Family Dollar: Headed For A Buyout?

    April 15, 2014
    Toni Matthews-El
    Comments are off for this post.

Things have not been looking good for Family Dollar.

The dollar store chain’s stocks continue to slide, recently hitting a 52 week low.

Both the company’s shares and earnings fell short of original projections made by Zacks Consensus Estimate.

Analyists predict a 14% drop in earnings by the end of 2014.

There is a chance that a lift may be coming for Family Dollar in the form of a buyout. Such speculation has been going on for the past few years and has strengthened as company losses increased.

In 2011, billionaire Nelson Peltz made an offer. At the time Chief Executive Officer Howard Levine had been reluctant to sell his father’s company. The decision not to take the offer may be coming back to haunt Levine.

As the situation worsens, it’s possible that investor activism or the emergence of future offers may force Levine’s hand.

Edward Jones analyst Brian Yarbrough said of the situation, “The ice has got to be getting thinner underneath [Levine]. A lot of times you’ll see private equity take an interest in some of these broken businesses, so you can’t rule it out.”

Family Dollar representatives have been somewhat tight-lipped about where the company stands at present.

Spokeswoman Bryn Winburn said in response to questions about potential buyers that Family Dollar does not comment about market speculation.

Family Dollar’s CEO recently explained to disappointed shareholders that the company’s losses could be blamed on the harsh winter weather.

This explanation didn’t seem quite adequate. Instead, there are more likely explanations being floated to explain the downturn in profits.

Some believe a drop in the earnings of dollar store companies means that customers have more money to spend. This logic implies that Americans are spending their money at higher end stores rather than saving money through dollar store purchases.

Others peg the company’s losses as the result of the competitive pricing at stores like Walmart, Target, and direct rival Dollar General.

There has even been speculation that it could be Dollar General that ultimately steps forward to buy out Family Dollar.

Image via Wikimedia Commons

  • Shane Rogers

    dollar tree is the king. the rest of em are crap.

  • LA Kelly

    Not surprised by this. First, most items at Family DOLLAR are not a $1. Dollar Tree stores rule on this one!

    • Shirley Layne

      Family Dollar never claimed to be a $1.00 store

  • H.Daniels

    Family Dollar does not treat their employees fairly. Weather has nothing to do with the loss of their profits. Customers realize how employees are treated and do not want to give their hard earned money to a company who treats employees unfairly. I was manager there 16 yrs and the way I was treated was terrible in my last year. The store I was at lost sales tremendously when my customers seen how I was done. They went $16,000 to $19,000 a week falling to about $7,000 to $10,000 a week. All my customer tells me all the times I see them they do not shop there anymore after I lef,t they spend their money at Dollar General. I also shop at Dollar General now also. Family Dollar deserves what they get. Karma always bites you in the butt and it has definitely bit them in the rears.

  • Home Girl

    Stores like this keep teachers out of the poor house.

  • anjealka

    Family Dollar is expensive & seems to prey upon the poorest people. In the past 15 years I have lived in 3 very different areas of the country and Family Dollar was always in either areas that were very poor with poor public transportation or rural areas with few options. Family Dollar charges about 25% more then a Dollar tree or Walmart but many of the shoppers can’t get to a Dollar tree or walmart so the poor end getting ripped off by Family Dollar.