Dollar Tree is considering a sale of Family Dollar as retailers feel a trade-down squeeze

One big unhappy family… Nearly a decade ago, discount retailer Dollar Tree added Family Dollar to its family tree, buying the brand for $8.5B. Now the $25B bargain biz is signaling it’s time for Family Dollar to move out: Dollar Tree’s exploring spinning off or selling the chain as it struggles to compete with Dollar General. Family Dollar has weighed down Dollar Tree’s branches: yesterday Dollar Tree reported that Family Dollar’s same-store sales grew just 0.1% last quarter (and while they have nearly the same # of stores, Dollar Tree contributes 14x more operating income). Family Dollar has become a problem child:

• Ratadealie: This year Family Dollar was fined $42M (the largest-ever monetary food-safety penalty) for knowingly distributing food and other items from a warehouse hosting rats and birds (both living and dead).

• Bargain-binned: Dollar Tree announced in March that it would close about 1K Family Dollars. Experts said many were understaffed, in poor condition, and too close to one another. Since 2018, OSHA has fined Dollar Tree $13M+.

Competition is measured in cents… Inflation has boosted discount specialists as shoppers hunt for deals. Dollar General is the fastest-growing US retailer with 18K stores. Recently, major chains including Target, Walmart, Walgreens, and Amazon Fresh have discounted thousands of products to win back thrifty shoppers. Competing on price has become more important after SNAP benefits (aka food stamps) were reduced last year, leaving some families with $250 less per month. That’s less $$ to spend at Dollar Tree and other go-to retailers for shoppers with low incomes.