Dollar Tree increases in price by 25%. Most items will cost $1.25

The company — one of America’s last remaining real dollar stores — said Tuesday it will raise prices from $1 to $1.25 for most of its products in the first quarter. The first of 2022. This change is indicative of the pressures that low-cost retailers are facing. prices during periods of high inflation.

Dollar tree (DLTR) Its decision to raise prices permanently to $1.25 “is not a response to short-term or transient market conditions,” said in a quarterly earnings call Tuesday.

The company said selling things for $1 has hampered Dollar Tree and forced it to stop selling some of its “customer favorites”. The price increase will give Dollar Tree more flexibility to reintroduce those items, expand its selection, and bring new products and sizes to its stores.

Dollar Tree also said the price increase would help the company increase profit margins by “minimizing increases in historically high commodity costs,” including transportation and distribution costs, as well as wage increases.

“This is the right time to break free from the constraints of the $1 price tag,” CEO Michael Witynski said in a statement.

The end of dollar stores

Dollar Tree mainly carries seasonal items, toys, stationery, home decor, kitchenware and party supplies.

It caters to suburban, middle-income shoppers, unlike Common Dollar (DG), its more rural-focused rival. Family Dollar – owned by Dollar Tree – targets mainly low-income shoppers in cities.

Dollar Tree has been selling products at $1 for 35 years and is the last of the big dollar stores that are actually dollar stores. (The company became known as “Just $1.00” in the late 20th century, before changing its name to Dollar Tree in 1993.)

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Dollar Tree has begun moving away from offering just $1 merchandise in recent years, in part in response to Wall Street’s bullish pressure. Dollar Tree has lagged behind Dollar General and other discount chains.

In 2019, an activist investor bought shares of the company and fueled the bullish streak. The team ended the fight after Dollar Tree announced that it plans to experiment with different rates.

In September, Dollar Tree said intends to start selling items at $1.25 and $1.50 at select stores for the first time. It also said it would add $3 and $5 items to more stores, expanding on its previous strategy of offering these prices at certain locations.
Since that announcement, a Various active investors built a stake in Dollar Tree and tapped a former Dollar General CEO to drive changes at the company.

Although Dollar Tree says its decision to permanently raise prices is not a response to short-term inflation, one analyst remains unconvinced.

“Deployment speed, along with [the] Sticky investor, Mantle Ridge, clearly suggests the opposite,” Kelly Bania, an analyst at BMO Capital Markets, said in a note to clients Tuesday.


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