- Dollar Tree raised prices to $1.25 and said that shoppers don't seem to be put off.
- Comparable sales in the quarter increased by 11.2%, with fewer transactions but higher totals.
- Dollar Tree and rival Dollar General said more consumers are buying their private-label products.
Dollar stores are pumping up prices amid soaring inflation.
Dollar Tree put up its prices to $1.25 over the last quarter but said shoppers don't seem to be put off. "The Dollar Tree banner delivered its strongest quarter in company history," CEO Mike Witynski said on its results call on Thursday.
The move to a $1.25 price point contributed to "both sales and margin improvements," he said. "Shoppers are responding favorably as the new greater value products hit our shelves."
Dollar Tree's comparable sales in the quarter rose by 11.2%. The number of transactions fell 3.6% but the value of each one rose by 15.4%, Witynski said.
Analysts say that the more flexible pricing could give customers more choice by allowing Dollar Tree to offer a wider variety of products and new brands, although they may have little option but to pay the higher prices as retailers across the board impose increases.
A myriad of factors including rising wages, the war in Ukraine, and supply-chain chaos have increased prices for gasoline, food, and energy in the US. The Consumer Price Index rose 8.5% in the year through March, according to the Bureau of Labor Statistics, though data suggests that America is past peak inflation.
"The consumer overall has been fairly resilient through this hyperinflation that we've seen," Dollar General CEO Todd Vados said on the company's results call on Thursday.
Dollar General's net sales rose by 4.2% in the first quarter compared with the same period last year. The average transaction amount grew, but a decline in footfall meant same-store sales dipped by 0.1% compared with last year. The retailer slightly increased its 2022 sales outlook, citing its performance to date.
Both dollar store chains said more consumers had been buying their private-label products, and Vados said Dollar General expected to attract more shoppers throughout the year.
"We knew that the consumer was going to get tighter in 2022, just because of the lack of stimulus compared to last year," Vados said. But he explained that inflation, including fuel price increases, "has quickened the pace a little bit. So we believe that she'll flee even further to value as she moves into the back half of the year, especially as she gets to that holiday time frame."
Dollar stores are pushing higher-priced items
Dollar Tree plans to expand Dollar Plus, its range priced at $3 and $5, which it brought to an additional 790 Dollar Tree stores during the quarter, Witynski added.
Dollar General is pushing shoppers towards more expensive items, too. It's planning to open more stores under its Popshelf brand, which sells items at higher prices with some costing more than $20. The concept targets wealthy young surburbanites and focuses on non-food items.
Vados said that the company plans to double the number of Popshelf stores by the end of 2022 and reach 1,000 by the end of 2025, up from less than 100.
"We're starting to see that next tier of customers start to shop with us a little bit more as well," he said, saying that the company had retained "higher-end" consumers who started shopping at its stores during the pandemic. The company said that it had a "greater mix of higher-value products" than the previous year.