Dive Brief:
- Dollar Tree signaled new leadership at the top of its corporate board weeks after announcing the retirement of its executive chairman and former CEO, Bob Sasser.
- Set to lead the board as executive chair under the new plan is Richard Dreiling, a former CEO of Dollar General, according to a release. Paul Hilal, CEO of investment firm Mantle Ridge, would be vice chair. The board also plans to add five other new directors.
- Mantle Ridge has been agitating for change at Dollar Tree as an activist investor. After earlier launching barbs at the firm, Dollar Tree has given in to one of its primary demands: installing Dreiling in a leadership position.
Dive Insight:
When recounting earlier communications with Mantle Ridge late last year, Dollar Tree chided the investment firm for its lack of actionable operational suggestions.
"Mantle Ridge simply expressed that it wanted a majority of the Board to be replaced, Mr. Dreiling to be named Executive Chairman, and other control rights," the company said in December. "Taken together, in the view of the Board, these demands amounted to handing control of the Company to Mr. Hilal and Mantle Ridge."
The retailer also said then that Mantle Ridge acted in an "unwarrantedly aggressive and hostile manner" after it notified the company of its intent to nominate a new board slate.
What a difference a couple of months makes.
When Dollar Tree announced Sasser's retirement in February, analysts speculated that it could clear the way to an agreement between Mantle Ridge and Dollar Tree. With the investment firm's chief taking a high-level board post at the retailer and its favored choice taking over the chair position, Dollar Tree has reversed its initial opposition to the activist's call for leadership change.
The five additional directors set to join Dollar Tree's board — Ned Kelly, Cheryl Grisé, Daniel Heinrich, Mary Laschinger and Bertram Scott — were also among those selected by Mantle Ridge previously.
The retailer has historically lagged Dollar General, struggled to capitalize on its Family Dollar acquisition from last decade, and was especially hard hit by supply struggles last year, all of which might have made it a target of activists.
Telsey Advisory Group analysts led by Joe Feldman said in a research note earlier in March that discussions with Mantle Ridge "brought urgency to accelerate growth, improve execution, and enhance shareholders value."
Earlier this month, Dollar Tree reported that net sales increased 4.6% to just under $7.1 billion in the fourth quarter, with comparable sales up 3.1% at its namesake banner and up 1.7% at Family Dollar. With freight costs spiraling upwards, the retailer saw a decline of more than $100 million in operating income year over year in Q4.
The retailer also finished rolling out its new $1.25 price point, a historic break from tradition for the chain. It also expanded its Dollar Tree Plus assortment, which includes items at $3 and $5 price points, to more locations, with plans to add the assortment to more than 1,500 Dollar Tree stores this year.
Feldman said, following Dollar Tree's Q4 and fiscal year results, that the retailer "continues to make progress on its transformation, which we view as a multi-year opportunity to structurally improve the profit profile of the business."
