Activist Investor Starboard Seeks Changes at Dollar Tree
Activist investor Starboard Value LP has taken a stake in
and is pushing the store to promote its Family Dollar industry and tweak its pricing style.
The New York hedge fund has a 1.7% stake in Dollar Tree value kind of $370 million and may be in search of majority keep watch over of the corporate’s 12-person board, it mentioned in a letter Monday.
Starboard quietly nominated seven administrators to Dollar Tree’s board forward of the nomination time limit final week.
The Wall Street Journal first reported on Starboard’s stake in Dollar Tree and plans Sunday.
Several shareholders and analysts have grown annoyed with the $22 billion dollar-store chain, whose stocks dropped about 15% over the last yr and lagged at the back of the ones of co-workers akin to
Corp., which rose by means of about an identical quantity.
At the middle of the complaint has been Dollar Tree’s sluggish growth integrating and turning round Family Dollar, which it purchased for $nine billion in 2015.
Some buyers noticed the 2 chains as mismatched from the outset.
Family Dollar sells groceries and units to low-income consumers in rural and concrete spaces at plenty of costs, and Dollar Tree, which best sells pieces for $1, caters to most commonly middle-income suburban consumers who revel in attempting to find bargains. Together they have got about 15,000 places.
Starboard desires Dollar Tree to discover a sale of the suffering chain, although it method promoting it for considerably lower than it paid for it, it says within the letter. Family Dollar may garner hobby from private-equity corporations ready to spend cash renovating the shops, it urged.
Starboard additionally mentioned within the letter it desires Dollar Tree to believe becoming a member of its competition in promoting some pieces at worth issues above $1, akin to $1.50 or $2.
Aside from a restricted trial a few years in the past, Dollar Tree’s $1 cap hasn’t budged in its 30-year historical past, whilst Dollar General and a number of other others were ready to give a boost to high quality and cope with inflation by means of promoting some higher-priced merchandise.
The corporate notes on its site that it modified its identify in 1993 from Only $1.00 to Dollar Tree “to address what could be a multi-price-point strategy in the future.”
A Dollar Tree spokesman mentioned the corporate is assured in its technique and believes its present board participants have the right combination of studies. He famous the corporate has added 4 new unbiased administrators since May 2016, together with one in December.
The corporate additionally mentioned it welcomes shareholder enter and that it hadn’t heard from Starboard sooner than receiving its nominations.
Dollar Tree Chief Executive Gary Philbin mentioned on its third-quarter profits name that the corporate plans to boost up renovations at Family Dollar shops in 2019.
He mentioned that whilst Family Dollar gross sales haven’t met expectancies, gross sales in renovated places were higher than anticipated.
In September, the Chesapeake, Va.-based Dollar Tree introduced plans to consolidate Family Dollar and Dollar Tree strengthen facilities and provides 700 staff the approach to relocate, a transfer that would make it tougher to wreck the 2 chains aside.
Family Dollar’s sale in 2015 was once caused by means of activist buyers together with Carl Icahn and Trian Fund Management LP. Dollar General additionally made a bid for the corporate at the time, however Dollar Tree gained out.
Write to Cara Lombardo at [email protected]