Dollar Tree Inc., DLTR 13.73% which sells nearly everything for a dollar in its namesake chain, plans to add more products at slightly higher prices as costs rise for a range of goods.
The retailer said it would start selling products at $1.25 and $1.50 or other prices slightly above $1 in some of its stores, expanding current tests selling items at higher price points as supply-chain snarls, a tight labor market and inflation push costs higher.
The discounter has experimented with selling items for $3 and $5 since 2019 in a shelf section labeled Dollar Tree Plus. Those tests continue in a few hundred of its around 7,900 Dollar Tree stores.
The addition of more above-$1 items is a response to rising costs and positive consumer feedback on tests so far, Michael Witynski, chief executive of Dollar Tree, said in an interview. “We recognize the need to make adjustments in the current economic environment,” he said, including “the pressure all of us are seeing on wages, freight and on our suppliers and cost increases.”
All stores with Dollar Tree Plus sections will get products at the above-$1 price points, as well as some legacy stores without the special section, said a company spokesman. He said over 100 legacy stores will carry the products.
With the above-$1 price point, Dollar Tree will be able to offer new products such as more frozen meat or seasonal items, said Mr. Witynski Tuesday. That could encourage shoppers to spend more per trip, he said.
For years some investors have clamored for Dollar Tree to boost profits by untethering itself from the $1 price point established when the company was founded in 1986. Many former and current executives see it as sacrosanct, a key reason shoppers gravitate to the store and the linchpin of simplified operating model that increases profits.
In 2019, hedge fund Starboard Value LP dropped a planned proxy fight at Dollar Tree after the retailer showed openness to implementing some of the changes the hedge fund sought, which included testing higher price points to boost profits. This year, as prices rise for many products, calls from investors to “break the buck” have intensified.
As of Tuesday evening, Dollar Tree’s stock had fallen around 20% so far this year, while the S&P 500 was up around 16%. Competitor Dollar General Corp.’s stock has risen around 2% so far this year.
Dollar Tree’s stock rose 6.3% in premarket trading Wednesday.
Write to Sarah Nassauer at [email protected]
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