Retail

Dollar Tree to close up to 390 Family Dollar stores, reports $2.3 billion loss

Key Points
  • Dollar Tree plans to close 390 Family Dollar stores this year while renovating 1,000 other locations.
  • About 400 stores will get expanded freezer and cooler sections, and it will also rebrand about 200 Family Dollar stores to the Dollar Tree.
  • The company took a $2.73 billion charge against its Family Dollar business during the fourth quarter.
Pedestrians walk past a Dollar Tree Inc. store in Detroit, Michigan, U.S.
Sean Proctor | Bloomberg | Getty Images

Discount retailer Dollar Tree plans to close 390 Family Dollar stores this year while renovating 1,000 other locations, the company said in releasing its fiscal fourth-quarter earnings Wednesday.

"We are confident we are taking the appropriate steps to reposition our Family Dollar brand for increasing profitability as business initiatives gain traction in the back half of fiscal 2019," CEO Gary Philbin said in announcing the results.

Its renovated Family Dollar locations will sell alcohol and include a $1 Dollar Tree merchandise section. About 400 stores will get expanded freezer and cooler sections, and it will also rebrand about 200 Family Dollar stores to the Dollar Tree brand. It had 7,001 Dollar Tree locations and 8,236 Family Dollar stores as of Feb. 2.

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The company's earnings beat Wall Street estimates, which were heavily adjusted to exclude a $2.73 billion write-down against its Family Dollar business, among other charges.

On an adjusted basis, the Dollar Tree reported a profit of $1.93 per share during the 13 weeks ended Feb. 2 compared with average estimates of $1.92 a share compiled by Refinitiv. Sales at stores open for at least a year rose 2.4 percent versus an estimate of 1.5 percent. It generated $6.21 billion in revenue, better than the $6.19 billion expected by Wall Street but down slightly from $6.36 billion a year earlier.

On an unadjusted basis, the company had a loss of $2.31 billion, or a loss of $9.66 a share, compared with a profit of $1.04 billion, or $4.37 a share, during the same quarter last year, which included an extra week.

Shares of the company rose more than 4 percent in intraday trading Wednesday.

The report comes after activist investor Starboard Value, which has a 1.7 percent stake in the company, pressured Dollar Tree this January to change its pricing and sell the store.

The company opened 143 stores in the fourth quarter, closed 84 Family Dollar stores and 10 Dollar Tree stores and expanded or relocated 14 stores. It currently operates 15,237 stores across the U.S. and Canada.

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