Dollar Tree is going to shut down or rebrand almost 600 Family Dollar stores this year.
The company has booked an impairment charge of $2.73 billion during the fourth quarter to lower Family Dollar’s value, according to the Wall Street Journal. It had purchased the chain in 2015 for almost $9 billion after a bidding war.
Dollar stores overall have enjoyed a decade of strength as consumers focused on buying cheap goods in the wake of the recession. However, sales at Family Dollar have been slumping for years thanks to unhappy workers, neglected stores and bad product selection, analysts have found.
Dollar Tree said on Wednesday that it plans to close up to 390 Family Dollar Stores and convert roughly 200 more into Dollar Tree shops. At the end of the latest quarter, the firm had about 8,200 Family Dollar stores and 7,000 Dollar Tree stores.
Starboard Value LP, an activist investor, asked management in January to consider selling Dollar Tree and asked the company to consider selling some of its items for more than $1 to increase profits.
Dollar Tree CEO Gary Philbin defended the value of Family Dollar to the company.
“I know it’s worth more to us than we are getting credit for and quite frankly it’s not worth that much to anyone else,” he told the Journal. “We are the ones committed to fixing and growing it.” [WSJ] – Eddie Small