Get ready to pay an extra quarter. Dollar Tree announced earlier this month that it will be raising prices on many of its goods from the established $1 price mark, which it has held for more than 30 years, to $1.25 starting in 2022.
Shelley Kohan
is a professor and retail expert at ϲ’s Whitman School. Professor Kohan is a highly accomplished and driven senior retail executive and consultant with more than 25 years of success in the retail industry. She provides comments below that can be quoted directly and is also available for interviews and questions.
Professor Kohan says:
“The problem with the Dollar Tree business model is that at some point inflation would eventually lead to many prices of product to be more than a dollar. While customers will be sad to see the 35-year-old mantra die out next year when the company has no choice but to raise prices, the shareholders are more positive about the pivot of the business.
“The extreme value sector of the retail business had a strong performance throughout the pandemic alongside discount stores and other essential retailers. Dollar Stores Incorporated experienced 8% sales growth in 2020 on top of 3.5% the year prior. Profits increased to 6.8% of net sales as compared to 2019 at 4.7%, however, recent pressures on the supply chain have caused the cost of goods to rise.
“The Dollar Store has experienced gross margins between 30-31% over the past three years, however, in 2021, the margin has narrowed to under 28% for the third quarter. Net profits for Q3 were 3.4% of sales compared to the same period last year at 5.3%. The bottom line is the current model is not sustainable in a highly competitive marketplace.
“By increasing the pricing beyond a dollar, the company can offer customers a broader assortment of products and maintain a profit model that can support the long-term success of the business. But will the customers buy-into higher prices?”
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