What is the Good way to transform a dollar store into a high-end shop? By raising the prices, of course. Dollar Tree will do just that, helping its stock soar in early trading.
Dollar Tree has long been committed to fulfilling its name, charging a dollar for everything in its stores. However, with logistics costs rising and surpluses turning to shortages, the firm announced on Tuesday night that it would start selling goods that cost more than $1 in its Dollar Tree Plus shops and testing them in its standard locations.
The advantages are quite substantial. “[Comps] can grow even more,” notes Jefferies’ Corey Tarlow. “Merchants may obtain new items to improve the customer experience, and productivity might be enhanced further. Supply chain flexibility may also arise as a result of [comps]. We think the potential for greater.
Dollar stores have been experiencing supply chain issues in recent quarters. On August 26, when Dollar Tree released its results, shares dropped 12 percent. While profits exceeded expectations, sales fell short, and margins were tight due to rising freight costs, Dollar Tree lowered its full-year earnings forecast as a result of the increase in shipping expenses.
Dollar Tree has made multiple changes in an effort to acquire more customers. These do not signify a shift in the company’s values, however. “Importantly, mgmt’s primary #1 objective will continue to be “value,” which will ultimately determine out-the-door pricing per SKU (e.g., $1 vs. $1
Dollar Tree said it would boost its share buybacks to $2.5 billion from $1.45 billion, a $1.05 billion increase.
Dollar Tree shares are up 13% at $97.50 in Wednesday trading, well above the 0.4% and 0.5% gains in the Dow Jones Industrial Average and S&P 500. Still, Dollar Tree was down 20% at Tuesday’s close in 2021.
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