Dollar Tree: where everything’s not a dollar
The addition of products costing more than a dollar at 100 Dollar Tree stores is being called a “test,” but it’s more likely the first step in a national expansion that will serve as a driver of same store sales growth for years to come.
Initially, Dollar Tree’s plans, which were alluded to at the end of last year, call for introducing a mix of roughly 100 single price point items costing as much as $5 in 100 stores. The merchandise will be displayed in a four foot sections branded as Dollar Tree Plus to clearly differentiate from the remainder of a stores’ $1 assortment. The increased price point offering is a “test” insofar as the company will examine endcap and inline placements and urban, suburban and rural stores with various signing treatments.
However, Dollar Tree has an exceptional team of merchants whose ability to source and profitably sell items costing only a dollar is the envy of other retailers. The company is a model of consistency and with a 2.5% first quarter same store sales gain extended its comp store sales increase streak to 45 consecutive quarters. It is a feat seldom seen in retail and the Dollar Tree’s merchants did it with essentially one arm tied behind their backs due to the company’s unwavering single price point commitment.
Now, that same team of merchants has been given license to source and showcase higher price point items they routinely encounter but are forced to pass on because an acceptable margin can’t be achieve if priced at $1.
Dollar Tree is wise to call Dollar Tree Plus a test to moderate investors’ expectations around the pace of expansion and sales contribution, but it is hard to imagine the concept work well and being expanded rapidly. Especially given the company’s track record of sourcing products and showcasing value that make its stores a treasure hunt destination. With higher price point goods in the mix, shoppers will have the opportunity to discover more valuable treasure.
“The test officially launched a few weeks ago with products hitting the shelves of the first batch of stores,” Dollar Tree CEO Gary Philbin said during the company’s first quarter earnings call on May 30. “We are in the process of rolling it down to more than 100 test stores and we'll measure, analyze and adjust products layout and other variables to ensure we are responding to customer feedback in our continued merchandising efforts. Because this is an iterative process we do not have a set time frame for the test.”