"Organized retail crime and theft in general is an increasingly serious issue impacting many retailers," Dick's CEO Lauren Hobart said.
Seth Wenig/AP
The surge in retail theft since the COVID-19 pandemic has spread from pharmacies like CVS and Walgreens, to big-box stores like Target, and now to sporting retailer Dick's Sporting Goods.
The company specifically blamed an increase in retail theft, also called "shrink" or "shrinkage" in the retail industry, as reason why it saw reduced profits in the second-quarter of the year. And it doesn't expect the problem to end anytime soon, as it warned investors that profits could be weighed down for the remainder of the year due to the uptick in retail thefts.
"Organized retail crime and theft in general is an increasingly serious issue impacting many retailers," Dick's CEO Lauren Hobard said on Tuesday. "The impact of theft on our shrink was meaningful to both our Q2 results and our go forward expectations for the balance of the year."
Earlier this year, Target said the rise of retail theft could cost it $500 million in profits in 2023. Videos of mobs of people crashing and dashing retail stores with stolen goods has proliferated the internet in recent years, and any present security guards are usually overwhelmed with the amount of people participating in the blatant theft.
"We think we're doing the best we can to try to curtail it [theft] with the security that we have in the stores, working with local authorities," Dick's Sporting Goods Chairman Ed Stack said.
The company reported adjusted earnings per share of $2.82 in the second-quarter, missing analyst estimates of $3.81, and reported revenue of $3.22 billion, representing year-over-year growth of 3.6%. For the full year, the company revised its profit guidance lower to a range of $11.50 to $12.30, which was well below analyst expectations.
The mention of theft hurting its business was a first for Dick's Sporting Goods, and it took analysts by surprise.
"We note the company's commentary on shrink being an issue in the quarter is new for Dick's as it was not flagged as a meaningful headwind last quarter," Goldman Sachs analyst Kate McShane said in a Tuesday note.
Dick's Sporting Goods was a darling retail stock that has seen strong performance since the COVID-19 pandemic began in March 2020. The stock was up 992% from its March 2020 low through yesterday, before the earnings report.
Part of the strength in Dick's Sporting Goods stock in recent years was driven by an increase in business as consumers got out of their house and more active as the pandemic subsided. A string of earnings beats from the company put it in Wall Street's good fortune. But that has changed after today's report.
"This is Dick's first hiccup in a number of quarters and puts them in the penalty box," Wells Fargo analyst Will Gaertner said in a note on Tuesday.
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