Dollar Tree, Inc. (NASDAQ: DLTR) operates a chain of discount variety stores, providing a range of products priced generally at $1.25 or less. The company has announced a significant strategic change, agreeing to sell its Family Dollar segment to Brigade Capital Management and Macellum Capital Management for approximately $1 billion. The agreement allows Dollar Tree to focus solely on its brand, which is positioned to benefit from a growing middle-income and value-seeking consumer base.

In the fourth quarter of fiscal 2024, Dollar Tree generated net sales of $5 billion, a 0.7% year-over-year increase. Comp sales across Dollar Tree locations increased by 2%, driven by a 0.7% rise in customer traffic and a 1.3% increase in the average ticket size. Adjusted diluted earnings per share for the fourth quarter were reported at $2.11, a 15.3% decline compared to the previous year, while adjusted operating income was $628 million, reflecting a 15.2% year-over-year decrease.

Gross profit for the quarter was $1.9 billion, leading to a gross margin of 37.6%, which contracted by 130 basis points due to factors such as sales leverage losses and increased costs. Selling, general and administrative expenses rose to 27% of total revenue, an increase of 260 basis points. On an adjusted basis, SG&A increased to 25.1% of total revenue, a 100 basis point rise from the prior year.

The company’s full-year outlook for fiscal 2025 anticipates net sales between $18.5 billion to $19.1 billion, with comparable store sales projected to rise by 3% to 5%. Adjusted diluted earnings per share are projected to be in the range of $5.00 to $5.50. For Q1 of fiscal 2025, net sales are expected to range from $4.5 billion to $4.6 billion, with adjusted EPS forecasted at $1.10 to $1.25.

In terms of operational metrics, Dollar Tree ended the year with approximately 2,900 3.0 format stores, which offer an expanded multi-price assortment. The company plans to grow this format significantly, targeting 5,200 3.0 stores by the end of 2025. Total cash and cash equivalents at the end of the fourth quarter stood at approximately $1.3 billion, with no outstanding borrowings on its revolving credit facility.

Moreover, the company’s strategic decision to sell Family Dollar has shifted the reporting, classifying Family Dollar results under discontinued operations, while Dollar Tree’s operations will now focus solely on the continuing Dollar Tree segment. This transition is expected to help streamline operations and improve shareholder value in the long term.