Dollar Tree Inc announced plans to close hundreds more Family Dollar stores on Wednesday as it wrote off $2.7 billion (€2.39 billion), or nearly a third of the value of the struggling discount chain it bought for $9 billion four years ago.
The company reported better-than-expected fourth-quarter same-store sales, along with the results of its full strategic assessment of the Family Dollar business. Hedge fund investor Starboard Value LP in January urged Dollar Tree to explore all alternatives for its Family Dollar business, including a sale, after years of weakness that has hurt the company’s overall profitability.
Though Family Dollar has remodelled some stores and expanded its product range, same-store sales growth has been nearly flat on average in the past two years, pushing down the parent company’s shares 7% in the last 12 months.
Same-store sales rose 1.4% at the smaller chain in the fourth quarter, the strongest in a year and pushing overall numbers up 2.4%, above an average analyst estimate of 1.5% rise, according to IBES data from Refinitiv.
The company said it would shut 390 Family Dollar stores, besides planned remodelling of 1,000 stores this year to add $1-only items. Dollar Tree had already closed 122 Family Dollar stores in the fiscal year ending 2 February.
The Chesapeake, Virginia-based company, which took a $2.73 billion one-time charge for the decline in the chain’s value in the fourth quarter, also said it would explore pricing some goods above the $1-mark, as Starboard has demanded.
