Renovation Equals Success for Dollar Tree

But in-store food sales disappoint in most recent quarter.

December 01, 2020

CHESAPEAKE, Va.—Store renovations are paying off for Dollar Tree, according to Progressive Grocer.

For the third quarter, Dollar Tree reported that the H2 renovation program in its Family Dollar chain has contributed to an average 10%-plus lift versus non-renovated locations in their first year. Customers have responded favorably to the new categories and new price points, and sell-through on seasonal items has been exceptional.

As of Oct. 31, Dollar Tree had about 2,240 Family Dollar stores in the H2 format and plans to renovate about 1,250 more next year. But food was not a bright spot for the chain.

"Consumables were down approximately 3%,” said Mike Witynski, president and CEO, during the post-earnings conference call with investors. “The comp sales for every line of business at Dollar Tree improved from quarter one to quarter two, with the exception of the food category. Factors impacting food include reduced availability of protein products from periodic plant shutdowns, slowed sales of impulse snacks as traffic has declined, and some vendors are focusing more on larger pack sizes based on demand and their production capacity." 

As COVID-19 cases increase, pantry loading is returning, he added.

"Current environment and related in-stock levels on domestic items are improving, but the continuation of high customer demand, especially on items such as paper towels and cleaning supplies, is still outpacing both vendor production capacity and the supply," Witynski said. "In-stock levels on certain items are constrained, but we do expect to see continued improvements as we move through the quarter."

More than 100 of the company’s stores were impacted during the incidents of civil unrest around the country. "Overall, we incurred nearly $17 million in cost during the quarter related to store damages, repairs and lost inventory,” he said. “The majority of the impacted stores have been reopened."

Dollar Tree also saw a shift in consumer buying habits because people are investing in and spending more time in their homes.

"Anything related to staying at home, such as lawn and garden and outdoor grilling continues to perform very well,” Witynski said. “And on the apparel side, we have had strong sell-through of our spring and summer apparel with a focus on our at-home items like loungewear, sleepwear, slippers, athleisure, children's clothing, as well as newborn and onesies."

Next year, Dollar Store will expand its Dollar Tree Plus! initiative into about 500 stores. Dollar Tree Plus! is a multi-price initiative focusing on the $1, $3 and $5 price points, which began testing in 100-plus stores in southwestern markets in 2019.

To learn more about the competition convenience stores face from dollar stores, read “The Buck Stops Where?” in the October 2019 issue of NACS Magazine.