Wed. Dec 1st, 2021

We like a good excuse for a company suffering a bad quarter at FT Alphaville. Whether it’s a strong dollar, the weather, or because customers prefer to shop where they do not need wear lipstickIt’s always fun to see management try to send off bad numbers on things that are allegedly out of their control.

So when we saw that U.S. retailer Best Buy’s shares fell nearly a fifth in early trading after we published its results this morning, we took a quick look to see what management said were the reasons.

Of course, supply chain issues seem to be the main issue. With the U.S. electronics retailer predicting lower holiday sales than Wall Street analysts have entered. But there was something else going on with his results, and it’s not that funny.

Actually, it’s quite dark.

Best Buy suffers from crime. And not just petty shoplifting – crowded masked crowds armed with crowbar-style crime.

Here is the relevant part of the conference call (transcript of Sentieo):

Anthony Chinonye Chukumba, Loop Capital Markets LLC, Research Division – Managing Director

And good luck with a good term, especially your ability to compare the competition with that very difficult year-to-year comparison. So after I said it all, one thing that struck me was just a little bit that you exclaimed shrinkage as a gross margin headwind. I was just wondering if you could just provide a little more color around there?

Corie Sue Barry, Best Buy Co., Inc. – CEO and director

Yes, absolutely, Anthony. I think you have probably seen in the media that we are definitely seeing more and more in retail, especially organized retail crime and the occurrence of contraction in our locations. And I think you’ve heard other retailers talk about it, and we’ve definitely seen it too. I want to start with, our priority has always been and will remain the safety of our people, whether it’s the pandemic, whether it’s rebellious customers, or whether it’s direct theft, which is a big part of what we’re seeing now. And this is a real issue that hurts and scares real people.

(Shrinkage is the difference between stated stock and actual stock. And not random cases with lasers and children.)

Later, Barry went on CNBC and further explained (thanks to retailer Don Macke who picked it up):

This may sound strange. Here’s a retailer with $ 52 billion in sales 1 005 stores in one of the richest countries in the world complains that crime levels are so significant that it affects their gross margins. It can not be so bad Can it?

But then look at the recent headlines. Gavin Newsom, Governor of California not yesterday deplores an increase in aggressive organized retail crime after a string robberies over the weekend. Someone involved 80 suspects. It’s not just the Bay either. With the change of month, the head of CVS Health’s anti-theft team told a Senate committee he is currently experiencing losses of $ 200 million at his chain pharmacies, with an average consumption of $ 2,000.

Well sure, it might just be hysteria. The FBI own data on robberies shows cases between 2010 and 2020 by a third. But, given the economic outcomes of Covid, who says that this year has not seen an increasing number of robberies of desperate citizens at the bottom of the economic food chain?

What we do know, however, is that this is the first time we’re seeing a blue chip CEO cite crime as an obstacle to financial performance. And that, in itself, feels striking to an American economy that is apparently starting to fire on all cylinders. To say the least.

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