In an odd move, intra-quarter Dollar Tree management has announced that it is going to introduce more price points above $1. Management is clearly reacting to the inflationary environment driving material earnings pressure in the face of a fixed $1 price point. Historically the company defended its ability to use multiple levers to maintain margin and value at $1. Now, however, the company seems to be acknowledging that ability to maintain margin and value is no longer the case. There are both risks and opportunities for DLTR around this larger multi-price point initiative as a well executed breaking of the buck can be one of the most powerful earnings drivers in all of retail, yet a hasty, poorly executed one could mean upsetting core customers.
For now the market likes the announcement alongside accelerated buyback, if nothing else it’s catching shorts off guard. The timing is odd leading some to wonder if management is unleashing a knee jerk reaction to potential activist pressure.
Tomorrow at 2pm EDT, we are hosting a call to give an overview of the DLTR Dollar Plus initiative and we’ll give our take on the latest developments as well as our take on positioning for the stock.
Call Details (Webcast Only):
Date/Time: Friday October 1st at 2pm EDT Add to Calendar: CLICK HERE
Live Video Link: CLICK HERE
