Dollar Tree has booked sales growth of only 0.7 per cent for the second quarter, which an analyst described as “anemic” and one of the worst growth rates since Q4 2019.

The company’s consolidated net sales for the quarter ended July 29 was $7.37 billion. The  Dollar Tree segment reported a 5 per cent increase in sales and 1.3 per cent uplift in same-store sales. Meanwhile, Family Dollar saw both sales and comparables plunge 4 per cent and 0.1 per cent, respectively.

In June, Dollar Tree said it was mulling a sale of spinoff of Family Dollar, and according to GlobalData MD Neil Saunders, the diverging performances of the two chains underscores the rationale behind the decision.

With this quarter’s update providing little details on the separation, Saunders maintains his view that a sale of Family Dollar at a full price will be challenging. Selling off the chain piecemeal will be complex, while the creation of a separate trading entity comes with many difficulties, he added.

“At present it is almost in the worst of all worlds with having to rationalize the Family Dollar chain – store closures are one of the reasons sales fell by so much – while ideally wanting to be shot of the whole business,” the analyst stated.

Saunders stressed the Family Dollar has lost a significant market share after it failed to keep prices competitive compared to other players. This will create a dilemma for Dollar Tree as the company needs to decide how much corrective action to take and how much investment to put into a business it ultimately wants to separate out, he added.

At the Dollar Tree division, performance is much better and supported by store expansion. While core customers remain under financial pressure, the multi-price format has offered an improved assortment and helped push up basket sizes, the analyst said.

On the bottom line, the company’s net income was down by a third to $132.4 million. 

For the full year, the retailer expects to deliver comparable store net sales growth in the low-single-digits for both the Dollar Tree and Family Dollar segments.