CHESAPEAKE, Va. — It is now 16 months since Rick Dreiling took the reins at Dollar Tree Inc., and he has not been idle. Suffice to say, the small-box discount sector is about to get much more interesting.

Last month Dreiling and the management team he has assembled provided analysts and investors a glimpse of what they have accomplished and what lies ahead for the Dollar Tree and Family Dollar chains. Most of what has been done thus far is foundational, intended to make up for years of inadequate investment by previous management, but the base is being laid for the kind of growth that Dreiling led during his years at Dollar General Corp.

One theme that Dreiling returned to repeatedly during his initial remarks was the negative effect of under-investment and deferred store maintenance not only on in-store execution and financial results but on employee morale, resulting in elevated turnover rates. 

“Somewhere along the line, no cost and low cost got confused,” he gibed. “The trouble is we didn’t invest in our stores, and we have many stores that are in pretty rough shape … Our decor right now in both banners is right out of 1975. So there’s a refresh that has to take place so the store is more compelling to shop in.”

That effort has already begun, with a test conducted in a single market containing nine Dollar Tree outlets and eight Family Dollar locations. The average investment for the Dollar Tree stores was $69,000, and it was $134,000 for the Family Dollars, which, as Dreiling noted, “were beat up pretty bad.” The refreshed Family Dollar stores experienced a sales lift of 19% with a unit volume increase of 7.8%, while the Dollar Trees turned in a 10% sales hike and unit volume lift of 10.4%. 

Another operational area that had suffered from under-investment is wages, which led to high turnover and execution issues as well. 

“Because of our wage structure, we have a significant amount of stores that do not open on time because they don’t have proper staffing, they close early because they don’t have proper staffing and because of the maintenance issues in the store, sometimes they don’t even open up,” Dreiling remarked.

In the markets where wage investments were made during fiscal 2022, late openings and early closures dropped by 51%, and the number of weekly job applicants rose by 25%. Comp sales, moreover, grew 2.75%. Most important in Dreiling’s view, store manager turnover fell 33%, a key metric since the retailer’s business model centers on the store managers and district managers.

Other areas that have suffered from under-investment include the supply chain and information technology (IT). Dreiling pointed out that store deliveries typically required three to four hours and three to four employees unloading product, if indeed there were employees available to perform the work, since managers did not know when a delivery was coming. In the future unloading time will be reduced to an hour or less as the company implements a Rotacart delivery system similar to that developed at Dollar General during Dreiling’s tenure. 

In the area of IT, Dreiling said, the scope of under-investment was “amazing.” The extensive menu of technology changes already in the works will affect virtually every part of the enterprise, from point-of-sale systems to merchandising, from supply chain to human resources management, from real estate to financial management.

Dreiling pointed to other early accomplishments that will have important effects going forward. First, Dollar Tree has adopted a multiple price-point strategy, a process that actually began, albeit in a hesitant and limited manner, under previous management. 

“Believe it or not, that was incredibly important and that now opens up merchandising potential that we’ve never had before,” Dreiling said.

He added that a major SKU expansion is under way at Family Dollar as well, with more than 2,000 SKUs scheduled to be added while about 1,000 under-performing SKUs will be dropped. 

Importantly, Dollar Tree has now established price parity with “our No. 1 competitor.” 

“As we tighten that gap, we also widen the gap with drug and grocery, and close the gap with the big-box retailers out there,” Dreiling noted.

Consequently, Dreiling and his team see enormous potential for growth and expansion of both the Dollar Tree and Family Dollar banners. By fiscal 2026 1,000 new store openings annually are anticipated, with 3,000 store renovations and Dollar Tree conversions to a new multi-price format. 

On the financial front, chief financial officer Jeff Davis reaffirmed the sales target of $30 billion to $30.5 billion for the current fiscal year, with earnings ranging from $5.73 to $6.13 per diluted share.

In wrapping up, Dreiling focused on the need to build a new culture at Dollar Tree, one that emphasizes such values as accountability, belonging, empowerment, excellence and integrity.