Dollar Tree’s decade-long effort to fold the Family Dollar chain into its business is ending after agreeing to sell the bargain store chain to a pair of private equity firms for $1 billion.
Dollar Tree Inc. bought Family Dollar with its over 7,000 stores ten years ago for more than $8 billion.
Neil Saunders, managing director of GlobalData, said that Dollar Tree struggled with supply chain issues, poor store locations and other operational difficulties ever since making the acquisition.
“Basically, Dollar Tree bit off far more than it could chew,” he said.
Last year Dollar Tree announced that it planned to close hundreds of Family Dollar stores.
Family Dollar carries a range of household staples, from food to laundry detergent. The stores are largely located in underserved, urban areas. Store closings that are underway, and those that may take place under new ownership, are likely to have an outsized impact on customers living in those areas.
Access to affordable, essential goods may become more challenging for lower income families as more Family Dollar stores close, said Marshal Cohen, chief industry advisor at Circana, a market research firm
Dollar Tree had been scouting options for Family Dollar for a while and said Wednesday that the sale to Brigade Capital Management and Macellum Capital Management will allow it to focus on its core business.
Dollar Tree, whose customer base is about 50% middle-income shoppers, are found in many suburban locations. Its shelves are more likely to feature seasonal goods, party supplies, crafts and snacks.
The sale will likely free Dollar Tree to focus on its core customers, Truist Securities analyst Scot Ciccarelli believes.
Bargain chains like Dollar Tree, which have raised some of their prices in recent years, are finding that they have little room to maneuver. Americans have tightened their spending as consumer confidence in the economy slides.
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