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Dollar Tree breaks the $1 barrier as costs take a bite

After expanding nationwide from only a handful of stores in Georgia, Tennessee and Virginia, Dollar Tree is breaking the "Everything's $1" mold it's had for decades.
Credit: AP
In this Feb. 25, 2021 photo, Dollar Tree store logos indicating that everything in the store is for $1 are promoted on its storefront window in Jackson, Miss.

Dollar Tree embedded in its very name what it stands for: Behind these doors, everything can be had for just $1.

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

After expanding nationwide from only a handful of stores in Georgia, Tennessee and Virginia, Dollar Tree is breaking the mold and will sell items in some locations that exceed the tantalizing $1 grab-n-go price.

The cost of clothes, cars, food and just about everything else has soared this year as the global economy emerges from a pandemic uppercut and Dollar Tree has not been untouched.

Last month the retail chain said that rising shipping costs would take a bite of $1.50 to $1.60 out of its per-share profits this year. That’s a huge hit for any business, perhaps more so for one founded decades ago steadfastly calling itself “Only $1.00 Inc.”

“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 that they also want a broader product assortment when they come to shop," said CEO Michael Witynski in a prepared statement.

Raising some prices will certainly give the national chain some flexibility and likely more variety on its shelves. But a dollar this year will not buy you what it did in 2020.

Annual inflation in the U.S. reached 4.2% in July, the highest in three decades. And this week in an appearance before Congress, Fed Chair Jerome Powell said that price increases have worsened amid snarled supply chains and rising labor costs.

That has hit businesses of every type, perhaps especially one that has held the line at $1 for decades.

Credit: AP
In this Feb. 25, 2021 photo, Dollar Tree store logos indicating that everything in the store is for $1 are promoted on its storefront window in Jackson, Miss.

Witynski said this week that Dollar Tree is a “test-and-learn” company, and they'll be watching how customers react.

The company had already begun testing higher prices at several hundred of its nearly 8,000 locations in a section of the store called “Dollar Tree Plus" with items that can go for as much as $5. Items that can go for $1.25 to $1.50 will soon be found in the mix at some locations amid the typical assortment of $1 products.

Analysts with J.P. Morgan noted past conversations with Dollar Tree executives who cited a significant sales boost at stores offering a Plus section and if no one else is cheering the shift to the top side of $1 at Dollar Tree, Wall Street is.

Shares of Dollar Tree Inc. jumped 13% at the opening bell Wednesday.

As Dollar Tree breaks the $1 barrier, Witynski said the company would remain true to its promise of value.

“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.

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