U.S. discount store Dollar Tree Inc. will start offering alcoholic beverages at about 1,000 of its Family Dollar Inc. stores, the company announced as it released its earnings results for the first fiscal quarter of 2019.
In the quarter ended May 4, the general merchandiser added adult beverage products to about 45 Family Dollar stores and expanded freezers and coolers at approximately 55 stores. Dollar Tree is now looking to roll out liquor products to about 1,000 Family Dollar stores in fiscal 2019, while also expanding freezers and coolers to about 400 branches.
The move comes as Dollar Tree conducts a store optimization program, announced in March. The plan, which aims to improve its unit's performance, includes the rebranding of approximately 200 Family Dollar stores to the Dollar Tree brand in fiscal 2019, as well as the closing of underperforming stores.
The parent company continues to expect to close as many as 390 stores, majority of which will take place in the fiscal second quarter.
A total of 16 Family Dollar locations were closed in the fiscal first quarter.
Meanwhile, Dollar Tree plans to renovate at least 1,000 Family Dollar stores in fiscal 2019. These stores will be transformed into a new model, referred to as H2.
The company said it tested the H2 model in 2018 and saw positive results. The model has improved merchandise offerings, an expanded party assortment and an expanded number of freezer and cooler doors.
Following the trial run of the new store concept, Dollar Tree said H2 stores increased traffic, with average comparable store sales growth of more than 10%. As of the first fiscal quarter, the company operates about 550 H2 stores.
During the same quarter, Family Dollar recorded $2.85 billion in net sales, up from $2.77 billion a year prior. Dollar Tree-branded stores generated $2.96 billion in net sales, also up from $2.78 billion in the first fiscal quarter of 2018.
"While we are pleased with the Family Dollar's team's same-store sale increase of 1.9% for the quarter, we recognize there is much more work to be done," Duncan Mac Naughton, president of Family Dollar, told analysts during the company's earnings call May 30.
In January, activist shareholder Starboard Value LP revealed that it had built a 1.7% stake in Dollar Tree and pushed for the sale of Family Dollar. After a monthslong proxy fight, Starboard withdrew its challenge, with Dollar Tree committing to improve Family Dollar's performance.