STORY BY USATODAY.COM
Dollar Tree is adding alcoholic drinks to about 1,000 Family Dollar stores in its latest effort to turn around the struggling chain.
Chesapeake, Virginia-based Dollar Tree announced the plans Thursday, saying it would also expand freezers and coolers at about 400 Family Dollar stores.
The company recently announced plans to close up to 390 Family Dollar stores this year, mostly in the second quarter. In a normal year, it closes about 75.
Dollar Tree acquired Family Dollar in 2015, but the acquisition has dragged the company's finances. Family Dollar's same-store sales rose only 0.1% in 2018 and 0.4% in 2017, prompting the overhaul efforts.
The disappointing results earlier this year had drawn a challenge from activist investors at Starboard Value.
The retailer is also renovating at least 1,000 Family Dollar locations to include expanded party goods and certain Dollar Tree-branded merchandise. Some 200 locations are being rebranded as Dollar Tree stores.
"In our view, Family Dollar remains a drag on performance and its transformation will continue to absorb both management time and company capital for the remainder of this year and beyond," GlobalData Retail managing director Neil Saunders wrote Thursday, but "fortunately, the steps being taken to improve performance at Family Dollar appear to be working."
Dollar Tree also announced Thursday that it isexpanding a test in which it offers more items for more than its customary $1 price point at its namesake locations. A trial underway during the first quarter for the Dollar Tree Plus! products will be extended to more than 100 Dollar Tree locations.
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The company, which has more than 15,000 stores overall, said it would continue to offer $1 items at Dollar Tree locations.
Sales at Family Dollar stores open at least a year rose 1.9% in the first quarter, marking the chain's best performance since Dollar Tree began reporting those figures.
"Our Family Dollar turnaround is gaining traction," Dollar Tree CEO Gary Philbin said in a statement. "Our efforts to accelerate initiatives to optimize the real estate portfolio are making a difference as demonstrated by our improving same-store sales results."
But challenges remain. "We are under no illusions that a complete turnaround of the business will not be delivered quickly nor will it come cheap," Saunders wrote. "This will both reverse the benefit of synchronistic cost savings from bringing Dollar Tree and Family Dollar together and raises questions over the amount paid for the business."
Overall, the retailer's first-quarter net sales rose 4.6% to $5.81 billion. Net income rose 66.9% to $267.9 million.
First-quarter sales at Dollar Tree stores rose 2.5%.
Video Credit: Jan Van Beek
Story Credit: USAtoday.com