The huge Dollar Tree discount retailer has become a distinctly American feature. Many people depend on their stores as their economic lifeline, some shop there for the fun of the bargain.
But the pandemic and post-pandemic landscape is causing changes to the popular chain.
Family Dollar has around 8,000 stores in the United States, and Dollar Tree operates more than 15,000 stores around the country. Both are part of the same parent company.
Previously, Dollar Tree announced that it plans to close about 1,000 Family Dollar and Dollar Tree stores, estimating that about 600 Family Dollar stores will close this year, and an additional 370 Family Dollar and 30 Dollar Tree stores will close over the next several years.
But the biggest change that you’ll see in the stores that remain open is their price point.
Dollar Tree is hiking its max prices, and customers can now expect to pay up to $7, company officials said at an earnings call this month.
“This year, across 3,000 stores, we expect to expand our multi-price assortment by over 300 items at price points ranging from $1.50 to $7,” Dollar Tree executive chairman and CEO Rick Dreiling said in a fourth-quarter earnings call on March 13, according to multiple media outlets.
The good news is that most Dollar Tree products will stay around $1.25, he said. But while this sounds reassuring, it is still a 25% hike over the familiar “dollar”.
Dreiling said the price hike is part of a multi-price point strategy and will give customers a more “relevant” assortment to choose from. In short, the one-dollar flat price for all their products that has been their signature and retail philosophy, will be a thing of the past.
“As we look forward in 2024, we are accelerating our multi-price rollout at Dollar Tree and taking decisive action to improve profitability and unlock value at Family Dollar,” Dreiling said in a news release.
Among the higher-priced items customers can add to carts: food, snacks, drinks, pet supplies and personal care.
“Over time, you will also see us fully integrate multi-price merchandise more into our stores so our shoppers will find $5 bags of dog food next to our traditional $1.25 pet treats and toys, and our $3 bags of candy will be found in the candy aisle,” Dreiling said.
As the economic landscape has changed, the low-end discount retailer has attracted a surprising number of higher income customers. Dreiling said most of the chain’s new customers last year were from households that earn over $125,000 per year.
As Dreiling pointed out, this change is not regional, “That boat is lifting pretty even all the way up.”
Both announcements came after the company said late last year it would review and optimize its portfolio to identify struggling stores for closure, relocation, or re-bannering.
While the good news is that the economic “boat has lifted evenly” across the country, the bad news is that there is still a swath of the population that is not benefiting from the uplift. For them the price hike may have significant consequences.
Dreiling has said “persistent inflation and reduced government benefits continue to pressure the lower-income consumers,” who make up a large share of Family Dollar’s customer base.
“We finished the year strong, with fourth quarter results reflecting positive traffic trends, market share gains, and adjusted margin improvement across both segments,” Dowling said. “While we are still in the early stages of our transformation journey, I am proud of what our team accomplished in 2023 and see a long runway of growth ahead of us.”
