Recent earnings at Dick’s Sporting Goods Inc. (NYSE: DKS) were so poor that they decimated the stock price. Since the core of the trouble is unlikely to go away, Dick’s could have a multiyear problem. Among the worst issues facing Dick’s is what used to be called “shoplifting.” However, that term does not come close to measuring the depth of the catastrophe. (Customers are abandoning these 25 brands.)
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Dick’s stock fell over 20% when it disclosed its numbers. While revenue rose 3% to $3.2 billion for the period, net income crashed 23% to $244 million. “Our Q2 profitability was short of our expectations due in large part to the impact of elevated inventory shrink, an increasingly serious issue impacting many retailers,” Dick’s President and CEO Lauren Hobart said as the company released its numbers. The root cause was activity by “organized crime.”
Inventory theft has been described as a $100 billion problem across the retail industry this year. Based on comments from major retailer management, this trend will continue and could worsen.
What is shocking is that an industry with trillions of dollars in sales nationally cannot address such damaging circumstances. This is particularly true when these resources are married to help from law enforcement. It means as a team, the groups cannot outsmart the country’s most successful criminals.
Since retailers have not come up with any option to combat the mammoth and growing theft problems, assume that earnings of these companies will be increasingly compromised by the issue in the future.
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