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(Reuters) -Dollar Tree Inc will start selling most products for $1.25 at all its eponymous stores, in an effort to offset the impact of spiraling freight costs and other pandemic-driven challenges.
The retailer said on Tuesday the new price point, which will be fully rolled out by the first quarter of 2022, would allow it to return to "its historical gross margin range" of 35% to 36% next year.
Chief Executive Officer Michael Witynski said the higher price point allows the discounter to expand assortments, introduce new products and sizes as well as bring back "traffic-driving" products.
Dollar Tree, known for selling everything from make-up to homeware at the $1 price-point, in September said it planned on adding new price points above $1 across some of its stores.
The price increase is a good thing, as the 3Q results, and our first-quarter outlook indicate freight headwinds are worse than anticipated, Evercore analyst Michael Montani said.
Rising freight costs from global supply chain disruptions have dented profits for most of Corporate America, further pressuring many retailers already grappling with higher labor and raw material costs.
Dollar Tree said that freight costs were significantly higher than anticipated in the third quarter and expects this to continue in the near term.
It projected fourth-quarter earnings per share of $1.69 to $1.79. Analysts on average were anticipating $1.75, according to Refinitiv IBES data.
Net income for the company fell to $216.8 million, or 96 cents per share, in the quarter ended Oct. 30 from $330.0 million, or $1.39 per share, a year earlier.
Net sales rose 3.9% to $6.42 billion, edging past expectations of $6.41 billion.
Shares of the Chesapeake, Virginia-based company rose 5.6% in morning trading.
(Reporting by Mehr Bedi in Bengaluru; Editing by Shinjini Ganguli)