Dollar Tree is divesting its Family Dollar brand for $1 billion, marking the end of a merger that analysts describe as unsuccessful. The sale to private equity firms Brigade Capital Management and Macellum Capital Management is subject to regulatory approval, expected in the next quarter. Originally, Dollar Tree acquired Family Dollar in 2015 for $9 billion, hoping to boost its market position against competitors like Walmart and Dollar General.
Family Dollar operates approximately 8,000 stores in the U.S., targeting low-income customers with prices ranging from $1 to $10. However, the chain has faced challenges, including poorly maintained stores, high prices, and over-expansion. Increased competition from larger retailers and inflationary pressures have further strained operations. Last year, Family Dollar announced plans to close over 900 stores and put itself up for sale.
The merger was intended to consolidate Dollar Tree’s customer base and reduce costs, but it proved to be a mismatch. Analysts noted that Family Dollar stores were in worse condition than anticipated, and strategies to enhance sales, such as introducing beer sales, did not meet expectations. Additionally, many Family Dollar locations were too close to one another, leading to internal competition.
Despite recent renovations, Family Dollar continues to face maintenance issues. Last year, the company was fined a record $41.6 million by the Justice Department for selling unsafe products stored in a rat-infested warehouse.
— news from CNN