Target (TGT) has become the target of a major theft, and it is taking a significant portion of the profits.
The retailer estimated in its earnings release Wednesday that inventory shrinkage — mostly stolen goods — would reduce profits by $500 million this year. Factoring in about $700 million of profits from inventory shrinkage in 2022, the target is to see $1.2 billion of profits go up in smoke mainly due to organized retail crime.
Target President and CEO Brian Cornell says the problem is getting worse, is across the country, and in different merchandise divisions.
“The unfortunate fact is that violent incidents are on the rise in our stores and throughout the retail industry. And when products are stolen, they are simply not available to the guests who depend on them,” said Cornell. told reporters on a call.
“Left unchecked, organized retail crime demeans the communities we call home. As we work to address this problem, the safety of our guests and our team members will always be our primary concern. Beyond security concerns, declining shrink rates are putting significant pressure on our financial results,” he said.
The problem of organized retail crime has gotten worse in recent years, as thieves seek to keep items safe and sell them cheaper to consumers in an age of high inflation.
According to a late 2022 study by the National Retail Federation (NRF), store thefts, which contribute to inventory shrinkage, are expected to hit $94.5 billion in 2021, up from $90.8 billion in 2020.
About 32.8% of the companies surveyed rated organized retail crime as a “very high” concern over the past five years.
In a report released last month, an NRF analysis of 132 crime groups operating booster operations between 2014 and 2022 found that 16% used at least one violent tactic in stores. Those tactics include robbing and grabbing, use of firearms or other weapons, battery, flash mob tactics, or threats of violence against store employees.
NRF CEO Matthew Shay said, “Organised retail crime has been a major concern for the retail industry for decades, putting store employees and customers at risk, disrupting store operations and causing financial damage to retailers and communities. Causing billions in damages.” “These concerns have grown in recent years, as criminal groups have become more brazen and violent in their tactics and are using new channels to resell stolen goods.”
The controversial status has caused large retailers to vacate some high-crime cities like San Francisco in 2023.
Nordstrom (JWN) recently followed Whole Foods in pulling out of a major location in San Francisco, citing concerns over worker safety.
The independent news site San Francisco Standard has tracked 20 closures of household name stores in the city since 2010, including Office Depot.
A view of the infant formula aisle at a Target store in Times Square, New York City, New York. Reuters/Jessica DiNapoli
Target declined to say whether it would close stores in high-crime cities. Cornell said he does not want to close the locations because of their importance to the community.
As Target decides whether to vacate these hotbeds of crime, it said it would improve worker training and add more “asset protection” staff at the locations. The company — similar to other big-box chains — has also resorted to discontinuing items like mouthwash to reduce theft.
“So it’s pervasive, and I can tell you, as I talk to my retail peers, is that it’s a common theme across all of retail. It will vary by market, by individual store, but The trend has been very consistent. And year after year we continue to see growth [in theft]Cornell said.
Brian Sozzi is the executive editor of Yahoo Finance. Follow Sozy on Twitter @BrianSozzi and on LinkedIn, Tips on deals, mergers, activist situations or something else? Email [email protected]
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