It appears no company is safe from the worrisome inflation impacting the United States, with even Dollar Tree reportedly having to institute some price hikes that essentially divorces itself from the meaning behind the well-known store’s name.
The business, which is one of America’s last real dollar stores, said on November 23rd that it would increase pricing on the bulk of its items from $1 to $1.25 by the first quarter of 2022. The shift reflects the difficulties low-cost merchants confront in keeping prices low at a time of growing inflation.
However, in the company’s quarterly earnings report released earlier in November that the decision to permanently raise prices to $1.25 on most items was not in direct response “to short-term or transitory market conditions” but rather a means to appease longtime shoppers by reintroducing “customer favorites” that the company had to discontinue in the past.
Kelly Bania, an analyst at BMO Capital Markets, seems unconvinced that Dollar Tree’s move to change pricing wasn’t influenced by the ongoing inflation.
“The pace of rollout, along with [the] engaged investor, Mantle Ridge, clearly suggests otherwise.”
Indeed, Dollar Tree has been infiltrated by what can best be described as activist investors in recent years. While having sold products for $1 for approximately 35 years, an investor in 2019 took a stake in the company and began applying pressure to increase prices.
This resulted in Dollar Tree running some test markets this past September where prices in the various stores saw increases in product prices to as high as $1.50.
Dollar Tree also claims that raising prices would help them boost profit margins by “mitigating historically high merchandise cost increases” such as freight and distribution expenses, as well as labor costs inflating.
In a statement regarding the end of the true-to-form dollar store, Dollar Tree CEO Michael Witynski said that now “is the appropriate time to shift away from the constraints of the $1 price point.”
So it seems that this marks the death of the true dollar store, with Dollar Tree seemingly to head in a direction akin to discount styled operations like Dollar General.