Dollar Tree may be raising prices due to crime as profits fall
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May 26, 2023 | 1:41 p.m
Dollar Tree Inc. may raise its prices in some areas due to theft, according to the discount retailer’s CFO.
Speaking to analysts and investors Thursday morning, CFO Jeff Davis said Dollar Tree expects to “improve our shrinking performance through defensive merchandising efforts, real estate optimization and possibly higher pricing to offset areas of systemic shrinkage higher” over time.
“Shrink” usually means theft and other inventory losses in the retail industry.
He also said the company, which released its first-quarter earnings, expects its “discretionary mix to normalize” over time as well.
Dollar Tree said Thursday it expects its diluted earnings per share for the fiscal year to end in the range of $5.73 to $6.13, an adjustment the retailer attributed to its expectation of heightened contraction and the shift in mix towards consumables to continue through the rest of the year.
Those numbers also factored in an “expected $0.29 contribution benefit from the 53rd week and $0.12 statutory reserve charge,” according to the earnings release.
Dollar Tree said Thursday it expects its diluted earnings per share for the fiscal year to end up in the range of $5.73 to $6.13. Reuters
Its fiscal 2023 outlook also included an expected range of $30 billion to $30.5 billion for consolidated net sales and “low to moderate digital comparable store sales growth.”
“While we modestly raised the midpoint of our core guidance, we are increasingly cautious about our margin outlook, given the industry’s growing challenges of accelerating contraction, unfavorable change in sales mix and their impact on our short-term profitability. Davis said on the call. “Since the beginning of the fiscal year, the impact of these two factors on our financial results has intensified.”
Dollar Tree expected “the combined and ongoing full-year earnings impact of the unfavorable consumables mix and higher shrinkage is expected to be approximately $0.55 per share in 2023,” according to the CFO.
One of the main reasons for potential price increases in some areas is due to theft, according to the retailer’s CFO, Jeff Davis. Reuters
Davis noted later in the call that the increase in Dollar Tree theft was occurring “across all shrink classes.”
He also said other retailers have similarly faced higher levels of theft. Dollar Tree, he added, was taking “all the right steps” to mitigate it.
CEO Rick Dreiling told listeners that he believed the change in consumables and the impact of the contraction would be temporary.
Davis said the increase in Dollar Tree theft was happening “across all shrink classes.” Reuters
“I think if we’re being realistic here, this change in consumables and this impact of shrinkage is transitory,” he said. “I don’t believe we’re going to live with them forever, and that’s all driving what we’re doing.”
Dollar Tree’s approach to shrinking is “multifaceted,” according to company executives on the call. Davis said the company has “introduced some new technology inside the store in how we monitor and alert” and is working with local law enforcement, as well as other measures, to combat shrinkage.
The discount retailer’s revenue saw a 6% year-over-year increase in the first quarter, reaching $7.32 billion.
Meanwhile, net income for the three-month period fell from $536.4 million to $299 million, a 44% drop.
Dollar Tree’s stock price is down more than 10% from where it was at the start of the day.
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