Why Dollar Tree Plans to Sell Family Dollar for $1 Billion

Back in 2015, Dollar Tree went all-in, coughing up a whopping $9 billion to buy Family Dollar in a fierce bidding war with Dollar General. Fast forward to 2025, and it’s hitting the eject button, offloading the chain to private equity firms Brigade Capital Management and Macellum Capital Management for a modest $1 billion. That’s not a typo. Nine billion in, one billion out. Oof. So, what happened? How did one of the biggest discount retailers in the U.S. turn a strategic acquisition into what can only be described as a slow-motion financial facepalm?  Let’s break it down.

Merged for Muscle, Ended with Migraine

Dollar Tree’s original plan was textbook MBA: acquire Family Dollar to boost market share and go toe-to-toe with heavyweights like Dollar General and Walmart. On paper, the math worked. In practice, not so much. Family Dollar brought baggage, rundown stores, underwhelming locations, logistical nightmares, and a customer base already squeezed dry by inflation. While the dollar store giant focused on middle-income shoppers in suburban areas, Family Dollar targeted lower-income urban and rural communities. In today’s economy, that’s a tough crowd. As government aid dried up post-pandemic and inflation ate into monthly paychecks, Family Dollar's shoppers had less to spend—and when they did shop, they often headed straight to Walmart.

At the time of sale, Family Dollar accounted for roughly 45% of Dollar Tree’s 16,000+ stores across the U.S. and Canada. But even with scale, the margins were missing in action. The financial fallout? Brutal. Same-store sales at Family Dollar dropped 1.2% in Q4, while higher-margin products like home goods saw a 12% plunge. Meanwhile, the dollar store giant core brand saw a 6.3% same-store sales uptick. The two chains weren’t growing up in the same neighborhood anymore.

The Financial Toll

In case you’re wondering how much this bad marriage cost: try $5 billion in impairment charges over the past five years. That’s a lot of zeros tied to shuttered stores and unrealized dreams. And let’s not forget the fresh $2 billion write-down the dollar store giant had to stomach last year alone. That sent annual earnings into the red zone and left analysts shaking their heads.

For context:

• 2023: Operating margin at Family Dollar? Negative. Return on invested capital for Dollar Tree overall? A measly 6%, compared to the golden days of 30% before the acquisition.
• Q4 2024: The dollar store giant posted $5 billion in net sales (excluding Family Dollar), up slightly from $4.96 billion YoY.
• 2025 forecast: Projected net sales are in the $18.5 billion to $19.1 billion range. But here’s the kicker: maintaining Family Dollar operations is expected to cost them 30 to 35 cents per share in earnings this year.

Source: FT

CEO Rick Dreiling had already hinted at this back in December, calling for a “comprehensive review” of underperforming Family Dollar stores. That came on the heels of a recall of OTC drugs and medical devices in over 20 states, another costly hit that dragged same-store sales down even further.

What the Sale Means Going Forward

The sale, expected to close within 90 days (Q2 2025), will deliver net proceeds of about $804 million, with an additional $350 million in tax benefits. Not too shabby, but still a fraction of the original investment. The Family Dollar brand will remain headquartered in Chesapeake, Virginia, where the dollar store giant is also based. Dollar Tree’s CEO, Mike Creedon, is optimistic. With Family Dollar off its balance sheet, the company plans to focus all its attention on revitalizing the giant dollar store brand and boosting margins. “We will be able to fully dedicate ourselves to the dollar store giant long-term growth, profitability, and returns on capital,” he said. That’s corporate-speak for we’re done cleaning up messes.

This also marks the end of a chapter that saw Dollar Tree lose over 40% of its market value in the past year, much like rival Dollar General. But without Family Dollar dragging it down, the dollar store giant may finally regain its footing. UBS even thinks the core Dollar Tree brand alone could be worth $160 per share, a significant leap from current valuations. Still, it's not all sunshine and lollipops. The discount retail sector as a whole is feeling the heat. Inflation may be cooling, but consumer sentiment, especially among lower-income households, is running on empty. Big-box stores like Walmart are eating everyone’s lunch (sometimes literally), and even Dollar General is showing signs of wear.

Know When to Fold ‘Em

This isn’t just a case of a bad business deal, it’s a lesson in knowing when to cut your losses. Dollar Tree tried to make Family Dollar work for nearly a decade. It threw money, leadership changes, and store closures at the problem. But in the end, it just wasn’t the right fit. The breakup may be embarrassing, but it’s also necessary. Now, Dollar Tree can focus on what it does best—selling $1.25 party supplies, snacks, and home goods to middle America—and leave the high-maintenance drama behind. As they say in the South, “Don’t let the door hit ya where the good Lord split ya.”

What’s Next for Finance Professionals

For accountants, tax planners, and finance professionals, this deal is a textbook case of:

• Impairment accounting in real life
• Tax-loss harvesting at scale
• The risks of overpaying in an acquisition
• And the ongoing importance of strategic divestiture

A $9 Billion Lesson in Letting Go

The Family Dollar exit might sting in the short term, financially and reputationally, but it clears the deck for the dollar store giant to finally double down on what’s working. Stripping away the loss-making chain gives the company a shot at restoring profitability, sharpening focus, and maybe even winning back Wall Street’s confidence. For finance professionals, it’s a live case study in M&A missteps, impairment strategy, and corporate turnaround planning. Keep your eyes on Dollar Tree’s Q2 2025 earnings, because that’s when we’ll start to see whether this bold breakup turns into a true bounce-back. And if you were among those watching this saga since 2015… grab a stress ball from the $1.25 aisle. This ride’s been a bumpy one. Timely trends, smart strategies, and financial deep dives—straight to your inbox. Join our newsletter and lead the conversation!