Dick's Sporting Goods blames 'increasingly serious' theft problem for profit plunge

By Parija Kavilanz, CNN

NEW YORK - Dick's Sporting Goods warned Tuesday that retail theft is damaging its business and would lead to lower annual profits.

The sporting goods and athletic clothing seller reported second-quarter results Tuesday morning that included a 23% drop in profit, despite sales that rose 3.6% in the period. Shares of Dick's (DKS) plunged nearly 22% Tuesday.

The company blamed shrink, the industry term for theft and damaged inventory, for its surprisingly poor earnings. Although other national retailers have also warned investors about growing theft, Dick's is among the first to blame its lackluster quarterly financial report primarily on theft.

"Our [second-quarter] profitability was short of our expectations due in large part to the impact of elevated inventory shrink, an increasingly serious issue impacting many retailers," CEO Lauren Hobart said in a statement. Retail "shrink" is a term that refers to merchandise that goes missing due to theft, fraud, damage, accounting errors or other reasons.

Looking ahead, the retailer said it now expects its earnings-per-share for the year to come in 12% below its initial forecast. The Pittsburgh-based retailer stuck to its full-year forecast for sales at stores open at least a year: flat to up 2%.

Retailers large and small say they are struggling to contain an escalation in store crimes — from petty shoplifting to organized sprees of large-scale theft that clear entire shelves of products. Target warned earlier this year that it was bracing to lose half a billion dollars because of rising theft.

It's not clear that crime is growing significantly more serious. But industry watchers say that amid mixed signals on the health of the economy, plus persistent inflation and rising borrowing costs, shoplifting can become more prevalent.

Sinking sales at big retailers

Also on Tuesday, home improvement chain Lowe's and department store chain Macy's reported second-quarter results.

Lowe's (LOW) posted quarterly sales that dropped 9.2% from a year ago and comparable sales that slipped 1.6% over the previous year.

At the same time, the retailer stuck with its full-year sale guidance for total sales of between $87 billion to $89 billion, citing improving sales in its home professionals business and the recent launch of initiatives such as same-day delivery nationwide.

That helped offset still-high lumber prices and softness in do-it-yourself home projects.

Macy's (M) also reiterated its full-year forecast Tuesday for sales of between $22.8 billion and $23.2 billion. The retailer said it expected comparable sales to fall by between 6% and 7.5% from a year ago. For the quarter, Macy's logged sales of $5 billion, down 8% from a year ago. Comparable sales fell 8.2% from the same period a year earlier.

The retailer said tighter inventory and greater markdowns and sales helped clear spring merchandise at its stores in the quarter, but warned that uncertainty about the economy remains an overhang on its business as budget-conscious households cut back on discretionary purchases.