Dick's Sporting Goods CEO highlights impact of organized retail crime: 'It's quite alarming what's going on'

By James Rogers

'Shrink' caused by organized retail crime, including theft, continues to be a key theme of retail earnings season

Dick's Sporting Goods' CEO Lauren Hobart has highlighted the "meaningful" impact of organized retail crime and theft on the sporting goods retailer's second-quarter results.

"Organized retail crime and theft in general, is an increasingly serious issue impacting many retailers," she said, during a conference call to discuss Dick's Sporting Goods' (DKS)second-quarter results. "Based on the results from our most recent physical inventory cycle, the impact of theft on our shrink was meaningful to both our Q2 results and our go-forward expectations."

"We're doing everything we can to address the problem and keep our stores, teammates and athletes safe," she added.

Related:Dick's Sporting Goods' stock slammed after earnings miss by a wide margin. The reason may be shoplifting

Dick's Sporting Goods reported its first earnings miss in three years before market open Tuesday, with the company citing elevated inventory shrink. The company's stock fell 24.2% Tuesday.

Organized retail crime during the second quarter was "significantly higher than we anticipated," said Dick's Sporting Goods CFO Navdeep Gupta during the conference call. "We have been seeing the number of incidents go up," he added. Dick's Sporting Goods is also expecting some elevated levels of shrink to continue, according to Gupta.

"It's quite alarming what's going on," Hobart said, in response to an analyst's question during the conference call, adding that Dick's Sporting Goods is working with trade partners and government to combat the problem. The company has also increased security, deployed LotCop cameras, and is working with local law enforcement and local partners, she added.

Related:Walmart's 'shrink' challenges differ from those of other retail giants, CEO says

"Shrink" continues to be a key theme of retail earnings. While there are a number of potential reasons behind inventory shrink -- such as damaged items -- theft and organized retail crime are increasingly important drivers, according to major retailers such as Target Corp (TGT) and Home Depot Inc. (HD). Last week, Target CEO Brian Cornell said that the company is facing an "unacceptable amount" of retail theft and organized retail crime.

Last week Home Depot also described the retail industry's battle with shrink this week and highlighted a new U.S. law designed to aid efforts to tackle a problem that costs the sector billions of dollars a year.

The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act, which went into effect June 27, is designed to add more transparency to online transactions and deter criminals from acquiring stolen, counterfeit or unsafe items and selling them through online marketplaces. The INFORM Consumers Act requires e-commerce sites to verify and disclose information about their high-volume third-party sellers.

Related: Target facing 'unacceptable amount' of retail theft and organized retail crime, CEO says

Last year, the National Retail Federation reported that retail-industry shrink amounted to $94.5 billion in 2021, up from $90.8 billion in 2020, and was primarily driven by external theft, including organized retail crime. The NRF's National Retail Security Survey, which was conducted with the Loss Prevention Research Council, found that retailers, on average, saw a 26.5% increase in organized retail crime incidents in 2021. Eight in 10 retailers surveyed also reported that violence and aggression associated with organized retail crime incidents had increased.

Shares of Dick's Sporting Goods have fallen 7.3% in 2023, compared with the S&P 500 index's SPX gain of 14.5%.

Ciara Linnane contributed.

-James Rogers

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

08-22-23 1204ET

Copyright (c) 2023 Dow Jones & Company, Inc.