Dollar Tree bumps prices by 25% to $1.25, ending run as one of last true dollar stores in U.S.

In a year of record-setting inflation, Dollar Tree is joining the club and hiking its prices, too. Items from the store are becoming 25% more expensive and will now cost $1.25 versus the former eponymous dollar.

That ends the Chesapeake, Virginia-based company’s 35-year run as one of America’s last-remaining true dollar stores—as opposed to brands like Dollar General, which have sold items well above a dollar for years. But the move wasn’t wholly wrought by recent inflation woes—rather, it was a much longer time coming. In a quarterly earnings release, the company refuted the idea that its decision was based on “short-term or transitory market conditions;” instead, it explained, capping prices at $1 had stunted the store’s growth over time and forced it to stop carrying a number of “customer favorites.” Raising prices would allow it to bring those back and also boost its selection of goods.

But it was also necessary, it conceded, to balance “historically high” freight costs and employee wage increases—both products of pandemic challenges.

Dollar Tree currently focuses on toys, stationary, home decor, kitchenware, party essentials, and seasonal stock, catering mostly to suburban and middle-class shoppers, although data from retail marketing firms suggests nearly 50% of all dollar-store patrons have household incomes under $35,000. That’s opposed to the primarily rural demographic of Dollar General customers. In recent years, Dollar Tree has straggled in the race with Dollar General and other discount chains; Dollar General in particular has enjoyed a major boom in the past decade, and this summer revealed its ambition to crack the healthcare industry by offering an array of health services and over-the-counter drugs at its outposts, which are stationed in what it calls “healthcare deserts” of rural America. Meanwhile Family Dollar, which is Dollar Tree’s low-income-targeted branch, is found mostly in cities.

Dollar Tree’s stock price was up more than 7% midday Tuesday following the news.