- Dollar Tree will begin selling most of its products at all of its stores for $1.25, to offset the impact of rising freight costs and other pandemic-induced challenges.
- The new price point, which will be fully operational by the first quarter of 2022, will allow the retailer to return to “its historical gross margin limit” of 35% to 36% next year.
- Dollar Tree said freight costs in the third quarter were significantly higher than expected and expects this to continue in the near term.
Dollar Tree will begin selling most products at all of its top-end stores for $1.25 to offset the impact of rising freight costs and other pandemic-induced challenges.
The retailer said Tuesday that the new price point, which will be fully rolled out by the first quarter of 2022, will allow it to return to “its historical gross margin range” of 35% to 36% next year.
Chief executive Michael Wittensky said the higher price point allows the discounter to expand the assortment, introduce new products and sizes, as well as bring back “traffic-driving” products.
Dollar Tree, which is known for selling everything from makeup to homeware at a $1 price-point, said in September that it planned to add new price points above $1 in some of its stores.
Evercore analyst Michael Montani said the price increase is a good thing, because 3Q results, and our first-quarter outlook, indicate that freight rates are worse than anticipated.
Rising freight costs from global supply chain disruptions have dented much of Corporate America’s profits, and put pressure on many retailers already grappling with high labor and raw material costs.
Dollar Tree said freight costs in the third quarter were significantly higher than expected and expects this to continue in the near term.
It forecast fourth-quarter earnings per share of $1.69 to $1.79. Analysts were forecasting an average of $1.75, according to Refinitiv IBES data.
The company’s net income fell to $216.8 million, or 96 cents per share, for the quarter ended October 30, from $330.0 million, or $1.39 per share, a year ago.
Net sales rose 3.9% to $6.42 billion, beating previous expectations of $6.41 billion.
Shares of the Chesapeake, a Virginia-based company, were up 5.6% in morning trading.