By MICHELLE CHAPMAN (AP Business Writer)
Dollar Tree is going to close nearly 1,000 stores and unexpectedly suffered a loss in the fourth quarter due to a $1.07 billion goodwill impairment charge.
Shares fell 15% before the market opened on Wednesday.
Dollar Tree plans to shut about 600 Family Dollar stores in the first half of this year and 370 Family Dollar and 30 Dollar Tree stores over the next few years.
Dollar Tree bought Family Dollar for over $8 billion almost ten years ago after a bidding war with rival Dollar General, but it has had trouble integrating the chain.
Neil Saunders, managing director of GlobalData, commented, "This significant reduction is the final blow in the somewhat problematic acquisition of the Family Dollar chain, which has caused Dollar Tree nothing but trouble since it was completed back in 2015. Essentially, almost ten years later, Dollar Tree is still dealing with the mess it inherited and has not been able to fully turn it around."
Saunders mentioned in an email that nearly 12% of current Family Dollar stores will be closing over the next three years.
For the three months ended Feb. 3, Dollar Tree lost $1.71 billion, or $7.85 per share. A year earlier the Chesapeake, Virginia, company earned $452.2 million, or $2.04 per share.
Excluding certain items, earnings were $2.55 per share, which is still less than the per-share earnings of $2.67 expected on Wall Street, according to a survey by Zacks Investment Research.
Revenue increased to $8.64 billion from $7.72 billion, slightly below Wall Street’s estimate of $8.67 billion.
Dollar Tree has been attracting consumers affected by inflation as they try to reduce spending. During the quarter, sales at Dollar Tree stores open for at least a year rose 6.3%, with traffic up 7.1%. While more shoppers were going to stores, they were carefully monitoring their spending, with average spending decreasing by 0.7%.
At Family Dollar, sales at stores open for at least a year declined by 1.2%. Traffic increased by 0.7%, but average spending dropped by 2%.
For fiscal 2024, Dollar Tree expects earnings between $6.70 and $7.30 per share. Revenue is projected to be between $31 billion and $32 billion.
Analysts polled by FactSet anticipate full-year earnings of $7.04 on revenue of $31.68 billion.
Dollar Tree predicts first-quarter earnings of $1.33 to $1.48 per share on revenue between $7.6 billion and $7.9 billion.
Wall Street expects first-quarter earnings of $1.70 on revenue of $7.68 billion.
