Dollar Tree Threatens to "Discontinue" Products Over Theft Concerns
The discount retailer is considering drastic measures to protect its inventory.
Theft has always been a concern among retailers, but it's really taken center stage over the past few years. Countless viral videos show thieves clearing out store shelves while employees stand by helplessly. Referred to as organized retail crime (ORC), this trend has taken a toll on a number of major companies, from Walmart to Home Depot, and they've responded with new anti-theft measures. Now, Dollar Tree is speaking out against the problem, and the retailer is threatening to discontinue certain products as a result. Read on to learn more about the steps Dollar Tree says it's taking to protect its inventory.
Dollar Tree's profits suffered in its most recent quarter.
In an Aug. 24 press release, Dollar Tree, Inc. released the financial results for its second quarter of the 2023 fiscal year, which ended on July 29.
Despite a increase in same-store sales for both of its discount brands (Dollar Tree and sister retailer Family Dollar), the company experienced a "surprisingly large drop" in its gross profit margin, according to CNN. The results indicate that Dollar Tree's gross margin declined to 29.8 percent in this last quarter, compared to the 32.7 percent it was at a year earlier.
And while there may be different explanations, the retailer is confident it knows why.
The company is blaming the decline on retail theft.
Dollar Tree, Inc. CFO Jeff Davis said there were several factors that have impacted the company's financial results, including a shifting sales mix and higher fuel prices. But in a statement accompanying the release, Davis also called out "unfavorable shrink trends" as a notable cause.
Retail shrink refers a loss of inventory from anything other than sales. Most retailers have "attributed the greatest portion of shrink to external theft, including organized retail crime," according to the National Retail Federation (NRF).
During an earnings call with analysts on Aug. 24, officials from Dollar Tree, Inc. made it clear that theft has played a major part in its elevated shrink levels, and the resulting fall in gross profit margin.
"As we think about shrink and mix, it has definitely advanced a little further than what we had anticipated in our guidance that we had given last quarter," Davis said during the call.
Some products may get discontinued over theft concerns.
During the earnings call, Dollar Tree, Inc. Chairman and CEO Rick Dreiling said that the company is "now taking a very defensive approach to shrink."
"We have several new shrink formats that we'll introduce in the back half of the year," Dreiling told analysts.
One of the anti-theft measures may be moving certain products off of shelves and behind the counter, while another could involve locking cases of items up. But a third possibility is likely to upset customers: discontinuing certain products completely, at both Dollar Tree and Family Dollar.
"Even to the point where we have some stores that can't keep a certain SKU on the shelf, just discontinuing the item," Dreiling explained.
Best Life reached out to Dollar Tree about these plans, and we will update this story with their response.
Dollar Tree previously indicated it might close stores or raise prices.
This isn't the first time the company has discussed extreme anti-theft measures. During Dollar Tree, Inc.'s previous earnings call in May, Davis noted that Dollar Tree and Family Dollar stores had already seen "a pretty rapid increase" in shrink levels in the first quarter of the fiscal year.
At the time, officials offered up other potential measures for resolving shrink levels, including closing stores and raising prices. Davis told analysts that if shrink continued to reach "evaluated levels," shoppers should expect their costs to go up.
"We're going to have to pass some element of this on to our consumer, we'll ultimately have to think about how we will price this into some of our merchandise," he said in May.