Dollar Tree Sells Family Dollar Business for $1 Billion
072 - Industry Insight IB (Consumer Retail)
Retailers Continue Struggling Under Tariff and Consumer Demand Pressures
This past week, the SPSIRE remained roughly flat, dropping 0.5%. Since the start of this new year, many retailers have either gone bankrupt, faced administration, or have been forced to sell unprofitable parts of their businesses, highlighting the precarious state of the retail industry. There is a continued emphasis on cost-saving strategies as tariffs are about to go into effect. These plans often include the implementation of AI to help improve supply chain strategies as well as internal operations.
Retailers have stockpiled a significant amount of inventory ahead of Trump’s tariffs.
In the retail space, pre-made cocktails are grabbing consumers’ attention as people are avoiding bars because of their overpriced menus.
Retailer Beyond had re-acquired BuyBuy Baby two months ago and now plans to relaunch BuyBuy Baby’s online store on May 8th.
Starbucks CEO Brian Niccol Discusses Company’s Growth Plans
In September of 2024, Starbucks appointed Brian Niccol as the firm’s new CEO as the brand struggled with rising costs, inefficiencies in operations, and a slowdown in new product offerings. Since taking over as CEO, Brian Niccol has emphasized driving growth through bolstering core operations and improving the customer experience.
The firm has said that it will focus on reducing mobile order wait times, as over the past years, 1 in 8 customers abandoned ordering off the app. This was especially concerning to the firm as roughly 20% of the business’ overall revenues come from mobile orders.
Starbucks has also implemented new policies, such as requiring a purchase for individuals to use the café spaces. This policy aims to reduce overall crowding within stores and address previous safety concerns that occurred in some cafés. Additionally, baristas at the stores will be writing messages on each individual beverage they sell, emphasizing the firm’s commitment to a better customer experience.
These policies and plans demonstrate the new CEO’s commitment to addressing its challenges and driving long-term growth.
Dollar Tree Sells Family Dollar Business for $1 Billion
Last summer, Dollar Tree began a turnaround plan for its Family Dollar division as the discount-retail chain struggled with weak demand and strong competition from big-box retailers like Walmart. The retailer had acquired Family Dollar in 2015 for $9 billion and is now selling it for $1 billion, as it was unable to revive sales and realize any synergies. According to The Wall Street Journal, Dollar Tree targets suburban consumers shopping for items like party supplies, while Family Dollar sells necessities in urban areas.
Since the beginning of last year, Dollar Tree has faced several growing challenges, including store thefts and inflation, which caused it to close roughly 1,000 Family Dollar locations. However, even these efforts were ineffective.
This sale also highlights the impact of tariffs on businesses: an estimated 40% of Dollar Tree’s sales rely on imported goods, according to KeyBanc Capital Markets.
Family Dollar is a subsidiary of Dollar Tree that targets customers in urban areas and sells groceries, cleaning products, and other home essentials at discount prices.
Macellum Capital Management is a private equity firm founded in 2009 that specializes in making investments in the consumer sector.
Brigade Capital Management is a private investment management firm that focuses on distressed credit and special situation investments. The firm identifies undervalued, financially distressed firms and seeks to generate returns through restructuring and turnaround.
JP Morgan was the lead financial advisor to Dollar Tree.
Jefferies and RBC Capital Markets served as financial advisors to Brigade and Macellum, respectively.