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Tag: Family Dollar

  • Dollar Tree Acquires Family Dollar For $8.5 Billion

    There were echoes of trouble for dollar store franchise Family Dollar back in April, and talks of an impending buyout.

    On Monday it was announced that rival franchise Dollar Tree would be buying Family Dollar.

    Dollar Tree is said to have acquired the floundering company for about eight and a half billion dollars, although it’s believed that the deal could actually be worth well over nine billion.

    There are a number of questions being asked as this event sends shock waves throughout the dollar store industry.

    Many observers are curious as to what will happen to the Family Dollar Brand. It’s not unusual for the rival to acquire a franchise, and then change the names of the old stores to their own.

    This would be somewhat difficult to pull off for Dollar Tree, which operates in a much different manner from Family Dollar.

    It’s known far and wide that everything in a Dollar Tree store is $1 or less. However, Family Dollar stores have items ranging in price.

    Dollar Tree has stated that it expects to operate Family Dollar as its own brand, separately from the Dollar Tree, Dollar Tree Canada, and Deals brands.

    This is a situation where the boards for both companies are very enthusiastic about the deal.

    Though the shareholders at Family Dollar still have to approve the deal for things to be finalized, the rise in stock prices for both Dollar Tree and Family Dollar should help bring them around.

    Dollar Tree shares jumped ten percent to reach a value of $59.72 and Family Dollar shares jumped by nearly $15 dollars to $75.55.

    Even with the positive early outlook, it’s likely Dollar Tree will have make adjustments.

    The dollar store industry faces stiff competition from companies like Walmart, which has gone after lower income shoppers and those still feeling the effects of the recession.

    Image via Wikimedia Commons

  • Family Dollar: Headed For A Buyout?

    Family Dollar: Headed For A Buyout?

    Things have not been looking good for Family Dollar.

    The dollar store chain’s stocks continue to slide, recently hitting a 52 week low.

    Both the company’s shares and earnings fell short of original projections made by Zacks Consensus Estimate.

    Analyists predict a 14% drop in earnings by the end of 2014.

    There is a chance that a lift may be coming for Family Dollar in the form of a buyout. Such speculation has been going on for the past few years and has strengthened as company losses increased.

    In 2011, billionaire Nelson Peltz made an offer. At the time Chief Executive Officer Howard Levine had been reluctant to sell his father’s company. The decision not to take the offer may be coming back to haunt Levine.

    As the situation worsens, it’s possible that investor activism or the emergence of future offers may force Levine’s hand.

    Edward Jones analyst Brian Yarbrough said of the situation, “The ice has got to be getting thinner underneath [Levine]. A lot of times you’ll see private equity take an interest in some of these broken businesses, so you can’t rule it out.”

    Family Dollar representatives have been somewhat tight-lipped about where the company stands at present.

    Spokeswoman Bryn Winburn said in response to questions about potential buyers that Family Dollar does not comment about market speculation.

    Family Dollar’s CEO recently explained to disappointed shareholders that the company’s losses could be blamed on the harsh winter weather.

    This explanation didn’t seem quite adequate. Instead, there are more likely explanations being floated to explain the downturn in profits.

    Some believe a drop in the earnings of dollar store companies means that customers have more money to spend. This logic implies that Americans are spending their money at higher end stores rather than saving money through dollar store purchases.

    Others peg the company’s losses as the result of the competitive pricing at stores like Walmart, Target, and direct rival Dollar General.

    There has even been speculation that it could be Dollar General that ultimately steps forward to buy out Family Dollar.

    Image via Wikimedia Commons

  • Family Dollar in Financial Straits Due to Competition and Store Closure

    The announcement on Thursday that Family Dollar will close nearly 400 stores has not helped the struggling company.

    The Motley Fool declared today that “Family Dollar had a terrible quarter!” The company reported 2.7 billion dollars in revenue for this quarter, short about one hundred million dollars it needed to appease investors. To compare, the company reported 2.9 billion dollars in revenue this time last year. The six percent drop signifies an end to the thirty two per cent growth of $7.9 billion to $10.4 billion from 2010 to 2013. The Fool attributed the drop to competition from Dollar General and Five Below, but remained optimistic the company would recover.

    Dismissing claims the downturn is due to poor weather or a re-cooperating economy, The Week asserted that the market for discount stores has been saturated. Unemployment numbers are still high and food stamp spending remains on the rise. These conditions are ripe for stores, but the aggressive expansion of the past has lead to a downturn of the present. The company added 5700 stores in the past five years, and now it is closing 370.

    In order to reverse the downturn, Family Dollar is also cutting prices on hundreds of items across its stores. “That magical $1 price point that has been so important to us over the years, it’s hard to find sometimes,” Chief Executive Officer Howard Levine told the Morning Call, “these investments will make us more competitive.”

    Speculation that the company might be taken over has been around since 2011. According to Bloomberg News, chief investor and hedge fund billionaire Nelson Peltz made an unsuccessful bid three years ago. Levine seems hesitant to sell, especially considering his father founded the company. Analysts predict further drops this year, further increasing the likelihood that hands might change. “The ice has got to be getting thinner underneath [Levine’s] skate,” Edward Jones analyst Brian Yarbrough told Bloomberg, A lot of times you’ll see private equity take an interest in some of these broken businesses, so you can’t rule it out.”

    Image via Family Dollar, Facebook

  • Family Dollar: Store Closings Signal End of An Era?

    Once upon a time it was practically guaranteed that no matter what was happening with the economy, the 99¢ or $1 stores would not be affected.

    After all, if regular stores were too expensive for cash-strapped Americans, many would no doubt turn to stores like Family Dollar for cheap essentials.

    This belief was shattered by the news that Family Dollar would be closing down 370 stores. The move to close hundreds of stores and lay-off thousands of workers is said to coincide with the slashing of prices nationwide.

    What went wrong for the seemingly invincible dollar store chain? The closings and lowered prices are due to a six percent loss in revenue over the past year.

    According to Family Dollar Chairman and CEO Howard Levine, the retailer’s financial woes could be blamed on poor weather. The harsh winter and excessive snowfall is said to have led to closed stores, disrupted deliveries, and greater than anticipated maintenance costs.

    The problem with this explanation is that it only accounts for winter weather within recent months. Since revenue losses go back to the latter part of 2013, it’s hard to use weather as the entire reason for a drop in profits.

    The big question is why customers aren’t shopping at dollar stores as much as they did during to and even prior to the recession.

    Some analysts believe that weakening dollar store profits (competitors Dollar General and Dollar Tree also saw losses) mean that the American economy has potentially strengthened quite a bit. After all, if dollar stores are suffering, surely American shoppers are taking their dollars to more expensive stores?

    Regardless of whether or not this is the case, Family Dollar’s plans for expansion have been dealt a sizable blow. The chain opened 500 new stores in 2013. Instead of opening an additional 500 stores in 2014, it’s being reported that Family Dollar will cut back to about 350 or 400 new stores.

    Image via Wikimedia Commons