Family Dollar could be sold or spun off

Dollar Tree is thinking about pruning some of its branches. The discount chain announced Wednesday it has launched a strategic review that could result in the sale or spin-off of the Family Dollar chain.

Family Dollar, which Dollar Tree acquired in 2015, has been struggling for some time, dragging down the parent company’s earnings. In March, the company announced plans to close nearly 1,000 stores.

The troubles haven’t ended there. Dollar Tree was fined more than $40 million for a rat infestation at a warehouse, forcing hundreds of stores to close temporarily. And the chain has also been in hot water with OSHA, the Occupational Safety and Health Administration, for putting workers in hazardous conditions, including blocked exits and improper access to fire extinguishers.

Dollar Tree stores target middle-income shoppers, while lower-income consumers make up a sizable percentage of Family Dollar’s customer base. A growing number of customers, though, have shifted to other retailers, including Walmart and Dollar General.

The price tag for Family Dollar nine years ago was $8.5 billion. Should Dollar Tree find a buyer, it’s highly unlikely the company will recoup that investment.

“The unique needs of each banner at this time – transformation at Family Dollar and growth acceleration at Dollar Tree – lead us to the decision to conduct a thorough review of strategic alternatives for the Family Dollar business ,” said Dollar Tree CEO Rick Dreiling in a statement. “Our goal is to position both the Dollar Tree and Family Dollar banners to progress further and faster, and to determine whether the exclusive attention of a dedicated team will benefit both, while creating value for Dollar Tree shareholders and other stakeholders.”

Dollar Tree has not set a deadline for a decision, the company says, and notes that there are no assurances the review will result in a sale or other action.

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