Dollar General is employing new measures to crack down on rampant retail theft that it says has been the most problematic problem for the business.
The company said it plans to remove items that are frequently stolen and eliminate self-checkout options from thousands of additional stores.
It's part of the company's ongoing effort to eliminate shrink, which "continues to be the most significant headwind," CEO Todd Vasos told analysts during an earnings call.
Shrink is an industry term referring to lost or stolen merchandise.
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"We are deploying an end-to-end approach to shrink reduction across the organization, including efforts in our supply chain, merchandising, and within our stores," Vasos said.
As part of its plan, the chief executive said the company converted approximately 3,000 additional stores away from self-checkout in May, totaling 12,000 total locations that have been converted since the beginning of the fiscal year.
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The company had outlined a plan in March to remove self-checkout registers from 300 stores that had the biggest issue with shrink during the first half of the year. The company also announced it was converting self-checkout registers to assisted-checkout options in approximately 9,000 stores as it sought to change its self-checkout strategy.
Even with the latest changes, the company doesn't expect to see a material impact right away.
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"While this represents a significant change in our stores, we believe this is the right course of action to drive increased customer engagement while also better positioning us to begin reducing shrink in the back half of '24 with a more material positive impact expected in 2025," Vasos said.
The company's supply chain teams are also working to make sure deliveries arrive on time, and its merchants are reducing the amount of inventory it has in stock, Vasos said.
As part of its efforts within stores, Dollar General plans to get rid of "high shrink" items, ones that are most likely to be stolen.
During the three-month period ending on March 31, gross profit as a percentage of sales fell 30.2%, a decrease of 145 basis points, which was "primarily attributable to increases in shrink" as well as markdowns, a greater consumable sales mix and lower inventory markups.
