Dollar Tree beat Wall Street’s fourth quarter earnings estimates Wednesday, following the company's decision to raise its average price point from 1$ to $1.25.
Comparable sales rose 8.7% at Dollar Tree and 5.8% at the company's Family Dollar unit.
The discount retailer also added assorted merchandise with price points totaling $3 and $5 in over 1,800 stores throughout the quarter and is planning to add another 1,800 stores to the list in 2023.
Some of the products include frozen and refrigerated foods like proteins, pizza and ice cream.
DOLLAR TREE DOUBLES DOWN ON PRICING ITEMS OVER $1
CEO Rick Dreiling said on the earnings call that the key takeaway from the new price points "is not only selling the product, but the store’s ability to manage multiple price points and not create confusion for the customer."
The improvement is not only the sales transactions counts, but what’s going on in the basket, he added. "And we know the basket is substantially larger when we get the multiple price points in it."
DOLLAR TREE FINED OVER $250,000 FOR SAFETY VIOLATIONS
Throughout the fourth quarter, Dollar Tree’s consolidated net sales increased 9% to $7.72 billion. Net income was $452.million for the three months ended Jan. 28, 2023, little changed from $454.2 million a yea ago.
Diluted earnings per share (EPS) rose 1.5% to $2.04. In 2022, consolidated net sales increased 7.6% to $28.32 billion while diluted EPS increased 24.3% to $7.21.
The retailer also repurchased 4,613,696 shares for $647.5 million in 2022.
CONSUMER CONFIDENCE SLIPS AGAIN
Consolidated net sales for full-year fiscal 2023 are expected to range from $29.9 billion to $30.5 billion, with lower single-digit sales increases at Dollar Tree and mid single-digit increases at Family Dollar.
Dollar Tree believes its actions and investments, beginning in the second half of fiscal 2022, are already contributing to top-line momentum, according to the company announcement.
"We have undergone a significant amount of change in less than one year, and believe we have the team in place to capture the opportunity ahead of us," Dreiling said.
"We are confident that the accelerated investments outlined will transform our company, will enable and propel us through years of accelerated growth and margin improvement, and will enhance the company’s ability to achieve substantially higher long-term earnings power," he said.
