February 21, 2024

Target Organized retail crime will cost $500 million more in stolen and lost merchandise this year than a year ago, it said Wednesday.

Target’s inventory losses, known as drawdowns, totaled about $763 million last fiscal year, according to calculations in company financial filings.Contraction to top $1 billion this year as expectations grow.

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Quantifying theft can be difficult because drawdowns include inventory loss from other causes, such as employee theft or damage.

Chief Executive Brian Cornell pointed to the challenge on the company’s fiscal first-quarter earnings call, saying the retailer and others were grappling with increased theft, slowing sales and shoppers’ interest in higher prices. sensitive issue. He described retail theft as a “worsening trend that has occurred over the last year” and said violence at Target stores has increased.

“This issue affects us all, limiting product availability, creating an inconvenient shopping experience, and hurting our teams and our guests,” he said by phone.

Organized retail crime has become a hot issue in the industry, with some companies blaming the growth of online marketplaces that allow thieves to anonymously sell electronics, cosmetics and other items they steal from stores. The Home Depot, walmart, Major retailers such as Best Buy, Walgreens and CVS have all addressed the issue, saying shrinkage has gotten worse.

“There’s a retail theft problem in this country,” Home Depot Chief Financial Officer Richard McPhail said in an interview with CNBC on Tuesday. “We’re confident in our ability to reduce and eliminate that stress, but it’s definitely there.”

However, it is difficult to verify whether organized retail theft has increased, and if so, by how much.shrink Retailers lose $94.5 billion In 2021, from $90.8 billion in 2020, according to the National Retail Federation. Its data is anonymized and shared with retailers, so it cannot be fact-checked.

NRF data shows that external retail crime accounted for only 37 percent of those losses, or about $35 billion.

There are other caveats. Covid fears and temporary store closures related to the pandemic have disrupted 2020, likely reducing foot traffic of shoppers and thieves. Furthermore, shrinkage comes not only from shoplifting and employee theft, but also from damaged products such as damaged furniture and expired food.

Target has been more vocal about organized retail theft as it struggles with excess inventory and disappointing profit margins. It missed Wall Street earnings expectations for three straight quarters last year. Unneeded merchandise sits idle in its stores and warehouses until the company takes aggressive action to cancel orders and mark down prices on items.

However, Cornell emphasized that more theft is the reason why Target is getting worse.

Chief Financial Officer Michael Fiddelke said on the company’s investor call Wednesday that the shrinkage knocked a full percentage point off the company’s gross margin in the fiscal first quarter compared with a year ago.

Cornell said Target is trying to reduce theft by installing guards at some stores and adjusting assortments. The company is working with politicians, law enforcement and retail industry trade groups to come up with policy solutions, he said.

Some retailers and trade groups have pushed for the INFORM Consumers Act, a law that seeks to require verification so thieves cannot easily sell stolen or counterfeit goods through online marketplaces. It was included in Congress’ comprehensive spending plan late last year and relies on state attorneys general for enforcement.

Cornell said the company is “focused on staying open in markets where things are going wrong.” It has about 1,900 stores nationwide, in suburban areas and major cities, including New York City and San Francisco.

—— CNBC Gabriel Fangrouge Contribute to this report.