Dollar Tree ditches the dollar standard — and paves the way for higher profits

Three Dollar Store… just doesn’t have the same ring to it. Discount legend Dollar Tree announced plans to start selling more items for $1.25, and even $3.50 (gasp). Driving the price jumps: a triple whammy of inflation, a global supply crunch, and the ongoing labor shortage. Despite the sudden shift from its signature price point, Dollar Tree shares jumped 16% yesterday after its announcement.

The namesake barrier... has been broken before. Since 2019, Dollar Tree has experimented with $3 and even $5 items in a section labeled “Dollar Tree Plus” (not a streaming service). Last year rival Dollar General launched Popshelf, a store aimed at higher-end shoppers like suburban moms who still love a good deal (prices up to $5). For Dollar Tree, price bumps have been hugely successful so far. And investors smell profit...

• Profits are 6% higher at “premium” Dollar Tree Plus stores than at regular Dollar Trees. DT expects to have 500 Plus stores by fiscal year’s end — and 5K by 2024.
• $5 products such as “Grandma’s Heirloom Pillow” and “decorative topiary” appeal to higher-income customers, who are more willing to splurge.
• Ditching the dollar standard allows Dollar Tree to expand into pricier — and potentially more profitable — new categories. Think frozen meats and seasonal decorative goods (#HallowLantern).