Dollar Tree taking 'very defensive approach' to shoplifting, CEO says

The CEO of Dollar Tree Inc. said Thursday the discount retailer is taking a "very defensive approach" to shoplifting.

The company, which runs Dollar Tree and Family Dollar, has "several new shrink formats" that it intends to roll out in the final six months of the year, CEO Rick Dreiling said in the morning. "Shrink" typically means theft and other types of inventory losses in the retail industry. 

"It goes everything from moving certain SKUs [stock-keeping units] to behind the check stand," he explained to those who tuned into the company’s earnings call. "It has to do with some cases being locked up. And even to the point where we have some stores that can’t keep a certain SKU on the shelf just discontinuing the item."

Dollar Tree pointed to shrink as a factor affecting its gross margin. That metric hit 29.2% in the second quarter, marking a 220-basis-point drop year over year.

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The company said "lower initial mark-on, unfavorable sales mix … and wage investments in distribution center payroll" also played a role.

CFO Jeff Davis noted at one point that shrink "is a sort of a trailing indication because stores are shrinking over the course of the year," adding it "takes time" for measures to "actually take hold."

In the prior quarter’s earnings call, the discount retailer flagged shrink as an issue it was facing, too.

Thursday morning’s comments from Dollar Tree Inc. executives come just a day after Kohl’s CFO Jill Timm described shrink as an ongoing "retail industry problem" and said it had "weighed in on our margins." Like Dollar Tree, she explained some of the measures Kohl’s has taken to address it.

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Measures taken by Kohl’s include "cabling products to fixtures," only having testers of beauty products, upping the presence of staff in fitting room areas and having more workers near the front doors, Timm said.

Ticker	Security	Last	Change	Change %
DLTR	DOLLAR TREE INC.	66.40	+0.64	+0.97%
KSS	KOHL'S CORP.	17.04	+0.66	+4.00%

Other companies such as Walmart and Target have raised the alarm on shoplifting and organized retail crime in recent weeks.

Ticker	Security	Last	Change	Change %
WMT	WALMART INC.	90.44	+2.04	+2.31%
TGT	TARGET CORP.	125.01	+3.42	+2.81%

The 2022 edition of the annual retail security survey from the National Retail Federation found that total losses from shrink increased roughly 4% in 2021, coming in at $94.5 billion. The survey, which came out in mid-September, linked the losses "primarily" to external theft like organized retail crime.

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Shrink and factors like sales mix, increased diesel prices, ocean freight savings and more factored into Dollar Tree’s updated projects for the fiscal year, according to the company. For consolidated net sales, Dollar Tree projected they would come in at $30.6 billion to $30.9 billion while diluted earnings per share would be in the $5.78 to $6.08 range.

Davis said Dollar Tree "see[s] nothing systemic or structural in the current environment that would have a lasting negative implication for the multiyear outlook that we shared in June."