Dollar Tree is one of the only chains in the United States that actually adheres to its feature brand – all of its products are sold for only one dollar. But the value of one dollar in 1986, when the company was founded, is today worth 2.5 dollars, so from now on – everything is not in dollars, but at 1.25. The Dollar Tree move illustrates the trend of many companies having to adjust to rising inflationAnd the global supply crisis, caused by the economic effects of MegCorona mouth.
The business model of dollar products, which relies for the most part on imports, worked when inflation rates were negligible, but now, with a jump in import costs, the model brings the company to losses and so it is forced to abandon it. Even investors, who claimed that the “everything in the dollar” business model is too rigid and delayed the chain’s growth, pushed for change, and indeed Dollar Tree announced that it would price most of its products at $ 1.25, and even add products up to $ 5 in some branches.
The Dollar Tree chain currently sells more than $ 25 billion a year. Since its issuance in 1996, its stock has yielded a cumulative return of 11,245% (19.3% per annum), compared to a return of 1,452% (10.8% per annum) of the S&P 500.
Dollar Tree reported a 1.5% decline in revenue in the first three quarters of 2021, compared to the same period last year. The company’s CEO said that the company believes that the new pricing will allow it to moderate the unusual price increase, as well as market new products, the sale of which for one dollar was not profitable for it. In addition, the company trusts that its competitors are taking similar steps, so customers are already used to the fact that when they say ‘everything in dollars’, it is not really a dollar.