FILE PHOTO: A person enters a Dollar Tree store in Washington, U.S., June 1, 2021. REUTERS/Erin Scott/File Photo
Dollar Tree Inc said Tuesday it would start selling more products for $1.25 at all its stores and forecast holiday-quarter profit below expectations as the discounter grapples with rising costs triggered by the pandemic.
The retailer said the new price point, applicable at all its namesake chain stores, would allow it to return to “its historical gross margin range” by offsetting some of the higher costs, including freight and wage increases.
Dollar Tree, known for selling everything from make-up to homeware at the $1 price-point, in September said it planned on adding new price points of $1.25 and $1.50 across some of its stores.
Rising freight costs from global supply chain disruptions have dented profits for most of Corporate America, and have put a further strain on many retailers who were already paying more for labor and raw materials.
Dollar Tree said that freight costs were significantly higher than anticipated in the third quarter and expects this to continue in the near term, adding the new price point would allow it to bring back certain key “traffic-driving” products.
It projected fourth-quarter earnings per share of $1.69 to $1.79. Analysts on average were anticipating $1.75, according to Refinitiv IBES data.
Net income for the company fell to $216.8 million, or 96 cents per share, in the quarter ended October 30 from $330.0 million, or $1.39 per share, a year earlier.
Net sales rose 3.9% to $6.42 billion, edging past expectations of $6.41 billion.
Shares of the Chesapeake, Virginia-based company fell 1.5% before the bell. They have climbed about 23% this year.