Fears of more Family Dollar closures as brand is lined up for the ax

Dollar Tree has agreed to sell Family Dollar to a group of private equity investors for roughly $1 billion. 

This would bring an end to the chain's nearly year-long search for potential buyers for the troubled discount-store chain.

But experts warn this could mean further closures for Family Dollar, which has already lined up around 1,000 locations to shut across the US. 

Dollar Tree mainly has stores in more middle-class and suburban locations, while Family Dollar stores are largely located in major cities. 

Party supplies, crafts and decorations are key items for Dollar Tree shoppers, while Family Dollar sells groceries, cleaning products and other essentials at a cut rate. 

Dollar Tree bought 66-year-old Family Dollar in 2015 for more than $8 billion, but it has struggled to integrate the chain.  

Not only has it been grappling with competition from big-box retailers such as Walmart and online retailers, including Amazon, Shein and Temu - but the chain has also been plagued by crime, shoplifting and neglected stores. 

Shares of Dollar Tree jumped as much as 6 percent in premarket trading off the back of the news it was offloading Family Dollar to Brigade Capital Management and Macellum Capital Management, Reuters reported. 

'The first thing private equity will do is review the chain,' Neil Saunders, managing director of GlobalData, told DailyMail.com. 

'There may be store closures out of this to get rid of loss-making shops.'

'It is truly "addition by subtraction" as Family Dollar had been a consistent weight on topline performance, margin rate, and management time,' Evercore analyst Michael Montani told Reuters.

The Family Dollar chain struggled with sales of higher-margin discretionary items such as home decor and apparel, as consumers pared back spending due to inflation.

Dollar Tree announced last year that it was closing around 1,000 Family Dollar Stores in a bid to revamp its struggling business.  

It came weeks after the company was slapped with a $41.7 million fine after pleading guilty to selling food, cosmetics and personal care items from a rodent-infested warehouse.  

'This dramatic cull is the coup de grâce in the rather botched acquisition of the Family Dollar chain, which has caused Dollar Tree nothing but hassle since it was completed back in 2015,' Saunders told the Associated Press at the time.

'Basically, almost ten years on, Dollar Tree is still sifting through the mess it inherited and has not been able to completely turn around,' he said.

As a result of the already-planned stores shutting across the US, Saunders said Wednesday that is unlikely there will be further 'mass closures' at the chain. 

Dollar Tree CEO Mike Creedon, who took up the top role in December, said the sale will allow the company to focus on its core business.

'This is a major milestone in our multi-year transformation journey to help us fully achieve our potential,' he said in a statement. 

Despite the sale of Family Dollar being seen as good news for investors, Dollar Tree also outlined how tariffs are likely to dampen business. 

The company said it expected a roughly $20 million per month impact from President Donald Trump's fresh tariffs on Canada, China and Mexico imposed in March.

Excluding sales from the Family Dollar banner, the company posted net sales of $5 billion for the quarter ended February 1, a marginal rise from $4.96 billion reported a year ago, Reuters reported.

'Dollar Tree's comparable sales performance has been inconsistent at best despite the company's efforts to aggressively remodel stores and roll out multi price points,' Mari Shor, senior equities analyst at Columbia Threadneedle Investments, told the outlet.