Theft has become such a nightmare for Dollar Tree and Family Dollar stores that they're going to lock up some items and simply stop selling others
- Theft is becoming a mounting problem at Dollar Tree and Family Dollar stores.
- Their CEO said stores would start locking up some items and even remove others from sale completely.
Dollar Tree and Family Dollar say theft has become so bad that they're going to start locking up some items in stores and even remove other items from sale completely.
This comes as retailers across the US warn of rising theft levels, including a jump in organized retail crime.
"We are now taking a very defensive approach to shrink," Dollar Tree, Inc CEO Rick Dreiling told investors Thursday, using the industry term for lost, expired, and damaged merchandise. "And it's taken us a quarter, but we have several new shrink formats that we'll introduce in the back half of the year."
Dreiling said that this included moving some products to behind the checkouts and locking some items up, meaning that employees would have to retrieve them for customers. Execs acknowledged during an earlier call with investors that this could hit sales.
Some stores "that can't keep a certain SKU on the shelf" would simply stop selling the item, Dreiling said.
At Dollar Tree, shrink costs increased 0.75% in the quarter to July 29 year-over-year. At Family Dollar, shrink costs were up 0.45%.
Executives said that higher shrink rates, coupled with sales-mix changes and product cost inflation, had pushed down the company's gross profit margins. As of late July, Dollar Tree, Inc owned just under 16,500 stores, with around half Dollar Tree and half Family Dollar.
Target CEO Brian Cornell told analysts last week that the company continued to face "an unacceptable amount of retail theft and organized retail crime," including a huge jump in the number of theft incidents involving violence or threats of violence. Dick's Sporting Goods, meanwhile, blamed a big drop in profits on shrink rates that were "significantly higher than we anticipated."
At its previous earnings call in May, CFO Jeff Davis said Dollar Tree and Family Dollar stores "saw a pretty rapid increase" in shrink levels during the quarter from January to April, though Dreiling added that he thought it was "transitory."
"Some of this is societal, some of it is economics, some of it, of course, is particular to us," Davis told investors.
Execs said at May's call that measures to help improve shrink levels included defensive merchandising, store closures, and local government action. Customers are likely going to have to pay more, too.
"We're going to have to pass some element of this on to our consumer," Davis said. "We'll ultimately have to think about how we will price this into some of our merchandise."
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