It turns out that stealing at Dick’s is causing shrinkage. Who knew…
First reported on August 22nd, shares of the stock tumbled by 24% in the opening minutes of trading on the news that their second-quarter profit margin was falling short of expectations by a significant amount. This was also the first time the company failed to reach its goals in the last three years. Back in April 2020, they missed their first quarter projections, and given the emergence of COVID and shutting things down nationwide, it was to be expected then.
CEO Lauren Hobart provided a statement to explain their sudden limp sales figures. “While we posted another double-digit EBT margin, our Q2 profitability was short of our expectations due in large part to the impact of elevated inventory shrink, an increasingly serious issue impacting many retailers.”
While shrinkage is something all retailers deal with from time to time, especially when they are in high demand, Dick’s is simply pushing their removal from the market. The organized retail theft that’s plagued other retailers is certainly a contributing factor, but the unnamed culprit is the black market.
These side retailers who import knock-off jerseys and sporting equipment are also a huge reason for their sudden soft sales. It’s hard for them to compete with companies who will sell identical goods for ½ price or less. Especially when they offer major discounts for buying in bulk, and custom orders faster than Dick’s can churn them out. This setup just doesn’t favor their high-profit, low-volume sales model.
Hobart still thinks the company can turn it around, but it’s clear investors don’t have her confidence. With the emergence of team apparel Fanatics rolling out their own stores and rumored to be expanding into the sporting goods markets, it might be time for Dick’s to pull out of retail and go online only.
