Dollar Tree to sell off Family Dollar
Family Dollar logo is seen in front of website. (Photo Illustration by Timon Schneider/SOPA Images/LightRocket via Getty Images)
Dollar Tree is selling Family Dollar a decade after buying it.
The Associated Press reports that Family Dollar is being sold to two private equity firms – Brigade Capital Management and Macellum Capital Management – for $1 billion.
Why is Dollar Tree selling Family Dollar?
What they’re saying: Neil Saunders, managing director of GlobalData, said that after acquiring the rival chain, Dollar Tree struggled with supply chain issues, poor store locations and other operational difficulties.
"Basically, Dollar Tree bit off far more than it could chew," he said.
Dollar Tree had been scouting options for Family Dollar for a while and said Wednesday that the sale will allow it to focus on its core business.
RELATED: 23andMe files for bankruptcy, CEO steps down: What customers should know
"This is a major milestone in our multi-year transformation journey to help us fully achieve our potential," said Mike Creedon, who was made permanent chief executive officer of Dollar Tree late last year.
The backstory: Dollar Tree Inc. acquired Family Dollar for more than $8 billion in 2015 after a bidding war with rival Dollar General.
Dollar Tree last year announced that it planned to close hundreds of Family Dollar stores. The company also said at the time that it would record a $950 million impairment against the trade name Family Dollar, on top of a $1.07 billion goodwill charge.
Dollar Tree had little room to maneuver, particularly in the months leading up to the sale. Americans have tightened their spending, even at bargain chains, as consumer confidence in the economy slides.
RELATED: Forever 21 files for bankruptcy–again
What’s next: The deal is expected to close later in the second quarter.
Saunders said Brigade and Macellum will have several issues to fix at Family Dollar, including pricing that isn't as sharp as many of its rivals and a customer base that isn't as loyal.
Family Dollar, which moved its headquarters from North Carolina to Chesapeake, Virginia, after the sale, will maintain its headquarters in Virginia.
Shares of Dollar Tree rose 5% before the opening bell.
The Source: This report includes information from The Associated Press.