Your trusted source for the latest news and insights on Markets, Economy, Companies, Money, and Personal Finance.

2 Strategies For Investors To Combat Increasing Retail Theft

Shrinkage, also known as inventory shrink, has become a significant issue for retailers in recent years. The problem gained attention in early 2023 when Target (NYSE: TGT) reported it as a factor affecting its profits. Other CEOs and retailers also highlighted the issue in subsequent quarters. For example, when Dick’s Sporting Goods (NYSE: DKS) disclosed that shrinkage had significantly impacted its profits, its shares fell more than 25%, leading to a negative revision in earnings guidance. Shrinkage costs retailers a significant amount of money, and it represents an investment opportunity. 

Here are two strategies for investors to combat increasing retail theft:

1. CDW: Leader in RFID and Solutions for Retail Theft Prevention
CDW (NASDAQ: CDW) is a prominent player in the market for retail theft prevention solutions, including RFID devices and a comprehensive range of services. Although CDW is not solely focused on retail theft, the company has extensive exposure to the industry. CDW’s stock trades at a price-to-earnings ratio of around 21x and offers a solid dividend, with a payout ratio of about 1.15% of the stock price. The company has been consistently increasing its dividend at a fast pace, with a 5-year compound annual growth rate (CAGR) above 20%. Furthermore, CDW’s payout ratio is low at 23% and is supported by strong cash flow conversion and a healthy balance sheet. Analysts view CDW favorably and rate the stock as a Moderate Buy. The 2023 results have exceeded expectations, leading to upwardly revised guidance and an optimistic outlook for future growth.

2. Avery Dennison: End-to-End Solutions for Loss Prevention
Avery Dennison (NYSE: AVY) provides comprehensive solutions to prevent loss from the moment inventory is received until it is sold. Although Avery Dennison has a smaller market capitalization compared to CDW, it offers a higher dividend yield. The company’s stock is valued similarly to CDW and currently yields 1.78% with a payout ratio of 40%. Avery Dennison has a track record of annually increasing its distribution at a double-digit pace, albeit lower than CDW’s 10% growth rate. Analysts hold a positive outlook on Avery Dennison, upgrading its rating to Buy. They anticipate a 13% increase in the stock price, driven by double-digit revenue growth in 2024. Additionally, 2024 is expected to bring margin expansion, a 24% rise in adjusted earnings per share, and further dividend safety. UBS, a renowned financial institution, recently upgraded Avery Dennison to Buy and raised the price target above consensus. UBS cites strength and stability in Avery Dennison’s core businesses and the RFID segment as drivers of market-beating growth in the upcoming year. They forecast a 14% to 15% CAGR for the next five years, which should support a double-digit pace of dividend increases.

In conclusion, retail theft is a growing concern for retailers, offering investment opportunities for strategies focused on retail theft prevention. CDW and Avery Dennison, with their expertise and solutions in this field, appear to be strong contenders in this market.

Share this article
Shareable URL
Prev Post

Trump Rejoins Twitter

Next Post

American-Style Ice Cream with a Sweet Twist: A Taste of New Zealand’s Fruity Flavors

Leave a Reply

Your email address will not be published. Required fields are marked *

Read next