That’s why one activist investor thinks it’s time for Dollar Tree to raise its prices.
“Dollar Tree has kept its prices at $1.00 since its founding thirty years ago, despite the fact that $1.00 in 1986 is worth approximately $2.30 today, due to inflation,” Smith wrote.
“However, the value that Dollar Tree has offered its customers has deteriorated because of the need to fit everything into a $1.00 price point. Products today are smaller or of lower quality than they were five, ten, and certainly thirty years ago,” Smith added.
“Dollar Tree has a great customer base, and we believe its loyalty stems from the fantastic value customers find at Dollar Tree, not merely because everything in the store is the same price,” he added.
Smith said Starboard planned to nominate seven directors for the company’s board at Dollar Tree’s next shareholder meeting and that it hopes to work with Dollar Tree’s current management team in order to make some strategic changes.
Smith suggested that disgruntled investors would support its plans for Dollar Tree.
Dollar Tree’s stock has fallen more than 15% in the past year, a drop that’s about twice as large as the fall in the broader stock market and the overall retail sector. The stock has also lagged the S&P 500 and its peers since the Family Dollar deal closed more than three years ago.
Dollar Tree responded to Smith’s letter Monday morning by saying it appreciated the investment and the suggestions.
“Dollar Tree is focused on ensuring our brands are the premier shopping destination for value and convenience, taking the right actions to solidify our leadership position in value retail,” the company said.
But the company also seems prepared for a fight, noting that it has already added four new independent directors since May 2016.