By Michelle Chapman | The Associated Press
Dollar Tree swung to a surprise fourth-quarter loss and will close nearly 1,000 stores after the discount retailer slashed the value of a rival chain it acquired almost a decade ago.
Dollar Tree plans to close about 600 Family Dollar stores in the first half of this year and 370 Family Dollar and 30 Dollar Tree stores over the next several years.
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Dollar Tree acquired Family Dollar for more than $8 billion in 2015 after a bidding war with rival Dollar General, but it has had difficulty absorbing the chain.
On Wednesday, Dollar Tree said that it would record a $950 million impairment against the trade name Family Dollar, on top of a $1.07 billion goodwill charge. Family Dollar will spend more than $594 million closing or rebranding stores, essentially erasing profits from the holiday season.
“This dramatic cull is the coup de grâce in the rather botched acquisition of the Family Dollar chain, which has caused Dollar Tree nothing but hassle since it was completed back in 2015,” wrote Neil Saunders, managing director of GlobalData. “Basically, almost ten years on, Dollar Tree is still sifting through the mess it inherited and has not been able to completely turn around,” Saunders said.
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Saunders said in an emailed statement that nearly 12% of current Family Dollar stores will be closing over the next three years.
Shares of Dollar Tree tumbled 14% at the opening bell Wednesday.
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.
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