🔓 Walmart’s shoplifting problem

Wednesday, December 7, 2022 by Robinhood Snacks |
Walmart’s bottom-line blind spot (Chris Hondros/Getty Images)

Walmart’s bottom-line blind spot (Chris Hondros/Getty Images)

Walmart’s bottom-line blind spot (Chris Hondros/Getty Images)

Walmart’s bottom-line blind spot (Chris Hondros/Getty Images)

Yesterday’s Market Moves
Dow Jones
33,596 (-1.03%)
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11,015 (-2.00%)
Bitcoin
$16,991 (+0.15%)

Hey Snackers,

Yetis are converging on Alaska, but instead of running for the hills, residents are heading to the coast. A shipping container spilled 1K+ Yeti coolers into the sea, and they're washing up as freebies on Alaskan beaches (beer not included).

Stocks tumbled again yesterday as strong econ data stoked concerns that the Fed could hike rates well into next year. Oil prices continued falling and were down for the year so far. China’s loosening of Covid restrictions was a market bright spot.

Lifted

Calling a store associate… to unlock the fancy razors in the glass case. Yesterday, Walmart CEO Doug McMillon said rising theft could lead to price hikes and store closures. America’s largest retailer is dealing with a surge in shoplifting that’s “higher than what it has historically been,” McMillon added. He said a lax approach from local prosecutors could lead to closures and higher prices if the problem persists.

Walmart isn’t the only one… Organized retail theft (think: criminal rings who steal large volumes of products only to resell them) is on the rise. Last year nearly 70% of retailers reported a spike, which contributed to losses of up to $69B. It can be hard to imagine that shoplifting could significantly affect multibillion-dollar corporate giants, but the scale has become so great it’s hitting their bottom line — and losing them hundreds of millions.

  • Target is also dealing with an increase in stealing, which it says is mostly organized retail theft. Recently, Target’s CFO said shoplifting at its stores has jumped 50% from last year. So far this year, losses from theft have dealt a $400M blow to its profit margins.
  • Rite Aid said it lost $5M last quarter from theft at its NYC locations, and last year Best Buy’s CEO said that rising theft had been “traumatizing” for workers.
THE TAKEAWAY

Corporate L’s can come in unexpected forms… When we talk about losses, we usually look at rising costs, slowing demand, and shrinking sales. But as America’s economic situation deteriorates, inflation isn’t retailers’ only problem: crime’s starting to become evident in earnings too. Now, retailers are bulking up safety measures like locking up items and adding armed guards. The downside: a less pleasant shopping experience.

Crunch

Falling flat… Pepsi’s plans to lay off hundreds of corporate staff to streamline its biz. The soda and snack giant has nearly 309K employees worldwide, and over a third are US-based. The latest cuts are aimed at its beverage biz, but will affect snacks too. FYI: Pepsi owns the four big O’s of snacking (Cheetos, Doritos, Tostitos, and Fritos). It isn’t the only one crunching down:

  • Coca-Cola recently announced plans to restructure through a “voluntary separation program,” which includes buyout offers for some of its 6K North American workers.

Party in the pantry... Despite inflated prices, Americans have continued splurging on brand-name groceries from companies like Pepsi, Kraft, and Kellogg. Pepsi’s offset higher costs by hiking prices or shrinking product sizes (cough, shrinkflation). Last quarter Pepsi doubled its annual sales forecast as snacking demand stayed strong. But recession fears are sparking concerns that consumers' label loyalty could be tested:

  • In October, Pepsi’s popular Frito-Lay brand saw sales volumes dip. Meanwhile, consumers across income levels are starting to trade down to cheaper private labels.
  • Now, Pepsi execs said they want to offset pressure on margins by preparing for “worsening macroeconomic conditions.”
THE TAKEAWAY

Pepsi wants to future-proof its biz… Tech layoffs started when things were already getting rough for the sector, but Pepsi is preparing for a snack-pocalypse that hasn’t happened yet. Other companies beyond tech are starting to cut headcount or freeze hiring, from Ford to Walmart to Beyond Meat. Economists say there could be spillover effects on more industries.

What else we’re Snackin’

  • Feed: Meta threatened to boot news links from Facebook if Congress passes a proposal that would empower media outlets to negotiate with platforms. A similar measure in Australia led to Meta paying news outlets.
  • SBF’d: Disgraced FTX founder Sam Bankman-Fried tried to raise cash with a surprising list of private equity as collateral, reportedly including shares of SpaceX, the Boring Company, and Bored Ape creator Yuga Labs.
  • Microsony: Microsoft said it offered Sony a 10-year deal to release "Call of Duty" on PlayStation as it tries to buy CoD developer Activision. The move seems aimed at easing regulator antitrust concern.
  • iDrive: Apple reportedly altered its planned self-driving car to include a steering wheel and pedals (anticlimactic). Autonomous tech has lagged expectations, as players like Tesla struggle to deliver on promises.
  • Brr: It could be a cold, dark winter for Europe: British and French officials are planning for rolling blackouts as slashed gas supply from Russia risks an energy shortage.

Snack Fact of the Day

This year, Fed officials have raised rates at the fastest pace since the early 1980s

Wednesday

  • Earnings expected from Campbell Soup and The Duckhorn Portfolio

Authors of this Snacks own: shares of Apple, Microsoft, Tesla, and Walmart

ID: 2627462