$1.25 Puts More Green on Dollar Tree

That’s what shoppers are now paying for most items at Dollar Tree, which raised prices for the first time in its 35-year history in order to restore profit margins sapped by inflation. 

Executives at the retail chain, known for its wide variety of $1 items, said the price hike rolled out earlier this year would help offset higher freight and wage costs and give them more freedom to introduce new products and sizes. While retailers like Walmart and Target saw increases in their own food and fuel costs eat away at profits in the most recent quarter, Dollar Tree on Thursday reported fiscal first-quarter profit jumped 19% from the same period a year earlier, a stark contrast to the decline seen in its fiscal fourth quarter.

“It probably was a wise thing for them to be proactive in putting this forward,” said Lee Holman, a retail analyst at IHL Group, suggesting Dollar Tree customers have had some time to get used to the price point. “Meanwhile, they're now more concerned about paying 75 bucks to gas up their car.”

While gas prices continue to soar to new records and grocery bills get relentlessly larger, there’s new evidence of just how much inflation—still near 40-year highs—is affecting the entire supply chain. Companies facing higher costs for shipping, merchandise, and labor are having to decide how much to pass those on, and how much will turn customers off. Last week, Walmart executives reported disappointing profit, noting they were caught off guard by the magnitude of their extra expenses and had begun to better match their costs to prices.

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