Even Dollar Tree isn’t immune to the impact of widespread inflation.
The discount chain is implementing permanent price raises across Dollar Tree Plus stores and most Dollar Tree stores. All prices will now start at $1.25 instead of the $1.00 price point which has defined the chain for decades.
Dollar Tree plans to roll out the new prices across 2,000 Dollar Tree stores in December, with a goal of reaching all stores by the end of Q1 2022. The retailer first tested Dollar Tree Plus in stores in 2019, offering items priced at $1, $3 and $5.
“For 35 years, Dollar Tree has managed through inflationary periods to maintain the everything-for-one-dollar philosophy that distinguished Dollar Tree and made it one of the most successful retail concepts for three decades,” the company said in a statement in its Q3 earnings release. “The Company believes this is the appropriate time to shift away from the constraints of the $1.00 price point in order to continue offering extreme value to customers.”
According to the chain, making prices higher than $1.00 will allow the chain to offer a greater breadth of products that consumers desire.
Dollar Tree first announced the price changes in September, as a response to supply chain slowdowns and rising freight costs that impacted the retailer’s ability to profit while keeping prices at $1 across the board. Dollar Tree CEO and president Michael Witynski told The Wall Street Journal at the time that “we recognize the need to make adjustments in the current economic environment.”
Consumer prices rose by 6.2% in October compared to a year ago, representing the highest inflation rate since the 12-month period ending in November 1990.
Now, as Dollar Tree rolls out these price changes, the company maintains that the decision is “not a reaction to short-term or transitory market conditions” and will allow the chain to mitigate high costs associated with merchandise, freight and distribution, and wages.
Dollar Tree said that 77% of surveyed shoppers said they noticed the price changes in the store, while 91% suggested that they would continue to shop there, despite price changes.
“Lifting the one-dollar constraint represents a monumental step for our organization and we are enthusiastic about the opportunity to meaningfully improve our shoppers’ experience and unlock value for our stakeholders,” Witynski said in the release. “Guided by Dollar Tree’s same founding principles, we will be relentless in our commitment to offer our customers the best value possible.”
In its Q3 results posted on Tuesday, Dollar Tree reported that net sales increased 3.9% to $6.42 billion. Gross margin was 27.5% of net sales, down from last year’s 31.2%.
“Ultimately, Dollar Tree is caught between the raging sea of inflation and the rock of maintaining value perceptions,” said Neil Saunders, managing director of GlobalData. “There are few great outcomes and whichever way it jumped there would have been some injury to the business.”