“Lifting the one-dollar constraint represents a monumental step for our organization,” chief executive Michael Witynski said in a statement. The higher price point will give the company “greater flexibility to manage the overall business, especially in a volatile, inflationary environment.”
Investors seemed to agree, sending the stock up 9.2 percent, to $144.71, in Tuesday’s trading.
Executives of the Chesapeake, Va.-based chain said the shift to $1.25 has been in the works since summer and would allow them to reintroduce popular items that had been dropped because of the $1 cap. In September, the chain began testing items that cost more than $1 at its Dollar Tree Plus stores, and officials said customer feedback has been positive.
Discount chains such as Dollar Tree and its biggest competitor, Dollar General, posted significantly higher sales and profits during the pandemic. They’re also expanding rapidly, with plans to open another 1,650 locations this year; that’s nearly half of all new national retail openings, according to Coresight Research.
But critics say the unfettered growth of such chains puts low-income communities at a disadvantage by driving out local grocery stores.
Dollar Tree said Tuesday that sales rose nearly 4 percent in the most recent quarter, to $6.42 billion. Profits, meanwhile, fell 34 percent, to $216.8 million, a drop that executives attributed primarily to higher freight costs. Other expenses, such as wholesale prices and employee wages, have also gone up.
In the most recent quarter, Dollar Tree opened 125 new stores, or more than one a day.
“We experienced a strong finish to the quarter, as shoppers are increasingly focused on value in this inflationary environment,” Witynski said.