Dollar Tree Is Cutting Some Prices Back to $1 — but Don’t Get Too Excited Yet

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

Dollar Tree recently announced it would be cutting back prices. Keep reading to learn how this roll back is part of a larger plan. 

Much ado has been made about Dollar Tree’s announcement that the chain will cut some prices back to $1. As nice as a return to $1 price tags sounds, the adjustment is not quite what it seems. Here, we lay out what a store executive recently said about prices, and why Dollar Tree policies matter to so many people.

Dollar Tree started selling items for $1 in 1986

Dollar Tree first opened in 1986. At the time — as the store name would suggest — every item was priced at $1. In 2021, the discount retailer announced it would begin to raise some prices as part of a test. At that time, prices increased to $1.25 or $1.50. However, just as inflation has impacted the average household’s checking account over the years, inflation has made it tough for Dollar Tree to maintain its profit margin.

Aside from generic brands and smaller packages of familiar products, it’s not always easy for Dollar Tree to purchase products it can sell so cheaply. Which leads to the question of why the retailer would decide to roll back prices now.

Big changes planned

Dollar Tree CEO Rick Dreiling told conference attendees in June, “It’s pretty hard to have a banner like (Dollar Tree), and you have an item that everybody else has at $1, and you’re at a buck and quarter.”

Of the 8,000 or so items Dollar Tree sells, only 300 to 400 will be impacted by the price decrease. That’s roughly 5% of Dollar Tree’s inventory and unlikely to be enough to help consumers send their kids to school or save for retirement.

What draws attention in upcoming months may not be the relatively few items Dollar Tree drops the price on, though. What may take people by surprise are the number of new products with higher-than-expected prices.

The retailer has already introduced the idea of higher price points by introducing $3 and $5 items and placing them in what it calls “Dollar Tree Plus” sections. According to the Dollar Tree website, Plus sections will continue to expand in coming years.

With over 8,000 Dollar Tree stores in the U.S. and Canada, there are no plans to slow down. According to Jeff Davis, chief financial officer for Dollar Tree, there are plans underway for 650 new stores.

Food deserts

“Food desert” is a term used to describe a community that lacks access to grocery stores and fresh foods. The Institute for Local Self-Reliance (ILSR) repeats the claim that stores like Dollar Tree specifically seek out such communities when scouting new locations. However, it doesn’t believe that claim gets it just right.

ILSR believes that chains like Dollar Tree choose locations where space is cheap and there is a significant concentration of low- and moderate-income residents. According to ILSR, “Dollar stores create food deserts,” by leaving little market opportunity for grocery stores to take root or survive.

Whether ILSR’s assessment is correct or not, Dollar Tree’s inclusion of $3 to $5 frozen and refrigerated items has allowed it to introduce new storage coolers to 3,500 stores. Coolers hold proteins, pizza, ice cream, and other food products popular with customers.

It appears that as some prices drop, others will rise. Fortunately, Dollar Tree accepts manufacturer coupons in store, giving shoppers the opportunity to save money on groceries and other items they need.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More