Dollar Tree Says Family Dollar Stores Could Be Re-Branded

CHARLOTTE, N.C. (The Charlotte Observer/TNS) —

Dollar Tree executives said they plan to turn around struggling Family Dollar by re-branding many of its stores and trimming costs following its $8.5 billion acquisition of the company.

On a conference call with investors Wednesday, Dollar Tree CEO Bob Sasser said he’s optimistic about the combined company’s future.

“While their reported results have not been stellar, we acknowledge that they have been operating through unique circumstances with great uncertainty regarding the future of the Family Dollar business,” said Sasser.

Virginia-based Dollar Tree said that it expects regulators will require “no more than roughly 300 stores” to be sold to get antitrust approval for its purchase of Family Dollar, and that approval from the Federal Trade Commission could be reached in early March.

Dollar Tree said it will work “to close the acquisition by April 27.”

The discount retailer lowered its full-year earnings outlook given the costs related to completing the deal for Family Dollar, which is based outside Charlotte.

Sasser said he will concentrate on several steps following the acquisition:

– Switching Family Dollar stores to Dollar Tree and vice-versa. “Most of the early re-bannering will be Family Dollar stores to Dollar Tree stores,” Sasser told investors. Family Dollar stores in the suburbs could be especially ripe for a transition, he said. “Our first priority was to take a look at the Family Dollar, underperforming Family Dollar stores that would perform better as Dollar Tree stores.”

– Cutting costs by reducing redundancies. “Over time, we will reduce costs through shared services, reducing redundant public company and board cost and to our systems integrations,” said Sasser. Family Dollar employs about 1,300 workers at its headquarters. The company has said it plans to keep a substantial presence there, but hasn’t spelled out details of its plans.

– Fixing results at Family Dollar stores by changing the in-store selection. “We will focus on improving sales per square foot and inventory productivity by expanding high-performing categories and eliminating products that do not meet our sales and profitability threshold,” said Sasser. Family Dollar’s profit margins have suffered as the company added more low-margin consumable goods, such as food, and sold fewer high-margin, discretionary goods, such as clothes.

Dollar Tree posted fourth-quarter earnings that beat Wall Street expectations, thanks to strong sales in categories including party supplies, household products and food.

For the fourth quarter that ended Jan. 31, excluding acquisition-related costs, net income was $239 million, or earnings per share of $1.16, 2 cents above the average estimate of analysts surveyed by Bloomberg. Same-store sales rose 5.6 percent, beating analysts’ consensus forecast of a 4.7 percent rise.

Including acquisition costs, Dollar Tree’s profits fell to $206.6 million, or $1 a share, in the fourth quarter, compared with $213 million, or $1.02 a share, a year before. Fourth-quarter revenue rose 11 percent to $2.48 billion, above the $2.47 billion Wall Street estimated.

Dollar Tree said it expects full-year earnings in the range of $3.30 to $3.50 per share, compared with analysts’ consensus forecast of $3.57. Revenue will range from $9.21 to $9.45 billion, Dollar Tree said.

Family Dollar shareholders last month approved the $8.5 billion deal to sell the company to Dollar Tree, effectively shaking off a hostile $9.1 billion offer from rival Dollar General. Dollar Tree, which sells everything for $1 or less, in a recent security filing said the FTC is reviewing more than 500 stores to possibly close and could identify more for review in the future.

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