Retail Theft Hits Dick’s Sporting Goods Hard
Dick’s Sporting Goods issued a warning on Tuesday that retail theft is negatively impacting its business and may result in lower annual profits. The sports and athletic clothing retailer reported a notable 23% drop in second-quarter profits, despite a 3.6% increase in sales during the same period. Consequently, shares of Dick’s plunged by nearly 24% on Tuesday.
The Impact of Shrink on Retailers
The company attributed its disappointing earnings to shrink, a term used in the retail industry to refer to theft and damaged inventory. Although several other national retailers have alerted investors about the increasing occurrence of theft, Dick’s is one of the first to attribute its lackluster quarterly financial report primarily to theft.
“Our [second-quarter] profitability was short of our expectations due in large part to the impact of elevated inventory shrink, an increasingly serious issue impacting many retailers,” CEO Lauren Hobart stated. As a result, the retailer announced that it now expects its earnings per share for the year to be 12% below its initial forecast.
The Growing Problem of Retail Theft
Retailers, both large and small, have reported struggles in managing a surge in store crimes, ranging from minor shoplifting to organized large-scale thefts that clear entire shelves of products. Earlier this year, Target warned that it was bracing for losses of half a billion dollars due to rising theft.
However, not all agree that crime is becoming significantly more serious. Walgreens argued that the problem is being overhyped, while industry observers suggest that factors such as mixed signals on the health of the economy, persistent inflation, and rising borrowing costs can contribute to an increase in shoplifting.
Organized Retail Crime on the Rise
According to the National Retail Federation, large-scale store theft is becoming a larger part of retail shrink. The NRF estimates total annual shrink reached $94.5 billion in 2021, up from $90.8 billion from 2020, with nearly half of this attributed to large-scale theft of products.
Organized retail crime, involving groups of people targeting stores that carry higher-value items like electronics, sporting goods, and designer clothing, has retailers particularly worried. These groups often resell the stolen merchandise in secondary marketplaces or even back into the legitimate supply chain.
Cities Fight Back Against Retail Crime
Cities are taking action against this type of crime. In Los Angeles, several police departments have formed a task force, in conjunction with the FBI, to target such incidents. However, police remain frustrated that changes to criminal laws meant to reduce jail population in the city, along with local DA’s policies that lean toward not seeking jail even for repeat offenders, offer little disincentive to perpetrators to stop the crime.
Effects on Other Retailers
On Tuesday, home improvement chain Lowe’s and department store chain Macy’s also reported second-quarter results. Despite a 9.2% drop in sales from a year ago for Lowe’s, the retailer stuck with its full-year sale guidance for total sales of between $87 billion to $89 billion. Macy’s reiterated its full-year forecast Tuesday for sales of between $22.8 billion and $23.2 billion, despite logging sales of $5 billion, down 8% from a year ago.
Original Story at www.cnn.com – 2023-08-22 19:31:00