Dollar Tree Announces Family Dollar Sale / Mixed 4Q Results
Analyst Highlights
- Agrees to sell Family Dollar for $1.01 billion to PE firms (details below)
- Family Dollar 4Q and FY24 Results reported as discontinued operations
- Dollar Tree 4Q comps rise 2% on +0.7% transaction volume and +1.3% average ticket
- Operating Income down 12% and 220 bps on a margin basis.
Store Highlights
- Opened 33 stores, converted four and closed 24 in 4Q.
- Opened 525 stores, converted 12 and closed 71 in FY24.
- Finished FY24 with approximately 2,900 Dollar Tree 3.0 multi-price format stores, including 2,600 conversions and
300 new stores.
Sale of Family Dollar
After a comprehensive review of strategic alternatives, on March 25, 2025, Dollar Tree entered into a definitive agreement to sell the Family Dollar business to Brigade Capital Management (previous investments in Guitar Center) and Macellum Capital Management (previous investments in Kohl’s, SpartanNash, Big Lots, etc.) for $1.01 billion, subject to adjustments for working capital and net indebtedness. Dollar Tree acquired Family Dollar for more than$8 billion in 2015. The transaction is expected to close in approximately 90 days (2Q25) subject to satisfying customary conditions, including the receipt of US antitrust approval. Dollar Tree estimates net proceeds from the sale to be approximately $804 million. The Company forecasts economic tax benefits from the losses on the sale to total approximately $350 million. The Family Dollar business will remain headquartered in Chesapeake, Virginia.
During 4Q24, Dollar Tree determined that the assets of the Family Dollar business met the criteria for classification as “held for sale.” Consequently, the Family Dollar business has been presented as discontinued operations within the consolidated financial statements for 4Q24. Results from prior periods have also been adjusted to align with this current presentation. Dollar Tree CEO Mike Creedon commented, “This is a major milestone in our multi-year transformation journey to help us fully achieve our potential. 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.”
Mr. Creedon continued, “Under the experienced, dynamic leadership of Family Dollar President Jason Nordin, and with the financial support of Brigade and Macellum, Family Dollar will be well-positioned for growth as a private company.
CEO and Partner of Macellum Jonathan Duskin commented, “This transaction presented a unique opportunity to play a key role in reinvigorating an iconic business. Throughout this process we have met an exceptional group of executives that are dedicated to the Company and its customers. We look forward to executing the strategic plan we have developed together. In particular, we are excited that Duncan MacNaughton (former Family Dollar President) will be joining the company as Chairman, where his insights as a former President and Chief Operating Officer of the company, and broader industry experience, will be invaluable.”
4Q24 Operational Results (Dollar Tree)
During 4Q24, Dollar Tree determined that the assets of the Family Dollar business met the criteria for classification as “held for sale.” Consequently, in its 4Q financial results, the Family Dollar business has been presented as discontinued operations within the consolidated financial statements. Results from prior periods have also been adjusted to align with this current presentation. Though very early in the process, we expect Dollar Tree to benefit from the sale of Family Dollar. Family Dollar has long been a struggling asset, primarily due to its limited scale and lack of a distinct product assortment.
For 4Q24, Dollar Tree reported a slight sales increase of 0.7% to $5.0 billion. Same-store sales rose 2.0%, driven by a 0.7% increase in transaction volume and a 1.3% increase in average ticket. Gross margin contracted due to a combination of lower leverage from the extra sales week in 2023, higher costs (including mark-on, shrink, distribution, and markdowns), while selling, general, and administrative expenses rose, driven by software impairments related to the Family Dollar sale and increased operating costs. Ultimately, operating income and operating margin fell by 12% and 220 bps, respectively. During the quarter, 33 stores were opened while 24 stores were closed and four were re-bannered. The Company ended the quarter with 8,881 stores in total. In FY24, management repurchased $3.3 million of common stock, leaving $952 million in authorization for future repurchases. Managment provided guidance below.
Management Comment
CEO Mike Creedon commented, “In the fourth quarter, our team was focused on successfully closing out the year, bringing the strategic review to a favorable conclusion, and setting Dollar Tree on a path to realize its full potential to create long-term
value for our associates, customers, and shareholders. We finished 2024 on a high note with strong execution at Dollar Tree as growing customer acceptance of our expanded assortment drove sales momentum. With the sale of Family Dollar set to close later this year, we will be able to fully dedicate ourselves to Dollar Tree’s long-term growth, profitability, and returns on capital.”
Guidance
Dollar Tree provided the following guidance for 1Q25 and FY25 outlook:
1Q25
Sales of $4.50 billion to $4.60 billion, up from $4.17 billion in 1Q24
Comps growth in the range of 3% to 5%, up from 1.7% in 1Q24
FY25
Sales of $18.50 to 19.10 billion, up from $17.58 billion in FY24
Comps growth in the range of 3% to 5%, up from 1.8% in FY24
Courtesy: retailstat.com