Dollar Tree (DLTR) is off to a rough start in 2023, with its share price down 7.99% over the past 30 days and down 3.51% over the past 90 days.
Wall Street analysts aren’t impressed.
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Dollar Tree was just downgraded from “overweight” to “neutral” by J.P. Morgan (JPM). Meanwhile, Dollar Tree is breaking in a new chief executive officer, with retail discount veteran Richard Dreiling taking the helm in January.
It’s the latest move from the bargain retailer that’s raising eyebrows, however, as Dollar Tree continues to change its legendary landmark pricing strategy. Throughout 2023, the company is expected to roll out $3.00 and $5.00 prices for goods in 1,800 retail stores, with most price hikes reportedly coming from the retailer’s Dollar Tree Plus product expansion initiative.
Dollar Tree Will Test Price Hikes As it Expands
Dollar Tree also reported it would have 5,000 new Dollar Tree Plus stores operated by the end of next year. Each store will sell products at the three current company pricing levels - $1.25, $3.00, and $5.00. The pricing tier is also active for online store purchases.
It’s no shocker that inflation is a big reason for the pricing pivot.
Inflation remains high, at 6.5% in Dec. 2022, as consumers continue to be slammed by higher retail prices. Yet Dollar Tree executives believe that shoppers will respond to multiple price points in the retailer’s aisle.
“The key is not only selling the product,” Dreiling, the former Dollar General CEO, said on an earnings call this week. “It’s also about the store’s ability to manage multiple price points and not create confusion for the consumer.”
Adding to the consumer’s shopping basket is another goal.
“We know the basket is substantially larger when we get the multiple price points in it," Dreiling said.
In 2022, Dollar Tree boosted its product price from $1.00 to $1.25.
Dollar Tree shares are priced at $144 on March 2.
