Dollar Tree To Offload Family Dollar Business For $1 Billion, Anticipates 3% To 5% Standalone Same-Store Sales Growth

Dollar Tree Inc DLTR shares are trading higher in premarket after the fourth-quarter FY24 earnings.

On Wednesday, the company reported fourth-quarter sales of $8.26 billion, beating the analyst consensus estimate of $8.24 billion.

Adjusted EPS of $2.29 also beat the consensus estimate of $2.19.

The revenue and adjusted EPS data includes the discontinued operations of Family Dollar. All the other data excludes Family Tree operations.

Dollar Tree reached an agreement today, under which Brigade Capital Management, LP (Brigade) and Macellum Capital Management, LLC (Macellum) will partner to acquire the company’s Family Dollar business segment for $1.007 billion.

Following an extensive evaluation of various options for the Family Dollar segment, the leadership team and Board of Directors at Dollar Tree concluded that selling Family Dollar to Brigade and Macellum would create the greatest value for Dollar Tree shareholders and set Family Dollar up for long-term success.

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Net proceeds from the sale are estimated to total approximately $804 million.

Same-store sales increased 2% for the Dollar Tree segment, and the sales gained 0.7% on a continuing operations basis.

Gross profit for the quarter decreased 2.8% Y/Y to $1.9 billion, and the gross margin contracted 130 basis points to 37.6%.

Operating income for the quarter plunged 26.5% to $533.6 million, and the margin contracted 390 basis points to 10.7%. 

The company held $1.25 billion in cash and equivalents as of February 1. Operating cash flow for the year totaled $2.2 billion with a free cash flow of $893 million, based on continuing operations.

The company opened 33 new Dollar Tree stores in the quarter, bringing full-year openings to 525. Dollar Tree repurchased 3.3 million shares for $403.6 million, including applicable excise tax.

“In the fourth quarter, our team was focused on successfully closing out the year, bringing the strategic review to a favorable conclusion, and setting Dollar Tree on a path to realize its full potential to create long-term value for our associates, customers, and shareholders,” said CEO Mike Creedon.

Outlook: Dollar Tree sees FY25 sales from continuing operations of $18.5 billion – $19.1 billion. Same store sales growth of 3% – 5%. The company anticipates FY25 adjusted EPS from continuing operations of $5.00 – $5.50.

Dollar Tree sees first-quarter revenue from continuing operations of $4.5 billion – $4.6 billion. Same store sales growth of 3% – 5%. The company expects first-quarter adjusted EPS of $1.10 – $1.25.

Price Action: DLTR shares traded higher by 3.10% at $69.22 in premarket at last check Wednesday.

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