You might have to dig a little deeper the next time you shop at Dollar Tree. The discount giant has announced that it's rolling out a $1.25 price point at all its stores by next year. And items could cost as much as $5 at its Dollar Tree Plus stores.
The company attributes its price increases to supply chain issues, "higher freight costs and other inflationary pressures." This marks the end of a discount era as Dollar Tree has been known for selling items for no more than $1 for more than 40 years.
And even as inflation choked out most dollar store chains, Dollar Tree was one of the last ones to resist and price the overwhelming majority of their items for $1 or less. But that's all going to change as we roll into 2022.
Why is Dollar Tree raising its prices?
Like many retailers, Dollar Tree is feeling the heat from inflation. Across the board, the prices for goods and services are increasing: The annual inflation rate in the U.S. soared to 6.2% in October 2021, marking the highest upward tick since 1990.
As a result, manufacturers are paying more for the basic materials used to make their products, and that price increase is getting passed on to you. To make matters worse, the COVID-19 pandemic is still tightening supply chains and making it harder and more expensive for companies to distribute their products.
Which Dollar Tree products will cost more?
The company wasn’t specific about which items are getting heftier price tags. But you can expect to pay $1.25-$1.50 for most items by 2022, according to the company. Dollar Tree is known for selling everyday goods like canned food, school supplies and toys. The company also noted that items priced at $3 and $5 at Dollar Tree Plus stores would include "arts and crafts, sports, home decor, apparel, and holiday and seasonal items.”
Are these price increases temporary?
Based on Dollar Tree’s latest earnings report, it looks like the “$1.25 Dollar Tree” is here to stay.
Dollar Tree CEO and president Michael Witynski said in a press release, “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.”
Moreover, Dollar Tree expects to convert more of its stores into Dollar Tree Plus stores, where items can be priced as high as $5. The retailer plans to have 500 Dollar Tree Plus stores by the end of 2021 and another 1,500 next year.
Despite freight and logistics issues, Dollar Tree unveiled some healthy earnings for the third quarter of 2021, which ended on October 31. Consolidated net sales increased 2.6% to $19.23 billion from $18.74 billion in the same period last year. Shares of Dollar Tree rose 16% Wednesday to more than $100. However, the stock is down 6% for the year.