Dollar Tree to sell more items above $1 amid rising shipping costs

Dollar Tree Inc. announced on Sept. 28 it will begin introducing higher-priced items at all combo stores and implementing Dollar Tree Plus sections across locations in the United States as part of its multi-price evolution.

The company will begin introducing price points above its signature $1 and will offer an assortment of items valued at $1, $3 and $5, according to a company news release.

The company had already begun testing higher prices at several hundred of its nearly 8,000 locations in a section of the store called Dollar Tree Plus. Items that can go for $1.25 to $1.50 will soon be found in the mix at some locations amid the typical assortment of $1 products.

Dollar Tree Inc. currently has 105 combo stores and expects to add another 400 in 2022. The company plans to add another 1,500 Dollar Tree Plus sections in 2022 and upwards of 5,000 in 2024.

FILE - Dollar Tree, discount variety storefront.

The combo store format, which was introduced in March, combined the Dollar Tree and Family Dollar brands under one roof.

"For decades, our customers have enjoyed the ‘thrill-of-the-hunt’ for value at one dollar - and we remain committed to that core proposition - but many are telling us that they also want a broader product assortment when they come to shop. We believe testing additional price points above $1 for Dollar Tree product will enable us over time to expand our assortments, introduce new products and meet more of our customers’ everyday needs," Michael Witynski, president and chief executive officer, said.

Witynski told analysts in August that Dollar Tree Plus stores have seen an overall sales lift of approximately 6%, while larger combo stores have delivered 23% more sales.

The move comes as Dollar Tree recently lowered its full-year profit outlook, citing higher supply chain and freight costs.

The company now projects that its regular ocean carriers will fulfill only 60% to 65% of their commitments, down from previous guidance of around 85%. It also cited a more than 20% increase in spot market rates for ocean freight from China since its first-quarter earnings report back in May.

Dollar Tree said that it now expects an additional $185 million to $200 million, or 60 to 65 cents per diluted share, in freight costs since its May guidance. For fiscal year 2021, Dollar Tree anticipates net sales in the range of $26.19 billion to $26.44 billion and diluted earnings per share in the range of $5.40 to $5.60.

"We are a ‘test-and-learn’ organization which is what we are doing with this new initiative. We listen to our customers and believe it will make shopping with us an even better experience," Witynski added.

The Associated Press and FOX Business contributed to this report.