Dollar Tree defends raising prices to $1.25 over supply chain problems

The retailer, Dollar Tree, cited increased shipping and operating costs as the motivation behind its decision to add a quarter to the price of most items.

The deal chain said the price increase was “not a reaction to… Short-term or transitional market conditionsHowever, it comes as figures released this month showed that annual inflation in the United States, at 6.2 per cent, has averaged The highest in three decades.

However, when announcing third-quarter results for 2021 and announcing the price hike, the company said that “shipping and supply chain disruptions remain the company’s biggest near-term challenge.”

Dollar Tree said it tested the higher prices in more than 100 of its stores and found that there was “broad consumer acceptance,” with 91 percent of customers saying they would continue to shop there despite the price change.

The company will roll out higher prices at an additional 2,000 stores in December and across its outlets across the country by the end of the first quarter of 2022.

The statement said the price hike would enable the company to “expand its offerings and introduce new products and volumes.”

Its statement also said it would allow Dollar Tree to reintroduce products “previously discontinued due to dollar price point restrictions.” There are more than 16,000 Dollar Tree outlets throughout the United States and Canada.

The company had a strong performance in the third quarter of 2021 as revenue increased 3.9% year-over-year from $6.18 billion to $6.42 billion.

She said the higher price for most products would allow them to “return to the historical gross margin range by moderating historically high merchandise cost increases.” These consist of higher freight and distribution costs, and more expensive operating costs, such as higher wages.

Dollar Tree President and CEO Michael Wittinsky said in a statement that the higher prices would give the company “greater flexibility to conduct business in general, particularly in a volatile and inflationary environment.”

Following the company’s announcement on Tuesday, Dollar Tree shares rose five percent.

Supply chain issues and rising labor costs have affected other retail giants such as Walmart, although the increase in sales growth managed to offset this to a large extent.

However, dollar stores have been particularly affected by slowing sales and lower profits during the pandemic, as well as pressure for higher wages, supply chain problems, and rejection of their business model by cities and towns.

Analysts say the price increase is important for the dollar store industry because it represents rising wages and an unreliable supply line from Asia.

“This means that these issues may be permanent,” said Scott Mushkin, an analyst at R5 Capital. New York times.

NEWSWEEK He has contacted Dollar Tree for comment.

Dollar Tree Store
The Dollar Tree store is photographed in Los Angeles, California on November 23, 2021. The company announced that it will permanently increase prices from $1.00 to $1.25 on most items.
Mario Tama/Getty Images

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