Discount retailer Dollar Tree announced plans to close around 1,000 stores following a surprise fourth-quarter loss and a significant write-down of its Family Dollar chain. The company will shutter about 600 Family Dollar locations in the first half of this year, with an additional 370 Family Dollar and 30 Dollar Tree stores closing over the next several years.
Dollar Tree acquired Family Dollar for over $8 billion in 2015 after a bidding war with rival Dollar General. However, the company has struggled to integrate the chain. In the latest quarter, Dollar Tree recorded a $950 million impairment charge against the Family Dollar trade name and a $1.07 billion goodwill charge. The company will also spend more than $594 million closing or rebranding stores, effectively wiping out its holiday season profits.
Analysts view the store closures as an acknowledgment of the challenges Dollar Tree has faced since the Family Dollar acquisition. “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.
For the quarter ended Feb. 3, Dollar Tree reported a loss of $1.71 billion, or $7.85 per share, compared to a profit of $452.2 million, or $2.04 per share, a year earlier. Adjusted earnings of $2.55 per share fell short of Wall Street expectations.
Revenue climbed to $8.64 billion from $7.72 billion, a bit below Wall Street’s estimate of $8.67 billion.
Despite the challenges, Dollar Tree has been attracting budget-conscious consumers amid high inflation. Sales at Dollar Tree stores open at least a year climbed 6.3%, while Family Dollar saw a 1.2% decline.
Looking ahead, Dollar Tree expects fiscal 2024 earnings between $6.70 and $7.30 per share on revenue of $31 billion to $32 billion. The company’s shares tumbled 14% following the announcement.
The Associated Press contributed to this article.