Best Buy fell as much as 17% on Tuesday after it said an increase in retail theft is hurting its profit margins.- "We are definitely seeing more and more organized retail crime," Best Buy CEO Corie Barry said.
- The retailer reported third-quarter earnings that beat analyst estimates and raised its guidance.
Shares of Best Buy fell as much as 17% on Tuesday after the electronics retailer said an increase in organized retail theft is hurting its profit margins.
The retail burglaries, which are often recorded and shared on social media by onlookers or store associates, involves a rush of dozens of people into stores, grabbing as much product as possible, and then running out. The chaotic thefts have hit stores from Walgreens, to Kroger, and now Best Buy, which is likely an attractive target due to its inventory of high-priced electronics that can come in small sizes.
"We are definitely seeing more and more organized retail crime and incidence of shrink in our locations," Best Buy CEO Corie Barry said in the company's third-quarter earnings call. Shrink is code-word for loss of inventory due to theft in the retail industry. Barry said the company is taking measures to stem the thefts, including hiring security guards and locking up certain products.
Best Buy's gross margin fell 0.1% to 23.5%, which was slightly below analyst estimates of 23.6%. "You can see that [retail theft] pressure in our financials," Barry said. Also hurting Best Buy's profit margins were promotional activities, higher prices, and supply chain disruptions, according to the earnings call.
One more reason for the sharp decline in Best Buy's stock price on Tuesday could be comments from Barry that indicated holiday sales may have been pulled forward by consumer concerns about disruptive supply chain bottlenecks during this holiday season.
Despite the drag on profits, Best Buy reported third-quarter revenue and earnings that beat analyst estimates. The retailer also raised its FY21 revenue guidance to $51.8 billion to $52.3 billion from a prior range of $51 billion to $52 billion. Analysts are expecting revenue of $51.8 billion.