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Dollar Tree Settles With Activist, Revamps Board

It appears Dollar Tree was the first to blink in its staring contest with activist investor Mantle Ridge.

On Tuesday, the retailer revamped its board of directors, and gave its activist investor one big win. The new executive chairman will be Richard Dreiling, a former CEO at competitor Dollar General. Dreiling was once involved with overseeing Dollar General’s turnaround efforts. Putting Dreiling on the board was a key demand from Mantle Ridge. In addition, Mantle’s CEO Paul Hilal will become vice chair. Dollar Tree last month disclosed the retirement of its executive chairman and former CEO Bob Sasser.

Mantle Ridge, which has a $1.8 billion stake in the dollar chain, began agitating for change in December, when it sought to overhaul the chain’s 11-member board. The entire board was up for re-election at this year’s annual meeting of shareholders. Others among those selected by Mantle Ridge who are set to join the dollar store’s board include Ned Kelly, Bertram Scott, Mary, Laschinger, Cheryl Grisé and Daniel Heinrich. Existing board members—CEO Michael Witynski, and independent directors Thomas Dickson, Jeffrey Naylor, Winnie Park and Stephanie Stahl—will remain part of the reconstituted board.

Dollar Tree, struggling with  supply chain issues due to the impact of higher freight costs, said in November that it plans to raises prices to $1.25 from $1—although it said at the time that the uptick was not related to the increase in operating costs.

“Importantly, the current CEO Mike Witynski will continue lead the company, with ongoing support of the new board. In our view, Mr. Witynski’s knowledge of the company, combined with Mr. Dreiling’s (and the board’s) knowledge on the industry, should help Dollar Tree accelerate growth, improve operations and generate strong returns in years ahead,” Joe Feldman, retail analyst at Telsey Advisory Group, said.

The analyst said Dollar Tree continues to make progress on its transformation, which he said was a multiyear opportunity to structurally improve the profit profile of the business. Also on the agenda is the rollout of the Dollar Tree Plus! multi-price point assortment of $3 and $5 items, plus the Family Dollar H2 remodels and expansion of the Dollar Tree-Family Dollar combo stores.

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Jefferies analyst Corey Tarlowe said the new board should “help bring fresh perspectives” to the company. But Tarlowe also kept his “Hold” rating on shares of the company, in part because “visibility on margins remains challenged” due to ongoing significant freight headwinds.

For the fourth quarter ended Jan. 29, Dollar Tree reported a 9.7 percent decline in net income to $454.2 million, or $2.01 a diluted share, on a 4.6 percent gain in net sales to $7.1 billion.

Last month, the retailer temporarily shut 404 stores across six states because of a massive rodent infestation. It also issued a voluntary recall of certain FDA-regulated products.