PRICE PROMISE
Dollar Tree CEO hits back after customers spot prices hike to $1.75 in store as he promises to provide ‘value’ in 2025
Plus, another big change underway at the discount chain
THE top boss at DOLLAR Tree has spoken out after shoppers have begun noticing items previously costing $1.25 surging up to $1.75.
The CEO outlined two main factors behind the price increases, and promised to continue to provide value to shoppers on a budget.
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Dollar Tree, originally named "Only $1.00," started by selling products for just $1, but has slowly raised its price point to combat inflation and increasing operational costs.
The chain increased prices to $1.25 in 2021 and also launched higher-priced items costing $3 and $5 under its Dollar Tree Plus section.
The discount chain has also rolled out three pricing models - Dollar Tree 1.0, 2.0, and 3.0 - and now sells items ranging from $1.25 to $7.
While the vast majority of items remain priced at the base $1.25 price, customers have begun to spot more recent increases to $1.50 and $1.75 on certain products.
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For example, shoppers have noticed a price uptick to $1.50 on food items such as ramen, bread, and buns.
Others have seen reading glasses rise from $1.25 to $1.50 as well.
Kitchen essentials such as foil wrap and foil pans have reportedly risen to $1.75.
Dollar Tree CEO Michael Creedon spoke out on the price changes at the company's 2024 fourth-quarter earnings call.
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He noted that new price points beyond the base $1.25 were being leveraged as a tool to mitigate the impact of tariffs and rising costs.
Other strategies Dollar Tree has implemented include negotiating with suppliers and even eliminating certain products.
Dollar Tree promises probe after shopper fumes over being ‘ripped off’ by $500 after purchasing a damaged gift card
Creedon admitted that while there was "still a great deal of uncertainty" regarding how the trade war would impact Dollar Tree, the team was continuously looking for ways to mitigate the impact, including its multi-pricing strategy.
"In terms of the different price points, we look at that value," explained the CEO.
"We look at convenience and we look at discovery and we say where can we offer that and maybe move on some pricing as part of not just tariffs, but an inflationary cost environment that we've got to mitigate.
"And so that's where you're seeing that work where it makes sense. And I think we're positioned better than we ever have before to manage what is a very uncertain and volatile arena that we're in."
MONEY MOVES
Dollar Tree shoppers will also see higher price tags as the company expands its 3.0 locations.
Stores under this pricing model are new or converted and sell Dollar Tree's expanded multi-price assortment throughout the store, with products ranging from $1.25 to $7, CEO Michael Creedon explained during the earnings call.
Dollar Tree also runs 2.0 locations, with smaller multi-price selections located in a single aisle that the company refers to as "the valley."
Dollar Tree 1.0 stores, on the other hand, sell over 95% of items priced at $1.25.
Dollar Tree pricing
Despite the name of the store, Dollar Tree recently added items that cost more than $1 to its inventory.
Most items at the store cost no more than $1.25, but items in the Dollar Tree Plus section cost up to $5.
Dollar Tree introduced Plus aisles to 100 locations in 2019 as part of an effort to diversify its products.
By 2022, Dollar Tree had added the items to over 1,500 locations.
"We believe testing additional price points above $1 for Dollar Tree products will enable us over time to expand our assortments, introduce new products and meet more of our customers’ everyday needs," president and CEO Michael Witynski said in a statement.
"Our brand promise is that customers get great value for what they spend at Dollar Tree. We will continue to be fiercely protective of that promise, regardless of the price point."
The chain has slowly been transitioning to the 3.0 model, more profitable due to the higher prices and wider selection of products with better margins.
Dollar Tree closed out the 2024 fiscal year with around 2,900 3.0-format stores, including roughly 2,600 converted ones and 300 new locations, Creedon shared.
The discount chain has plans to reach a total of 5,200 3.0 locations by the end of this year, including 2,000 converted stores and 300 new ones under the priciest model.
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Dollar Tree has another big change underway - it is set to sell its Family Dollar subsidiary for $1 billion following an announcement of 1,000 store closures.
Plus, check out the chain's viral $1.25 dupe of the $46 Amethyst scrub.