Title: Dick’s Sporting Goods Faces Profit Decline Due to Rising Retail Theft
Subtitle: Increased theft and damaged inventory negatively impact second-quarter earnings
Date: [Current Date]
New York, CNN – Dick’s Sporting Goods, a popular sporting goods and athletic clothing retailer, has warned investors that the rise in retail theft is causing significant damage to its business and will result in lower annual profits. Despite reporting a 3.6% increase in sales for the second quarter, the company’s profit dropped by 23%, leading to a sharp decline in its stock prices.
The retailer attributed its poor earnings to “shrink,” an industry term encompassing theft and damaged inventory. While other national retailers have also expressed concerns about growing theft, Dick’s is among the first to primarily blame theft for its lackluster financial performance.
CEO Lauren Hobart explained, “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.”
Retail “shrink” refers to merchandise that goes missing due to theft, fraud, damage, accounting errors, or other reasons. Looking ahead, Dick’s Sporting Goods now predicts a 12% decrease in its earnings-per-share for the year, below its initial forecast. However, the retailer maintains its full-year sales forecast of flat to up 2% for stores open for at least a year.
Retailers of all sizes are grappling with a surge in store crimes, ranging from petty shoplifting to organized theft sprees that result in the complete clearance of entire product shelves. Target, a prominent retailer, recently warned of a potential loss of half a billion dollars due to increasing theft incidents in its stores nationwide.
While crime statistics do not necessarily suggest a significant rise in severity, industry experts believe that factors like mixed signals on the economy’s health, persistent inflation, and rising borrowing costs may contribute to an increase in shoplifting incidents. Experts highlight the combination of need and opportunity as major catalysts for driving up retail crime rates.
Large-scale store theft, which involves organized groups targeting retailers selling high-value items, has become a significant concern for the industry. The stolen merchandise is often resold in secondary marketplaces such as eBay or Facebook Marketplace, sometimes even finding its way back into the legitimate supply chain.
Shopping malls and upscale stores in major cities like Los Angeles, Chicago, and New York City have witnessed a spate of dangerous smash-and-grab attacks. Perpetrators armed with sledgehammers and other tools break into stores, making off with thousands of dollars’ worth of merchandise. These incidents have prompted cities to take action, with collaborative efforts between local police and federal agencies formed to combat organized retail crime.
Law enforcement agencies have observed a recent surge in organized retail crime due, in part, to changes in criminal justice reform laws. Under these laws, judges can no longer impose jail sentences or bail for grand theft, making it less of a disincentive for repeat offenders. This loophole has resulted in a disproportionate number of perpetrators remaining on the streets and continuing their criminal activities.
Retail industry reports indicate that large-scale store theft accounts for nearly half of total annual shrink, which amounted to $94.5 billion in 2021, up from $90.8 billion in 2020. Retailers, on average, experienced a 26.5% increase in this type of theft compared to the previous year.
While Dick’s Sporting Goods battles its theft-related challenges, other major retailers like Lowe’s and Macy’s are also facing their share of difficulties. Lowe’s reported a 9.2% drop in sales from the previous year, coupled with a 1.6% decline in comparable sales. Meanwhile, Macy’s recorded an 8% decrease in sales and an 8.2% decline in comparable sales.
As uncertainty about the economy persists and budget-conscious households reduce discretionary spending, retailers across the board continue to navigate the challenges presented by rising theft and evolving consumer trends.
Sources:
– CNN Business
– National Retail Federation
– New York Police Department