CEO Rick Dreiling said in the morning that the company, which runs Dollar Tree and Family Dollar, has “several new shrink formats” that it plans to roll out in the last six months of the year. In the retail business, “shrink” usually means theft and other types of product loss.
“It includes everything from moving some SKUs to behind the counter,” he told those who were listening to the company’s earnings call. “It has to do with locking up some cases. And it’s gotten so bad that some stores that can’t keep a certain SKU in stock have just stopped selling it.”
Dollar Tree said that shrinking was one thing that hurt its gross profit. This number reached 29.2% in the second quarter, which is a drop of 220 basis points from the same time last year.
At one point, CFO Jeff Davis said, “Shrink is kind of a lagging indicator because stores are getting smaller over the course of the year.” He also said that it “takes time” for changes to “take hold.”
During the results call for the quarter before, the discount store also said that shrink was a problem.
The words from Dollar Tree Inc. executives on Thursday morning come just one day after Kohl’s CFO Jill Timm called shrink a “retail industry problem” and said it had “weighed in on our margins.” Like Dollar Tree, she talked about what Kohl’s has done to deal with it.
Timm said that Kohl’s has taken steps like “wiring products to fixtures” and only having testers of beauty products. They have also put more staff in fitting rooms and by the front doors.
The National Retail Federation’s yearly retail security survey for 2022 found that the amount of money lost to theft rose by about 4% in 2021, to $94.5 billion. The poll, which came out in the middle of September, said that the losses were “primarily” caused by thefts from outside the company, such as organized retail crime.
Dollar Tree said that its updated plans for the fiscal year took into account things like sales mix, higher diesel prices, saves on ocean freight, and more. Dollar Tree thought that its total net sales would be between $30,6 billion and $30,9 billion, and that its earnings per share would be between $5.78 and $6.08.
Davis said that Dollar Tree “sees nothing in the current environment, either systemic or structural, that would have a long-term negative effect on the long-term outlook we shared in June.”