Dollar Tree Inc will begin selling most products for $ 1.25 in all of its eponymous stores in an effort to offset the impact of rising shipping costs and other pandemic-driven challenges.
The retailer said on Tuesday that the new price point, which will be fully rolled out in the first quarter of 2022, will allow it to return to the “historic gross margin range” of 35 percent to 36 percent next year.
CEO Michael Witynski said the higher price point allows discounter to expand ranges, introduce new products and sizes as well as bring back “traffic-driving” products.
Dollar Tree, known for selling everything from makeup to home furnishings for $ 1, said in September that they planned to add new price points over $ 1 in some of its stores.
The price increase is a good thing, as the results for Q3 and our outlook for Q1 indicate that freight headwinds are worse than expected, said Evercore analyst Michael Montani.
Rising freight costs from global supply chain disruptions have weakened profits for most of Corporate America, further pushing many retailers already struggling with higher labor and commodity costs.
Canada’s annual inflation rose 4.7 percent in October
Dollar Tree said shipping costs were significantly higher than expected in the third quarter and expects this to continue in the short term.
It expected fourth-quarter earnings of $ 1.69 to $ 1.79. Analysts expected an average of $ 1.75, according to Refinitive IBES data.
Net income for the company fell to $ 216.8 million, or 96 cents per share, in the quarter ended October 30, from $ 330.0 million, or $ 1.39 per share, a year earlier.
Revenue rose 3.9 percent to $ 6.42 billion, moving toward previous expectations of $ 6.41 billion.
Shares of the Chesapeake, Virginia-based company rose 5.6 percent in morning trading.
(Reporting by Mehr Bedi in Bengaluru; Editing by Shinjini Ganguli)
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