Dollar Tree announced on Wednesday, Mar. 13, that it would close 970 of its Family Dollar stores in an effort to revamp its business.
According to Reuters, the company made the decision after its shares fell about 8% in premarket trading and missed Wall Street expectations for quarterly sales and profit.
Dollar stores have been struggling to deal with a shift in consumer spending to lower-margin essentials from higher-margin discretionary products like home decor, electronics and toys. They also face stiff competition from bigger rivals like Walmart and the Chinese e-commerce platform Temu.
Dollar Tree said in November that it would be reviewing its Family Dollar business, including potentially shutting down underperforming stores, to return to growth.
In its announcement, the company said it would be closing about 600 Family Dollar Stores in the first half of 2024 and 370 more over a period of a few years, along with 30 Dollar Tree outlets, either outrightly closing it or allowing their lease terms to expire.
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Failing to Meet Profit Parameters
In the reported quarter, the company took a $594.4 million charge for a portfolio optimization review, incurred a goodwill impairment charge of $1.07 billion, and incurred $950 million in other asset impairment charges.
Because of this, Dollar Tree incurred a $1.71 billion net loss, or $7.85 per share, in the fourth quarter that ended on Feb. 3, compared with a year-on-year profit of $452.2 million, or $2.04 per share.
LSEG data added that the company earned $2.55 per share on an adjusted basis, compared to an estimated $2.65.
Analysts predicted that Dollar Tree would have a quarterly net sale of $8.67 billion but only got $8.63 billion in actuality.
For the full year, Dollar Tree expected sales between $31 billion and $32 billion, the midpoint of which was below analysts' estimate of $31.65 billion. It also expected a 2024 profit between $6.70 and $7.30 per share, the midpoint of which was slightly below analysts' estimate of $7.04 per share.
