Dollar Tree Cuts Ties with Family Dollar in $1 Billion Sale
In a significant strategic shift, Dollar Tree announced on Wednesday that it will sell its Family Dollar business to a group of private equity investors for approximately $1 billion. The deal concludes a nearly year-long search for a buyer for the underperforming discount retail chain, and marks a sharp pivot away from what was once seen as a bold acquisition.
Dollar Tree originally purchased Family Dollar in 2015 for around $9 billion, hoping to scale its presence in the competitive discount retail space. But over the past decade, Family Dollar has struggled to keep pace with a rapidly evolving retail landscape—losing ground to big-box titans like Walmart and digital disruptors like Amazon, Shein, and Temu.
“This is truly a case of addition by subtraction,” said Evercore analyst Michael Montani. “Family Dollar had been a consistent drag on topline performance, margins, and management focus.”
The sale, which transfers Family Dollar to Brigade Capital Management and Macellum Capital Management, was met with an initial 6% jump in Dollar Tree shares during premarket trading, though some of those gains were pared later as the company warned of ongoing cost pressures.
Family Dollar's problems ran deeper than competitive threats. The chain struggled to sell higher-margin discretionary items like home decor and apparel, as inflation-weary consumers prioritized essentials. Dollar Tree, by contrast, has been remodeling stores and introducing multi-price points in an effort to remain relevant and profitable.
Yet challenges remain. Despite excluding Family Dollar, Dollar Tree reported only a marginal uptick in net sales for the quarter ending February 1—$5 billion, up from $4.96 billion a year earlier. Analysts remain skeptical about the company's projected 3% to 5% growth in comparable sales. “That outlook seems aggressive in this macro environment,” noted Mari Shor, senior equities analyst at Columbia Threadneedle Investments.
Further compounding headwinds, Dollar Tree warned that new tariffs imposed by former President Donald Trump on Canada, China, and Mexico in March could cost the company about $20 million per month.
Still, company executives expressed cautious optimism. The ongoing inflationary squeeze is driving even middle- and higher-income shoppers toward discount retailers. “Doesn’t matter how much money you make, everybody is hurting right now,” said CEO Mike Creedon during a post-earnings call.
Competitors are feeling the same pressure. Dollar General recently forecast weaker-than-expected sales and profit, noting that many consumers are downgrading purchases—even struggling to afford basic essentials.
Looking ahead, Dollar Tree expects net sales from continuing operations to range between $18.5 billion and $19.1 billion in fiscal 2025. With Family Dollar now off its books, the company hopes to refocus and streamline its core business.
The $1 billion sale may be seen as a major markdown from its original $9 billion purchase—but for Dollar Tree, shedding Family Dollar could be the reset it desperately needs.
