Dollar Tree announced on Wednesday that it is considering various options, including a potential sale or spinoff of its Family Dollar banner, as part of a restructuring effort amidst ongoing high inflation that continues to impact consumer spending.

The retailer, similar to its competitor Dollar General, has been facing weak discretionary demand as consumers prioritize less-profitable consumables. Dollar Tree is also contending with strong competition from Walmart, Target, and Chinese e-commerce platform Temu, all of which are offering lower-priced products to attract budget-conscious Americans.

Family Dollar, acquired by Dollar Tree in 2015, has been its primary underperformer. Earlier this year, the company announced plans to close 970 Family Dollar stores. As of February 3, Dollar Tree operates 8,359 stores under the Family Dollar banner and plans to close an additional 150 stores by the end of fiscal 2024.

“Many of these stores had been under-invested in for years, and the capital investment required to fix them could not deliver an acceptable rate of return,” said CEO Richard Dreiling.

The company has not set a deadline or definitive timetable for completing the review process and noted that there is no assurance it will result in any transaction.

“Dollar Tree would get nowhere near the $8.5 billion it originally paid for the Family Dollar acquisition,” said Neil Saunders, managing director of GlobalData. “It is clear to all in the market that Family Dollar is a chain that needs a lot of work and investment, a fact which will also thin out the number of interested parties,” Saunders added.

J.P. Morgan Securities LLC is acting as the financial adviser for Dollar Tree.

The Wall Street Journal first reported the news on Wednesday. Shares of Dollar Tree fell 2% in premarket trading after the company forecasted annual profit below analysts’ estimates. The company expects adjusted profit for fiscal 2024 to be between $6.50 and $7 per share, with the midpoint below LSEG estimates of $6.89.

Dollar Tree noted that its outlook reflects increased transportation costs due to the loss of a distribution center in Oklahoma from a tornado. Overall, same-store sales grew 1% in the first quarter, missing estimates.

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