Dollar Tree ditched its single $1 price point years ago. Now, executives say, that’s giving the retailer an advantage as it deals with tariffs.
The discount chain said Wednesday that it would face an extra $70 million in tariff-related costs during its second quarter after a brief period this spring when it had to pay duties of 145% on some imports from China, CFO Stewart Glendinning said on the company’s first-quarter earnings call.
Those extra costs could send Dollar Tree’s earnings per share between 45% and 50% lower for the second quarter, the retailer said. Dollar Tree expects its earnings growth to improve in the last two quarters of its fiscal year.
Dollar Tree executives pointed to an ongoing effort that is helping them recoup some of those tariff costs: Stocking more higher-priced items at its stores.
In 2021, the retailer said it would raise prices to $1.25 and abandon the $1 price point that it had used for years.
Dollar Tree doesn’t plan to respond to tariffs by raising prices across the board. “We don’t see this as a break-the-dollar moment,” CEO Michael Creedon said on Wednesday’s call.
But Creedon pointed to several ways that Dollar Tree is trying to reduce the costs it faces from tariffs and other cost increases, from negotiating with its suppliers to adjusting the size of an item.
Those strategies — and “especially” Dollar Tree’s addition of more products that cost more than $1.25 — “gives us the flexibility to make sure that if a customer wants that product, we can have that product for them,” Creedon said.
Dollar Tree customers can find products in some stores that cost well more than $1.25. The company is testing selections of frozen food items at some locations that range in price from $3 to $7.25, Creedon said on Wednesday.
“The multi-price model also gives Dollar Tree more scope in mitigating the impact of tariffs,” Neil Saunders, managing director at GlobalData, said after Dollar Tree reported earnings on Wednesday.
Rival chain Dollar General, meanwhile, sells roughly 2,000 items “at or below” $1 in its stores, CEO Todd Vasos said in an earnings call on Tuesday. Like Dollar Tree, Dollar General also sells many items at higher price points.
The higher-priced items mean that Dollar Tree can offer customers a wider range of goods than it could by sticking to the $1.25 price point, executives said.
“There will be more gains from this over the balance of the year,” Saunders said, referring to the multi-price strategy.
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