Discount Variety Retail Chain Family Dollar brand has finally come to an end as Dollar Tree announced it entered into a definitive agreement to sell the Family Dollar business to Brigade and Macellum for just over $1 billion, the retailer revealed during its fourth quarter earnings call on Wednesday.
The agreement was official on Tuesday and net proceeds are estimated to total about $804 million. The deal is expected to close in about 90 days. “This is a very exciting day for our company,” Dollar Tree CEO Mike Creedon said during the call. “The sale of Family Dollar is the best way to achieve … our goals. With Dollar Tree as our sole focus … we can return to our roots.”
Dollar Tree initiated a formal review of strategic alternatives for the Family Dollar brand in mid-2024. “The unique needs of each banner at this time, transformation at Family Dollar and growth acceleration at Dollar Tree, lead us to the decision to conduct a thorough review of strategic alternatives for the Family Dollar business,” former Dollar Tree Chairman and CEO Rick Dreiling said at the time.
It was a relatively solid fourth quarter for Dollar Tree, as net sales increased 0.7% year over year to $5 billion, and same-store net sales grew by 2%, driven by a 0.7% increase in traffic and a 1.3% rise in average ticket. For the first time since Q4 of 2022, average ticket grew faster than traffic, according to Creedon.
For the first quarter of 2025, the Chesapeake, Va.-based retailer expects net sales to fall in the range of $4.5 billion to $4.6 billion, based on comparable store net sales growth of 3% to 5%.
“Dollar Tree is seeing middle-income shoppers, who make up about half of our customer base, focusing more on value,” Creedon said. “At the same time, we are seeing stronger demand from higher-income customers who increasingly view Dollar Tree as a cost-effective source for an expanding range of products.”
Tariff talk
Dollar Tree spent a significant amount of time during the earnings call discussing its strategy regarding tariffs on China, Canada, and Mexico, as well as retaliatory tariffs. Creedon said multiple contingencies are in place to address various tariff scenarios, including negotiating supplier cost concessions, changing product specifications, dropping non-economical items, moving the country of origin, and exercising the flexibility the multi-price format offers.
“We intend to remain flexible and nimble, focusing our efforts on sourcing products via channels that deliver the lowest landed cost in order to maintain value continuity for our customers,” Creedon said.
Dollar Tree offset more than 90% of the incremental cost of the 10% tariff on China as of Feb. 4. The impact of the second round of tariffs levied in March has not been included in the 2025 outlook.
Multi-price means one result: success
The discount retailer’s multi-price format boosted Q4 performance, according to Creedon. The 3.0 stores are either new or converted stores that offer an expanded multi-price assortment throughout the store. The 2.0 stores have a smaller multi-price assortment concentrated in a single aisle called The Valley, and 1.0 stores have 95% of products tagged at $1.25.
Creedon said 3.0 stores performed better than the other formats during the fourth quarter. Dollar Tree operates 2,900, 3.0 stores, including about 2,600 store conversions and 300 new stores. The goal is to have 5,200, 3.0 stores by the end of 2025, including 2,000 conversions and 300 new stores.
Distribution center changes
Dollar Tree will replace the distribution center in Marietta, Ga., that was hit by an F4 tornado later this year. The Family Dollar distribution center in Odessa, Texas, will be converted to a Dollar Tree DC.
By the numbers:
For the full fiscal year, net sales increased 4.7% to $17.6 billion.
Same-store sales during the 52 weeks ending February 1 were up 1.8% year over year, driven by a 1.6% increase in traffic and a 0.1% increase in average ticket.
Gross profit increased 4.5% to $6.3 billion.
For fiscal year 2025, net sales are projected to fall in the range of $18.5 billion to $19.1 billion.
Comparable store net sales growth is expected to be 3% to 5% in FY 2025.
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