Dollar-25-Tree? Discount Retailer Forced To Hike Prices Amid Persistent Inflation
Dollar Tree Inc. has built an entire brand on every item priced under a buck across 16,000 US retail stores in 48 states and five Canadian provinces. But with logistical costs soaring, persistent labor shortages, and the cost of everything rising, the company announced Tuesday that its new price point would be $1.25.
“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,” Dollar Tree President and CEO Michael Witynski stated in a corporate press release.
Here’s more on the $1.25 plan:
The Virginia-based discount retailer announced earnings Tuesday. It earned 96 cents per share in 3Q on sales of about $6.42 billion, missing the FactSet consensus estimate by 1 cent. Last year, the company earned $1.39 a share on sales of $6.18 billion. In other words, margin compression is crushing the company due to soaring inflation. Third-quarter same-store sales increased 1.6%. Shares are up more than 4% around 1000 ET on the price hike, meaning the company could soon restore its margins in the coming quarters.
Dollar Tree acknowledged the inflationary environment and said the price hike would help alleviate high freight and distribution costs, as well as wage increases. It said, “freight and supply chain disruptions continue to be the Company’s biggest challenge in the near term.”
The company recently announced select stores would carry higher price items as a pilot test to observe “consumer acceptance of the new price point,” Witynski said.
Lifting prices over a buck is the clearest signal that purchasing power of consumers is waning amid a persistent inflationary environment. It comes as real wages have turned negative on the year, and there’s growing discontent among consumers.
None of this sounds “transitory” to us but permanent. Time for Dollar Tree to change its name to reflect higher prices. What about “Dollar Plus Store”?