Dollar Tree Sells Family Dollar For $1 Billion: 'Truly Addition By Subtraction,' Analyst Says

Dollar Tree, Inc. DLTR on Wednesday announced it sold its Family Dollar segment and seemingly relieved investors sent the company's stock higher on the news.

The Deal: Brigade Capital Management, LP and Macellum Capital Management, LLC will partner to acquire the Family Dollar business segment for $1.007 billion with the deal expected to close later in 2025.

While Dollar Tree expects an earnings hit of roughly 30 cents to 35 cents per share from the deal, executives spoke positively on the company's earnings call about the opportunity to refocus on Dollar Tree stores alone.

"Dollar Tree and Family Dollar are two different businesses with limited synergies and each is at a very different stage of its journey. Separating them will enable each banner to be led and managed by a dedicated team that can focus exclusively on that banner's distinct needs and on realizing each banner's full potential," Dollar Tree Interim CEO Mike Creedon said on the call.

Analysts and investors seemed to agree that the sale will benefit Dollar Tree and its share price rose as much as 8% in Wednesday's trading session.

“It is truly addition by subtraction as Family Dollar had been a consistent weight on topline performance, margin rate and management time,” Evercore ISI analysts wrote in a note on Wednesday per Yahoo Finance.

Truist Securities analyst Scot Ciccarelli maintained a Buy rating on Dollar Tree stock and raised the price target to $84 from $76. Ciccarelli highlighted the cash inflow from the sale of Family Dollar, tax advantages and the opportunity for the company to focus on its primary Dollar Tree business, according to Investing.com.

Dollar Tree's CEO echoed similar sentiments on the earnings call and expressed optimism for the future of the company.

"I strongly believe selling Family Dollar and returning to our roots with an expanded assortment of Dollar Tree has created material value. Dollar Tree remains one of the best growth stories in retail and the separation of the two businesses will allow us to move forward with the single-minded focus of driving growth and profitability," Creedon said.

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