The "retail apocalypse" crisis is now hitting discount chains.
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On the heels of major retailers such as Gap, JCPenney, Victoria’s Secret and Foot Locker all announcing massive closures over the last week, discount chain Dollar Tree announced it has been impacted as well.
The Chesapeake, Virginia, company said Wednesday that it plans to close up to 390 Family Dollar stores nationwide this year and convert about 200 more into Dollar Tree locations instead.
Additionally, the remaining 1,000 Family Dollar stores will get renovated under its $2.73 billion goodwill impairment charge against the value of the chain.
Since acquiring Family Dollar in 2015 for nearly $9 billion in cash and stock, the chain has been dragging down Dollar Tree's overall performance.
Shares for Dollar Tree popped on the news.
|DLTR||DOLLAR TREE INC.||87.53||+2.33||+2.73%|
While the move has been planned for months, it likely got an added push by activist investor Starboard Value LP, which took a stake in Dollar Tree in January.
Over the last few months, Starboard has been aggressively pushing the retailer to sell Family Dollar and offer a broader range of products at different price points at its Dollar Tree locations to drum up sales.
What’s more, Starboard has nominated a slew of new board members to the chain, including Kathleen Guion, former EVP and Division President of Store Operations at Dollar General and Bill Simon, former chief executive of Walmart U.S.
On Wednesday, Dollar Tree reported better-than-expected quarterly same-store sales, with its namesake stores showing its strongest rise yet with a 3.2 percent increase during the fourth quarter.
By contrast, same-store sales at Family Dollar only rose 1.4 percent during the critical holiday season.
However, both chains did beat Wall Street expectations for same-store sales, which were estimated to rise by 0.08 percent for Family Dollar and by 2.94 percent for Dollar Tree.