Down to Business: Companies’ bottom lines being impacted by lost or stolen merchandise

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Dollar Tree Inc., the deep discounter that operates retail stores under that name and as Family Dollar, talked frankly in its late-May earnings call about “shrink” – the name given to lost or stolen merchandise.

The company wasn’t alone. A week earlier, Target Corp. opened the quarterly reporting period for retailers by terming shrink “a worsening trend that emerged last year” and would continue to pressure earnings in the first half of fiscal 2023.

Walmart echoed the sentiment as it posted quarterly results. So did Macy’s.

In fact, Macy’s predicted last week that such theft, which it calls “shortage,” could have a 12-cent hit on the company’s expected annual earnings per share. For Dollar Tree, shrink would be part of a 2023 earnings impact projected at 55 cents per share.

“In addition to the historic levels of inflation and labor market challenges, retailers have seen in just the past quarter elevated levels of shrink and even further pressure on the consumer’s willingness to spend on discretionary goods,” Rick Dreiling, CEO of Dollar Tree, said on a conference call when earnings were released.

“Shrink tends to be cyclical,” he added later. “And what happens with shrink is we all work to mitigate it. If you can’t, all costs that can’t be taken out get passed on to the consumer eventually.”

The National Retail Federation reported last fall that shrink accounted for $94.5 billion in lost sales in 2021, a big jump from 2020’s total of $90.8 billion. Numbers for 2022 are currently being collected.

The trade group said last week that a recent survey of consumers showed more than half of respondents believe shoplifting and organized looting have increased since the COVID-19 pandemic, and three-quarters perceive they’re paying more at checkout as a result.

The group continues to raise the alarm over organized retail crime – the smash-and-grab and flash-mob thefts that make headlines and the quieter criminal enterprises that enlist “boosters” to steal in stores and then resell the spoils.

The latter led Target’s CEO, Brian Cornell, to worry aloud about the impact not only on the company but on workers and shoppers who may be put “in harm’s way.” Left unchecked, he said on the company’s earnings call, “theft and organized retail crime degrade the communities we call home.”

Cornell said Target, like other retailers, is working with the Retail Federation to raise the issue before lawmakers and law enforcement to craft industry-wide solutions. Meantime, expect to see more items go behind lock and key and stores to close in high-crime areas.

Dollar Tree’s Dreiling said he was struck that shrink was “pretty uniform” across the company’s stores, even at ones not expected to see much theft.

But among the potential solutions being explored, he said, was whether “in our higher- shrink stores, … do we need the same assortment as a low-shrink category store.”

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at  [email protected].

Categories: Business, News, Opinion, Opinion

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