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Dollar Tree is raising prices 25 percent to $1.25

The increase will help the discount retailer navigate ‘a volatile, inflationary environment,’ executives say

Dollar Tree was the last remaining national discount chain to sell everything for $1. Now it's moving to a $1.25 price point. (Erin Scott/Reuters)

Dollar Tree, which for 35 years has sold everything for $1, is raising prices by a quarter.

The retailer said Tuesday it has begun marking up merchandise at its nearly 8,000 Dollar Tree stores across the country, the latest sign that higher manufacturing and transportation costs are trickling down to consumers. The Biden administration has indicated that fighting inflation has become a top priority as polls show Americans have become more fretful about higher prices.

“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.

Americans are unhappy about the economy but still spending big

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.

Booming business at dollar stores shows the widening gulf between haves and have-nots during pandemic

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.