Dollar Tree Inc. jumped the most in a year after top executives detailed the steps they’re taking to further an activist-backed turnaround effort following years of underperformance at the discount retailer.
(Bloomberg) — Dollar Tree Inc. jumped the most in a year after top executives detailed the steps they’re taking to further an activist-backed turnaround effort following years of underperformance at the discount retailer.
The overhaul depends in part on improving supply-chain capabilities, modernizing technology systems and boosting wages, Chief Executive Officer Rick Dreiling said Wednesday. But a lot of it comes down to old-fashioned retail basics such as upgrading stores that Dreiling said have been starved for investment.
“Our decor right now in both banners is right out of 1975,” Dreiling told analysts at an investor day, referring to Dollar Tree’s namesake stores and its Family Dollar operation. “We didn’t invest in our stores, and we have many stores in this chain that are in pretty rough shape.”
Dollar Tree is pushing a revamp spurred by activist investor Mantle Ridge, which took a stake in the retailer in late 2021 and later brought in Dreiling, a former CEO of rival Dollar General Corp. The effort faltered last month when Dollar Tree cut its annual profit forecast amid demand shifts to less profitable basics such as food. But Dreiling said the long-term strategy is on track at the company, which caters to lower-income shoppers.
Earnings will rise to more than $10 a share in Dollar Tree’s fiscal year ending in January 2027, according to a company statement. That’s in line with Wall Street’s estimates.
The shares rose 4.1% at 3:05 p.m. in New York after advancing as much as 6.6% for the biggest intraday gain since May 2022. While Dollar Tree has long trailed Dollar General in market value, the gap had dwindled to $6.1 billion at the close of trading Tuesday, down from almost $24 billion at the end of last year.
Dollar General cratered earlier this month after cutting its profit outlook.
Turnaround Steps
Dreiling and his colleagues offered additional details on how they plan to improve results at Chesapeake, Virginia-based Dollar Tree:
- Merchandising: Dollar Tree is streamlining the number of items it sells, while also expanding its selection of higher-priced goods, which typically offer better deals on a unit basis. The company has also narrowed its price gaps with Dollar General and says it’s now at parity.
- Wages: Sometimes stores would open late or close early because they didn’t have enough staffing. Raising pay will help fix that, Dreiling said.
- Supply chain: The retailer is shifting to a system in which employees can roll products off delivery trucks and into stores. That will cut unloading times to one hour from four, said Chief Supply Chain Officer Mike Kindy, another Dollar General veteran.
- Information technology: Some of the computer coding in Dollar Tree’s systems is so old that the people who wrote it are now retired, Dreiling said. That’s being modernized.
- Capital expenditures: The turnaround effort requires a lot of investment, and spending will remain high before starting to normalize in 2026, Chief Financial Officer Jeff Davis said.
Dreiling, who shook up the Dollar Tree management team after becoming chairman of the board last year, said he was also trying to change the company’s work environment. He took the reins as CEO early this year.
“We had a culture where people were afraid to speak up,” Dreiling said. “We have to get away from that.”
(Updates with shares in sixth paragraph.)
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