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Dollar General expects competition after Family Dollar deal closes

When Virginia-based Dollar Tree completes its $8.5 billion purchase of Family Dollar,  the merged company will have a combined 13,000 stores.
When Virginia-based Dollar Tree completes its $8.5 billion purchase of Family Dollar, the merged company will have a combined 13,000 stores. mhames@charlotteobserver.com

Dollar General is already anticipating stiffer competition this year once Dollar Tree completes its purchase of Matthews-based Family Dollar.

In an earnings release Thursday, the Tennessee-based discount retailer said it expects income and sales for the year ending next January to fall below Wall Street estimates as it ramps up spending to open more stores ahead of the official close of the Dollar Tree-Family Dollar merger.

Dollar General said full-year earnings will range between $3.85 to $3.95 a share, below the $3.99 a share forecast by Bloomberg-surveyed analysts. Sales will grow between 8 and 9 percent, or $20.4 billion to $20.6 billion, Dollar General said. Analysts forecast 9 percent growth for the year.

The company said it will spend between $500 million and $550 million to open about 730 new stores in 2015, as well as remodel or relocate 875 stores. In 2014, when Family Dollar rejected Dollar General’s hostile $9.1 billion takeover bid, Dollar General opened 700 new stores and remodeled or relocated 915 stores.

“Given our strong return profile for new stores, we plan to accelerate our new store openings to approximately 7 percent square footage growth in 2016,” Rick Dreiling, the company’s chairman and CEO, said in a statement.

With 11,789 stores in 40 states, Dollar General is currently the biggest dollar chain in the country. But when Virginia-based Dollar Tree completes its $8.5 billion purchase of Family Dollar, which could happen by April 27, the merged company will have a combined 13,000 stores.

In an earnings call in February, Dollar Tree said it expects regulators will require “no more than roughly 300 stores” to be sold to get anti-trust approval of its Family Dollar purchase. Dollar Tree CEO Bob Sasser also said many Family Dollar stores could be rebranded to become Dollar Tree stores after the deal is complete.

For the fourth quarter that ended Jan. 30, Dollar General’s net income rose to $355.4 million, or $1.17 a share, which was in line with Wall Street forecasts and above the $322.2 million, or $1.01 a share, the year before. Quarterly revenue rose 9.9 percent to $4.94 billion, just under analysts’ expectations.

Dollar General also announced a $1 billion share repurchase plan Thursday, and said David Tehle, the company’s chief financial officer will retire on July 1.

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