Dollar Tree Adding Items That Cost Above $1 as Rising Prices Hit Company's Bottom Line

Dollar Tree, known for offering every item on its shelves for just $1, says its stores will begin selling some items for a higher price, according to the Associated Press.

The retail chain, once committed to that single price, has not been untouched by soaring prices, spurred by the coronavirus pandemic, in just about every industry, from cars to clothing.

Dollar Tree, based in Chesapeake, Virginia, said last month that rising shipping costs would result in a $1.50 to $1.60 loss in its per-share profits in 2021, the AP reported. Any company would be hit hard by that development, particularly a retailer that has done business for decades on an "everything for $1" promise.

In a prepared statement, Dollar Tree CEO Michael Witynski said adding higher-priced products will meet consumer demand for a wider range of items.

"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," Witynski said.

For more reporting from the Associated Press, see below.

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, Federal Reserve Chairman Jerome Powell said that price increases have worsened amid snarled supply chains and rising labor costs.

That has hit businesses of every type, perhaps especially one that has held the line at $1 for decades.

Witynski said this week that Dollar Tree is a "test-and-learn" company, and they'll be watching how customers react.

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.

Shares of Dollar Tree Inc. jumped 13 percent at the opening bell Wednesday.

As Dollar Tree breaks the $1 barrier, Witynski said the company would remain true to its promise of value.

"We will continue to be fiercely protective of that promise, regardless of the price point, whether it is $1.00, $1.25, $1.50," Witynski said.