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Dollar Tree raises price point to $1.25, citing inflation

The company known for its dirt-cheap deals says it can offer more items with a higher cap.
Inflation has come for Dollar Tree with the baseline price increasing to $1.25.
Inflation has come for Dollar Tree, where the baseline price is increasing to $1.25.Erin Scott / Reuters file

Dollar Tree, a favorite shopping option of bargain hunters, will raise its baseline price for items from its namesake dollar to $1.25, the company said Tuesday.

President and CEO Michael Witynski blamed inflation but insisted that Dollar Tree customers will roll with the price-tag punches.

“Our Dollar Tree pricing tests have demonstrated broad consumer acceptance of the new price point and excitement about the additional offerings and extreme value we will be able to provide,” Witynski said in a statement detailing third-quarter company earnings. “Accordingly, we have begun rolling out the $1.25 price point at all Dollar Tree stores nationwide.”

While some items cost more than $1, Dollar Tree is widely known for holding nearly all its goods to the $1-per-unit price point, said Neil Saunders, an analyst at GlobalData Retail.

Most of the company's loyal customers understand the nation's struggles with inflation and supply chain slowdowns, and they are likely to stick with Dollar Tree despite having to shell out $1.25 for many items, Saunders said.

"It's not helpful, but it's not disastrous," he said.

Sucharita Kodali, a vice president and principal analyst at Forrester Research, also said customers would get over any initial sticker shock.

"I think if there are specific items that people are used to buying for a dollar, like soda or a candy bar, it could be a shock to have a higher price, but at the same time, I don’t know that people will riot," she said. "Most people see it as a quarter, not as 25 percent inflation."

The company claimed that with a higher price ceiling, it can offer more products it couldn't carry with a strict adherence to a $1 cap.

Dollar Tree now has the "ability to materially expand its offerings, introduce new products and sizes, and provide families with more of their daily essentials," the company said in a statement.

It's unlikely that the chain will change its familiar name.

“The ‘One Dollar and a Quarter Tree store' doesn’t have the same ring to it," Saunders said.