Dollar Tree stock sinks: Closing 1,000 stores, earnings miss
Dollar Tree (DLTR) shares are plunging after reporting fourth quarter results that fell short of Wall Street expectations. The company also announced it was closing 1,000 stores: 600 Family Dollar locations in the first half of fiscal 2024 and an additional 370 Family Dollar locations and 30 Dollar Tree stores as their leases expire in the coming years.
As Yahoo Finance's Brooke DiPalma reports in the video above, the closures serve as a reminder of what can happen when an acquisition doesn't work out as hoped.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Stephanie Mikulich
Video Transcript
- Time for some Trending Tickers as we move closer to the closing bell on Wall Street. Let's check out Dollar Tree here to start. Shares, you can see, dropping after announcing its plans to close hundreds of Family Dollar stores, as well as some Dollar Tree stores. News coming as the retailer delivers lower than expected, fourth quarter results. So, Julie, on the results, earnings did miss the Street's forecast of 2.66 a share. Same-store sales, they actually climbed about 3%, but, yeah, that was better than expected. But the headline getting attention is there's going to be fewer stores here going forward.
- Fewer stores, but also in the results, what was interesting is they reported a loss, and it's because of write-downs, partially cost to close those stores, but also writing down the value of Family Dollar, which they, you know, fought to acquire a number of years ago. So, it's interesting now that that has not worked out as they planned, and now, obviously, they are trying to break the ship by closing a number of stores. They also closed a bunch of stores in 2019, about 400 stores. So, this is the second time they're trying it, and they're doing it in a bigger fashion by closing more stores.
- Well, for more color on this, let's bring in Yahoo Finance's Brooke DiPalma, what happened to learn lead to Dollar Tree now deciding to make these hundreds of store closing. What's the reason here?
- Yeah, well, this HAS certainly has been a decade-long struggle of Dollar Tree trying to make Family Dollar really work for them here, and this is the first time that we're really seeing Dollar Tree say, hey, this Family Dollar acquisition actually isn't working, and they're ultimately taking action here. As you noted, Dollar Tree really fought hard for this bid. Dollar General came in with a higher bid. Dollar Tree had the lower bid here, but due to fewer anti competition concerns among lawmakers, they ultimately led to them closing the deal in July of 2015, and experts telling me that this was a sub-optimal business to begin with, that really the signs were against them. It had a weak brand image. It had a weak brand loyalty. They didn't leave the category in terms of pricing, and they also had supply chain issues, and so Dollar Tree tried a number of things. They tried to dabble with private label. They converted some stores, but right now, here we are seeing that the new management, who came in a year ago, who actually is the former CEO of Dollar General, the Dollar Tree CEO, he's coming in and really saying, you know, we're going to rationalize these unprofitable locations, turn them around, and experts also telling me they're doing what they can with the cards that they've been dealt.
- Yeah, I mean, what's-- a couple of things stand out to me too about this story. They're closing in 1,000 stores, but there are more than 16,000 of these things, which I didn't realize that there are so many. The other thing I didn't quite realize is that Family Dollar is more urban, right, and Dollar Tree actually is more suburban and does have a bit of a higher-income consumer. The other headline that caught my eye today, I guess from the conference call, is that Dollar Tree is planning to expand its price range a little bit. They're going to go up to more like the $7 range, which I guess by Dollar Tree standards is a higher price point. More dollar, no more 1.25. Now we're up to--
- Well, I guess they have.
- They start at $1 but then they go all the way up to 7, which is not as high as they had gone previously. So maybe that is part of the attempt also to capitalize on some of those higher income consumers.
- And what's interesting too is Family Dollar does have this sort of appeal where people are grocery shopping. They have more than just the general merchandise you might see in a Dollar Tree. People are really going there, particularly low-income consumers, for their everyday needs. To cook dinner, to make ends meet. And so it'll be interesting to watch where exactly these customers will go to next. Will they turn to a Dollar General? Will they then turn to a local Dollar Tree store? So if they're losing these roughly-- 970 Family Dollar stores, where will these then consumers ultimately turn to buy their everyday needs? We'll have to watch.
