Just last week, Best Life reported that several discount retailers, including Five Below and Japanese dollar store Daiso, would be opening hundreds of new locations this year. But for another discount store, the outlook is quite different. In an announcement today, Dollar Tree confirmed that it would sell all 7,600 remaining Family Dollar locations that it owns.
RELATED: Big Lots Is Opening Remodeled Stores Next Month—Here's Where.
Dollar Tree is selling Family Dollar for $1 billion.
Dollar Tree acquired Family Dollar for $8.5 billion in 2015, when the latter was struggling. However, the chain never quite caught up to the success of Dollar Tree's namesake stores.
This time last year, Dollar Tree first floated plans to close roughly 970 Family Dollar stores. The news came on the heels of poor fourth-quarter financial results, which the company partially attributed to a series of over-the-counter drug recalls that affected Family Dollar. As The New York Times reported, this resulted in a $41.7 million food safety lawsuit that called the chain out for "distributing food, drugs, medical devices and cosmetics from a rat-infested warehouse."
Then, in June, Dollar Tree shared that it was exploring a possible sale of Family Dollar, citing inflation as an additional concern (Family Dollar stores are typically located in low-income areas hit hardest by rising prices, whereas Dollar Trees tend to be in more middle-income neighborhoods.)
Now, Dollar Tree has officially announced that it will sell all 7,600 remaining Family Dollar locations to two private equity firms, Brigade Capital Management and Macellum Capital Management, for $1 billion. The sale is expected to close in 90 days.
What does this mean for Dollar Tree and Family Dollar?
According to a press release, the new owners of Family Dollar plan to move the store forward.
"We look forward to continuing and enhancing Family Dollar as its own enterprise, which we are confident will drive greater success for the business and value for all of Family Dollar’s stakeholders, including employees, customers, and communities," said Brigade partner Matt Perkal.
Jonathan Duskin, CEO and partner of Macellum, added that the two private equity firms have already developed a strategic plan that will help "in reinvigorating an iconic business."
Meanwhile, Dollar Tree is optimistic about how the sale will affect its namesake stores in the future.
"This is a major milestone in our multi-year transformation journey to help us fully achieve our potential," said Mike Creedon, Dollar Tree, Inc. CEO, in a statement press release. "We will continue to grow and optimize our Dollar Tree business to maximize value for Dollar Tree associates, customers, and shareholders with an enhanced focus on compelling initiatives, including our expanded assortment, significant planned new store openings across the United States, and transactions that advance our growth strategy."
And it looks like investors agree with Creedon's rosy outlook, as stocks jumped four percent after the sale announcement, CNBC notes.
RELATED: The Absolute Best 8 Things to Buy at Dollar Tree, According to Retail Experts.
Dollar General is also closing locations.
Dollar General Is Closing 141 Stores Amid Slumping Sales
Shutterstock
Family Dollar isn't the only dollar store feeling the pinch. Earlier this month, Dollar General announced that it would close 141 underperforming stores this year.
"Many of our customers report that they only have enough money for basic essentials with some noting that they have had to sacrifice even on the necessities. We are not anticipating (an) improvement in the macro environment, particularly for our core customer," Dollar General's CEO Todd Vasos said at the time.
As Best Life shared, the company will shutter "96 Dollar General stores and 45 Popshelf stores. (The latter is more similar in inventory and shopping experience to Five Below than a traditional dollar store.) Additionally, six Popshelf locations will be converted to Dollar General stores."
