Dollar Tree CEO Bob Sasser said Thursday that he expects the Federal Trade Commission will require fewer than 500 store divestitures to gain approval for its proposed acquisition of Family Dollar stores.
The company when it announced the $8.5 billion deal in July said it was preparing for up to 500 divestitures.
How the Federal Trade Commission views the small discount space has become a major factor for the future of Family Dollar, which is being pursued concurrently by Dollar General. That offer is also under FTC scrutiny. Dollar General has said it could absorb up to 1,500 divestitures. Family Dollar’s board has backed the Dollar Tree offer, saying it represented less antitrust risk.
The companies expect to hear back from the FTC over their respective deals in the coming weeks.
Sasser, in remarks during a earnings conference call Thursday, emphasized that Dollar Tree’s single-price point strategy and middle-market customer focus differentiated it from Family Dollar, which tends to target lower-income shoppers and sells items at multiple price points.
“Our concepts, merchandise and customers are very different,” Sasser said. “As a result, we are confident and expect a number of any divestitures will be less than the original divestiture commitment we made in the July merger agreement. This will not materially affect our business or results of operation.”
In third quarter financial results, Dollar Tree said net income improved by 13.2% to $406.7 million on $2.1 billion in sales, a 11.2% increase. Comparable store sales improved by 5.9% in the period, which ended Nov. 1.
Sasser said back-to-school and seasonal sales, as well as the continued addition of food items at stores, helped to affect the sales increase. Margin as a percent of sales was down by 40 basis points to 34.6%, reflecting freight costs and a greater percentage of lower-margin items like food in the merchandise mix.
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