Dollar Tree is selling the Family Dollar brand to two private capital firms for just over $1 billion, the company announced on Wednesday after years of struggling with Family Dollar’s operation.
The private equity firms Brigade Capital Management and Macellum Capital Management are buying Family Dollar together, according to the statement. In the announcement, Dollar Tree’s chief executive, Michael Creedon, called the sale a “major milestone in our multiyear transformation journey.”
Dollar Tree purchased Family Dollar in 2015 for about $9 billion, hoping the merger would help both stores reach more customers. But it struggled to effectively manage the Family Dollar brand. About a year ago, Dollar Tree said it would close nearly 1,000 of Family Dollar’s roughly 8,000 stores.
In June, Dollar Tree announced it was exploring plans to sell Family Dollar, citing inflation, theft and the end of pandemic-era benefits from the federal government.
Investors seemed to respond favorably to the announcement, as Dollar Tree’s stock jumped Wednesday morning.
Family Dollar’s stores are predominantly in urban areas and serve mostly low-income shoppers, who have been squeezed the hardest by inflation. Dollar Tree has more stores in suburban areas and caters to consumers with relatively higher incomes.
In 2021, Dollar Tree raised the price on most items to $1.25, a decision that the company said would be permanent after it had kept its prices at $1 for 35 years. Last year, the company started a multitiered pricing system in some of its stores, with some of its prices increasing to as high as $7.
Dollar Tree also reported its latest quarterly earnings on Wednesday, noting potential drags on its sales including “tariffs or other measures that create barriers or restrictions on trade.” The company also warned in December that tariffs could affect its prices and inventory.