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Family Dollar, Dollar Tree to close 1,000 stores after surprise fourth-quarter loss

(AP) – Dollar Tree posted a surprise fourth-quarter loss and will close nearly 1,000 stores after the discount retailer wrote down the value of a rival chain it acquired nearly a decade ago.

Dollar Tree plans to close about 600 Family Dollar stores in the first half of this year and 370 Family Dollar stores and 30 Dollar Tree stores over the next several years.

Dollar Tree acquired Family Dollar for more than $8 billion in 2015 after a bidding war with rival Dollar General, but it has struggled to absorb the chain.

On Wednesday, Dollar Tree announced it would take a $950 million writedown on the Family Dollar business name, in addition to a $1.07 billion goodwill charge. Family Dollar will spend more than $594 million to close or rebrand stores, essentially wiping out profits from the holiday season.

“This dramatic removal is the final blow in the rather botched acquisition of the Family Dollar chain, which has caused nothing but trouble for Dollar Tree since its completion in 2015,” wrote Neil Saunders, managing director of GlobalData. “Basically, almost ten years later, Dollar Tree is still sorting through the mess it inherited and hasn't been able to fully turn itself around,” Saunders said.

Saunders said in an emailed statement that nearly 12 percent of current Family Dollar stores will close in the next three years.

Dollar Tree shares fell more than 14% on Wednesday.

For the quarter ended February 3, Dollar Tree lost $1.71 billion, or $7.85 per share. A year earlier, the Chesapeake, Va., company earned $452.2 million, or $2.04 per share.

Excluding certain items, earnings per share came to $2.55, still below the $2.67 earnings per share expected on Wall Street, according to a survey by Zacks Investment Research.

Revenue rose to $8.64 billion from $7.72 billion, slightly below Wall Street's estimate of $8.67 billion.

Dollar Tree is attracting consumers stung by inflation as they look to cut spending. During the quarter, sales at Dollar Tree stores open at least a year climbed 6.3%, with traffic up 7.1%. As more shoppers hit stores, they closely monitored how much they spent, with the average price down 0.7%.

At Family Dollar, sales at stores open at least a year fell 1.2%. Traffic increased slightly by 0.7%, but the average ticket fell by 2%.

For fiscal 2024, Dollar Tree expects earnings between $6.70 and $7.30 per share. Revenue is expected to be between $31 billion and $32 billion.

Analysts polled by FactSet expect annual profit of $7.04 on revenue of $31.68 billion.

Dollar Tree expects first-quarter earnings of between $1.33 and $1.48 per share on revenue of between $7.6 billion and $7.9 billion.

Wall Street expects first-quarter earnings of $1.70 on revenue of $7.68 billion.

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