Dollar Tree Explores Sale of Family Dollar

Dollar Tree said on Wednesday that it was considering a sale or spinoff of Family Dollar, which has struggled with its operation for years.

There are about 8,000 Family Dollar stores, and Dollar Tree, which owns Family Dollar, said in March that it would close nearly 1,000 of them. In February, the U.S. Justice Department fined Family Dollar $41.7 million, the largest-ever financial criminal penalty in a food safety case, for distributing food, drugs, medical devices and cosmetics from a rat-infested warehouse.

Rick Dreiling, chairman and chief executive of Dollar Tree, said in a statement on Wednesday that the “unique needs” of its discount store chains led the company to explore a sale of Family Dollar, which it bought in 2015 in an $8.5 billion deal.

“Dollar Tree has been on a multiyear journey to help the company fully achieve its potential,” said Mr. Dreiling, who was made chief executive in January 2023.

Dollar Tree operates more than 16,000 stores across the United States and Canada, including Family Dollar’s stores, which are predominantly in urban areas and serve mostly low-income shoppers, who have been squeezed the hardest by inflation. Dollar Tree stores are found more often in suburban areas and cater to consumers with higher incomes.

Michael Montani and Greg Melich, analysts at the investment bank Evercore, wrote in a research note on Wednesday that any potential buyer of Family Dollar “would have a lot of heavy lifting to turn the business.”

It was not clear whether many buyers would be interested in Family Dollar, the analysts said. But if Dollar Tree can sell the struggling brand, it would most likely be viewed as a positive step for Dollar Tree’s performance.

Neil Saunders, the managing director of the retail consulting firm GlobalData, said in a statement that selling Family Dollar would allow Dollar Tree to focus more on its core business. He also noted that it could be difficult to find a buyer.

A spinoff might be easier than a sale, Mr. Saunders said, but in both instances Dollar Tree “will likely take a loss on the original purchase price.”

“For almost 10 years, Dollar Tree has battled to improve a company that it originally fought so hard to buy, investing an extensive amount of capital and energy,” Mr. Saunders said. “There have been pockets and periods of success but, overall, the trajectory has been entirely unsatisfactory.”