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Dollar Tree to close nearly 1,000 stores as it posts a fourth quarter loss

A customer exits a Dollar Tree store holding a shopping bag on Wednesday, May 11, 2022, in Jackson, Miss.
Rogelio V. Solis
/
AP
A customer exits a Dollar Tree store holding a shopping bag on Wednesday, May 11, 2022, in Jackson, Miss.

Dollar Tree swung to a surprise fourth-quarter loss and will close nearly 1,000 stores after the discount retailer slashed the value of a rival chain it acquired almost a decade ago.

Dollar Tree plans to close about 600 Family Dollar stores in the first half of this year and 370 Family Dollar and 30 Dollar Tree stores over the next several years.

Dollar Tree acquired Family Dollar for more than $8 billion in 2015 after a bidding war with rival Dollar General, but it has had difficulty absorbing the chain.

On Wednesday, Dollar Tree said that it would record a $950 million impairment against the trade name Family Dollar, on top of a $1.07 billion goodwill charge. Family Dollar will spend more than $594 million closing or rebranding stores, essentially erasing profits from the holiday season.

"This dramatic cull is the coup de grâce in the rather botched acquisition of the Family Dollar chain, which has caused Dollar Tree nothing but hassle since it was completed back in 2015," wrote Neil Saunders, managing director of GlobalData. "Basically, almost ten years on, Dollar Tree is still sifting through the mess it inherited and has not been able to completely turn around," Saunders said.

Saunders said in an emailed statement that nearly 12% of current Family Dollar stores will be closing over the next three years.

Shares of Dollar Tree tumbled more than 14% Wednesday.

For the three months ended Feb. 3, Dollar Tree lost $1.71 billion, or $7.85 per share. A year earlier the Chesapeake, Virginia, company earned $452.2 million, or $2.04 per share.

Stripping out certain items, earnings were $2.55 per share, which is still short of the per-share earnings of $2.67 expected on Wall Street, according to a survey by Zacks Investment Research.

Revenue climbed to $8.64 billion from $7.72 billion, a bit below Wall Street's estimate of $8.67 billion.

Dollar Tree has been attracting consumers that have been stung by inflation as they seek to cut spending. During the quarter, sales at Dollar Tree stores open at least a year climbed 6.3%, with traffic up 7.1%. While more shoppers were heading to stores, they were closely watching how much they spent, with average ticket down 0.7%.

At Family Dollar, sales at stores open at least a year slipped 1.2%. Traffic edged up 0.7%, but average ticket fell 2%.

For fiscal 2024, Dollar Tree anticipates earnings between $6.70 and $7.30 per share. Revenue is expected in a range of $31 billion to $32 billion.

Analysts polled by FactSet expect full-year earnings of $7.04 on revenue of $31.68 billion.

Dollar Tree expects first-quarter earnings of $1.33 to $1.48 per share on revenue in a range of $7.6 billion to $7.9 billion.

Wall Street anticipates first-quarter earnings of $1.70 on revenue of $7.68 billion.

Copyright 2024 NPR. To see more, visit https://www.npr.org.

The Associated Press