Theft is eating into Dollar Tree’s profits

Joining a growing group of retailers, Dollar Tree saw a surprisingly significant drop in its quarterly profits. The discounter says the decline is due to changing consumer behavior, inflation, and theft.

Dollar Tree CEO Richard Dreiling and CFO Jeffrey Davis blame the decline in gross profit margin, which dropped 2.9% from a year ago, on shrink (inventory loss due to theft or damages).

Shares of Dollar Tree fell and hit a 52-week low yesterday.

Theft is a growing concern
Other retailers like Home Depot, Dick’s, Target, and even smaller ones, say they are seeing an increase in store crimes. Target warned earlier that it could lose nearly half a billion dollars due to rising theft.

To combat such crimes, Dollar Tree plans to move some products behind the check stands and keep more items locked.

Another part of the problem
The decline in profits can also be attributed to the changing buying habits of consumers as they have started to cut down on discretionary spending. Target revealed sales decline last quarter for the first time in four years.

As consumers juggle rising interest rates, higher fuel and electricity prices, and rising costs of groceries, their shopping lists have reduced to need-to-have items. Want-to-have items can wait.