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Dollar Tree is considering selling its Family Dollar business, the company said Wednesday.
“Dollar Tree has been on a multi-year journey to help the Company fully achieve its potential,” Dollar Tree CEO Rick Dreiling said in a statement. A potential sale of its Family Dollar unit has been under close review since last year, he said.
As of now, there is no “deadline or definitive timetable” for either a sale or spinoff of Family Dollar, the company said. The process may not result in a transaction. The deep-discount retailer is working with J.P. Morgan and law firm Davis Polk & Wardwell LLP.
Dollar Tree stock was down slightly in Wednesday morning trading.
Dollar Tree said in March that it would close almost 1,000 underperforming Family Dollar stores, after it posted a $1.7 billion loss during its fourth quarter. Those closures were meant to reallocate investments to remaining locations that showed growth potential, Dreiling said at the time.
Family Dollar has been struggling for some time. That’s largely due to competition from its immediate rival Dollar General, as well as other retailers such as Walmart and Target, which have captured the attention of cash-strapped consumers with discounts of their own.
In Dollar Tree’s most recent quarterly earnings report, Family Dollar continued to lag behind Dollar Tree. Sales during the first quarter increased by just 0.1% for Family Dollar, while Dollar Tree reported a 1.7% increase in sales.
“We are already beginning to see progress in this targeted strategy in the streamlined Family Dollar banner,” Dreiling said. He added that the company is “aggressively” trying to grow Dollar Tree through multi-price offerings (which means higher prices on items that were once a $1), new store openings, and most recently, its purchase of hundreds of beleaguered 99 Cents Only Stores.
Separately, the company said in its earnings release that an April tornado destroyed its distribution center in Marietta, Oklahoma. Based on the damage to the facility, Dollar Tree said it could not salvage the facility nor the inventory within it, causing a $117 million loss that it expects will be fully offset by insurance recoveries.