Dollar Tree to close 600 Family Dollar stores in 2024; swings to Q4 loss
Dollar Tree is shrinking the footprint of its Family Dollar banner — starting this year.
The discount retailer, which initiated a comprehensive review of its Family Dollar business in November, plans on closing approximately 600 Family Dollar stores in the first half of fiscal 2024. (At the end of the third quarter, slightly more than half of the company’s approximately 16,622 locations operated under the Family Dollar banner.)
In addition, approximately 370 Family Dollar and 30 Dollar Tree stores will close over the next several years as each store's current lease term expires.
As a result, the retailer took a $594.4 million charge for a portfolio optimization review and incurred a goodwill impairment charge of $1.07 billion, as well as $950 million in other asset impairment charges in the reported quarter.
Dollar Tree swings to loss in Q4
Dollar Tree announced the closings on the heels of a disappointing fourth quarter in which it swung to a loss and missed Street expectations for profit and sales. The company reported a net loss of $1.71 billion and loss per share of $7.85 in the quarter ended Feb.3, , compared to net income of $452.2 million and earnings per share of $2.05.
Net sales increased 11.9% to $8.63 billion, just below estimates of $8.67 billion. Total same-store sales increased 3%, driven by a 4.6% increase in traffic and partially offset by a 1.5% decline in average ticket.
By banner, Dollar Tree same-store sales increased 6.3%, driven by a 7.1% increase in traffic, partially offset by a 0.7% decline in average ticket. Family Dollar’s same-store sales decreased 1.2%, driven by a 0.7% increase in traffic, partially offset by a 2.0% decline in average ticket.
On the company's earnings call, Rick Dreiling, chairman and CEO, said that lower income consumers continue to be very deliberate about their spending.
“Persistent inflation and reduced government benefits continue to pressure the lower-income consumers that comprise a sizable portion of Family Dollar’s” customer base, " he told analysts.
Dollar Tree opened 219 new stores in the fourth quarter of fiscal 2023, bringing full-year new store openings to 641.
For the full year, Dollar Tree reported a net loss of $998.4 million and diluted loss per share of $4.55, compared to net income of $1.61 billion and earnings per share of $7.24 in fiscal 2023. Excluding nonrecurring items, such as $1.66 billion in charges related to the company’s review of its stores and the impairment of goodwill, adjusted earnings per share were $2.55, below analysts' estimates of $2.66 per share.
Consolidated net sales increased 8% to $30.6 billion from $28.3 billion.
Total same-store net sales increased 4.6% from the prior fiscal year. Dollar Tree same-store sales increased 5.8%, driven by a 7.4% increase in traffic, partially offset by a 1.5% decline in average ticket. Family Dollar’s 3.2% same-store sales increase was comprised of a 2.5% increase in traffic along with a 0.7% increase in average ticket.
Looking ahead, Dollar Tree expects net sales for full-year fiscal 2024 to range from $31 billion to $32 billion. Annual profit is expected to be between $6.70 and $7.30 per share, the mid-point of which is slightly below expectations of $7.04 per share.
"We finished the year strong, with fourth quarter results reflecting positive traffic trends, market share gains, and adjusted margin improvement across both segments," Dreiling stated in the earnings statement. "While we are still in the early stages of our transformation journey, I am proud of what our team accomplished in 2023 and see a long runway of growth ahead of us. As we look forward in 2024, we are accelerating our multi-price rollout at Dollar Tree and taking decisive action to improve profitability and unlock value at Family Dollar."
Based in Chesapeake, Va., Dollar Tree Inc. operated 16,774 stores across 48 states and five Canadian provinces as of Feb. 3, 2024. Stores operate under the brands of Dollar Tree, Family Dollar and Dollar Tree Canada.