Dollar Tree Woos Affluent Shoppers as Savings Dwindle

Dollar Tree store

As even affluent consumers see their spending power diminish, Dollar Tree is making gains with high-income shoppers, even as the business on the whole faces ongoing challenges.

The discount retail giant, which owns its self-titled banner as well as Family Dollar, shared on a call discussing its fourth-quarter fiscal 2023 financial results that it is benefitting from an influx of new higher-income customers. Despite prevailing economic challenges, Dollar Tree attracted 3.4 million additional customers in 2023, predominantly from households earning over $125,000 annually.

“The fastest-growing demographic is north of $125,000 a year in income, which brings a lot more firepower to the store,” Dollar Tree Chairman and CEO Rick Dreiling said. “ I think that attraction is the multi-price point and the fact that we’ve been able to increase the variety of product in the store.”

The company has been stepping up its offerings at higher price points, items priced at $3, $4, and $5 across various categories. Chief Financial Officer Jeff Davis added that, when consumers purchase these higher-priced items, their total basket value tends to be “as much as 2 times” the average amount.

Certainly, higher-income consumers have been looking for more ways to save. The February/March PYMNTS Intelligence report “New Reality Check: The Paycheck-to-Paycheck Report: Why One-Third of High Earners Live Paycheck to Paycheck,” which draws from a census-balanced survey of more than 4,200 U.S. consumers, finds that nearly three-quarters of those making more than $100,000 a year say their incomes have not kept up with inflation.

Against this backdrop, the study found that nearly half of all consumers in this income bracket live paycheck to paycheck, as do 36% of those annually earning more than $200,000. Among the top reasons high earners do not have that financial safety net include insufficient income, large amounts of debt and paying for family members, the study found.

These gains with higher-income shoppers come amid a challenging time for the company, with Dollar Tree being the latest retailer to announce widespread closures. The company said Wednesday that it is shuttering 600 Family Dollar locations in first half of its fiscal year, and will close another 370 once their leases expire. Plus, approximately 30 Dollar Tree stores will close and the end of their leases in the years ahead.

“While the operating environment remains difficult, I don’t believe the challenges we face are structural and I continue to believe that a well-run and well-located Family Dollar store is a powerful retail force,” Dreiling told analysts.

Many retailers are closing stores amid soft demand as consumers pull back their spending. The same “New Reality Check” report noted that 56% of high-income, 66% of middle-income and 69% of low-income shoppers said they have cut down on nonessential spending in the last year due to retail product price increases.

Macy’s recently announced the upcoming closure of 150 locations over the next couple of years. Signet Jewelers — owner of Kay Jewelers, Zales and Jared — is closing up to 150 American and British locations by the middle of the year. Allbirds said on Tuesday (March 12) that, over the course of this year, it aims to close10 to 15 retail stores in the United States.