Dollar Tree to introduce more one-stop stores during pandemic

FILE PHOTO: A customer walks out of a Dollar Tree discount store in Austin, Texas, U.S., February 27, 2017. REUTERS/Mohammad Khursheed

(Reuters) - Dollar Tree will reshuffle aisles of discount stores that normally focus on discretionary goods, adding more items such as groceries and toilet paper, to pull in a higher number of consumers who want to do all their shopping under one roof.

The company’s shares rose 6% on Wednesday as the Family Dollar parent said it had identified over 3,000 locations to introduce the “combination store” concept, having seen the 50 it had already opened deliver higher profit margins.

To limit trips outside their homes due to the COVID-19 pandemic, Americans have been consolidating their shopping trips to just a few stores, a trend that has most benefited big national retail chains that sell a wide variety of products.

Dollar Tree said several of the 200 new Family Dollar stores it plans on opening, and 1,250 outlets it would renovate this fiscal year would follow the combination store format.

Family Dollar stores usually focus on selling inexpensive discretionary goods, such as apparel, while Dollar Tree outlets sell essential items.

“We will continue to refine strategic store formats designed to serve more customers in all types of geographic markets,” Chief Executive Officer Michael Witynski said.

In the fourth quarter ended Jan. 30, Dollar Tree’s net sales rose 7.2% to $6.77 billion, but missed analysts’ estimates of $6.79 billion, according to Refinitiv IBES data.

The company earned $2.13 per share, above estimates of $2.11.

Dollar Tree, which boosted its stock repurchase plan by $2 billion on Wednesday, said it expected fiscal 2021 earnings to improve at both its discount store chains.

Reporting by Praveen Paramasivam in Bengaluru; Editing by Vinay Dwivedi and Shounak Dasgupta