Dick’s Sporting Goods, a prominent retailer in the sporting goods industry, experienced a significant impact from organized retail crime and theft during the second quarter. CEO Lauren Hobart addressed this issue during a conference call, emphasizing its meaningful effect on the company’s results.
The Severity of Organized Retail Crime
Hobart acknowledged that organized retail crime and theft have become increasingly serious concerns for many retailers. The impact on Dick’s Sporting Goods was noticeable in their most recent physical inventory cycle, affecting both their second-quarter results and their future expectations.
Taking Action to Protect Stores and Customers
In response to this growing problem, Dick’s Sporting Goods is taking proactive measures to combat theft and ensure the safety of their stores, teammates, and athletes. The company is dedicated to addressing the issue comprehensively and has implemented various strategies to achieve this goal.
Earnings Miss and Inventory Shrink
Dick’s Sporting Goods faced its first earnings miss in three years, which they attributed to elevated inventory shrink. This disappointing outcome led to a 24.1% decrease in the company’s stock on Tuesday.
The Rising Trend of Organized Retail Crime
During the conference call, CFO Navdeep Gupta revealed that organized retail crime during the second quarter was significantly higher than anticipated. Gupta acknowledged that the number of such incidents has been increasing, and Dick’s Sporting Goods expects elevated levels of shrink to persist.
Collaboration with Trade Partners and Government
Hobart expressed alarm regarding the situation when responding to an analyst’s question. She emphasized that the company is actively collaborating with trade partners and government entities to combat organized retail crime. Additionally, Dick’s Sporting Goods has enhanced security measures, implemented Lot Cop cameras, and engaged with local law enforcement and partners in their efforts.
In conclusion, Dick’s Sporting Goods recognizes the seriousness of organized retail crime and theft in the industry. They are committed to protecting their stores, teammates, and athletes through various initiatives, while also working alongside trade partners, government entities, and law enforcement to address this pressing issue.
The Growing Concern of Retail Shrink
“Shrink” continues to be a pressing issue in the retail industry. Although there are several factors that contribute to inventory shrink, such as damaged goods, theft and organized retail crime have emerged as significant drivers. Major retailers like Target Corp and Home Depot Inc have expressed their concern regarding this matter. Target CEO Brian Cornell recently stated that the company is grappling with an “unacceptable amount” of retail theft and organized retail crime.
Home Depot also shed light on the ongoing battle against shrink in the retail sector and emphasized a new U.S. law that aims to address this problem, costing the industry billions of dollars annually.
The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act came into effect on June 27th with the objective of increasing transparency in online transactions and deterring criminals from selling stolen, counterfeit, or unsafe items through online marketplaces. The act mandates e-commerce sites to verify and disclose information about their high-volume third-party sellers.
According to the National Retail Federation’s report last year, retail-industry shrink reached $94.5 billion in 2021, up from $90.8 billion in 2020. The primary driver behind this increase was external theft, including organized retail crime. The NRF’s National Retail Security Survey conducted in collaboration with the Loss Prevention Research Council revealed that retailers experienced a 26.5% surge in organized retail crime incidents in 2021 on average. Moreover, eight out of ten retailers reported a rise in violence and aggression associated with these incidents.
While the S&P 500 index has witnessed a gain of 14.6% in 2023, shares of Dick’s Sporting Goods have declined by 7.2%.
