Dollar Tree just had a miserable Q2 and the company is blaming the terrible results not just on consumer demand shrinking thanks to inflation making necessities like food, fuel, and electricity more expensive, but also theft leading to increasingly high “shrink.” So, the company aims to combat the crime problem and restore its profits by installing locked cases at its stores to make theft more difficult.
Speaking about the matter in a recent earnings call, Dollar Tree CEO Richard Dreiling and CFO Jeffrey Davis noted that the company’s tumbling profit margin had been deliriously affected by theft, which led to large inventory losses.
The problem so severe was that company’s gross profit margin tumbled to 29.8% last quarter from 32.7% a year earlier, with the theft-induced “shrink” being one of the primary issues for the struggling retail giant’s profit margin.
The problem was apparently even more severe than the company thought and is getting even worse, with CFO Jeffrey Davis saying that the “shrink” problem is “definitely advanced a little further than what we had anticipated.”
Picking up on that, CEO Richard Dreiling told analysts that the company had a plan to deal with the problem: locked cases. He said, “We are now taking a very defensive approach to shrink. We have several new shrink formats that we’ll introduce in the back half of the year, and it goes everything from moving certain SKUs to behind the check stand. It has to do with some cases being locked up. And even to the point where we have some stores that can’t keep a certain SKU on the shelf just discontinuing the item. So we have a lot of things in the works.”
Dollar Tree isn’t the only company to face serious losses from rising crime and brazen theft. Target announced that it expects to suffer losses from crime of “$500 million more than what we saw last year,” when “shrink” losses were an already massive $800 million, meaning that Target now expects to lose $1.3 billion from crime.
Discussing the problem, Target said, “While there are many potential sources of inventory shrink, theft and organized retail crime are increasingly important drivers of the issue. We are making significant investments in strategies to prevent this from happening in our stores.”
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Speaking to the New York Post about the issue, Target said, “We are working with legislators, law enforcement and retail industry partners to advocate for public policy solutions to combat theft and organized retail crime.”
Continuing, the company indicated that it might end up having to close retail locations because of the devastating crime issue, telling the New York Post, “We will do everything in our power to continue to keep our stores open. At the same time, we will be closely evaluating the continued safety of our team and guests, as well as the financial impact to our business, as we determine the right path forward at Target.”
Featured image credit: Screenshot from embedded video