Analysts: Dollar Tree deal could bring lower prices at Family Dollar

Customers enter a Family Dollar store on Plaza Boulevard, in Kinston, NC.
Customers enter a Family Dollar store on Plaza Boulevard, in Kinston, NC. AP

Lower prices at Family Dollar could be one result of Dollar Tree’s purchase of Matthews-based Family Dollar – a deal that is expected to be completed within weeks.

In a study sent to clients Wednesday, Sterne Agee analysts compared prices of a basket of 42 items at Family Dollar, Dollar General and Walmart and found that prices had risen slightly at all three since October. Family Dollar has had the highest prices on average for several years, the analysts found, but that could change following the Dollar Tree merger.

The total basket price at Family Dollar was $151, or $3.59 per item on average, the highest since September 2013. At Dollar General, the total basket price was $150 and at Walmart, it was $149.

“Clearly, going forward, once the Dollar Tree merger closes in early July – we would expect to see more aggressive price action out of (Family Dollar) and will be monitoring this closely,” the analysts wrote.

Both Dollar General and Family Dollar sell a variety of items under $10 – from groceries to cleaning products to electronics – to households on tight budgets.

After Family Dollar agreed to sell itself for $8.5 billion to Virginia-based Dollar Tree in July, Dollar General made a hostile $9.1 billion bid to break up the Dollar Tree deal. Wary that federal regulators would block the Dollar General deal for competitive reasons, Family Dollar shareholders approved the sale of the company to Dollar Tree in January.

Last month, Dollar Tree, which sells everything for $1 or less, said it reached an agreement to sell 330 Family Dollar locations to a private equity firm as part of its planned acquisition. The store divestiture is designed to address competition concerns raised by federal regulators, who are still reviewing the deal. It’s expected to close in early July.

On Tuesday, Dollar Tree and Family Dollar signed Agreement Containing Consent Orders proposed by the Federal Trade Commission, bringing the two companies one step closer to completing the deal.

The combined Dollar Tree company will have more than 13,000 stores, making it the largest dollar store chain in the U.S. by store count.

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