(Bloomberg) – Dollar Tree, Inc. has announced today that its top executives have detailed the steps they are taking to spur an activist-backed turnaround effort after years of poor performance. Biggest price increase of the year.
Bloomberg’s most read articles
Chief Executive Rick Dreiling said Wednesday that the overhaul rests in part on improving supply chain capabilities, modernizing technology systems and raising wages. But much of it comes down to old-fashioned retail basics, such as upgrading investment-starved stores.
“The current look on both banners is exactly what it was in 1975,” Dreiling told analysts at an investor briefing, referring to Dollar Tree’s namesake store and the Family Dollar operation. “We don’t invest in stores. There are a lot of pretty run down stores in this chain.”
Activist investor Mantle Ridge, who acquired a stake in the company in late 2021 and then brought in Dreiling, the former CEO of rival Dollar General Corporation. We are pushing forward with the renovation promoted by . The effort was derailed last month when Dollar Tree cut its annual profit. The forecast is expected as demand shifts to less profitable necessities such as groceries. But Dreiling said the company’s long-term strategy to cater to low-income shoppers is on track.
Dollar Tree’s earnings are expected to increase to more than $10 per share in the fiscal year ending January 2027, the company said in a statement. This is in line with Wall Street predictions.
The stock rose 4.1% as of 3:05 p.m. on the New York market, its first intraday gain since May 2022 and a 6.6% gain. Dollar Tree has long lagged behind Dollar General in terms of market capitalization, but as of May 2022, the gap had closed to $6.1 billion. It was down from about $24 billion at the end of last year at the close of trading on Tuesday.
Dollar General plunged earlier this month after lowering its earnings outlook.
Turnaround procedure
Dreiling and his colleagues provided further details on how Chesapeake, Virginia-based Dollar Tree will improve its performance.
-
Merchandising: Dollar Tree is streamlining the number of items it sells while expanding its selection of higher priced items, which typically offer better deals on a unit basis. The company also said its price gap with Dollar General has closed and is now on par.
-
Wages: Due to staffing shortages, stores sometimes opened late and closed early. Dreiling said raising salaries would help solve the problem.
-
Supply Chain: This retailer is transitioning to a system that allows employees to unload goods from delivery trucks and load them into stores. This will reduce unloading time from four hours to an hour, said Chief Supply Chain Officer Mike Kindy, another veteran of Dollar General.
-
Information technology: Some of the computer coding for Dollar Tree’s system is so old that the people who wrote it are now retired, Dreiling said. It’s been modernized.
-
Capital spending: Restructuring efforts will require significant investment, and spending will remain high until 2026 when it begins to normalize, Chief Financial Officer Jeff Davis said.
Dreiling, who transformed Dollar Tree’s management team after becoming chairman of the board last year, said the company is also changing the working environment. He took over as CEO earlier this year.
“We had a culture where people were afraid to speak up,” Dreiling said. “We have to escape from there.”
(Updates to add sharing in sixth paragraph.)
Bloomberg Businessweek’s Most Read Articles
©2023 Bloomberg LP
