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Theft continue to be a big issue.
They're going to put employees at front of the store at at check out. What a novel concept!
Self check-out seems to be a big source of theft. Surprise!
Will be changing to assisted (employee supervised) self check out in many stores.
Eliminating self checkout completely in high-shrink stores.

Earnings Call Transcript:

"Notably, year-over-year shrink (theft) headwinds continued to build during the year, increasing more than 100 basis points for both the fourth quarter and full year. We are taking multiple actions aimed at reducing shrink and 2024 which Todd will discuss in more detail later in the call."

"In addition, we expect shrink to be an ongoing headwind to gross margin in the first part of the year before the anticipated positive impact of our mitigation efforts begin to manifest in the back half of the year."

"In summary, we are confident in the long-term strategy for this company and believe we are well positioned to drive top and bottom line growth in the years ahead. In the near term, we are taking actions to strengthen our position to support long-term growth with our Back to Basics efforts with a particular focus on driving comp sales, gaining market share and reducing shrink.

"Over the long-term, our underlying opportunities to grow operating margin are still in place, including shrink reduction, the DG Media Network, private brands, global sourcing, category management and inventory optimization, distribution and transportation efficiencies and our Save to Serve approach to controlling costs.

"And finally, over the first half of the year, we plan to completely remove self-checkout from more than 300 of our highest shrink stores. Collectively, we believe these steps are in line with where the customer wants us to be, which includes increasing personal engagement with them at the store."

"While we anticipate a continuing headwind from shrink early this year, we believe our actions will have a significant mitigation impact in the back half of the year and into 2025."

"Beyond our changes to self-checkout, we are also executing on a variety of other actions to reduce shrink this year, including inventory reduction efforts, where we see additional opportunity in 2024; SKU rationalization, which I'll discuss more momentarily; additional shrink incentive programs for our store managers to encourage and foster a greater sense of ownership; and the utilization of high-shrinkplanograms, whereby we will remove certain high-shrinkitems from high-shrink stores to target the greatest opportunity for improvement.

"While we anticipate a continuing headwind from shrink early this year, we believe our actions will have a significant mitigation impact in the back half of the year and into 2025."

".. we significantly increased the employee presence at the front end of our stores. These team members are dedicated to providing a friendly welcome and positive checkout experience for our customers."

"With that in mind, we are making three changes to our self-checkout strategy this year. As a reminder, we currently have self-checkout options available in more than 14,000 stores. Although adoption rates for self-checkout have been high, we believe there's truly no substitute for an employee presence at the front end of the store to greet customers and provide excellent customer service, including at checkout."

"Importantly, when choosing our self-checkout solution, we implemented a product that is convertible from self-checkout to associate assisted checkout. To that end, we have begun immediately converting some or all self-checkout registers to assisted-checkout options in approximately 9,000 stores. This is intended to drive traffic first to our staffed registers, with assisted-checkout options available as second or third options to reduce lines during high-volume times.

"Our second course of action will apply to all remaining stores with self-checkout, where we have begun limiting self-checkout to transactions consisting of five items or less.

"And finally, over the first half of the year, we plan to completely remove self-checkout from more than 300 of our highest shrink stores. "


https://seekingalpha.com/article/4678269-dollar-ge...

Notably, shrink was flat during the quarter, slightly better than our expectations, reflecting the impact of our investments this year in training, labor, and new fragrance fixtures.

For the full year, shrink as a percentage of sales increased 40 basis points. Moving to expenses, SG&A increased 7.6% to $820 million. Overall SG&A spend was better than planned due to focused expense management and a shift in timing of certain strategic investments. As a percentage of sales, SG&A decreased 50 basis points to 23.1% compared to 23.6% last year,

https://seekingalpha.com/article/4678371-ulta-beau...

In contrast to DG, ULTA mentioned shrink or theft only twice in the earnings call. Also there is better control over expense management than DG.

I don't think ULTA and DG have anything in common. Other than they are both retail stores.

theft, https://www.newsbreak.com/news/3367831576624-dolla...

Shrink (theft) continues to get worse:

Q1 2024 Earnings Transcript:

"Shrink continues to be our most significant headwind and with 59 basis points worse in the first quarter compared to prior year. As Todd noted, we are taking multiple actions aimed at reducing shrink, and I'll discuss our expectation for this headwind for the remainder of the year in just a bit.

Before I turn the call over to Kelly, I want to provide a brief update on our shrink reduction efforts, including the changes to our self-checkout strategy that we announced in March. Shrink continues to be the most significant headwind in our business, and we are deploying an end-to-end approach to shrink reduction across the organization, including efforts in our supply chain merchandising and within our stores to help combat issues around shrink.

Our supply chain teams are primarily focused on ensuring deliveries are on time and in full, and our merchants on reducing the amount of inventory we carry. Within our stores, we are focusing on delivering a more consistent front end presence, broaden in the reach of our high shrink planograms, which include the removal of high shrink SKUs and the elimination of self-checkout in the vast majority of stores.

As we discussed on last quarter's call, we converted approximately 9,000 stores away from self-checkout during the quarter following the quick and successful conversion of these stores in Q1, and given the ongoing challenge from shrink, we converted approximately 3,000 additional stores away from self-checkout in May, bringing us to approximately 12,000 conversions completed in total.

While this represents a significant change in our stores, we believe this is the right course of action to drive increased customer engagement, while also better positioning us to begin reducing shrink in the back half of ‘24 with a more material positive impact expected in 2025.

Moving forward, we plan to have self-checkout options available in a limited number of stores, most of which are higher volume and low shrink locations. Overall, we are pleased with the results and progress across the business during the first quarter, which I will discuss in more detail later."

https://seekingalpha.com/article/4696532-dollar-ge...

Shrink (theft) continues to get worse:

Q1 2024 Earnings Transcript:

"Shrink continues to be our most significant headwind and with 59 basis points worse in the first quarter compared to prior year. As Todd noted, we are taking multiple actions aimed at reducing shrink, and I'll discuss our expectation for this headwind for the remainder of the year in just a bit.

Before I turn the call over to Kelly, I want to provide a brief update on our shrink reduction efforts, including the changes to our self-checkout strategy that we announced in March. Shrink continues to be the most significant headwind in our business, and we are deploying an end-to-end approach to shrink reduction across the organization, including efforts in our supply chain merchandising and within our stores to help combat issues around shrink.



It would be nice to know exactly what the problem is, without the 'shrink' euphemism. Where is the shrinking happening? They mention supply chains, inventory and at checkout, which are all very different problems from each other. And if outright robbery (a holdup, for instance, or someone just brazenly walking out the door without paying) a big part of it, or is putting something in your pocket, or is it collaboration between the client and the cashier, or is it not scanning things at checkout, or what? Some of these have easier solutions than others, but if it is cultural slippage, where stealing is becoming morally and socially acceptable, or trivialized (police refusing to prosecute small crimes), then it might mean a pretty serious impairment to the business model.

dtb

"It would be nice to know exactly what the problem is..."

It's not complicated. People are walking out of the store with items they have not paid for.

Dollar Tree/Family are reporting similar problems:
https://www.newsnationnow.com/business/dollar-tree...

The solution may be more complicated. DG management mention eliminating self-checkout completely. That implies having to hire more employees.

I have been in a few Dollar General stores where there has only been one employee in the store. At one here in rural Colorado I had to hunt down the employee who was stocking shelves and acting as cashier and manager all at the same time. There were a few other customers in the store at the same time. We all had to wait in line up front until the DG employee came free from stocking shelves to check us out. It would have been easy to pick items off the shelves and just walk out without paying.

Costco has employees standing at the exit checking every customer's receipt agains items in their cart. Costco has very low shrink.

"if it is cultural slippage, where stealing is becoming morally and socially acceptable, or trivialized (police refusing to prosecute small crimes)..."

I think you have struck at the root of the problem.

I do need to go into a local DG & DLTR here in GA & size them up. I did enter a Walgreens, however, midday and waited 3 minutes at front check out, looked around and said loud “hello, need help at check out” for a couple minutes then just left in frustration & went to the local super market. Strange and sad- drug stores & customer service are a far cry from the old days.

Seems to be a sticky problem. Once you take something and get by with it you are probably going to do it again and again. May even brag to your friends how easy it is. As a society we may find a solution other than some items are only sold through Amazon. The good news is that everyone has the problem but that said, it's easier to absorbs the costs of controlling the shrinkages is you are a high volume store like Costco.
We'll have to adjust. How long will that take and at what cost? Us shareholders are probably going to share in that cost, right?

It would be nice to know exactly what the problem is, without the 'shrink' euphemism. Where is the shrinking happening? They mention supply chains, inventory and at checkout, which are all very different problems from each other. And if outright robbery (a holdup, for instance, or someone just brazenly walking out the door without paying) a big part of it, or is putting something in your pocket, or is it collaboration between the client and the cashier, or is it not scanning things at checkout, or what?

These are good questions and I haven't seen a good answer to them. I do think the problem is more complicated than an increase in 'walk out the door' type theft, facilitated in part by DG's staffing model and the move to self-checkout.

I occasionally read DG employee forums to get a read on some of the issues arising at the employee side. Its true there are quite a few complaints about self-checkout and how it leads to theft, which I can understand on a psychological level -- I've seen fellow customers do it myself (not scan a couple items, or whatever, because X). There's also various reports of brazen walk out the door theft, and the refusal of police to get involved. As its become easier and more common to low-level thieve, perhaps it's also become a bit more culturally acceptable. I know that here in Canada where the grocery industry is basically an oligopoly, low level theft via self-checkout is now celebrated in some circles as a way to stick it to grocery chains (the honest customer pays of course, but I've heard the rationale more than a few times). No idea how much that contributes to shrink in the grand scheme of things.

But returning to DG employee forums, there are also quite a few complaints of store managers writing off pallets worth of goods, and then taking the same home, or the store restoration folks coming in to restore a store, dumping certain merchandise, and then taking the whole lot. It takes quite a few stolen snickers bars to match this kind of organized corruption in some of their staff.

At the end of the day, I don't think shareholders have been given a good portrait of where or how the shrink is happening, aside from the indication that the lack of front end staffing and the use of self-checkout has been at least part of the problem. It's entirely possible DG is still trying to track some of this stuff down.

When I was a vendor to the building materials industry in the early years when the large chains were starting to grow you got to know many of players. It seemed to the higher ups that as much as a half of the theft was internal. The hens were steeling the eggs.

Walgreens reported the same "frontend shrinkage" this morning that DG has. https://www.cnbc.com/2024/06/27/walgreens-wba-earn...
They only have a coupe thousand stores. DG has 20,000 conveniently located stores to steal from. For that matter DG has as many stores as Starbucks has in the US which I find interesting.
One of Charlie's book recommendations was "Wisdom of Crowds, why the many are smarter than the few." We'll get this figured out as everyone has the problem.
Seems like there are two sources to pay for this. One is that we all will pay in higher retail prices. Or two, that investors will accept a lower return on their invested capital.
Seems likely we'll pay more.

"Seems like there are two sources to pay for this. One is that we all will pay in higher retail prices. Or two, that investors will accept a lower return on their invested capital.
Seems likely we'll pay more."

Here's a novel idea...why not just try stopping the theft?

Costco does it by posting staff by the exit who check each customer's receipts. Apparently those customers (myself included)see this as an only minor inconvenience. Costco has very low shrink (theft). I go to Costco to pay less.

Or maybe even we should arrest the shoplifters when caught in the act, as was done in the good old days? After all, it is theft.

Target has decided to get tougher on shoplifting. I expect other retailers to follow suit.

Bloomberg
By Jaewon Kang
June 27, 2024 at 6:31 PM UTC

Target Corp. is lowering the bar to stop shoplifters, taking a tougher approach to further curb store theft that has weighed on operations.

Store staff can now seek to halt incidents of theft worth at least $50, lower than the previous threshold of $100, people familiar with the matter said, asking not to be identified discussing private company policy. The new guideline is expected to be enforced this summer, they said.

The change in guidance marks one of the latest steps Target is taking to tackle theft. The Minneapolis retailer, which operates nearly 2,000 stores in the US, has said that shrink – inventory loss due to theft, damage and other factors – has squeezed its profit margins in recent quarters. The company expects such losses to plateau this year, however.
A Target spokesman said the company is making meaningful progress to address theft through actions in stores and efforts from policymakers and various communities.

https://www.bloomberg.com/news/articles/2024-06-27...

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