When Dollar Tree announced last week that it would start rolling out prices above $ 1 on more items, executives said this was intended to help the retailer introduce new products and meet more needs. customers – which in today’s reality means the money is not strong enough to tackle the discount retailer’s supply and workforce issues.
Some analysts have said the price increase has great significance beyond the discount retail sector, as it indicates how the pressures of higher wages and unreliable supply lines from of Asia are exercised on the retail sector. Scott Mushkin, founder and analyst at R5 Capital, told the New York Times that could mean these problems are permanent.
Read more: Dollar Tree adds more expensive products to stores
Dollar Tree told analysts and investors last month that it expects freight costs to be up to $ 200 million more this year than it had expected in May and lowered his estimate of annual earnings per share between 5.40 and 5.60 dollars.
Michael Witynski, President and CEO of Dollar Tree, noted on a conference call that Dollar Tree is more sensitive to freight costs than others in the industry due to its lower prices, which means that the freight cost is a higher percentage of the gross margin on the merchandise and it is not profitable to use air shipments.
“As transportation costs moderate in the future, we are confident that, along with our team’s significant efforts to improve our supply chain, this will become a significant positive wind contributing to better product margins,” the CEO told analysts.
See: Dollar Tree Raises Estimated Freight Costs, Reduces Outlook
Still, Witynski said Dollar Tree does not count on “hardware improvements” in 2022, especially in the first part of the year.
As the holiday shopping season approaches, consumers face less choice and higher prices as retailers face shutdowns of key factories in Asia, partial port closures in China and a shortage of truck drivers in Europe, among other issues that add to huge grunts in the supply chain. . Nike last month said factory closures in Vietnam caused at least 10 weeks of lost production time, meaning holiday and spring merchandise will likely be delayed.
Related: Factory closures cause more than 10 weeks of lost production for Nike
Lack of warehouse staff
Witynski also said last month that Dollar Tree was facing labor shortages in distribution centers and stores, which forced the company to be more proactive in hiring through national events, enrollment bonuses, higher salaries and reimbursement of tuition fees, among other initiatives.
But Dollar Tree is also fighting some of the biggest names in retail in an attempt to woo workers, with Walmart expecting to hire 20,000 people for its supply chain operations and Target seeking to hire 100,000 seasonal workers. . Amazon is also trying to hire 40,000 business and technology positions across the United States, in addition to “tens of thousands” of hourly positions in Amazon’s network of operations.
Read more: Warehouse worker shortages trigger wage hikes, use of robot assistants
In July, according to the most recent data available from the United States Bureau of Labor Statistics, the retail sector had 1.1 million job openings, up from 781,000 in the same period of the year. last. Transportation, warehousing and utility companies had 490,000 open jobs, up from 296,000 in July 2020.
ShipBob CEO Dhruv Saxena told PYMNTS in a recent interview that he expects it to be very difficult for some companies to find enough workers to staff their distribution and fulfillment centers. orders, as many large companies make every effort to hire before the peak season.
See: ShipBob CEO Says D2C Differentiation Must Extend to Achievement
“You have to be very creative to understand what the job market is like and how to attract these seasonal employees to choose you rather than choosing the different options,” Saxena said.