Dollar Tree has announced a significant shift in its pricing strategy, raising its price cap to $7 in response to changing consumer demographics and inflationary pressures. This adjustment follows previous increases in base prices, such as raising the price point to $1.25 three years ago and setting a $5 cap last June. With this latest change, Dollar Tree plans to expand its multi-price assortment by over 300 items, ranging from $1.50 to $7, across 3,000 stores.
The expanded price range will include a variety of products, particularly food, snacks, pet care, and personal care items. This move comes as Dollar Tree observes an influx of higher-income shoppers, with CEO Rick Dreiling noting that the company added 3.4 million new customers in 2023, primarily from households earning over $125,000 annually. The company aims to cater to this growing demographic by offering a wider selection of products at higher price points.
Despite these strategic adjustments, Dollar Tree reported a significant net loss in the fourth quarter, amounting to $1.71 billion, or $7.85 per share, compared to a year-ago profit. In response to the losses and shifting consumer trends, Dollar Tree announced plans to close nearly 1,000 stores, including 600 Family Dollar locations in the first half of 2024 and 370 stores over the following years.
The decision to close stores reflects Dollar Tree’s efforts to optimize its portfolio and adapt to evolving market conditions. The company faces challenges from changing consumer spending habits, with a growing preference for e-commerce platforms like Temu, which offer competitive pricing on everyday items.
In light of these developments, Dollar Tree is reassessing its Family Dollar business and undertaking measures to return to growth. However, the store closures incurred significant charges, including a $594.4 million charge for portfolio optimization review, a goodwill impairment charge of $1.07 billion, and $950 million in other asset impairment charges in the reported quarter.
Overall, Dollar Tree’s pricing adjustments and store closures reflect its efforts to navigate a challenging retail landscape while addressing shifting consumer preferences and market dynamics.