CHARLOTTE, North Carolina: Dollar Tree is cutting ties with its struggling Family Dollar chain in a US$1 billion deal that marks the end of a rocky chapter in its discount retail strategy.

The company announced this week that private-equity firms Brigade Capital Management and Macellum Capital Management will acquire Family Dollar, marking the culmination of a nearly year-long effort to divest the underperforming business. Dollar Tree had purchased Family Dollar in 2015 for $9 billion.

"It is truly 'addition by subtraction' as Family Dollar had been a consistent weight on topline performance, margin rate, and management time," said Evercore analyst Michael Montani.

Since the acquisition, Family Dollar has struggled to compete against larger retailers like Walmart and online rivals including Amazon, Shein, and Temu. The chain was hit especially hard by falling sales of discretionary items such as apparel and home decor, as inflation pressured consumers to focus on essentials.

Dollar Tree shares rose as much as six percent in premarket trading following the announcement, but later gave up some gains after the company highlighted new cost challenges.

In particular, the company stated that it anticipates a $20 million monthly impact from tariffs introduced by President Donald Trump in March on imports from Canada, China, and Mexico.

For the quarter ending February 1, Dollar Tree reported net sales of $5 billion, a slight increase from $4.96 billion in the same quarter a year earlier, excluding Family Dollar. But analysts remain cautious.

"Dollar Tree's comparable sales performance has been inconsistent at best despite the company's efforts to aggressively remodel stores and roll out multi-price points," said Mari Shor, senior equities analyst at Columbia Threadneedle Investments. "The outlook for three percent to five percent growth in comparable sales seems aggressive in this macro environment."

Looking ahead, Dollar Tree expects full-year 2025 net sales from continuing operations to range between $18.5 billion and $19.1 billion.

Despite economic pressures, company leaders reported that more Americans across various income brackets are turning to discount retailers.

"Doesn't matter how much money you make, everybody is hurting right now," CEO Mike Creedon said on a post-earnings call.

Rival Dollar General also flagged consumer strain, noting a trend of shoppers trading down to lower-priced items and facing difficulty affording necessities.