Biggest Challenge for Dollar Tree's New CEO

Soon, the CEO of the price-conscious retailer Dollar Tree (DLTR -0.05%) will change. On January 29, current chain executive chairman Rick Dreiling will formally succeed Mike Witynski in that role.

The 69-year-old Dreiling has more than 50 years of retail expertise, including a seven-year term as CEO of Dollar General (DG -0.43%), the main rival of Dollar Tree.

Family Dollar is a chain of discount retailers offering products at a range of price points, whereas Dollar Tree has always made a point of offering everything it has for only one dollar.

Many Dollar Tree stores now sell a small selection of items for far over $1.25 each, demonstrating that the company's selection is appealing enough to draw customers back and offset the effects of inflation.

Curiously though, the parent company's profits aren't being negatively impacted by the Dollar Tree division. It's Family Dollar, notwithstanding the retailer's ability to vary its prices.

To put things in context, Dollar General typically has gross profit rates of around 31% and net operating margins of roughly 9%.

CFO Jeff Davis stated, "Family Dollar's gross margin dropped 100 basis points, mostly due to a product mix shift and product cost inflation," during the third-quarter results call conducted in November.

Investors searching for a value-oriented retailer with the appropriate product mix being sold at the appropriate price utilising the appropriate business model should continue with Dollar General.

Check Out More Stories