Retailers: Theft Is Killing Our Bottom Lines

Dollar Tree is the latest company to partly blame theft for plunging profits. The company's gross profit margin fell to 29.8% last quarter from 32.7% a year earlier, CEO Richard Dreiling and CFO Jeffrey Davis told Wall Street analysts on Thursday, per CNN. They attributed much of that to "shrink," which refers to items lost, stolen, or damaged. Davis said Dollar Tree, which also owns Family Dollar stores, had addressed the problem but it was continuing to grow and had "definitely advanced a little further than what we had anticipated." That means more drastic steps need to be taken, the company said. "We are now taking a very defensive approach to shrink," said Dreiling, noting certain items would be placed behind the counter, locked up in cases, or entirely removed from some stores.

Dollar Tree lowered its profit forecast for the current quarter in part because of the cost of the theft prevention efforts, per CNN. It reports shares of the company "plunged 10% on the news." Dollar Tree isn't alone. Earlier this week, Kohl's said it was taking various steps to prevent shrink, which had "weighed in on our margins," per Fox Business, while Dick's Sporting Goods cited theft as a main reason for a 23% decrease in profit in Q2 as sales climbed. "The number of incidents and the organized retail crime impact came in significantly higher than we anticipated," Dick's CFO Navdeep Gupta told the Street.

Walmart and Target have also "raised the alarm on shoplifting and organized retail crime in recent weeks," per Fox. Target CEO Brian Cornell said the company saw a 120% increase in theft incidents involving violence or threats, per NewsNation. The company expects to lose up to $1 billion this year due to unaccounted-for inventory, up from $700 million in the previous year. In 2021, retail shrink cost retailers $94.5 billion in total, up from $90.8 billion in 2020, according to the National Retail Federation. Dollar Tree also cited a consumer shift away from discretionary items, in favor of food and other necessities, as other companies have done. It also said increased shipping costs due to rising diesel prices, air conditioning costs, and wage investments in distribution center payroll had contributed to declining profits. (More retail stories.)