Dollar Tree Hikes Prices to $1.25 Permanently — How It Could Affect Stock
After 35 years of namesake pricing, Dollar Tree said it would be raising its $1 price point to $1.25 permanently. The company described the move as “not a reaction to short-term or transitory market conditions.”
The $1.25 price point will apply to a majority of Dollar Tree’s inventory, and will enable the company to expand its offerings, introduce new products and sizes, and provide families with more of their daily essentials, according to a statement.
The new pricing strategy enables the company to reintroduce key traffic-driving products that were previously discontinued due to the constraints of the $1.00 price point.
“Lifting the one-dollar constraint represents a monumental step for our organization and we are enthusiastic about the opportunity to meaningfully improve our shoppers’ experience and unlock value for our stakeholders,” President and CEO Michael Witynski expressed in a statement. “Guided by Dollar Tree’s same founding principles, we will be relentless in our commitment to offer our customers the best value possible.”
Dollar Tree has been preparing for this price hike since late summer 2021. In September, the company announced its plan to add additional price points above $1.00 to all Dollar Tree Plus stores and — on a test-and-learn basis — to selected legacy Dollar Tree stores. This move in September sent the stock soaring to its best day in more than 20 years, as GOBankingRates previously reported. As of the morning of Wednesday, Nov. 24, the stock was up 0.55% in pre-market trading.
So far, Dollar Tree has described the results as “overwhelmingly positive.”
When surveyed, 77% of shoppers indicated they were almost immediately aware of the new price point when visiting the store. Additionally, 91% of those surveyed indicated they would shop at Dollar Tree with the same — or increased — frequency. Many customers also indicated they are seeing price increases across the market, and that Dollar Tree is still providing the products they need at an “undeniable value,” per the statement.
Dollar Tree has detailed plans to introduce the new price point in more than 2,000 additional legacy Dollar Tree stores in December, completing the rollout to all stores by the end of the first fiscal quarter of 2022.
In a note sent to GOBankingRates, CFRA Research said it is maintaining its “Buy” opinion on Dollar Tree shares.
“We’re positive on this news, as it will help offset recent inflationary pressures, some of which are likely structural (e.g., higher wages) and give DLTR the opportunity to expand product assortment, which is something its customers have been asking for,” Arun Sundaram, senior equity research analyst at CFRA, said in the note. “This move should also help generate significant operating leverage. Even with higher price points, we expect store traffic trends to remain robust since consumers are increasingly focusing on value amid broader inflation concerns,” he added.
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