Dollar Tree Inc. is divesting its Family Dollar chain to private equity firms Brigade Capital Management and Macellum Capital Management for $1 billion, ending a troubled chapter nearly a decade after acquiring the discount retailer in a deal once valued at over $8 billion.
The company confirmed the sale Wednesday, calling the move a strategic step to streamline operations and focus on its core Dollar Tree brand. The transaction, expected to close in the second quarter, marks a dramatic reversal of a 2015 acquisition that Dollar Tree initially described as transformational but ultimately failed to deliver the anticipated synergies.
"This is a major milestone in our multi-year transformation journey to help us fully achieve our potential," said Mike Creedon, CEO of Dollar Tree, who assumed the role permanently in late 2023.
Dollar Tree purchased Family Dollar following a bidding war with rival Dollar General, with the final transaction price surpassing $9 billion. But the integration proved problematic, burdened by weak store performance, operational inefficiencies, and supply chain challenges.
"Basically, Dollar Tree bit off far more than it could chew," said Neil Saunders, managing director at GlobalData. "It struggled with supply chain issues, poor store locations, and other operational difficulties."
The fallout was financially significant. In 2023, Dollar Tree closed hundreds of Family Dollar stores and recorded a $950 million impairment charge on the brand name, in addition to a $1.07 billion goodwill write-down.
Key financial figures released Wednesday alongside the deal announcement included:
- Expected net proceeds of over $800 million from the sale.
- Adjusted Q4 EPS (excluding Family Dollar): $2.11 on $5.0 billion in revenue.
- Same-store sales growth: 2%.
- FY2025 guidance: Revenue of $18.5-$19.1 billion, EPS of $5.00-$5.50, and same-store sales growth between 3% and 5%.
Dollar Tree shares surged nearly 7% in premarket trading and closed the session up 5%. The stock had declined roughly 47% over the past 12 months.
The Family Dollar business, which relocated its headquarters from North Carolina to Virginia following the acquisition, will remain headquartered in Chesapeake after the sale.
"This transaction presented a unique opportunity to play a key role in reinvigorating an iconic business," said Jonathan Duskin, CEO and Partner of Macellum Capital Management.
