{ "docId": "019dd923-622b-71dc-a6d9-ed157055035f", "docSlug": "137bd4361640", "documentTitle": "Dollar Tree, Inc. (DLTR)", "authorId": "03_Starboard_Value", "authorName": "Jeffrey C. Smith", "documentKindSlug": "shareholder-letter", "documentKindLabel": "Shareholder letter", "sourceTypeSlug": "activist_investor", "sourceTypeLabel": "Activist investor", "presentationDate": "2019-01-07 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 10, "pageCount": 11, "prevPage": 9, "nextPage": 11, "slideType": "cite_precedent", "function": "cite_precedent", "density": "dense", "nDataPoints": 3, "notes": "The slide uses external analyst sentiment to validate the activist's thesis regarding the destruction of value from the Family Dollar acquisition.", "elementsJson": [ "bullet_list", "paragraph" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622b-71dc-a6d9-ed157055035f/10", "deckHref": "/decks/019dd923-622b-71dc-a6d9-ed157055035f", "deckJsonHref": "/decks/019dd923-622b-71dc-a6d9-ed157055035f.json", "deckAnchorHref": "/decks/019dd923-622b-71dc-a6d9-ed157055035f#slide-10", "components": [ { "bbox": null, "kind": "callout", "text": "We believe that the Company must strongly and urgently consider the points we have outlined above and begin discussions regarding the separation of Family Dollar and the introduction of a multi-price point strategy.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd952-ee36-760b-92a4-f0abd9f5871b", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.65, "w": 0.7, "x": 0.15, "y": 0.08 }, "kind": "list", "text": "Collection of analyst quotes from Barclays, Goldman Sachs, Wells Fargo, Credit Suisse, and RBC regarding the Family Dollar underperformance.", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "60f93b36-1876-4b11-8197-b6cfd7074e76", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.7, "x": 0.15, "y": 0.85 }, "kind": "paragraph", "text": "We hope to maintain a constructive dialogue with you and the Board. However, we are also cognizant of the Company’s corporate governance deadlines.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e8e75440-65f0-4843-97d0-a79db398fa28", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.1, "w": 0.7, "x": 0.15, "y": 0.75 }, "kind": "paragraph", "text": "Shareholders have grown frustrated with Dollar Tree’s performance, and a refusal to consider alternatives that would create significant value for shareholders would continue to frustrate shareholders.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f5480f37-df8e-4196-8d5b-1ca439ad7039", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "\"longer works because FD is now a detriment to the combined entity's valuation, 3) management seems unwilling to acknowledge the asset is destroying value, so 4) while the only hope is activism at this point - given management's ongoing hope that FD can rebound - the potential for activism seems low....\" — Barclays – August 30, 2018; \"Finally, we have also begun to field questions from investors about management's ability to successfully turnaround Family Dollar and whether DLTR would consider other strategic options...we are growing concerned that such a heavy focus of time, capital, and opex is being spent on Family Dollar with little to no fundamental improvement and that it may be better spent on the core Dollar Tree segment.\" — Goldman Sachs – August 30, 2018; \"The market's interest in sum-of-the-parts (SOTP) and a potential break-up clearly indicates that the wheels have come off the Family Dollar bull thesis. This turnaround has stalled much too early and the core business, while producing good top-line, is experiencing margin pressure...Family Dollar a Clear Disappointment: Three years after closing on this turnaround project, comps are weak, the productivity gap to DG is as large as ever, and margins are back-tracking after initial progress. We estimate the value destruction of this deal at $7 billion...We were not fans of this transaction from the start, and it's now clear that DLTR would have been much better off today if they had not done this deal.\" — Wells Fargo – July 11, 2018; \"While very low likelihood, in our view, DLTR could go down the path of multiple price points at Dollar Tree or simply raising the single price point. This could be done with or without the divestiture of Family Dollar stores. While, on paper, we understand the attractiveness of such a move (better comps and profit dollar growth, temporarily) we don't see the current Board or management team as amenable.\" — Credit Suisse – June 12, 2018; \"Family Dollar's performance has disappointed investors – We have been disappointed/frustrated with Family Dollar's progression.... A 10% premium to the market for Dollar Tree implies investors are essentially getting Family Dollar for FREE...In this case, investors have essentially attributed ZERO value to Family Dollar's 8,000 stores, $10 billion of sales and $512mmE of EBIT.\" — RBC – June 8, 2018; \"The Dollar Tree concept has been highly successful, but there remains significant opportunity to unlock value by expanding price points and we see three reasons this catalyst could arrive sooner than expected...Lastly, we believe the moment of truth is here for Family Dollar, and failure to drive a more meaningful comp improvement could leave management searching for another source of growth.\" — Wells Fargo – May 18, 2018", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd952-ee36-760b-92a4-f77af2d04f19", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "authority-citation", "slug": null, "matchId": "28d3d74c-ba06-46a2-bcda-7ce3a63da6f0", "evidence": "Uses multiple reputable financial analyst quotes to support the activist's argument.", "confidence": 1 } ], "arcBeats": [ { "to": 11, "from": 10, "beatId": "887509ab-3e80-42fb-8f88-b9b46fcc6cb5", "arcName": "The Consultant's Gambit", "arcSlug": "consultants-gambit", "beatName": "Impact & Next Steps", "beatSlug": "consultants-gambit-impact-next-steps", "evidence": "The document concludes with a closing ask", "position": 4, "confidence": 0.8, "parentBeatName": "Resolution", "parentBeatSlug": "resolution" } ], "loops": [ { "to": 10, "from": 7, "name": "Cost Of Inaction", "slug": "27-cost-of-inaction", "bestFor": "Urgent budget requests, compliance, risk mitigation", "matchId": "4217c7b2-db8a-4683-aaac-68be9a8f01fa", "evidence": "The document highlights the risks of inaction", "position": 0, "objective": "The company should not wait until same-store sales growth turns negative or margins contract further", "structure": "The Status Quo -> The Hidden Costs Accumulating -> The Future State of Inaction -> The Tipping Point", "confidence": 0.7, "description": "Quantify what happens if the audience does nothing" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }