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Key Takeaways
- Once known for its $1 price point, Dollar Tree has been moving further away from those origins.
- Executives say stores with $5 and $7 merchandise are outperforming its legacy stores, bolstering its plans to make more locations into what they call Dollar Tree Plus shops.
- Customers at Plus stores come to the register with more merchandise, and return more frequently, executives say.
Get ready for Dollar Tree’s $7 era.
A buck hasn’t been sufficient to shop at the discount retailer for years, and branching out from its dollar-store origins into higher price points has proven profitable for Dollar Tree (DLTR), executives said last week. While most of its merchandise costs $1.25, shoppers can eventually expect to see some $7 goods at 3,000 of its stores.
The retailer that for decades was known for the $1 price tag said stores with $5 and $7 merchandise are outperforming legacy stores, bolstering its plans to make more of its about 8,900 locations into what the company calls Dollar Tree Plus shops. Customers at “Plus” stores come to the register with more merchandise, and return more frequently, interim CEO Michael Creedon Jr. said on an earnings call last week.
“The customer response has been incredibly positive,” Creedon said, according to a transcript made available by AlphaSense. “They’re really embracing that treasure hunt.”
Shoppers are looking for value. Retailers like Walmart (WMT) have wooed affluent households as more Americans scour stores and the internet for the best deals. Dollar Tree, which also owns the Family Dollar chain, said it has seen more middle-income and high-earners pick up frozen meals and other food as inflation has pushed prices higher in recent years.
The brand has also grown its market share among low-income households, who are increasingly buying items as they are needed, Creedon said.
Dollar Tree Plus locations also sold slightly more discretionary items this fall compared to last year, Creedon said, even as discount retailers have said inflation-weary customers are cutting back on nonessentials.
Dollar Tree began moving away from the $1 price strategy in 2019 when the retailer launched Plus stores, where prices maxed out at $5, according to the company’s website. About 7,000 of the brand’s locations will be Plus stores by the end of the year, executives said this spring.
The company raised its base price—from $1 to $1.25—in 2021 for the first time in three dozen years, adding more-expensive items along the way to $7, which Dollar Tree started using earlier this year at stores dubbed Dollar Tree Plus 3.0.