Dollar Tree said Tuesday that it will raise prices to $1.25 for most of its products because of the rising cost of goods and freight.
Dollar Tree said the reason for raising its prices to $1.25 was not due to short-term or transitory market conditions. The higher prices will allow the company to cope with high merchandise cost increases as well as higher operating costs, such as wages.
Dollar Tree believes that this is the right time to shift away from the $1.00 price point in order to continue offering extreme value to customers.
Dollar Tree was the last true dollar store after most of its competitors moved away from that price point.
In September, the company said it was testing higher prices at some stores. The new price point will be introduced in more than 2,000 additional Dollar Tree stores in December and will be rolled out to all of its stores by early next year. Dollar Tree has about 8,000 stores.
Michael Witynski said he expects Dollar Tree customers to stay loyal.
Witynski said on the call that shoppers believe that at $1.25, it is still an obvious value. Dollar Tree hasn't raised its price in 35 years, so they're giving us credit.
On Tuesday, the company's stock rose after the announcement and the company's quarterly earnings. The analysts at Citigroup said the earnings were disappointing and that investors were looking past the earnings to the company raising prices.
