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Dollar Tree to Offer High-Value, Multi-Price Products in Its Combo and Dollar Tree Plus Stores

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Shares of Dollar Tree Inc. traded 16% higher after the company reported it is expanding the offerings and pricing of items in its stores to more than one dollar due to recent successful market test results at its newly formatted Combo and Dollar Tree Plus stores. The firm also announced that its Board of Directors has raised authorized share repurchases to US$2.5 billion.

After U.S. markets closed for trading yesterday, national discount variety store operator Dollar Tree Inc. (DLTR:NASDAQ) announced that "it plans to begin adding new price points above $1 across all Dollar Tree Plus stores and will begin testing additional price points above $1 in selected legacy Dollar Tree stores." The firm indicated that the change in its price points strategy was based upon positive feedback from customers and the success achieved at its new Combo and Dollar Tree Plus format stores.

Dollar Tree indicated that is currently on track to have 500 of its Dollar Tree Plus stores fully operational by FYE/21. These stores will offer a wide assortment of additional products at expanded price points of $1.00, $3.00 and $5.00. The company advised that another 1,500 stores are scheduled to be converted in FY/22 and that by the end of FY/24, it expects that a total of 5,000 Dollar Tree Plus stores will be open. The firm did not specify in the report if these locations were for newly built or reformatted stores.

The firm additionally pointed out that it has enjoyed very good success with its newest store format which it calls the 'Combo Store'. The company listed that it presently operates 105 of these stores and plans to add approximately 400 more in FY/22. The firm anticipates that it will ramp up the number of these store to around 3,000 locations over the next several years.

The company's President and CEO Michael Witynski remarked, "For decades, our customers have enjoyed the 'thrill-of-the-hunt' for value at one dollar, and we remain committed to that core proposition, but many are telling us that they also want a broader product assortment when they come to shop. We believe testing additional price points above $1 for Dollar Tree product will enable us over time to expand our assortments, introduce new products, and meet more of our customers' everyday needs."

"We are a 'test-and-learn' organization which is what we are doing with this new initiative. We listen to our customers and believe it will make shopping with us an even better experience," Witynski added.

Witynski concluded his comments by saying that Dollar Tree remains focused on keeping its promise to deliver great value to its customers and that that will not change as it offers items at higher price points.

In a separate news release today, the company announced that "its Board of Directors has increased the company's share repurchase authorization by $1.05 billion to an aggregate amount of $2.5 billion, including approximately $1.45 billion available for repurchases under the Board's previous repurchase authorization approved on March 2, 2021."

CEO Witynski commented, "Delivering value to our customers and shareholders is our top priority. We are committed to a disciplined capital allocation strategy that balances returning capital to our shareholders and investing in our business for growth."

"In fiscal 2021, we have repurchased $950 million of shares. Over the past several years, we have paid down more than $4 billion in debt and returned to an investment grade rating. As a result, with the meaningful free cash flow from our business, we expect to maintain share repurchasing as an important part of our capital allocation strategy," Witynski added.

The company noted that the Board of Director's authorization provides the company with the option to purchase the firm's shares in the open market or through privately negotiated purchases as it deems appropriate up to the aggregate limits authorized by the Board.

Dollar Tree is based in Chesapeake, Va., and is an operator of discount variety stores. The Fortune 200 company listed that as of July 31, 2021, it operated 15,865 stores in 48 states in the U.S. and within 5 provinces in Canada. The firm's branded retail stores include Dollar Tree, Family Dollar, and Dollar Tree Canada.

Dollar Tree began the day with a market cap of around $19.4 billion with approximately 224.9 million shares outstanding and a short interest of about 2.3%. DLTR shares opened almost 8% higher today at $93.095 (+$6.815, +7.90%) over yesterday's $84.26 closing price. The stock has traded today between $92.96 and $101.43 per share and closed at $100.51 (+$14.23, +16.49%).


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