Dollar Tree stock has shot up in value after the company sold Family Dollar for an extraordinary fee.
After closing 600 Family Dollar stores last year, the discount retailer is set to sell its family branch to private-equity firms.
On Wednesday, Dollar Tree (DLR) reached a deal to sell Family Dollar to a pair of investment companies for $1 billion. Brigade Capital Management and Macellum Capital Management will gain Family Dollar in a transaction "anticipated to close later in the second quarter." Within their quarterly earnings report, the company estimates the deal will generate over $800 million in net proceeds.
The transaction has sparked interest amongst traders and now, Dollar Tree shares have gone up 5% in recent trading.
That increase came right after another surge of nearly 10% earlier that day.
At the start of the Wednesday session, the company’s stocks were down about 47% over the last 12 months.
Dollar Tree bought Family Dollar in 2014 for more than $9 million. After a decade of ownership, they announced they would close about 1,000 stores that were underperforming.
A couple months after making that initial announcement, they revealed they were considering selling or spinning off the Family Dollar brand.
Without factoring in Family Dollar's performance, the discount retailer posted adjusted earnings per share (EPS) of $2.11 on revenue of $5.0 billion, with same-store sales increasing by 2%.
For 2025, Dollar Tree anticipates sales between $18.5 billion and $19.1 billion, a same-store sales growth of 3% to 5%, and adjusted EPS ranging from $5.00 to $5.50.
Despite Dollar Tree’s mass popularity currently, Family Dollar was established first. The discount store was founded by 21-year-old entrepreneur Leon Levine who, according to its website, wanted to offer a variety of “high-quality, good-value merchandise” for under $2. He opened the first Family Dollar in Charlotte, North Carolina in 1959.
Before the first Dollar Tree was created in 1986, Family Dollar had opened 27 stores throughout southern states and brought in an annual income of more than $5 million.
By the time they opened the 100th store, they were already public, offering a common stock of $14.50 a share. A decade later, the company was trading on the New York Stock Exchange and saw annual sales of over $100 million.
