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Dollar Tree says expects fewer merger-related store divestitures

Published 11/20/2014, 11:29 AM
© Reuters. A view of the sign outside the Dollar Tree store in Westminster

(Reuters) - Discount retailer Dollar Tree Inc (O:DLTR) said it was confident it would need to divest fewer stores than anticipated to win antitrust approval to buy Family Dollar Stores Inc (N:FDO).

Dollar Tree's shares rose as much as 7 percent to a record high of $67.08 on Thursday.

The company, which like other discounters is facing competition from small-format stores opened by big retailers such as Wal-Mart Stores Inc (N:WMT), offered to buy Family Dollar for $8.5 billion in July.

Dollar Tree will become the largest U.S. dollar store chain if it pulls off the deal by fending off a rival offer by Dollar General Corp (N:DG), the No. 1 U.S. discount chain.

Dollar General has offered $9.1 billion and has said it would divest as many as 1,500 stores to clear antitrust concerns.

Dollar Tree said in July it would divest up to 500 stores, but later said it was ready to divest "as many stores as necessary" to obtain antitrust approval.

Chief Executive Bob Sasser said on Thursday the company now expected to reduce its store count by less than 500 and that the divestitures would not materially affect its business.

The company had 5,282 stores as of Nov. 1.

A New York Post report, citing sources, said on Wednesday that Dollar General may be required to divest more than 4,000 stores to satisfy regulators.

Dollar Tree also raised its sales outlook for the year after recording a 5.9 percent jump in quarterly same-store sales, their strongest growth since 2011.

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U.S. consumer sentiment rose in October to its highest level in more than seven years on growing optimism about the economy.

A drop in gas prices and discounts helped larger retailers Wal-Mart and Target Corp (N:TGT) buck quarters of slow or no growth in same-store sales in the United States.

Dollar Tree's net income rose 6 percent to $133 million, or 64 cents per share. Excluding items, profit was 69 cents per share.

Net sales rose 11 percent to $2.1 billion.

Analysts on average had expected earnings of 64 cents per share on revenue of $2.06 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Saumyadeb Chakrabarty)

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