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President and CEO Michael Witynski said that so far, Dollar Tree's plan to increase the price of its entire store from $1.00 to $1.25 does not seem to discourage customers.

When reporting the results of the third quarter of fiscal 2021 yesterday, Dollar Tree stated that after more than 30 years of development, the company will "get rid of the $1.00 price point limit" and adjust the price of most of its chain store products to $1.25. Price level. The transition plan starts with more than 2,000 Dollar Tree stores in December, and will cover nearly 8,000 banner stores by the end of the first quarter of fiscal year 2022 next spring. Family Dollar is another deep discount store subsidiary of this Chesapeake, Virginia-based retailer, operating under a multi-level value pricing strategy.

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"We firmly believe that now is the right time to get rid of the $1.00 price limit in order to continue to provide the ultimate value to our customers." — Michael Witynski, CEO of Dollar Tree (photo courtesy of Dollar Tree)

"Since the end of summer, our leadership team has been planning to expand this initiative. As you know, in September, we announced plans to add a price point higher than $1.00 to all Dollar Tree Plus stores, and are testing and learning The traditional Dollar Tree store was chosen on the basis of the investment. Due to the positive customer feedback and store performance in the initial stage, we have introduced the program to nearly 200 additional old Dollar Tree stores," Witynski told analysts on a conference call yesterday. "[Today] We announced for the first time in Dollar Tree’s 35-year history that we will increase the $1.00 price point cap on most of the products in Dollar Tree stores. 

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He explained: “The price point of US$1.25 enhances our ability to substantially expand our varieties, launch new products and new sizes, and provide families with more daily necessities.” “We will have greater flexibility and continue to provide Incredible value, and help customers get the daily necessities they need and Dollar Tree’s most famous celebration and seasonal products. In addition, we are now re-launching many customers’ favorites and key traffic-driven domestic and consumer products. Dollar Tree’s previous reasons Production is discontinued under the restriction of the $1.00 price point. The new price point will also allow us to mitigate historically high cost of sales growth, including freight and distribution costs, as well as higher operating costs, such as wage growth."

Witynski pointed out that most shoppers at the initial store were aware of the upcoming price changes and "reacted well", adding that the survey showed Dollar Tree was still providing customers with "undeniable value." 

"Independent surveys of shoppers across the United States indicate that 77% of shoppers are aware of the change in price points almost immediately. Of these 77% of shoppers, 31% knew about it before visiting the store, and 17% Immediately aware of entering the store before visiting the store, and 29% of people know within minutes of entering the store," he said on an analyst conference call. "It is crucial that 91% of respondents said they will shop at the same or higher frequency. We will continue to monitor the success of these initiatives. We believe we will see improvements in survey results because now we Have the ability to further expand product supply and introduce key transportation-driven projects."

The Dollar Tree Plus concept-offering a series of products worth $1, $3 and $5-is planned to be available in nearly 600 stores by the end of this year.

The Dollar Tree Plus concept-offering a series of goods worth $1, $3 and $5-is expected to be available in nearly 600 stores by the end of this year.

According to Dollar Tree reports, the comparable sales of stores undergoing pricing upgrades have increased, partially offset by the smaller decline in unit sales and the initial increase in product profit margins. As the sales team develops classification, over time Over time, these profit margins are expected to return to normal.

"Importantly, we expect that this move will allow us to reduce higher freight and other inflationary costs in order to return to a historical gross margin of 35% to 36% in fiscal year 2022, while improving the merchandise we provide to our customers. ," Vitinsky said.

Dollar Tree is also continuing to expand its $3 and $5 product categories under the Dollar Tree Plus concept. The plan calls for the Plus format-offering a range of products worth $1, $3, and $5-to appear in nearly 600 stores by the end of this year, and to launch another 1,500 stores in fiscal year 2022, and reach at least 5,000 stores through the end of fiscal year 2024. At the same time, the Dollar Tree Combo Store format has brought some Family Dollar multi-price categories to Dollar Tree shoppers. It is estimated that 400 more locations will be added by fiscal year 2022, and there are currently more than 100 locations. According to Dollar Tree, in the future It may reach 3,000 locations in a few years.

"We are delighted to have the opportunity to improve Dollar Tree's performance by continuing to provide our customers with the ultimate value at the new price of US$1.25, drive product sales and increase store productivity, and increase flexibility to better manage the overall business in an inflationary environment ," Vitinsky said on the phone.

The Dollar Tree Dollar Tree Combo Store format brings some Family Dollar multi-price categories to Dollar Tree shoppers, and is expected to add another 400 locations in fiscal year 2022.

The Dollar Tree Combo Store format brings some Family Dollar multi-price product combinations to Dollar Tree shoppers, and it is expected that another 400 locations will be added in fiscal year 2022.

In the third quarter ended October 30, Dollar Tree's total net sales increased by 3.9% to $6.42 billion, and corporate same-store sales increased by 1.6% year-on-year and 6.7% year-on-year in two years. At constant exchange rates, Dollar Tree same-store sales increased by 0.6% (including the Canadian dollar fluctuation of 0.8%, while Family Dollar same-store sales increased by 2.7%. This quarter, the company opened 125 new stores, expanded or relocated 34 stores , And closed 23 stores. In addition, the retailer completed 450 refurbishments in the form of Family Dollar H2 or Combo Store.

Efforts to implement price point transfer include removing signs and display elements with the "Everything's $1.00" slogan; installing new signs on display shelves, end caps, and shelf strips throughout the store at a price of $1.25; at the entrance and at the checkout Publish customer newsletters everywhere; and provide messages to the store team in response to shoppers’ inquiries.

"For 35 years, we have been able to survive the inflationary period in order to maintain the '1 dollar of everything' philosophy, which distinguishes Dollar Tree and makes it one of the most successful retail concepts in 30 years," Witynski said. "However, we firmly believe that now is the right time to get rid of the $1.00 price limit in order to continue to provide the ultimate value to our customers."

Dollar Tree reported a gross margin of 27.5% on net sales in the third quarter, compared with 31.2% in the same period last year and 30.5% in fiscal year 2020. But Jefferies analyst Corey Tarlowe agrees that the $1.25 pricing move should help the dollar tree recover its historical gross profit margin for the next fiscal year, with a profit margin ranging from 35% to 36%.

"We believe that Dollar Tree's price point expansion and Combo Stores may bring a competitive advantage in the future," Tarlowe wrote in a research report yesterday. "We believe that, over time, these initiatives may also boost profit margins."

As of October 30, Dollar Tree operated 15,966 stores in 48 states under Dollar Tree, Family Dollar and Dollar Tree Canada and five provinces in Canada. The company ranks No. 2 in the number of stores and sales in the Supermarket News Top 50 Retailers list in 2021. 

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