Dollar General Chief Financial Officer Kelly Dilts said Thursday that the discount retailer expects to incur an additional $100 million loss from retail theft.
"The shrink environment has continued to worsen," Dilts said Thursday during the company's second-quarter earnings call. "We now expect approximately $100 million of additional shrink headwind since last quarter's call."
She also expects this pressure to continue.
Shrink is an industry term used to describe the loss of inventory that can be attributed to factors such as shoplifting. Dilts' comments are among the latest indicators that the retail industry is continuing to incur significant financial losses due to organized retail crime.
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During the three-month period ending on Aug. 4, Dollar General's gross profit as a percentage of net sales fell 126 basis points compared with a year ago, which the retailer attributed to "lower inventory markups and increased shrink, markdowns and inventory damages."
It also had a "greater proportion of sales coming from the consumables category," which is generally less profitable, the company said in an earnings release.
Even though the company expects pressure from theft to continue, Dilts said that it is "working to reduce these levels through multiple targeted actions."
"These include reducing our inventory position, refreshing and refining our processes, leveraging additional tools and technology and improving execution in our stores," she added.
The company projected "softer sales trends and an increase in expected inventory shrink for the second half of 2023" and cut its profit and sales expectations for the year.
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It now expects net sales growth in the range of 1.3% to 3.3%, down from its previous expectation of 3.5% to 5%. It also expects fiscal 2023 same-store sales growth in the range of a 1% decline to 1% growth. That's also down from the previous expectation of a 1% to 2% increase.
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In recent weeks, a growing number of retailers echoed similar concerns about the increase in theft impacting profits including Dick's Sporting Goods, Kohl's, Foot Locker, Target, Walmart and Dollar Tree.
Overall, retail theft has become a nearly $100 billion problem for the industry. The nation's largest retail trade group, the Nation Retail Federation, said there's evidence the problem is growing.
