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What you need to know
- Dollar Tree, once known as a retailer with a $1 starting price, has moved away from its origins.
- Dollar Tree Plus stores are performing better than its traditional stores. This is a reason for the company to convert more stores into these shops.
- Plus store executives claim that customers are more likely to return and purchase more items when they visit the stores.
Get ready for Dollar Tree's $7 era.
Dollar Tree’s (DLTR) executives revealed last week that a buck isn’t enough anymore to make a purchase at its discount retailer. The company has been able to increase the price of their products, moving away from dollar stores. Although most of the merchandise is priced at $1.25 or less, some of it will eventually be sold for $7 in 3,000 stores.
Dollar Tree Plus is the name given to stores that sell merchandise priced at $5 or $7. The company, which was famous for selling $1 items for many decades, said these stores are more profitable than the legacy ones. It plans to turn out more Dollar Tree Plus locations. 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,” According to AlphaSense’s transcript, Creedon stated. “They're really embracing that treasure hunt.”
Customers are searching for the best value. Walmart (WMT), a retailer that caters to affluent families, has positioned itself as ‘the go-to place for Americans looking for great deals in stores and online. Dollar Tree (which also owns Family Dollar) said that it had seen more high-earners and middle-income earners buy frozen food and other items as prices have risen in recent years.
Creedon stated that the brand’s market share has grown among households with low income, as these families are more likely to buy items when they need them.
Creedon noted that Dollar Tree Plus outlets also sold slightly fewer discretionary items in the fall of this year compared to previous years, even though discount retailers reported inflation-weary consumers are cutting down on unnecessary purchases.
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.
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