said on a post-earnings call.
"Doesn't matter how much money you make, everybody is hurting right now," CEO Mike Creedon said on a post-earnings call.
Close rival Dollar General forecast annual sales and profit below estimates and said consumers were trading down to cheaper goods, with lower-income consumers struggling to buy essentials.
(Reporting by Juveria Tabassum and Ananya Mariam Rajesh in Bengaluru; Editing by Shounak Dasgupta, Shinjini Ganguli and Anil D'Silva)
