By Jeff Gray, Jeff Mason and Leah Sandals
Dollar Tree Inc. said Friday it would raise the price point of its consumable goods, reasoning that rising food and other commodity prices make price elasticity of demand in the economic cycle clear.
The company, which operates about 11,000 stores, said that planned price hikes represent a blend of menu adjustments in stores to $1.25 from $1 and other pricing initiatives.
“Over the past 15 months, for the year to date ending May 4, we have improved our gross margin driven by increased price realization for basket items by 6 percentage points, despite moderating food inflation due to lapping from last year’s food deflation,” said CEO Bob Sasser in a statement.
Prices for items in Dollar Tree’s impulse aisle, which includes everyday groceries and snacks, will rise to $1.50 from $1.
The Columbia, S.C.-based company also gave profit guidance for the third quarter of 26 cents to 28 cents a share, missing Wall Street expectations of 35 cents.
The company reported a profit of 36 cents a share for the second quarter, slightly above estimates of 35 cents.
It posted revenue of $4.98 billion, which was a decrease of nearly 3 percent from the same period last year, but above estimates of $4.85 billion.