Dollar Tree on Tuesday, in tandem with its third-quarter earnings results, announced a big change in the works for the discount retailer. By April, almost everything on its shelves will cost more than $1. In fact, they will cost $1.25, to be exact. Moreover, the company says this change is permanent and that it’s not in reaction to short-term conditions.
Sure, okay. Completely blowing up the value proposition implied in the store’s name is not at all related to US inflation being at a three-decade high, got it. Buried in the company’s announcement of the price increase, which it tries to spin as something customers will apparently celebrate, is the culprit. Rather, multiple culprits. “The new price point will enable Dollar Tree to return to its historical gross margin range by mitigating historically-high merchandise cost increases, including freight and distribution costs, as well as higher operating costs, such as wage increases.”
Dollar Tree is getting a price hike
Dollar Tree will soon be $1.25 tree.
— Rachel Ramirez (@rachjuramirez) November 23, 2021
Translation: Like a lot of businesses right now, Dollar Tree isn’t making as much money as it used to. Its cost of business is sky-high. Freight and distribution costs as through the roof. Moreover, this is also a specific example of a much larger trend.
As noted by The Wall Street Journal on Monday, US inflation is at its highest rate in 31 years. Prices are up sharply for a broad spectrum of consumer goods and services. A trend that’s “stoked by imbalances in the economy created by the COVID-19 pandemic.” The Dollar Tree price increase, meanwhile, means that for the first time in the chain’s 35-year history, at a time of record-high inflation that defenders of President Biden continue to downplay, almost everything in the store will cost more than $1. This also comes at a time when gas prices are soaring. I paid almost $4/gallon myself a couple of hours ago.
Dollar Tree has become the very thing it swore to destroy. These are truly dark times. pic.twitter.com/8zPhpzsOjC
— HiHiMarcieAmiYumi⚧ (@Riftyparx) September 29, 2021
For its part, Dollar Tree said it’s had this price increase in the works since this summer. And it plans to introduce the new price point in more than 2,000 more stores in December. After which, the plan is to wrap up the rollout to all stores by the end of the first fiscal quarter of 2022.
“Lifting the one-dollar constraint represents a monumental step for our organization and we are enthusiastic about the opportunity to meaningfully improve our shoppers’ experience and unlock value for our stakeholders,” said Michael Witynski, the chain’s president and CEO, in a press release.
Biden inflation news
Scoop: General Mills will raise prices in January on Cheerios, Lucky Charm's, Wheaties, Fruit Roll-Ups Betty Crocker, Pillsbury, Annie's, Progresso & more
Latest in Big Food to plan price hikes. Higher grocery bills aren't going away in early 2022.https://t.co/m4aIQgcYrT
— Nathaniel Meyersohn (@nmeyersohn) November 23, 2021
Dollar Tree’s contention is that it’s got data on its side. Some 91% of shoppers surveyed during the price increase’s test phase said they wouldn’t shop at the chain any less. But before that’s used as a defense of the price increase being totally fine, it also helps to remember one thing. It’s also a good bet some of the chain’s shoppers feel like they have to shop there, because of budget constraints. Meaning, just because they feel compelled to keep shopping there amid a price increase? That doesn’t mean they’re going to like it.
As noted, this all coincides with surging inflation. Even products as prosaic as your favorite cereal brand are going to get hit with price increases soon. Plus snacks, soups, and more.
Per CNN, General Mills has notified retail customers that prices are going up in January on hundreds of items. They include everything from Yoplait yogurt to Fruit Roll-Ups, Cheerios, Cinnamon Toast Crunch, Lucky Charm’s, and Trix.
Indeed, prices at grocery stores have exploded during the coronavirus pandemic. Market research firm IRI is projecting that inflation on things like food and other household items will jump to 8% during the first half of next year. And as far as right now? The Bureau of Labor Statistics says grocery store prices are up more than 5% compared to this time last year.