A few years ago, “multi-price points” were the new buzzwords at Dollar Tree. Now it’s “re-stickering.” Either way, it’s going to cost you more. And Dollar Tree executives, analysts and shoppers are divided over whether that’s a good thing.
As its costs increase and sales slow, Dollar Tree is leaning even further into its strategy of offering more products priced higher than its storewide base price of $1.25, which itself was raised from $1 four years ago. Add to that the uncertainty over tariffs that’s causing the retailer to temporarily raise prices on many products – “re-stickering” them with new price tags – and some analysts are concerned that the discount store has lost its way, and its uniqueness.
Retail analyst Corey Tarlowe of the investment firm Jefferies noted that store traffic, and spending per trip, are declining, as Dollar Tree’s practice of offering more products at higher price points is “eroding simplicity” and wiping out the retailer’s “differentiation.” With competitors like Dollar General, Five Below and Walmart offering more products at similar price points, Dollar Tree no longer stands out, “leaving its multi-price strategy exposed.”
Dollar Tree also said last month that the immediate financial benefit from offering higher-priced products and raising base prices on many other products was beginning to wane – potentially sending it into an endless loop of raising prices to boost profits, experiencing slower sales, and then seeing no other way out but to raise prices again.
And then there are the red stickers.
Over the past several months, store employees have labored to cover many preprinted $1.25 price tags with red stickers, indicating that the price is no longer $1.25, but $1.50, or more. In a recent presentation to investors, Dollar Tree CEO Mike Creedon insisted this practice was temporary, directly related to tariff-related cost increases, and had nothing to do with the retailer’s ongoing multi-price strategy.
“Re-stickering is an operational stopgap we’ve deployed to manage external cost pressures,” he said. “We fully acknowledge the retail execution behind re-stickering isn’t ideal. And it doesn’t make working in our stores easier. But I can assure you it’s short term, and will primarily phase out by the end of our current fiscal year.”
“Phasing out” red stickers doesn’t necessarily mean phasing out the higher prices that those stickers signify, though. Chief Financial Officer Stewart Glendinning elaborated on the sticker phaseout, explaining that “we will not require further stickering efforts because these new product purchases are not prepriced.” Which appears to mean that $1.25 prices won’t be covered up with red stickers anymore, because newer products whose prices were raised won’t be preprinted with $1.25 prices anymore.
While the stickers may be temporary, Dollar Tree says its multi-price strategy is here to stay. “Dollar Tree must evolve,” Creedon said. “And we are.” While he didn’t break out how many products are still offered at the retailer’s $1.25 base price, he pointed out that 85% of products are priced at $2 or less, and the average selling price per item is $1.40. Higher price points aren’t about charging more for the same products, he said, but being able to feature bigger-ticket items that Dollar Tree could never have offered for just $1 or $1.25.
But plenty of other retailers offer a wide variety of products at a wide variety of prices. Dollar General, in particular, now offers more than 2,000 items priced at just $1, undercutting what was once Dollar Tree’s leading value proposition.
Whether due to external forces, or internal choices, Dollar Tree prices are now inconsistent, and sometimes even higher than competitors, leaving some analysts unimpressed. “Inflation, management decisions, and tariffs have turned a simple business model into a complex one,” Jefferies’ Tarlowe said.
Dollar Tree management disagrees. “The red stickering, no one liked,” Creedon admitted. But “our multi-price strategy is one of the most important strategic shifts in Dollar Tree’s modern history. And it’s working.”
So executives and investors have had their say. In the end, it will be up to shoppers to determine which one is right.
Image source: Dollar Tree
