Dollar Tree shares soar 16% after news that more higher-priced goods are on the way

Dollar Tree Inc. DLTR Stock,
+1.73%
climbed 16.5% in Wednesday trading after the discount retailer announced it would test higher-priced merchandise at its Dollar Tree and Dollar Tree Plus stores.

The rally pushed the company’s shares above $100 during the trading session. The stock fell early Thursday.

In March, the company announced a number of changes and additions to store formats and its merchandise lineup, including expanding the rollout of Dollar Tree Plus, which offers items priced above $1, and additional Dollar Tree-Family Dollar combo stores.

“We believe that testing additional prices above $1 for the Dollar Tree product will allow us over time to expand our assortments, introduce new products and meet more of our customers’ everyday needs.”


—Michael Witynski, Managing Director, Dollar Tree

Combination stores target small towns and rural communities of 3,000 to 4,000 people where shopping options are limited.

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The company is on track for 500 Dollar Tree Plus stores by the end of the fiscal year, which will have merchandise priced at $1, $3 and $5. At least 5,000 stores are expected by the end of fiscal 2024.

There are currently 105 combined stores, with 400 additions planned in fiscal 2022 and a potential 3,000 over the next few years.

Extract from the archives (March 2019): Dollar Tree has plans for Family Dollar stores, acquired in 2015

“For decades our customers have enjoyed the ‘thrill of the hunt’ for a dollar’s worth – and we remain committed to this core proposition – but many tell us they also want a wider assortment of products when they come to shop,” chief executive Michael Witynski said in a statement.

“We believe that testing additional prices above $1 for the Dollar Tree product will allow us over time to expand our assortments, introduce new products and meet more of our customers’ everyday needs.”

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Dollar Tree announced a $1.05 billion increase in its share buyback program, bringing the total authorized amount to $2.5 billion.

“Our brand promise is that customers get great value for what they spend at Dollar Tree,” said Witynski. “We will continue to fiercely protect that promise, regardless of the price, whether it’s $1, $1.25, $1.50.”

UBS analysts believe there are a number of benefits to raising Dollar Tree’s prices, and the retailer still won’t lose its price advantage. “The fixed price has become restrictive over the years as inflation has eroded the purchasing power of $1,” UBS analysts said.

“Now the company can offer products that it had to eliminate in the past, such as bleach or cloth towels. Moreover, it can add more value while maintaining a wide price gap with others. »

UBS has a $120 price target on Dollar Tree shares, which it is pricing to buy.

Dollar Tree stock fell 12% in 2021 as of midday Thursday, while the benchmark S&P 500 SPX,
-0.16%
gained more than 15%.