Dollar Tree raises prices to offset inflation


Robert S |

M’Niyah Lynn

Dollar Tree announced that it will begin raising the price of items in some of their stores above $1 to expand the assortment of products and introduce new ones.

The company is planning to sell products including seasonal goods, stationery and kitchenware at prices like $1.25 and $1.50.. This raise in prices is an expansion of an old strategy that Dollar Tree has had in recent years to move away from “only offering goods for $1,” CNN Business said.

“The mantra to which the Chesapeake, Virginia, company has held true for decades will now be only mostly true,” the Associated Press said.

Inflation motivated this price increase. One of the reasons inflation is a growing problem for companies like Dollar Tree is it’s relation to rising costs for the store chain, Dollar Tree CEO Michael Witynski said, according to CNN. Higher freight costs have caused the company to act with less flexibility regarding price raises.

“Annual inflation in the U.S. reached 4.2% in July, the highest in three decades,” the Associated Press said.

Despite this, inflation is here to stay, according to Evercore ISI analyst Michael Montani. Current inflation is likely to remain higher for an extended period of time, which forces Dollar Tree and similar chains to adjust their business models to accommodate these circumstances.

However, Dollar Tree has raised prices in the past. The company tested selling items priced at $3 and $5 in segments of the store called Dollar Tree Plus. This program started in 2019 and is still in operation in some stores across the country.

“By the end of 2024, Dollar Tree will have these sections in at least 500 stores,” CNN said.

The company hopes that by increasing the price of some of its items, it won’t continue to be pressured by investors and Wall Street. This sentiment was reflected in the markets when the stock of the company rose a record-breaking 13% at the opening bell on Sept. 29 following the news.

Skyrocketing shipping costs have been another area of concern for the company, which have “crimped the company’s ability to make more money,” according to reports from Reuters.

Higher wages and supplier costs have been other points of pressure, according to the Wall Street Journal.

The main concern for the company and some business experts has been if price increases will alienate customers. Some worry that customers will find the new prices to be too expensive.

“Dollar Tree should benefit from changes in its pricing strategy, although we worry about the customer reaction, given their higher sensitivity to prices,” Joseph Feldman, an analyst at Telsey Advisory Group, said, according to CNN.

Nonetheless, the company has been confident that its plan to raise prices will be accepted by customers based on positive customer reactions and the success of its combination store format, the Plus, mixed with the regular locations.

“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 they also want a broader product assortment when they come to shop,” Witynski said in a company press release.

The press release said that the company is already on track to have 500 Dollar Tree Plus stores by the end of this fiscal year. Another 1,500 stores are expected for fiscal 2022 and at least 5,000 by the end of fiscal 2024.

“Our brand promise is that customers get great value for what they spend at Dollar Tree. 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.