Dollar Tree GUTS Family Dollar in Private Equity Fire Sale—Shares Soar 8%...

After nearly a decade of trying to make Family Dollar work, Dollar Tree is officially cutting its losses and selling the brand to private equity scambois—sorry, I mean, “investment firms”---Brigade Capital Management and Macellum Capital Management for $1 Billy. That’s a $7 billion L on the books, considering Dollar Tree originally bought Family Dollar for roughly $8.5 billion back in 2015.

Spoiler: Yes, you do (Source: Giphy) 

If you’re wondering, “Wait, how do you lose $7 billion running a chain of discount stores?”—congratulations, you’re already thinking harder than Dollar Tree’s execs did when they thought this acquisition was a good idea.

In short, from day one, Dollar Tree and Family Dollar were a terrible match. Dollar Tree, known for its suburban, middle-class-friendly stores where everything was (until recently) literally a dollar, tried to blend operations with Family Dollar, which caters to lower-income shoppers in urban areas with a mix of cheap groceries, household goods, and general retail chaos. The result? A logistical and operational hellscape, including supply chain issues, terrible store locations, and a customer base that wasn’t loyal and couldn’t care less about decency. 

(Source: AP) 

Dollar Tree spent years and billions of dollars trying to fix Family Dollar’s problems—closing stores, remodeling others, and tweaking pricing models—only to finally admit what everyone else already knew: this was never going to work. For this reason, Dollar Tree’s stock popped 3% on the news (up 8.78% on the day), because Wall Street loves when a company admits it’s been lighting cash on fire and finally stops. Investors have been begging Dollar Tree to ditch Family Dollar for years, and now that it’s happening, the company can finally focus on its core business instead of trying to bail water out of a sinking ship. 

For Family Dollar, though? The future isn’t looking great. Private equity firms aren’t exactly known for long-term investments in retail chains. Brigade and Macellum will probably gut expenses, close even more stores, and try to squeeze every last penny out of Family Dollar before flipping it again. Oh, and let’s not forget the massive impact on lower-income communities—the ones that actually rely on Family Dollar for essentials. As more stores inevitably shut down or get stripped for parts, access to affordable products in these areas is going to get much worse.

(Source: New York Times) 

So what’s next for Dollar Tree?, Well, now that it’s free of Family Dollar’s dead weight, Dollar Tree can go back to doing what it does best: selling cheap crap to middle-class America. CEO Mike Creedon is hyping this up as a “major milestone” in the company’s “multiyear transformation journey”—which really just translates to “We don’t have baggage anymore.” 

But still, that doesn’t mean Dollar Tree is in the clear. The company is still dealing with inflation, rising operational costs, and tariffs on cheap imported goods, which could put even more pressure on pricing. Plus, its core customer base is more budget-conscious than ever—which means raising prices too much could push even loyal shoppers away.

(Source: Coupons in the News) 

At the end of the day though, this was inevitable. Dollar Tree had no choice but to cut its losses and move on. Family Dollar was a bad investment, a bad fit, and a massive drain on resources. The market is rewarding the move now as prices are up an additional 8.78% on the day, but long-term? Dollar Tree still has work to do. In the meantime, keep your eyes on Dollar Tree, and place your bets accordingly. As always, stay safe and stay frosty, friends! Until next time… 

P.S. Just when you thought our beloved congressmen couldn’t get any greasier, one Republican lawmaker decided to YOLO $175k into a stock… right before a major FDIC announcement hit. Lucky timing? Insider edge? You be the judge. We broke it all down inside our recent Stocks.News premium article… click here to check it out ASAP. 

Stocks.News does not hold positions in companies mentioned in the article.