Dollar Tree is selling Family Dollar to a pair of private equity firms for $1 billion after a decade of trying to make its acquisition of the bargain chain fit, according to the Associated Press. Dollar Tree Inc. acquired Family Dollar for more than $8 billion in 2015 after a bidding war with rival Dollar General.
Neil Saunders, managing director of GlobalData, said that after acquiring the rival chain, Dollar Tree struggled with supply chain issues, poor store locations and other operational difficulties.
Last year, Dollar Tree announced that it planned to close hundreds of Family Dollar stores. The company also said at the time that it would record a $950 million impairment against the trade name Family Dollar, on top of a $1.07 billion goodwill charge.
Dollar Tree had been scouting options for Family Dollar for a while and said Wednesday that the sale to Brigade Capital Management and Macellum Capital Management will allow it to focus on its core business.
Saunders said Brigade and Macellum will have several issues to fix at Family Dollar, including pricing that isn’t as sharp as many of its rivals and a customer base that isn’t as loyal. The deal is expected to close later in the second quarter.
Bargain chains like Dollar Tree, which have raised some of their prices in recent years, are finding that they have little room to maneuver. Americans have tightened their spending as consumer confidence in the economy slides.
