Dollar Tree Sells Family Dollar: Understand the Billion Dollar Deal

Big news in the discount world! Dollar Tree is saying goodbye to Family Dollar. After 10 years of trying to make it work, they’re selling the business.

Remember when Dollar Tree bought Family Dollar back in 2015 for a whopping $8. 81 billion? Well, things haven’t exactly been smooth sailing. Two private equity firms, Brigade Capital Management and Macellum Capital Management, are picking up Family Dollar for just over $1 billion. Quite a discount, right?

The deal should be finalized next quarter. What does this mean? Family Dollar will become a private company, no longer part of the Dollar Tree family.

Why the Change?

Dollar Tree CEO Mike Creedon sounds optimistic. He believes this move will help Family Dollar reach its full potential. He says Family Dollar President Jason Nordin will lead the way, with financial backing from Brigade and Macellum. A fresh start, maybe?

But why sell in the first place? According to Neil Saunders at GlobaData, Dollar Tree has “struggled” to make Family Dollar profitable. Think of it like trying to fit a square peg in a round hole. Sometimes things just don’t mesh.

Dollar Tree vs. Family Dollar: What’s the Difference?

Even though they sound alike, Dollar Tree and Family Dollar are different. It’s like comparing apples and oranges. Both are fruit, but they have different tastes and textures.

Dollar Tree:

• Mostly in the suburbs.
• Think party supplies and crafts.

Family Dollar:

• Found in cities.
• Sells essentials like groceries and cleaning supplies.

Family Dollar stores were hit harder by inflation and theft. Also, they had trouble selling things like home decor, especially with giants like Walmart and Amazon in the picture.

Rats and Restructuring

It hasn’t been easy. In early 2024, Dollar Tree reported a big loss and announced they were closing about 1,000 underperforming Family Dollar stores. Ouch!

Then there was the fine. A hefty $41. 7 million from the U. S. Justice Department. Why? A rat-infested warehouse. Not good for business, to say the least.

What’s Next?

Right now, there are over 7,600 Family Dollar stores in the U. S. Dollar Tree has over 8,000 locations in the U. S. and Canada. Will things change for shoppers? We’ll have to wait and see.

Dollar Tree’s stock has taken a hit, down about 10% this year. The market is watching closely. Will this sale turn things around? Only time will tell.