Based on Goal, losses attributable to organized retail crime have skyrocketed
Goods locked up to deter theft at the Target Store, Queens, New York.
Lindsey Nicholson | Universal Images Group | Getty Images
Goal said Wednesday organized retail crime will cause $500 million more in stolen and lost goods this year compared to last year.
According to calculations from the company’s financial records, Target’s shrinkage for the past fiscal year was approximately $763 million. With the expected increase, the decline this year would exceed $1 billion.
related investment news
It can be difficult to quantify theft because shrinkage also includes inventory losses for other reasons, such as B. Theft or damage by employees.
CEO Brian Cornell highlighted the challenge in the company’s earnings release, saying the retailer and others are grappling with rising theft in addition to slower sales and more price-sensitive shoppers. Describing retail theft as “a worsening trend that has become apparent over the past year,” he said violent incidents at Target stores have increased.
“The issue affects us all, it limits product availability, creates a less convenient shopping experience and puts our team and guests at risk,” he said on a conference call with investors.
Organized retail crime has become a hot topic in the industry, and some companies blame it on the growth of online marketplaces that allow thieves to anonymously sell electronics, makeup and other items stolen from stores for sale. home depot, walmart, Best Buy, Walgreens and CVS are among the big retailers who have spoken out about the problem, saying shrinkage has gotten worse.
“The country has a problem with retail theft,” Home Depot CFO Richard McPhail said in a call to CNBC on Tuesday. “We’re confident that we can mitigate and alleviate that pressure, but that pressure is definitely out there.”
However, it is difficult to determine whether and how much organized retail theft has increased. According to the National Retail Federation, shrinkage cost retailers $94.5 billion in 2021, up from $90.8 billion in 2020. The data is anonymized and shared by retailers, so factual verification is not possible is.
NRF data shows that outside retail crime accounts for only 37% of these losses, or about $35 billion.
There are other caveats. Covid fears and pandemic-related temporary store closures have disrupted 2020, potentially limiting foot traffic for both shoppers and thieves. In addition, shrinkage is caused not only by shoplifting and employee theft, but also by damaged products such as damaged furniture and expired groceries.
Target has been more vocal on organized retail theft as the company struggles with excess inventory and disappointing margins. The company missed Wall Street earnings expectations for three straight quarters last year. Unwanted merchandise littered its stores and warehouses before the company took aggressive action to cancel orders and mark down items.
However, Cornell has stressed that increased thefts are the reason Target’s increasing shrinkage.
Chief Financial Officer Michael Fiddelke said at the company’s investor conference on Wednesday that Shrink reduced the company’s gross margin by a full percentage point in the fiscal first quarter compared to a year ago.
Cornell said Target is trying to reduce theft by installing security guards and adjusting the assortment in some stores. He said the company is working with politicians, law enforcement and retail groups to find policy solutions.
Some retailers and trade organizations have been pushing for the INFORM Consumers Act, a law that would require screening to prevent thieves from easily selling stolen or counterfeit goods through online marketplaces. It was included in Congress’ overall spending package late last year and relies on enforcement by the attorney generals.
Cornell said the company is “focused on keeping our stores open in markets that are experiencing issues.” It has about 1,900 stores across the country, located in suburban and metropolitan areas like New York City and San Francisco .
— CNBC’s Gabrielle Fonrouge contributes to this report.