Dollar Tree will increase its nationwide price point to $1.25.
The company said in its most recent earnings report that the move marks its first price hike in decades:
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. However, as detailed in its September announcement, 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. This decision is permanent and is not a reaction to short-term or transitory market conditions.
The $1.25 price point, which will apply to a majority of Dollar Tree’s assortment, will enhance the Company’s ability to materially expand its offerings, introduce new products and sizes, and provide families with more of their daily essentials. The Company will have greater flexibility to continue providing incredible value that helps customers get the everyday items they need and celebratory and seasonal products Dollar Tree is best known for.
“We experienced a strong finish to the quarter, as shoppers are increasingly focused on value in this inflationary environment,” said Dollar Tree chief executive Michael Witynski. “Our Dollar Tree pricing tests have demonstrated broad consumer acceptance of the new price point and excitement about the additional offerings and extreme value we will be able to provide. Accordingly, we have begun rolling out the $1.25 price point at all Dollar Tree stores nationwide.”
The New York Times reported that 91% of customers said they would continue shopping at Dollar Tree after the change. Dollar Tree’s stock price increased by 11% following the announcement.
Many retail brands are feeling pressure as inflation continues to accelerate. For example, executives at American Plastic Toys — which sells its products in Dollar Tree — are experiencing headaches due to higher price levels, labor shortages, and supply chain bottlenecks.
“It’s not going to be transitory because … I can’t imagine going back to the people that have stuck with us and saying, ‘Okay, we’re going to take $1 out of your hourly wage.’ I just don’t see wage inflation retreating any time soon,” explained CEO John Gessert during an interview with CNBC.
Elaborating on the supply chain issues, he said that “I couldn’t in good conscience accept additional orders when I had to really work and do everything I could possibly to satisfy the orders that we’d already booked … six months ago in some cases.”
“We have some loads that have been actually on the truck for almost a week waiting for logistic companies, transportation companies to turn those loads,” he continued.
Bill Simon — who led Walmart from 2010 to 2014 — agreed that the supply chain crisis is a “mess from start to finish.”
“I’ve never seen it like this, and I don’t really think anybody living in this country has,” the executive told Fox Business. “I mean, this is really unprecedented.”
In a separate interview, Simon argued that “there’s a shortage of labor in our distribution system and there’s a shortage of people to put [items] on the shelf.” He believes that the crisis will not be mitigated “until we alleviate the labor shortage that’s out there and get people driving trucks and unloading at the docks and stocking shelves.”