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Dollar Tree is going to shut down almost 1,000 stores and has unexpectedly lost money in the fourth quarter

Dollar Tree unexpectedly had a loss in the fourth quarter and plans to close nearly 1,000 stores after reducing the worth of a competing chain it bought almost ten years ago.

Dollar Tree unexpectedly had a loss in the fourth quarter and plans to close nearly 1,000 stores after reducing the worth of a competing chain it bought almost ten years ago.

In the first half of this year, Dollar Tree intends to close approximately 600 Family Dollar stores and 370 Family Dollar and 30 Dollar Tree stores over the next few years.

In 2015, Dollar Tree bought Family Dollar for over $8 billion after a bidding war with Dollar General, but it has struggled to integrate the chain.

Dollar Tree announced on Wednesday that it would take a $950 million hit against the brand name Family Dollar, in addition to a $1.07 billion goodwill charge. Family Dollar will spend over $594 million to close or rebrand stores, essentially wiping out profits from the holiday season.

Neil Saunders, GlobalData's managing director, said, “This significant reduction is the final blow in the somewhat flawed acquisition of the Family Dollar chain, which has caused Dollar Tree nothing but trouble since it was completed back in 2015. Basically, almost ten years on, Dollar Tree is still sifting through the mess it inherited and has not been able to completely turn around.”

Saunders stated in an email that nearly 12% of current Family Dollar stores will be closing over the next three years.

Dollar Tree's stocks fell 14% at the opening bell on Wednesday.

For the three months ended Feb. 3, Dollar Tree lost $1.71 billion, or $7.85 per share. A year earlier the Chesapeake, Virginia, company earned $452.2 million, or $2.04 per share.

Excluding certain items, earnings were $2.55 per share, which is still below the expected $2.67 per share according to a survey by Zacks Investment Research.

Revenue increased to $8.64 billion from $7.72 billion, slightly lower than Wall Street’s estimate of $8.67 billion.

Dollar Tree has been attracting consumers affected by inflation as they aim to reduce spending. During the quarter, sales at Dollar Tree stores open at least a year rose 6.3%, with traffic up 7.1%. While more shoppers visited stores, they were closely monitoring their spending, with average ticket down 0.7%.

At Family Dollar, sales at stores open at least a year declined 1.2%. Traffic increased by 0.7%, but average ticket dropped 2%.

For fiscal 2024, Dollar Tree expects earnings between $6.70 and $7.30 per share and revenue in the range of $31 billion to $32 billion.

According to FactSet analysts, the projected full-year earnings are $7.04 on revenue of $31.68 billion.

Dollar Tree anticipates first-quarter earnings of $1.33 to $1.48 per share on revenue ranging from $7.6 billion to $7.9 billion.

Financial experts expect first-quarter earnings of $1.70 on revenue of $7.68 billion.

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