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- Customers are spending more as Dollar Tree ramps up its range of higher-priced items.
- It has set its main price point to $1.25 and is selling more products that cost up to $5.
- Fewer customers have been visiting Dollar Tree, but they've been spending considerably more.
Dollar Tree says it has been "aggressively expanding" how many of its stores sell higher-priced items, specifically in its grocery section, as customers don't seem to be put off by new prices.
Dollar Tree began putting up its prices from $1 to $1.25 and adding new $3 and $5 products to certain stores amid soaring inflation in the fall of 2021. The new $1.25 price point has now been rolled out at almost all of its stores. Execs have previously said that shoppers have responded well, saying that the first quarter of 2022 was the "strongest" in company history.
Sales data from the company shows that fewer customers have been visiting Dollar Tree but they've been spending more. In the company's fourth quarter, which ended on January 28, same-store sales increased 8.7% compared to the same time period the prior year, driven by a 10% increase in average ticket, despite a 1.1% decline in traffic.
The discount chain has also been ramping up its rollout of Dollar Tree Plus products – merchandise priced mostly at $3 and $5, alongside higher-priced grocery items.
Dollar Tree added the Plus range to 1,805 more stores in 2022 and plans similar growth for 2023. Nearly a third of its stores now sell Dollar Tree Plus products.
CEO Rick Dreiling said in its earnings call on Wednesday that Dollar Tree had also been "aggressively expanding" its range of frozen and refrigerated products priced at $3, $4, and $5, including proteins like eggs, meat, and fish, as well as pizza and ice cream. Dreiling said that Dollar Tree had brought the coolers to 3,500 stores in 2022 and noted that customers had been "responding positively."
When customers buy these higher-priced products, they typically spend more than twice as much as other shoppers, Dreiling said.
Dollar Tree, which has more than 8,000 stores, posted $15.4 billion in revenues in the year to January 28, an increase of just over 10% compared to the previous year. Operating profit was up by nearly 50% to $2.5 billion.
While Dollar Tree posted year-over-year traffic declines each quarter in the 2022 fiscal year, sister company Family Dollar actually saw traffic grow in the last two quarters.
The average basket size didn't increase to the same extent as Dollar Tree, however, and it posted a 5.8% increase in same-store sales in the fourth quarter.