Dollar Tree Points to Theft as Factor Behind Profit Margin Decline


The newest corporation to partially attribute declining revenues to theft is Dollar Tree. 

Richard Dreiling, the company’s CEO, and Jeffrey Davis, the CFO, told Wall Street analysts on Thursday that the company’s gross profit margin dropped from 32.7% in the prior quarter to 29.8% in the most recent period.

They ascribed a large portion of that to “shrink,” or the loss, theft, or destruction of goods. The issue had been resolved, but according to Davis, Dollar Tree, which also owns Family Dollar shops, had “definitely advanced a little further than what we had anticipated.” 

The corporation said that necessitates taking more extreme measures. “We are now taking a very defensive approach to shrink,” said Dreiling, stressing that some goods might be hidden behind the counter, locked up in cases, or even removed from some locations.

According to CNN, Dollar Tree cut its earnings prediction for the current quarter in part due to the expense of the theft prevention initiatives. Dollar Tree isn’t the only firm whose stock “plunged 10% on the news,” according to the report.

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Guarding the Bottom Line

Fox Business reports that Kohl’s announced earlier this week that it was taking further precautions to prevent shrink, which had “weighed in on our margins,” while Dick’s Sporting Goods cited theft as the main reason for a 23% decrease in profitability in Q2 despite increasing sales.

“The number of incidents and the impact of organized retail crime came in significantly higher than we anticipated,” said Navdeep Gupta, CFO of Dick’s, to the Street.

Target and Walmart have also “raised the alarm on organized retail crime and shoplifting in recent weeks,” according to Fox. According to NewsNation, Target CEO Brian Cornell stated that the firm has seen a 120% spike in theft occurrences involving violence or threats. 

The loss from unaccounted-for merchandise is expected to reach $1 billion this year, up from $700 million the year before. According to the National Retail Federation, retail contraction cost businesses $94.5 billion in total in 2021, up from $90.8 billion in 2020.

As other businesses have done, Dollar Tree has noted a customer shift away from frivolous products and toward food and other basics.  In addition, it claimed that rising diesel prices, higher shipping costs, air conditioning expenses, and salary expenditures in distribution center payroll had all contributed to falling profitability.

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Source: NEWSER

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