Dollar Tree announced on Wednesday that it has agreed to sell its Family Dollar division to a group of private equity firms in a deal valued at approximately $1 billion.
The acquisition by a consortium of companies that includes Brigade Capital Management and Macellum Capital Management confirms an earlier report from the Wall Street Journal.
The decision to sell Family Dollar comes as part of Dollar Tree’s strategic efforts to streamline operations and enhance profitability under new leadership.
Dollar Tree had previously hired investment bankers to conduct a comprehensive review of its Family Dollar business.
Despite their similar names and focus on discount merchandise, Dollar Tree and Family Dollar cater to different consumer bases.
Dollar Tree primarily operates in suburban areas, serving middle-income customers interested in affordable party items, crafts and assorted household knickknacks.
Traditionally, items at Dollar Tree were priced at $1 apiece — though the retailer has recently introduced higher price points.
Conversely, Family Dollar has a significant presence in urban markets, providing groceries, cleaning supplies and essential household products across various price ranges.
Family Dollar’s offerings are generally more diverse, with a focus on everyday necessities.
Dollar Tree originally acquired Family Dollar in 2015, after outbidding competitor Dollar General with a roughly $9 billion offer.
However, since that acquisition, Family Dollar has faced ongoing challenges, struggling with profitability amid heavy investment requirements.
Last year, Dollar Tree announced plans to shut down around 1,000 Family Dollar stores that were struggling under the weight of high inflation, increased theft incidents and other industry-wide challenges.
Despite these issues, Dollar Tree reported encouraging financial performance in late 2023, leading to a raised sales forecast for the full year.
Recent changes in leadership also marked a critical phase for Dollar Tree.
Michael Creedon assumed the role of CEO and the company appointed a new chief financial officer scheduled to begin duties later this month.
Analysts suggest that selling Family Dollar positions Dollar Tree to redirect its resources into more promising growth ventures.
Last year, the retailer also expanded by acquiring leases from the 99 Cents Only Stores chain.
“With the financial support of Brigade and Macellum, Family Dollar will be well-positioned for growth as a private company,” Creedon said.
Dollar Tree’s shares have declined roughly 10% this year, placing its market capitalization at just under $15 billion as of this week.
