Organized Retail Crime: A Growing Concern for Retailers
Best Buy Co. shares have tumbled the most since the start of the pandemic after the electronics retailer said increased robberies by organized groups of thieves are adding to an array of profit pressures. Burglaries range from dozens of people rushing into stores and grabbing merchandise to theft by smaller groups, some of them brandishing guns or crowbars, Chief Executive Officer Corie Barry told reporters Tuesday.
The Troubling Trend
Northern California has been a particular trouble spot, she said, but Best Buy has seen pockets of criminal activity all over the country. This trend is not isolated to Best Buy; police in Northern California are looking for suspects after a series of thefts in recent days targeted businesses from a Louis Vuitton store to cannabis dispensaries to a Walgreens.
The Financial Impact
Organized crime costs retailers an average of US$720,000 for every US$1 billion in sales, the National Retail Federation found in a survey published in December. Best Buy’s shares plunged 15 per cent at 10:14 a.m. in New York after sliding as much as 17 per cent for the biggest intraday decline since March 2020.
Profit Pressures Mount
Theft isn’t Best Buy’s only financial headache. While the company beat analyst estimates for third-quarter profit and sales, it said its gross margin — a closely watched measure of profitability — also got hit by stepped-up promotional activity and a drag from its new TotalTech membership program. Gross margin fell 0.1 percentage point to 23.5 per cent, Best Buy said in an earnings statement.
A Steep Decline
That slightly trailed the 23.6 per cent average of analyst estimates compiled by Bloomberg, and the decline in the core U.S. operation was steeper. The company also reported a 10 per cent drop in domestic online revenue as more shoppers returned to stores.
The Pullback Continues
Best Buy’s adjusted earnings rose to US$2.08 a share, compared with the US$1.96 average of analyst estimates compiled by Bloomberg. Sales climbed to US$11.9 billion. Analysts had predicted US$11.7 billion.
A Concerning Trend
Declines in gross margin at Walmart Inc. and Target Corp. spurred selloffs in each company’s shares last week. Best Buy’s pullback follows a seven-week rally that contributed most of the stock’s year-to-date gain.
The Impact on Retailers
This trend is not limited to Best Buy; other retailers are also facing challenges from organized retail crime. The impact on retailers can be significant, with losses estimated in the millions.
A Solution in Sight?
To combat this trend, retailers must work together and implement measures to prevent and deter organized retail crime. This includes investing in security technology, increasing collaboration between law enforcement agencies, and educating employees about the signs of organized retail crime.
Conclusion
The uptick in organized robberies is a concerning trend for retailers like Best Buy. While the company’s shares have pulled back, it is essential to address this issue to prevent further losses and protect customers and employees.
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