Dollar Tree Raises Price Cap to $7

Long gone are the days when Dollar Tree customers could expect to spend $1 or even $1.25 on every item in the store. After raising the price cap to $5 last year, Dollar Tree is now raising prices on 300 of its items to $7.

The discount retailer announced the move during its fourth-quarter earnings call earlier this month; the increase follows the June 2023 $5 price cap, reports Yahoo Finance, and the 2021 increase from $1 to $1.25.

"This year, across 3,000 stores, we expect to expand our multi-price assortment by over 300 items at price points ranging from $1.50 to $7," company CEO Rick Dreiling reported during the March 13 call. He explained that the multi-price assortment would impact the prices of food, pet and personal care items.

"Over time, you will also see us fully integrate multi-price merchandise more into our stores so our shoppers will find $5 bags of dog food next to our traditional $1.25 pet treats and toys, and our $3 bags of candy will be found in the candy aisle," Dreiling said.

The CEO added that the company's "fastest-growing demographic" earns a yearly salary that is "north of $125,000," a finding that aligns with InMarket's recent report that there was a 4% average increase in dollar store visits made by consumers who earn more than $100,000 in 2022.

Moving forward, the "$3 and $5 center-store merchandise [will be] available at approximately 5,000 Dollar Tree stores," the press release states. Also, "$3, $4, and $5 frozen and refrigerated items [will be] available at more than 6,500 Dollar Tree stores."

In addition to the new multi-price assortment, the company announced during the call that it will close approximately 600 Family Dollar locations this year and nearly 400 Family Dollar stores over the next several years as store leases expire. Dollar Tree purchased Family Dollar for $8.5 billion in July 2014.

CNN Business reports that years of mismanagement and poor conditions in stores have hurt the Family Dollar brand. The company reported a fourth-quarter net loss of $1.71 billion and a net loss of $998.4 million for fiscal year 2023, Supermarket News reports. In addition, Family Dollar was recently fined more than $40 million for a rat infestation at a warehouse that forced hundreds of stores to temporarily close. CNN Business also attributes inflation and general consumer pullback with impacting Family Dollar's profits, exacerbating its battle with other discounters like Dollar General and Walmart.

The 1,000 closures will improve the company's profitability but are likely to leave a void for shoppers with already limited shopping choices. Shares of Dollar Tree sank more than 13% to their lowest level this year on Wednesday.