Dollar Tree zeroes in on grocery

Dive Brief:

• Dollar Tree is planning to add “hundreds of national brand equivalents” to its consumables private label portfolio in the back half of the year, Rick Dreiling, the discounter’s chairman and CEO, told investors during the company’s fourth-quarter earnings call Wednesday.
• Also in 2023, Dollar Tree is aiming to add 16,000 cooler doors to its stores, eventually offering roughly 30 doors per store, Dreiling said.
• During Q4, which ended Jan. 28, Dollar Tree reported same-store sales growth of 8.7% for its Dollar Tree banner and 5.8% for its Family Dollar banner. The company’s consolidated net sales for the quarter increased 9% year-over-year, to $7.7 billion. For all of fiscal year 2022, Dollar Tree recorded consolidated net sales of $28.3 billion, up 7.6% from the prior year.

Dive Insight:

Like close competitor Dollar General, Dollar Tree sees increasing its grocery assortment as a way to draw customers and boost its basket sizes.

Dollar Tree’s significant cooler door expansion is connected to its addition of frozen and refrigerated items, Dreiling said Wednesday. The company has been “aggressively” growing its assortment of $3, $4 and $5 frozen and refrigerated products across its Dollar Tree store base, bringing those items to 3,500 stores in 2022, he said. The company has dedicated three cooler doors — one for each price point — at each of those stores.

“[W]hen the customer purchased at least one of these items, the basket size is more than double the basket with no multi-priced items,” said Dreiling, who became Dollar Tree’s chief executive in January.

Dollar Tree, which runs more than 16,000 stores, said it added 464 locations in fiscal 2022, including 123 stores during Q4.

During the last quarter, Dollar Tree stores added bread and ice to its assortment, Dreiling noted. The company is trying to add grocery items in way that will grow transaction sizes but without drastically changing the core shopping experience, he said.

“It’s a methodical process. But I think what’s important here is that it’s nothing but opportunity if we can manage our way through it,” Dreiling said.

Dollar Tree’s new private label items will include “new labels and redefined labels, many of which are being developed in our new test kitchen here in Chesapeake, Virginia,” where the company is based, Dreiling said. He noted that the private label additions provide a boost to margins and are part of the company’s efforts to achieve higher levels of profitability.

Consumers have turned to discount retailers for their grocery needs during the prolonged period of price inflation, and Dollar Tree is looking to further cash in on the opportunity. While the average ticket size at Dollar Tree stores rose 10% in Q4, traffic declined 1.1%. The company’s Family Dollar stores, meanwhile, saw average ticket size grow 5.3%, while traffic grew 0.5%.