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Dollar Tree Inc. is the latest retailer to highlight the impact of “shrink,” or inventory losses due to factors such as theft, and CEO Rick Dreiling says the company is ramping up its efforts to tackle shoplifting.
“We are now taking a very defensive approach to shrink,” he said during a conference call to discuss Dollar Tree’s
DLTR,
second-quarter results Thursday. “It has taken us a quarter, but we have several new shrink formats that we will introduce in the back half of the year.”
The CEO said the company is rethinking its approach to how certain products are sold. “It [includes] everything from moving certain SKUs to behind the checkstand, it has to do with some cases being locked up,” he said. “And even to the point where, we have some stores that can’t keep a certain SKU on the shelves, just discontinuing the item.”
Related: Dollar Tree is the latest retailer to say shoplifting is squeezing margins
“We have a lot of things in the works that’s going to roll forward,” he added.
Dollar Tree highlighted elevated shrink as one of the factors behind its quarterly decline in gross margins, along with lower initial mark-on, unfavorable sales mix, and wage investments at its distribution centers, which were partially offset by lower freight costs.
Shares of Dollar Tree fell 10.4% Thursday, outpacing the S&P 500’s
SPX
decline of 0.4%.
Related: As concerns mount about organized retail crime, these are the products being targeted
Shrink continues to be a key theme of retail earnings. While there are a number of factors, including damaged items, behind inventory shrink, theft and organized retail crime are increasingly important drivers, according to major retailers such as Target Corp.
TGT,
and Home Depot Inc.
HD,
Earlier this week, Lowe’s Cos.
LOW,
explained how it is using technology to combat theft of power tools.
Last week Home Depot described the retail industry’s battle with shrink and highlighted a new U.S. law designed to address a problem that costs the sector billions of dollars a year.
Related: Here’s the technology Lowe’s plans to deploy to combat power-tool theft
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 thus 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.
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