It’s the end of an era as Dollar Tree announces it will raise prices from $1 to $1.25. As one of America’s last true dollar stores, the company confirmed it will raise its pricepoint beginning in 2022.
The announcement comes following demands of low-cost retailers amidst a period of rising inflation. The business confirmed its decision to increase prices to $1.25 indefinitely in their quarterly earnings release on Tuesday. However, they clarified the rise in prices is “not a reaction to short-term or transitory market conditions.”
The concept of selling items for only $1 undermined the company, business leaders said. Dollar Tree was forced to discontinue some “customer favorites” due to its low-cost model. Increasing the prices will give the conglomerate the autonomy to bring back those items. Additionally, they’ll have the opportunity to expand their collection and bring in new products and sizes to stores.
The increase will help Dollar Tree grow its profit margins by “mitigating high merchandise cost increases.” This includes freight, distribution, and labor markups.
CEO Michael Witynski said, “This is the appropriate time to shift away from the constraints of the $1 price point.”
Formerly known as Only $1.00, Dollar Tree is a Fortune 500 company headquartered in Chesapeake, Virginia. The multi-price-point empire operates over 15,000 stores through 48 U.S. states and Canada. The stores carry primarily seasonal goods, toys, stationery, home decor, kitchenware and party items.
Catering mostly to the middle-class shopper, Dollar Tree has sold $1 products for the last 35 years. The franchise is also one of the last major dollar store chains to actually sell items for $1. It’s no wonder consumers are freaking out over the news of the price increase.
Public Reacts to the Price Increase
Consumers were quick to post their reactions to the price increase via Twitter.
“Not even Dollar Tree can outlast inflation,” said @LoanswithCaleb.
Another user tweeted, “But $1.25 isn’t The Dollar Tree. What I don’t understand is they’ve been The Dollar Tree for years. Why change prices now??”
Other’s weren’t as shocked by the announcement.
“… I’m surprised we could still get things for a dollar in 2020,” posted @abeecee123. “It’s almost like thinking that you could still get a gallon of gas for 19 cents forever.”
The recent announcement is in response to building pressures on Wall Street to raise prices. In September, Dollar Tree announced they would begin testing different price-points adding $3 and $5 items to their overall inventory. Since then, an investor in the company is working with a former Dollar General CEO to press the company to begin making these pricing changes.
Even though Dollar Tree stated its decision to raise prices was not in reaction to short-term inflation, not everyone is convinced.
“The pace of rollout, along with [the] engaged investor, Mantle Ridge, clearly suggests otherwise,” stated Kelly Bania, an analyst at BMO Capital Markets in a note to clients on Tuesday.
