Naperville Business Lawyer on Discount Store’s Planned Changes
When you tell someone that you are going to the “dollar store” to pick up a few things, you might be referring to one of a few different retail outlets. It not uncommon for people to refer to discount stores like Family Dollar or Dollar General as dollar stores—ostensibly due to the inclusion of the word “dollar” in their names. While these outlets are generally considered discount stores with prices that lower than typical department stores or even some big-box stores, they offer merchandise at a variety of price points. Dollar Tree, however, promises that everything in the store is always $1 or less, making it a true “dollar store” in the minds of many.
As a business law attorney, I recognize the importance of adjusting a business plan and operations model to keep pace with a changing market. Perhaps that is why I was not shocked to learn that Dollar Tree is experimenting with offering higher-priced merchandise alongside its usual stock. The national discount chain recently announced plans to expand the test into several dozen more locations in the coming months.
Dollar Tree Plus! to Reach More Than 100 Stores
Over the last few years, Dollar Tree is the only national chain to have remained steadfast on its promise to keep prices at $1 or less. However, pressure seems to be mounting from the company’s stockholders to increase profitability. Dollar Tree currently operates some 15,000 locations in the United States and Canada, which includes locations of its subsidiary brand, Family Dollar.
Earlier this year, the company began adding products in a few stores that were priced above the traditional $1. According to Dollar Tree officials, the move did not raise prices on currently offered merchandise. Instead, merchandise under the “Dollar Tree Plus!” line was added to the stores in question. Industry experts speculate that the experiment was prompted by suggestions from investors who suggested a shake-up of Dollar Tree’s board and the sale of the Family Dollar brand in addition to higher prices.
This week, Dollar Tree released its first-quarter earnings, along with the announcement that the Dollar Tree Plus! test would be expanded to over 100 stores in various areas of the country. In the stores where the program is running, the average price point would be bumped up to $1.25 this year, with the goal of $2.25 in five years. At those numbers, analysts suggest that same-store sales could increase by nearly 12% by 2024. In real dollars, the company’s operating profits would be estimated at about $3.5 billion in 2024 compared to $1.6 billion this year.
Of course, the success of the program depends on customers continuing to shop at Dollar Tree despite rising prices. With no prominent national competitor offering lower prices, however, customers might not have another option.
Contact a DuPage County Business Lawyer
If you are considering an update to your company’s business plan or model of operations, an experienced Naperville business law attorney can help you analyze how your changes will affect your business. Call 630-756-1160 for a confidential consultation at the Gierach Law Firm today.