Did Dollar Tree Make the Worst Acquisition in History?

How an enormous win turned into a tumultuous loss for America’s discount retailer... [Derby City Daily logo]( [Derby City Daily logo]( June 5, 2024 [Did Dollar Tree Make the Worst Acquisition in History?]( By Andy Swan Almost a decade ago, Dollar Tree (DLTR) won an ENORMOUS battle against a much larger competitor when it secured Family Dollar over the reigning goliath, Dollar General (DG). Back then, Dollar Tree was much smaller than those rivals. But the company made an $8.7 billion bet to acquire Family Dollar and make sure its footprint dominated. Here’s an infographic published by The Wall Street Journal at the time: Source: The Wall Street Journal (2015) It was a hard-fought battle. Dollar General had been courting Family Dollar, even making a $9.1 billion all-cash counteroffer in the hopes of beating out Dollar Tree’s. But Family Dollar shareholders went with the safer bet, fearing a Dollar General acquisition would face regulatory hurdles. Now, nine years later, what felt like a big win for DLTR has turned into a massive loss. After years of struggle, the company announced yesterday that it’s looking at “strategic alternatives” to salvage the Family Dollar banner it strived so hard for. A sale could be on the table. And it looks like Dollar General dodged one heck of a bullet. SPONSORED AD [Luke Lango’s Apple AI Emergency Briefing]( Tim Cook, Apple’s CEO, is set to make his “100X AI” announcement this coming Monday at 1 pm ET that will trigger a MAJOR shockwave throughout the markets. That’s why Luke Lango is hosting an urgent briefing at 1 pm ET this Friday - 72 hours before Apple's big announcement. To share the details on a tiny small-cap AI stock that could double your money in a matter of weeks, and even 10X your money in the coming months... Please prepare BEFORE Apple’s “100X AI” announcement. [Click here now to instantly save your spot]( (By clicking the link, your email address will automatically be added to the Event RSVP list.) What Went Oh-So-Wrong Dollar stores in general are facing challenges right now due to a shift in consumer spending towards lower-margin essentials, increased competition from rivals like [Walmart (WMT)]( and the Chinese [e-commerce]( platform Temu, and the ever-present issue of theft (aka “shrink”). A stunning percentage of Gen Z shoppers (31%) admit to shoplifting from self-checkout kiosks, according to one recent survey, with many targeting expensive items. Last week, Dollar General announced it would virtually eliminate self-checkout stations in its stores. But Family Dollar’s problems are... unique in their scope and severity. The Family Dollar brand caters to [lower-income consumers]( with a focus on urban locations throughout the U.S., while the Dollar Tree brand tends to draw middle-income consumers with its more rural and suburban locations. At first, this seemed like a good match. But it hasn’t worked out that way. In an inflationary environment, Family Dollar has seen major categories like apparel, home decor, electronics, and general merchandise weaken as its main demographic pulls back on spending. Family Dollar stores can be deceptively expensive: Despite its dollar-store moniker, items can run up to $10 apiece – if you can even find them in the jumbled mess. It’s also poorly managed: Family Dollar was recently hit with a $41.6 million fine when a rat infestation in one of its warehouses caused hundreds of stores to shutter temporarily. And, quite frankly, Family Dollar has earned a terrible reputation with consumers, who often report dangerous conditions at its stores. LikeFolio’s consumer metrics put a fine point on the issue. Family Dollar’s Consumer Happiness stands at an abysmal 51%: How Is DLTR Combatting Headwinds? Dollar Tree isn’t just giving up. It already planned to close 970 Family Dollar stores to revamp its struggling business after missing holiday-quarter sales and profit expectations in March. During the first fiscal quarter, it made progress, closing more than 500 locations. Now, it’s looking to potentially offload Family Dollar entirely – if it can find a buyer. (And that’s a big if.) Dollar Tree also has acquisitions underway of 99 Cents Only stores in Arizona, California, Nevada, and Texas following the latter's bankruptcy. This acquisition allows Dollar Tree to expand its footprint in the western U.S., with conversions to begin this fall. (99 Cents Only blamed inflation and previously mentioned theft for its closure, reflecting the broader economic challenges faced by these retailers.) 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Until next time, [Andy Swan's signature] [Andy Swan's signature] Andy Swan Founder, LikeFolio Discover More Free Insights from Derby City Daily Here's what you may have missed from Derby City Daily this week... ✓ [84% Gains and Counting: This Spotify Call Keeps Paying Off]( ✓ [This Kentucky Derby Stock Is Worth a Bet in 2024]( ✓ [The Man Who Sent NVDA to $1,100 Could Sway the Election]( Get Instant Access Click to read these free reports and automatically sign up for research throughout the week. [The Infinite Income Manifesto]( [25 Doomed Blue Chip Stocks]( [5 Unapologetically Profitable Stocks for 2024]( © 2024 TradeSmith, LLC t/a Derby City Insights. All Rights Reserved. 1125 N. Charles Street, Baltimore, MD 21201 To unsubscribe or change your email preferences, please [click here](. [Terms of Use]( | [Privacy Policy](