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"Dick’s Sporting Goods Is Falling Apart Right Now
As All Hell Is Breaking Loose In The Retail Market"
by Epic Economist, 8/24/23
"The largest omni-channel sporting goods retailer in the U.S., Dick’s Sporting Goods, is facing a total nightmare right now. With shares crashing by 25%, profits plunging, and serious inventory imbalances, the company is looking at hundreds of millions in lost revenue. The famous chain, which sells major brands like Adidas, Gatorade, Nike, Peloton, Under Armour, and more, is alerting about an issue that is becoming increasingly common in the retail industry. While consumers are expected to deal with more empty shelves and price increases, thousands of struggling businesses will likely be pushed an edge closer to bankruptcy due to this growing problem.
On Tuesday, the leading omni-channel chain reported a 23% drop in profits for the second quarter. Executives cited falling sales of outdoor gear and extensive inventory losses caused by a retail theft boom as some of the main reasons behind the poor performance.
In a single day, the retailer saw its shares lose almost a quarter of their value amid the worst selloff in its 75-year history. Dick’s Sporting Goods stock crashed by 22% on Tuesday, another 3.4% on Wednesday, and started the day today on a very bad note. Early trading data shows that losses are nearing the 27% mark already. That’s the biggest losing streak for the company in at least six years, Business Insider reports. Dick’s Sporting Goods reported net income of $244 million last quarter, down from the $318.5 million in the same three-month period in 2022. Meanwhile, earnings-per-share missed investors’ expectations by almost a dollar, coming in at $2.82 while analysts predicted it would hoover around $3.81 per share.
Dick's isn't alone in ringing alarm bells over shoplifting and lost inventory. The “shrink” problem has also been cited by companies like Target, beauty retailer Ulta, and TJX. In fact, data compiled by Bloomberg showed that U.S. retailers mentioned shrink more last quarter than any other quarter on record.
insurance company Travelers highlighted that theft from physical stores is just one aspect of this growing epidemic. The entire supply chain is being impacted by this trend. Researchers found that theft of items coming into port or being stored in warehouses surged by a whopping 600% this year, particularly shipments of food and beverage, home goods, and electronics.
But that’s not the only significant threat these businesses are coping with right now. An analysis published by Allianz Trade exposes a rather bleak view of the future for many retailers. Most increases in turnover are often purely owed to price increases while sales volumes are sharply dropping. Costs are rising while profits are falling in the second half of the year. Many retailers are already heavily in debt and find it harder to meet their obligations due to soaring interest rates. “We foresee a very difficult period. Retail has plenty of other concerns: staff shortages, rising wages, and higher energy costs. For many products, those higher costs cannot simply be passed on to higher prices,” they wrote. That means many companies will take a hit on their bottom lines.
At the moment, retailers en masse are predicting worst-case scenarios and bracing for a serious recession. Thousands of companies that are hanging by a thread are facing a real possibility of going out of business in a few short months. Put differently, the rapid changes in the industry are just a hint of the devastating crisis that is about to unfold."
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