A customer utilizes a Dollar Tree store in this file photo.Dollar Tree is buying rival discounter Family Dollar, giving it a wider reach in the intensifying fight for deal-seeking customers.
The $8.5 billion deal will give Dollar Tree more than 13,000 stores in the U.S. and Canada. The current leading discounter, Dollar General Corp., has more than 11,300 stores in the U.S.
Dollar stores have struggled as major retailers including Wal-Mart Stores Inc. and Kroger have stepped up their courtship of lower-income customers by opening smaller store formats that compete more directly with such discounters. Sales are also suffering because the lower-income customers who go to dollar stores still haven’t recovered from the recession and its aftermath because of persistent job instability and slow wage growth.
Family Dollar shuttered stores and cut prices as result, and had been conducting a strategic review since the winter. Last month, investor Carl Icahn urged the company to put itself up for sale. Icahn has built up a stake in the company of more than 9 percent, according to regulatory filings.
On Monday, Dollar Tree CEO Bob Sasser noted that his company and Family Dollar have different business models. While all items sold at Dollar Tree cost just a dollar, Family Dollar charges a broader range of prices, which allows it to sell a greater variety of items including brand-name products such as Kraft cheese or Tide laundry soap.