Retail

Dollar Tree May Close Up To 390 Family Dollar Stores

Family Dollar

Amid plans to rebrand and shutter hundreds of Family Dollar stores, Dollar Tree reportedly marked down the value of the chain. The retailer said that it marked a goodwill impairment charge of $2.73 billion against the chain’s value, The Wall Street Journal reported.

In 2015, the retailer bought the Family Dollar chain for almost $9 billion in stock as well as cash. But since that time, the chain has faltered and brought down Dollar Tree’s performance. As it stands, Dollar Tree plans to convert roughly 200 of those stores to its eponymous brand, while closing as many as 390 locations. The retailer also plans to revamp 1,000 Family Dollar stores at a minimum in 2019.

For earnings, Dollar Tree reported consolidated net sales of $6.21 billion for the quarter that concluded on February 2 (a decrease from a comparable period of roughly 2 percent.) And the retailer had a $2.31 billion net loss in comparison to a $1.04 billion during a period a year earlier.  (However, the report noted that a tax benefit had bolstered the company in that prior time.)

In October, Quo Vadis Capital’s John Zolidis contended that the market assigns very little value to Family Dollar. During a presentation earlier that month, he claimed that Dollar Tree would keep 96 percent of its current market value in the event that it would sell or split off from Family Dollar. And he reportedly contended that Family Dollar would be worth somewhere between $5 billion and $6.2 billion if it were to be spun off.

But, while most players in the world of digital retail have felt the “Amazon effect” sting, extreme discount retailers, or “dollar stores,” have remained mostly immune to the onslaught so far. And as other brick-and-mortar players are looking to shrink their physical footprint in favor of growing a digital presence, these dollar store retailers have constructed plans for growth amid a customer base nearly 100 million strong.

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