Dollar Tree unexpectedly experienced a loss in the fourth quarter and will shut down nearly 1,000 stores after reducing the worth of a competitor it bought nearly ten years ago.
Dollar Tree intends to close around 600 Family Dollar stores in the first half of this year and 370 Family Dollar and 30 Dollar Tree stores within the next few years.
In Pennsylvania, there are over 220 Dollar Tree stores and over 200 Family Dollar stores.
Dollar Tree acquired Family Dollar for over $8 billion in 2015 after a competitive bidding process with rival Dollar General, but has faced challenges in integrating the chain.
On Wednesday, Dollar Tree announced a $950 million impairment against the trade name Family Dollar, along with a $1.07 billion goodwill charge. Family Dollar will spend over $594 million closing or rebranding stores, essentially wiping out profits from the holiday season.
Neil Saunders, managing director of GlobalData, stated that almost 12% of the current Family Dollar stores will close in the next three years, describing it as the final blow to the problematic acquisition of the Family Dollar chain by Dollar Tree in 2015.
Saunders mentioned in an email that approximately 12% of existing Family Dollar stores will be shut down over the next three years.
Dollar Tree's shares dropped by 14% at the start of trading on Wednesday.
For the three months ended Feb. 3, Dollar Tree recorded a loss of $1.71 billion, or $7.85 per share. In comparison, the Chesapeake, Virginia, company earned $452.2 million, or $2.04 per share, a year earlier.
After excluding certain items, earnings were $2.55 per share, still falling short of the expected per-share earnings of $2.67 on Wall Street, according to a survey by Zacks Investment Research.
Revenue increased to $8.64 billion from $7.72 billion, slightly below Wall Street’s estimate of $8.67 billion.
Dollar Tree has been attracting consumers dealing with inflation who are looking to reduce their spending. During the quarter, sales at Dollar Tree stores open for at least a year rose by 6.3%, with foot traffic increasing by 7.1%. Although more shoppers were visiting the stores, they were closely monitoring their spending, resulting in a 0.7% decrease in the average purchase.
At Family Dollar, sales at stores open for at least a year declined by 1.2%. Foot traffic increased by 0.7%, but the average purchase dropped by 2%.
For fiscal 2024, Dollar Tree expects earnings ranging from $6.70 to $7.30 per share, with revenue expected to be between $31 billion and $32 billion.
Analysts surveyed by FactSet anticipate full-year earnings of $7.04 with revenue of $31.68 billion.
Dollar Tree anticipates earnings of $1.33 to $1.48 per share for the first quarter, with revenue expected to be between $7.6 billion and $7.9 billion.
Wall Street expects first-quarter earnings of $1.70 on revenue of $7.68 billion.
