Dollar Tree threatens to 'discontinue' its products due to theft issues

The discount retailer is considering drastic measures to protect its inventory.


Theft has always been a concern among retailers, but it has really taken center stage in recent years. Countless viral videos show thieves emptying store shelves while employees stand helpless. Called Retail Organized Crime (ORC), this trend has had a negative impact on a number of large corporations, from Walmart has Home deposit , and they responded with new anti-theft measures. Today, Dollar Tree is reporting the issue and the retailer is threatening to discontinue some products as a result. Read on to learn more about the steps Dollar Tree says it is taking to protect its inventory.

RELATED: Shoppers Are Turning Away From The Dollar Tree: Here's Why .

Dollar Tree's earnings suffered in its most recent quarter.

dollar tree store
sock photo / Shutterstock

In an August 24 Press release , Dollar Tree, Inc. reported financial results for its second quarter of fiscal 2023, which ended July 29.

Despite an increase in same-store sales for its two discount brands (Dollar Tree and its subsidiary Family Dollar), the company experienced a " a surprisingly large drop in its gross profit margin, according to CNN. The results indicate that Dollar Tree's gross margin declined to 29.8 percent in this latest quarter from 32.7 percent a year earlier.

And while there may be different explanations, the retailer is confident they know why.

RELATED: Dollar Tree sells these exact same 6 items for less than Walmart and Target .

The company attributes the decline to retail theft.

basket of groceries outside dollar tree
Doclensoscope / Shutterstock

Dollar Tree, Inc. Chief Financial Officer Jeff Davis said several factors impacted the company's financial results, including a changing sales mix and higher fuel prices. But in a statement accompanying the release, Davis also cited “adverse shrinkage trends” as a notable cause.

Shrinkage refers to a loss of inventory from something other than sales. Most retailers have "assigned the largest share of loss to external theft, including organized retail crime,” according to the National Retail Federation (NRF).

During a call for results On August 24, to analysts, Dollar Tree, Inc. officials made it clear that theft played a major role in the high levels of shrinkage and the resulting decline in gross profit margin. ae0fcc31ae342fd3a1346ebb1f342fcb

"As we think about shrinkage and mix, it's definitely moved up a bit more than what we anticipated in our guidance given last quarter," Davis said on the conference call.

RELATED: These are the products you 'have to stop buying' at Dollar Tree, says buyer .

Some products may be discontinued due to theft issues.

dollar tree employee in aisle
Victoria Ditkovsky / Shutterstock

During the earnings call, the chairman and CEO of Dollar Tree, Inc. Rick Dreiling said the company is "taking a very defensive approach to contraction now."

"We have several new shrink formats that we will be introducing in the second half," Dreiling told analysts.

One anti-theft measure may involve moving certain products off the shelves and behind the counter, while another could involve locking the boxes of items. But a third possibility may upset customers: the complete discontinuation of certain products, both at Dollar Tree and Family Dollar.

"Even to the point where some stores can't keep a certain SKU on the shelf, they just drop the item," Dreiling explained.

Better life contacted Dollar Tree about these plans, and we'll update this story with their response.

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Dollar Tree previously indicated it may close stores or raise prices.

the grand opening of a Family Dollar and a Dollar Tree combined into one retail store.
Shutterstock

This isn't the first time the company has discussed extreme anti-theft measures. During the Dollar Tree, Inc. call for previous results in May, Davis noted that Dollar Tree and Family Dollar stores had already seen "pretty rapid increases" in shrinkage levels in the fiscal first quarter.

At the time, authorities offered other potential measures to address the levels of shrinkage, including closing stores and raising prices. Davis told analysts that if shrinkage continues to reach "assessed levels," buyers should expect their costs to rise.

"We're going to have to pass some of that on to our consumers, we'll have to ultimately think about how we're going to incorporate that into some of our merchandise," he said in May.


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