- Retailer is working to absorb Family Dollar takeover
- Newly acquired stores will require investments, company says
Dollar Tree Inc., working to integrate its acquisition of Family Dollar Stores Inc., fell the most in more than six years after forecasting sales that trailed analysts’ estimates.
Revenue this year will be $15.3 billion to $15.5 billion, the Chesapeake, Virginia-based company said Tuesday in a statement. Analysts estimated $15.6 billion. Dollar Tree declined to give a profit forecast in the statement, citing the Family Dollar takeover and plans to divest some stores to satisfy antitrust regulators’ concerns.
Dollar Tree said it needs to invest in Family Dollar’s stores, which it acquired in a $9.07 billion deal in July, to make sure they are clean, well-maintained and appropriately staffed. Dollar Tree is betting the takeover will create a more formidable competitor to Dollar General Inc., the largest U.S. dollar-store chain by revenue, once it has had time to make improvements.
"With the addition of Family Dollar, we are a larger, stronger, more diversified business better able to serve more customers in more markets," Chief Executive Officer Bob Sasser said on a conference call.
The shares fell 8.7 percent to $69.65 at the close of trading in New York, the biggest one-day drop since February 2009. Dollar Tree has slid 1 percent this year, compared with a 1.6 percent gain for Dollar General.
Discount retailers also have been dealing with continued spending restraint among lower-income consumers, even as lower gas prices leave more money in their wallets. And while the job market has been improving, wages and salaries rose at the slowest pace on record in the second quarter, according to Labor Department figures released in July. Concerns about an increase in interest rates by the Federal Reserve and slowing economies abroad also have been weighing on consumer confidence.