Dollar Tree breaks the $1 barrier as costs take a bite

CHESAPEAKE, Va. — Dollar Tree embedded in its very name what it stands for: Behind these doors, everything can be had for just $1.

The mantra to which the Chesapeake, Va., company has held true for decades will now be only mostly true.

After expanding nationwide from only a handful of stores in Georgia, Tennessee and Virginia, Dollar Tree is breaking the mold and will sell items in some locations that exceed the tantalizing $1 grab-n-go price.

The cost of clothes, cars, food and just about everything else has soared this year as the global economy emerges from a pandemic uppercut and Dollar Tree has not been untouched.

Last month the retail chain said that rising shipping costs would take a bite of $1.50 to $1.60 out of its per-share profits this year. That’s a huge hit for any business, perhaps more so for one founded decades ago steadfastly calling itself “Only $1.00 Inc.”

“For decades, our customers have enjoyed the ‘thrill-of-the-hunt’ for value at one dollar — and we remain committed to that core proposition — but many are telling us that they also want a broader product assortment when they come to shop,” said CEO Michael Witynski in a prepared statement.

Raising some prices will certainly give the national chain some flexibility and likely more variety on its shelves. But a dollar this year will not buy you what it did in 2020.

Annual inflation in the U.S. reached 4.2 percent in July, the highest in three decades. And this week in an appearance before Congress, Fed Chair Jerome Powell said that price increases have worsened amid snarled supply chains and rising labor costs.

The company had already begun testing higher prices at several hundred of its nearly 8,000 locations in a section of the store called “Dollar Tree Plus” with items that can go for as much as $5. Items that can go for $1.25 to $1.50 will soon be found in the mix at some locations amid the typical assortment of $1 products.

Analysts with J.P. Morgan noted past conversations with Dollar Tree executives who cited a significant sales boost at stores offering a Plus section and if no one else is cheering the shift to the top side of $1 at Dollar Tree, Wall Street is.

In addition to the sales test of higher-priced items at its legacy establishments, Dollar Tree will also add more goods that go for more than a buck at its Combo and Dollar Tree Plus stores, which were already charging $3 or $5 for some items. Dollar General Corp., a rival chain, also sells products for more than $1.

Dollar Tree is on track to have 500 Plus stores by the end of its fiscal year in January, and plans to open another 1,500 next year.