Family Dollar is a discount retail chain brand that sells bargain goods at a very cheap price. Essentially a franchise of dollar stores, you can find most of the most common household products at these outlets: from cleaners to health and beauty products—even clothing and some food products. And, while dollar stores offered all products for the same simple price, just about everything you can find at a Family Dollar outlet will be close to $1 or, at most, no more than $10.
As attractive as this business model might sound—and as fitting as it might seem this business model should be in today’s market—Family Dollar has been struggling, lately. As a matter of fact, the Dollar Tree brand of discount stores bought the Family Dollar brand in 2015 for $8.5 billion; and they continue to face pressure to sell and restructure, even today.
Starboard Value CEO Jeffrey Smith advises, “Dollar Tree significantly overpaid for Family Dollar, and this business is proving to be a meaningful distraction. The underperformance at Family Dollar, since the acquisition has persisted long enough.”
You may recall that Starboard Value is best known for helping to revitalize Darden Restaurants International, the parent company of Olive Garden.
With that in mind, this is a crucial time for Dollar Tree—and the dollar store business model as a whole, perhaps. The brand operates more than 15,200 stores across the continental United States, with another 5 stores in Canada. These stores operate under the brands: Dollar Tree, Family Dollar, and Dollar TreeCanada. And this year, the company expects to rebrand approximately 200 stores. Fortunately, this rebranding comes at a time when the chain has seen some of its strongest growth in recent history.
As such, Dollar Tree CEO Gary Philbin comments, “We are confident we are taking the appropriate steps to reposition our Family Dollar brand for increasing profitability as business initiatives gain traction in the back half of fiscal 2019.”
One of these steps might include the rollout of a new model for both new and renovated Family Dollar stores. Philbin says he hopes this will bring “significantly improved merchandise offerings,” including the resurrection of $1 items. In addition, the plan appears to include introducing adult beverages at 1,000 stores with the expansion of coolers and freezers at approximately 400 stores.