Target stores are looted, and it takes away a huge chunk of profit.
The discount retailer told reporters on a call to discuss its third quarter results that reduced inventory – or disappearance of merchandise – had reduced its gross profit margin by $400 million so far in 2022. .
“There are a handful of things that can cause our business to decline and theft is definitely a key factor,” Target CFO Michael Fiddelke said. “We know we are not the only ones in retail to see a trend that I believe has gotten worse over the past 12-18 months. So we are taking the right steps in our stores to help curb this trend where we can, but it’s becoming a bigger and bigger headwind to our business and we know other people’s business.”
A Target spokesperson told Yahoo Finance via email after the call that the decrease was primarily “organized retail crime.”
Organized crime in retail is not just a Target problem as it has impacted other major retailers such as Best Buy and Rite-Aid. From Yahoo Finance Editor-in-Chief Andy Serwer earlier this year:
“Why are people stealing these days? That’s a tough question. To some extent, it reflects our times. Simply put, the American social contract is a strained store with only a handful of employees. When our social contract is strong – i.e. people get a fair shake – it’s a model that works. Now it seems like more people are stealing instead. (By the way, our stressed social contract can limit how far we can push this lightweight, tech-enabled model. Last month, Wegman’s ended its scan-and-go shopping app. Why? Shrinkage, of course.)
I think wealth inequality has everything to do with all of this. Think back to the so-called era of public enemies in the 1930s, when bank robbers ran rampant across the country. It also coincided with the Great Depression. Less money in the hands of the poor and more theft. It seems like a cause and effect to me.”
Stolen goods from stores increased to $94.5 billion in losses in 2021, from $90.8 billion in 2020, according to a new report from the National Retail Federation (NRF). The report revealed that the average stock-out rate last year was 1.44%. Although this is a modest decline from the previous two years, it is still comparable to the five-year average of 1.5%.
“Retailers face security challenges on many fronts,” the NRF said. “Most retailers surveyed report that in-store, e-commerce and omnichannel fraud are on the rise. The majority of respondents also reported that guest-to-guest violence, external theft, ORC and cyber crimes have become higher priorities. for their organizations.Challenges around labor shortages, retaining and hiring employees – as well as issues around masking and maintaining COVID precautions – have contributed to violence risks. and hostility.”
Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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