Target Expects Retail Crime To Cost an Additional $500 Million — Retail Bum

Target expects losses resulting from organized crime to surpass $1 billion this year, with stolen and lost merchandise estimated to cost an additional $500 million.

The estimated losses mark a dramatic increase from the $763 million the company lost to inventory shrink last year.

Target CEO Brian Cornell said the problem with theft further complicates the company’s position as its business is already grappling with slower sales and price-sensitive shoppers.

Retail theft, in particular, is a “worsening trend that emerged last year,” with violent incidents on the rise at Target stores, he said.

“The problem affects all of us, limiting product availability, creating a less convenient shopping experience, and putting our team and guests in harm’s way.”

Cornell added that more theft is driving the company’s shrink and is the reason behind the company’s Q1 gross margin rate falling by a full percentage point compared to the year before.

That said, it is worth noting that Target’s troubles also stem from excess inventory, which has impacted its profit margins and contributed to the company missing Wall Street’s expectations for three quarters straight.

Target is far from the only major retailer that has voiced concerns over inventory theft. Last week, Cornell’s concerns were echoed by Home Depot CFO Richard McPhail in a call with CNBC.

“The country has a retail theft problem,” McPhail said. “We’re confident in our ability to mitigate and blunt that pressure, but that pressure certainly exists out there.”

Photo credit: Target

Originally published at https://retailbum.com on May 18, 2023.