Dick’s Sporting Goods said Tuesday quarterly profits plummeted nearly 25% after the retail chain became a target of “organized retail theft.”
Retailer Facing Organized Crime Challenges
The sporting goods and athletic clothing seller reported second-quarter results Tuesday morning, including a 23% drop in profit, despite sales that rose 3.6%.
Shares of Dick’s (DKS) plunged nearly 24% Tuesday.
The dismal profit news came one day after Bloomberg reported that Dick’s Sporting Goods laid off 250 corporate employees. The company reportedly plans to use the freed up overhead to hire employees in other areas of the business.
“The number of incidents and the organized retail crime impact came in significantly higher than we anticipated,” CFO Navdeep Gupta told investors on a Tuesday earnings call.
“Our [second-quarter] profitability was short of our expectations due in large part to the impact of elevated inventory shrink, an increasingly serious issue impacting many retailers,” CEO Lauren Hobart said in a statement. Retail “shrink” is a term that refers to merchandise that goes missing due to theft, fraud, damage, accounting errors or other reasons.
The company blamed shrink, the industry term for theft and damaged inventory, for its surprisingly poor earnings. Although other national retailers have also warned investors about growing theft, Dick’s is among the first to blame its lackluster quarterly financial report primarily on theft.
Last year, Dick’s Sporting Goods reported a net income of $319 million in the second quarter. This year, profit amounted to only $244 million in the second quarter.
Dick’s Sporting Good’s specifically listed “organized retail crime and our ability to effectively manage inventory shrink” among the reasons why their second-quarter profit was lower than forecasted.
The retailer employs around 53,000 globally. In the Pittsburgh region, Dick’s had 4,170 employees at the end of 2022.
Theft has been a concern at other major retailers this year, including Target, Home Depot and Macy’s, which said Tuesday it is moving high-theft items away from store entrances, among other precautions.
Target said last week that disappearing merchandise caused a $400 million hit to the retailer’s gross profit margin for the year.
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