Dollar Tree Ponders Family Dollar Divorce Amid 'It's Not Me, It's You' Sales Slump
Dollar Tree Inc. may be reconsidering the whole "for better or worse" part of its relationship vows to Family Dollar. After a decade-long corporate marriage, where the concept of happily ever after seems to be more fiction than fact, Dollar Tree is contemplating a potential sale, spin-off, or other disposition of its Family Dollar chain of stores. This development comes hot on the heels of dismal sales and a sinking ship of an earnings report (CBS).
In a plot twist worthy of a daytime soap opera, Dollar Tree's announcement isn't entirely surprising. The company's latest earnings revealed losses of $1.7 billion in its fourth quarter ending on February 3. Yes, billion with a 'B' – the kind of loss that makes throwing in a towel look like a modest proposal (CBS).
Despite a slight uptick in revenue to $8.6 billion from the previous year's $7.7 billion, Dollar Tree still managed to fall just short – less of a home run and more of a bunt, comparatively speaking—of Wall Street's often exacting expectations (CBS). One might reasonably ask how revenue gains translate to multi-billion losses, but that’s a question best left to accountants and financial oracles.
Dollar Tree acquired Family Dollar for over $8 billion nearly a decade ago after an intense bidding war with Dollar General – think of it as the retail version of The Bachelor
, but with more spreadsheets and fewer roses (CBS). Yet, despite having won this prize, Dollar Tree might be discovering that all that glitters isn't gold – sometimes it’s just overpriced tin.
Family Dollar, catering predominantly to low-income customers in urban centers, seems to have missed the memo about the synergy that corporate mergers are supposed to generate (CNN). With the struggle bus firmly parked, Family Dollar has been battling to keep its head above the fiscal waters, famously announcing plans to close 900 stores last year. That’s right, 900 stores – a liquidation special that would make anyone’s head spin (CNN).
Neil Saunders of GlobalData succinctly summarized the problem: “The Family Dollar business isn't delivering the needed growth and profit” (CBS). A diplomatic way of saying Family Dollar is like that one school friend who never quite figured out how to ‘adult.’ Sure, they have potential, but potential doesn't pay the bills.
With these challenges in mind, it's easier to understand Dollar Tree's contemplation of estrangement. After all, at some point, one must decide whether to stick it out for the long, hard slog or consider cutting one's losses and moving on.
Cue the stock market jitters, analysts’ debate, and the inevitable myriad of speculation by retail pundits. One thing is for certain, though: whether this ends in an amicable split, a nasty corporate divorce, or a Hail Mary turnaround, Dollar Tree's journey with Family Dollar is one plotline guaranteed to keep the financial world on the edge of its ergonomic office chairs. Here's hoping they don't need a Family Dollar aisle earmarked for clearance therapy.