Dick’s Sporting Goods’ profits drop 24% due to retail theft.
Retail Giant Dick’s Sporting Goods Faces Profit Plunge Amidst Rise in Organized Retail Theft
Retail giant Dick’s Sporting Goods has reported a staggering 23% drop in profits due to a significant increase in organized retail theft, according to the company’s statement on Tuesday.
The decline in profits has prompted Dick’s to revise its earnings guidance for 2023 and implement markdowns to clear excess inventory of outdoor products, as stated in a recent report.
Challenges and Consequences
The disappointing financial results have caused Dick’s shares to plummet by 24%, erasing the 22% year-to-date gain that had been achieved until Monday’s close, falling short of Wall Street estimates.
The report also highlights the retailer’s revised profit forecast, which anticipates further losses due to theft and internal issues, commonly referred to as shrink.
Interestingly, the report reveals that Dick’s has not addressed the issue of shrink in any press release or earnings call for nearly two decades.
CEO’s Perspective
“Organized retail crime and theft in general is an increasingly serious issue impacting many retailers. Based on the results from our most recent physical inventory cycle, the impact of theft on our shrink was meaningful to both our Q2 results and our go forward expectations for the balance of the year,”
CEO Lauren Hobart expressed.
Hobart further emphasized the company’s proactive measures to address the situation:
“Beyond shrink, we also took decisive action on excess product, particularly in the outdoor category, to allow us to bring in new receipts and ensure our inventory remains vibrant and well positioned.”
she added.
Revised Earnings Guidance
The previously issued earnings guidance of $12.90 to $13.80 per share has been adjusted by Dick’s to an expected range of $11.33 to $12.13 per share for the year, according to the report.
Despite the Q2 profit losses, Dick’s remains optimistic about an increase in gross margins for 2023 compared to 2022.
Unexpected Impact
“The biggest impact in terms of the surprise for Q2 primarily came from shrink,”
explained Chief Financial Officer Navdeep Gupta.
Gupta acknowledged that the company had underestimated the extent of organized retail crime and its impact on shrink, resulting in higher-than-anticipated losses.
He revealed that the realization of the shrink’s impact occurred during the annual physical inventory count, conducted just before the start of the school year.
A Collective Challenge
Gupta emphasized that the issue of organized retail theft is not exclusive to Dick’s Sporting Goods:
“This is not just a Dick’s Sporting Goods challenge. This is a collective retail challenge.”
he stated.
He also expressed the company’s expectation that the challenge will persist in the near future.
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