Dollar Tree (DLTR) stores have become a hot spot for consumers who are looking to save a few bucks in their pockets during a time when inflation is putting extra pressure on their finances.
The discount retailer, which also operates Family Dollar, has revealed in its latest earnings report that it faced a 3.5% year-over-year increase in its consolidated net sales during the third quarter of 2024.
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“Our Dollar Tree and Family Dollar merchandising efforts produced tangible results, and our third quarter sales came in at the high-end of our expected range,” said Dollar Tree Interim CEO Mike Creedon in the release.
Dollar Tree interim CEO responds to a major concern
As Dollar Tree faces increased consumer demand, its interim CEO recently issued a stern warning about the future of the company’s products and prices at its stores.
Recently, President-elect Donald Trump vowed to impose tariffs of 60% to 100% on all goods coming from China, 25% on all goods from Mexico and Canada, and 10% to 20% on goods imported from all other countries as soon as he takes office next year.
Tariffs are taxes companies pay to import goods from overseas. Often, the extra costs are passed down to consumers, resulting in higher prices for goods/services.
During an earnings call on Dec. 4, Creedon claimed that Dollar Tree is “prepared to act on multiple fronts" if these tariffs are imposed.
He said that the company faced a similar challenge in 2018 and 2019, and its team was able to pull three levers when the price of importing a product became too expensive.
“Back then, the choices were they could change some of the specs on the product, they could negotiate furiously with our suppliers, or they can eliminate the product altogether,” said Creedon. “They still have all three of those levers to pull.”
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Creedon also claimed that Dollar Tree may consider raising its prices through its “multi-price” strategy.
“Multi-price gives us the ability to flex where we need to if a certain product becomes something that we've got to move in the market to be competitive,” said Creedon.
Another price increase at Dollar Tree may backfire
Dollar Tree has gone through several price increases over the past few years. In 2021, the retail chain increased the price of items to $1.25 after originally selling all of its products for $1.
Also, in 2023, it introduced products priced between $3 and $5 at thousands of stores across the country.
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Most recently, it announced in April that it will sell merchandise priced up to $7 by the end of the year.
Some consumers have not embraced Dollar Tree's recent price increases, so the looming possibility of another price hike due to tariffs might have a negative impact.
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Creedon also acknowledged during the earnings call that Dollar Tree’s consumers are already "pressured" by higher costs nationwide.
“The low, the middle income and even the higher income is still feeling some pressure,” said Creedon. “And basically, when you look at a year ago, they were cutting out big purchases. TVs, things like that. If you look at the early part of this year, they started eating more at home and cutting going out.”
Amid recent price hikes, Dollar Tree’s shares have plummeted by roughly 40% this year. Its stock price reached a peak of $149 per share in March, and currently, it sells for about $73 per share.
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