CHESAPEAKE, Va. (AP/WAVY) — Dollar Tree embedded in its very name what it stands for: Behind these doors, everything can be had for just $1.
The mantra to which the Chesapeake, Virginia, company has held true for decades will now be only mostly true.
After expanding nationwide from what the company’s website said began as a five-and-dime store in downtown Norfolk, Dollar Tree is again breaking the mold and will sell items in some locations that exceed the tantalizing $1 grab-n-go price.
The cost of clothes, cars, food and just about everything else has soared this year as the global economy emerges from a pandemic uppercut and Dollar Tree has not been untouched.
Last month the retail chain said that rising shipping costs would take a bite of $1.50 to $1.60 out of its per-share profits this year. That’s a huge hit for any business, perhaps more so for one founded decades ago steadfastly calling itself “Only $1.00 Inc.”
“For decades, our customers have enjoyed the ‘thrill-of-the-hunt’ for value at one dollar — and we remain committed to that core proposition — but many are telling us that they also want a broader product assortment when they come to shop,” said CEO Michael Witynski in a prepared statement.
Raising some prices will certainly give the national chain some flexibility and likely more variety on its shelves.
Nick Egelanian, founder and president of SiteWorks Retail, said he sees the move as vital for Dollar Tree to stay relevant.
“They are not as unequally convenient as they once were before. And they are not delivering the same type of value that they were before,” Egelanian said, pointing to the increase in brick-and-mortar consumable competition.
Dollar stores used to be the in-between of convenience stores and big box retailers when it comes to groceries. Egelanian said now, you can get milk at a Lidl or Aldi for the prices that for years you could only find at a dollar store.
It’s forcing the chain to increase the value of its products.
“They don’t want [the customer] making choices to go just a little further to get to someone else. This allows them to nip some of that competition in the bud and keep their customers closer to home,” Egelanian said.
Plus, a dollar this year will not buy you what it did in 2020.
Annual inflation in the U.S. reached 4.2% in July, the highest in three decades. And this week in an appearance before Congress, Fed Chair Jerome Powell said that price increases have worsened amid snarled supply chains and rising labor costs.
That has hit businesses of every type, perhaps especially one that has held the line at $1 for decades.
Witynski said this week that Dollar Tree is a “test-and-learn” company, and they’ll be watching how customers react.
The company had already begun testing higher prices at several hundred of its nearly 8,000 locations in a section of the store called “Dollar Tree Plus” with items that can go for as much as $5. Items that can go for $1.25 to $1.50 will soon be found in the mix at some locations amid the typical assortment of $1 products.
Analysts with J.P. Morgan noted past conversations with Dollar Tree executives who cited a significant sales boost at stores offering a Plus section — and if no one else is cheering the shift to the top side of $1 at Dollar Tree, Wall Street is.
Shares of Dollar Tree Inc. jumped 13% at the opening bell Wednesday.
It’s also good news for Hampton Roads. Dollar Tree is one of two Fortune 500 companies in the region and provides more than 1,000 jobs outside of its nearly 70 stores in the region.
“Walmart is not adding a single store this year and Dollar Tree will add 1,500 stores next year. Which one do you want in your neighborhood?” Egelanian said.
As Dollar Tree breaks the $1 barrier, Witynski said the company would remain true to its promise of value.
“We will continue to be fiercely protective of that promise, regardless of the price point, whether it is $1.00, $1.25, $1.50,” Witynski said.