Family Dollar has long been an anchor dragging at Dollar Tree. That's over now.
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- Dollar Tree says it has reached a deal to sell its long-struggling Family Dollar chain.
- The $1 billion sale comes a decade after the company bought the former rival.
- For most of that time, Dollar Tree was unable to find a way to make the brand perform well.
It's a new day for Dollar Tree.
The discount chain said Wednesday that it has reached a deal to sell its long-struggling Family Dollar chain to a private equity company in a deal worth $1 billion.
The sale comes a decade after the company bought the smaller chain for $8 billion in 2015, beating out Dollar General for the deal, but ultimately losing ground against its now-larger rival.
"Basically, Dollar Tree bit off far more than it could chew," Global Data retail analyst Neil Saunders said in a note.
Saunders said that Dollar Tree's efforts to turn the brand around were hampered by supply chain issues, challenging store locations, and a pricing strategy that wasn't as sharp as other brands.
Removing the weight of Family Dollar has already lifted Dollar Tree's financials, which the company reported Wednesday.
"With the pending sale of Family Dollar, I am excited at the opportunity to return to Dollar Tree's roots and begin to unlock the full potential of this iconic retail brand," interim CEO Michael Creedon said during an earnings call.
Dollar Tree said last year that it planned to close about 1,000 Family Dollar locations, but the company did not specify whether any additional closures would be made following this deal.
Shares of Dollar Tree were trading up over 3% on Wednesday morning.