Nearly 600 stores to be closed or rebranded

CHESAPEAKE, Va. — Dollar Tree Inc. said Wednesday that it plans to renovate at least 1,000 Family Dollar Stores in the coming year. It also plans to shutter as many as 390 Family Dollar stores and convert another 200 to the Dollar Tree banner. The moves are part of an effort to improve the performance of the chain Dollar Tree acquired in 2015 following a bidding war with Dollar General.

Dollar Tree said its has developed a new format, known internally as H2, for both new and renovated Family Dollar stores. The format includes new merchandise offerings, including an assortment of $1.00 merchandise like that carried in the Dollar Tree chain. The H2 Family Dollar has produced increased traffic and provided an average comparable store sales lift in excess of 10% over control stores, the company said, adding that the H2 performs well in a variety of locations, including places where Family Dollar has been most challenged in the past.

Dollar Tree said it plans to renovate at least 1,000 stores this year and will pursue an accelerated renovation schedule in future years. Meanwhile the company closed 84 under-performing stores in the fourth quarter, and closed more 37 more than it originally planned for the year. In the current fiscal year, the Family Dollar chain will seek rent concessions from landlords for under-performing stores. If it does not get those concessions, the company will close more stores. As many as 390 Family Stores could be shuttered in fiscal 2019. That compares to the banner’s normal annual closing rate of about 75 stores.

About 200 Family Dollar stores are due to be converted to the Dollar Tree banner in 2019. And the renovation of the remaining Family Dollar stores will include the addition of adult beverages in about 1,000 stores and the expansion of freezers and coolers in about 400 stores.

The plans for Family Dollar were announced as Dollar Tree announced its results for the fourth quarter and fiscal year.

Consolidated net sales for the thirteen-week fourth quarter 2018 were $6.21 billion, compared to $6.36 billion in the prior year’s fourth quarter, which had fourteen weeks. Excluding $406.6 million of sales from the extra week in the prior year’s quarter, consolidated net sales increased 4.2%. Same-store sales increased 2.4% (or 2.3% when adjusted to include the impact of Canadian currency fluctuations). Same-store sales were up 3.2% for the Dollar Tree banner and 1.4% for the Family Dollar banner.

“Sales for the quarter were strong,” Dollar Tree president and chief executive officer Gary Philbin said in a statement. “Our results demonstrate the increasing strength of the Dollar Tree brand, and accelerated progress on the Family Dollar turnaround, as Family Dollar delivered its strongest quarterly same-store sales growth of the year.”

Net loss for the quarter, including discrete charges, was $2.31 billion and GAAP diluted loss per share was $9.66 compared to diluted earnings per share of $4.37 in the prior year’s quarter. On an adjusted basis, diluted earnings per share increased 2.1% to $1.93 compared to an adjusted $1.89 in the prior year’s fourteen week-quarter. The extra week in the fourth quarter of 2017 contributed $0.21 to earnings. On a comparable 13-week basis, adjusted diluted earnings per share increased 14.9%.