CHESAPEAKE, Va.—Dollar Tree will update 1,250 existing stores this year, and the company will add 600 new stores, including more of its “combo stores,” which are Dollar Tree and Family Dollar locations under one roof, the company said.
“Compared to other Family Dollar stores located in small markets, these Combination Stores are delivering a same-store sales lift of greater than 20% on average,” the company said in a statement, adding that the tandem locations are “more productive, deliver higher gross margins and are better at leveraging store expenses.”
Dollar Tree said it will open 400 Dollar Tree stores and 200 Family Dollar stores. The new Family Dollar stores will be comprised of H2 and Combination Store formats, based upon market locations, the company said.
Gross profit margin in the fourth quarter of 2021 improved to 31.8% from 31% a year ago, due to a better sales mix, reduced markdowns and improved occupancy costs, as its freight and distribution costs went up.
For the fiscal fourth quarter ended Jan. 29, Dollar Tree sales were $7.08 billion, compared with the average analyst estimate of $7.12 billion, reports Reuters. The company's earnings of $2.01 per share, excluding items, topped estimates of $1.77 a share.
In November, Dollar Tree raised its prices by 25% for the first time in 35 years. Most items will cost $1.25.
“Lifting the one-dollar constraint represents a monumental step for our organization,” said Dollar Tree President and Chief Executive Officer Michael Witynski. The higher price point will give the company “greater flexibility to manage the overall business, especially in a volatile, inflationary environment.”
Discount retailers continue to encroach on c-store territory, and the incursion of dollar stores on the c-store space “represents the greatest immediate threat to the convenience industry,” according to the 2020 NACS State of the Industry report.
Dollar Trees feature a Snack Zone concept in an effort to move additional cold beverages, candy and snacks. Family Dollar—owned by the same company—sells alcohol. Dollar General is bringing fresh fruits and vegetables to as many as 10,000 stores over the next several years, with a number of those in current U.S. Department of Agriculture (USDA)-defined food deserts. Fortunately, many convenience retailers are moving beyond “gas, Cokes and smokes” and embracing a differentiated offer anchored in foodservice.