Dollar Tree (DLTR.O), opens new tab said on Wednesday it was exploring options, including a potential sale or spinoff of its Family Dollar banner, as the retailer looks to restructure its business amid stiff competition and strained consumer spending.
The Chesapeake, Virginia-based retailer, like its peer Dollar General (DG.N), opens new tab, has been grappling with weak demand as rivals Walmart (WMT.N), opens new tab, Target (TGT.N), opens new tab and Chinese e-commerce platform Temu are also offering products at lower price points to attract inflation-hit customers.
Family Dollar, which Dollar Tree bought for $8.5 billion in 2015, has been the main underperformer for the company.
Dollar Tree had said in November last year it was going to review the business, and outlined plans to shutter 970 of its Family Dollar stores earlier in 2024.
The Family Dollar banner operates 8,359 stores and 10 distribution centers, as of Feb. 3. Overall, Dollar Tree operates more than 16,000 stores.
CEO Richard Dreiling had noted in March that the Family Dollar business was continuing to be hurt by macroeconomic uncertainties. The banner has particularly seen its core lower-income customers come under pressure due to reduced government benefits and higher borrowing costs in the last few months.
The retailer has also seen sales take a hit from reduced customer spending on more profitable products like electronics and furnishings since 2022. In an attempt to revive demand, it has also introduced products at price points such as $3 and $5.share prices of these household names have varied wildly.00:1206:21
Dollar Tree currently has a market capitalization of $26.2 billion, according to LSEG data. It has raked in about $31 billion in revenue for fiscal 2023, of which Family Dollar accounted for 45%.
The Wall Street Journal first reported the news on Wednesday.
Shares of Dollar Tree were up 4.7% in premarket trading. The stock has fallen more than 15% so far this year.