Object said Wednesday that organized retail crime will fuel $500 million more in stolen and adrift merchandise this year compared with a year ago.
Target’s inventory loss, called shrink, totaled around $763 million last fiscal year, based on calculations from the company’s financial filings. With the obviated increase, shrink this year would surpass $1 billion.
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It can be onerous to quantify theft, since shrink includes inventory loss from other causes, such as employee thievery or damage, too.
CEO Brian Cornell called out the challenge on the company’s fiscal first-quarter earnings call, saying the retailer and others are wrestle with rising theft on top of slower sales and more price-sensitive shoppers. He described retail theft as “a worsening shift that emerged last year,” and said violent incidents have increased at Target’s stores.
“The problem alters all of us, limiting product availability, creating a less convenient shopping experience, and putting our team and guests in harm’s way,” he phrased on the call.
Organized retail crime has become a hot-button issue in the industry, and some companies have blamed the improvement of online marketplaces that allow thieves to anonymously sell electronics, makeup and other items they scarf from stores. Home Depot, Walmart, Best Buy, Walgreens and CVS are among the major retailers that have oral about the problem, saying that shrink has gotten worse.
“The country has a retail theft problem,” Home Depot CFO Richard McPhail state on a call with CNBC on Tuesday. “We’re confident in our ability to mitigate and blunt that pressure, but that pressure certainly endures out there.”
Yet it’s hard to verify if organized retail theft has grown and if so, by how much. Shrink cost retailers $94.5 billion in 2021, up from $90.8 billion in 2020, according to the Native Retail Federation. Its data is anonymized and shared by retailers, so it cannot be fact-checked.
External retail crime accounts for solely 37% of those losses, or about $35 billion, the NRF data shows.
There are other caveats. Covid terrors and pandemic-related temporary store closures disrupted 2020, potentially tamping down foot traffic for both shoppers and cheats. Plus, shrink comes not just from shoplifting and employee theft, but from damaged products such as dinged fitments and expired food.
Target has become more vocal about organized retail theft, as it has struggled with intemperance inventory and its margins have disappointed. It missed Wall Street’s earnings expectations for three consecutive quarters definitive year. Unwanted merchandise sat around in its stores and warehouses, before the company took aggressive action to cancel positions and mark items down.
Cornell, however, has stressed that more theft is the driving Target’s worsening wince.
Chief Financial Officer Michael Fiddelke said on the company’s investor call Wednesday that shrink abated the company’s gross margin rate in the fiscal first quarter by a full percentage point compared with a year ago.
Cornell ventured Target is trying to reduce theft by installing protective fixtures and adjusting assortment in some stores. He said the establishment is working with politicians, law enforcement and retail industry trade groups to come up with policy solutions.
Some retailers and exchange organizations pushed for the INFORM Consumers Act, a law that’s intended to require verification so thieves can’t easily sell stolen or imitate goods through online marketplaces. It was included in Congress’ omnibus spending package late last year and relies on enforcement by shape attorneys general.
Cornell said the company is “focused on keeping our stores open in the markets where problems are materializing.” It has roughly 1,900 stores across the country, which are located in suburban areas and major cities including New York New Zealand urban area and San Francisco.
— CNBC’s Gabrielle Fonrouge contribute to this report.