(Reuters) – Dollar Tree said on Wednesday it plans to close 970 Family Dollar stores in a bid to turn around its struggling business after holiday quarter sales and profits fell short of market expectations.
The company's stock price fell about 14% in early trading after the company also forecast that sales and profits for 2024 would be lower than expected.
Dollar stores are struggling as consumption shifts from high-margin discretionary goods to low-margin necessities. It also faces stiff competition from rivals such as Walmart and Chinese e-commerce platform Temu.
“The biggest challenge right now is getting enough product into stores quickly enough for consumers to respond,'' said CEO Rick Dreiling, who said Family Dollar is responding to macroeconomic disruptions. He added that certainty continues to hurt.
Dollar Tree announced in November that it would review its Family Dollar business, including closing unprofitable stores, in an effort to get it back on track for growth.
The company, which operates approximately 16,774 stores, announced that it will close approximately 600 Family Dollar stores in the first half of fiscal 2024, an additional 370 stores over the next few years, and 30 Dollar Tree stores due to lease expirations. .
As a result, the company incurred a portfolio optimization review charge of $594.4 million, as well as a $1.07 billion goodwill impairment charge and a $950 million other asset impairment charge in the reported quarter. There has occurred.
“There are a lot of investors who don't want to be charged that much money,” said Joseph Feldman, an analyst at Telsey Advisory Group.
Dollar Tree reported a net loss of $1.71 billion, or $7.85 per share, for the quarter ended Feb. 3, compared with a profit of $452.2 million, or $2.04 per share, in the year-ago period. was.
Revenue in 2024 is expected to be between $31 billion and $32 billion, according to LSEG data, with the midpoint lower than the expected $31.65 billion.
Full-year earnings are expected to be between $6.70 and $7.30 per share, slightly below the median estimate of $7.04 per share.
(Reporting by Granth Vanaik and Anuja Bharat Mistry in Bengaluru; Editing by Pooja Desai)
