Updates shares in paragraph 3, adds background on Family Dollar business in paragraphs 4 and 5

March 26 (Reuters) - Dollar Tree DLTR.O said on Wednesday a consortium of private-equity investors will buy its Family Dollar business for about $1 billion, bringing an end to its nearly year-long search for potential buyers for the troubled discount-store chain.

The 66-year-old business, which Dollar Tree bought in 2015 for about $9 billion, had been grappling with competition from big-box retailers such as Walmart WMT.N, and online retailers including Amazon AMZN.O, Shein and Temu.

Shares of Dollar Tree were up 6% in premarket trading after the news of the sale to Brigade Capital Management and Macellum Capital Management.

The Family Dollar chain struggled particularly with sales of higher-margin discretionary items such as home decor and apparel as lower-income consumers, earning about $50,000 a year, pared back spending in the face of higher inflation.

The company last year announced the closure of over 900 Family Dollar stores, and sweeping changes to its top management, bringing in insider Michael Creedon to replace industry veteran Rick Dreiling as its CEO after he stepped down due to health reasons.

Excluding sales from the Family Dollar banner, the company posted net sales of $5 billion for the quarter ended February 1, a marginal rise from $4.96 billion reported a year ago.

Dollar Tree expects 2025 net sales from continuing operations to be in the range of $18.5 billion to $19.1 billion, with comparable store net sales growth of 3% to 5%.

It sees a 30 to 35 cents impact on its full-year earnings due to the sale, with the impact concentrated in the first two quarters of the fiscal year.

Dollar Tree expects the sale to close in about 90 days, with Family Dollar chain retaining headquarters in Chesapeake, Virginia.

(Reporting by Juveria Tabassum and Ananya Mariam Rajesh in Bengaluru; Editing by Shounak Dasgupta and Shinjini Ganguli)

((Juveria.Tabassum@thomsonreuters.com))