Target: 'Organized retail crime' has driven $400 million in extra profit loss this year

[mahatmakanejeeves]

Yahoo Finance

Target: 'Organized retail crime' has driven $400 million in extra profit loss this year

Brian Sozzi·Anchor, Editor-at-Large
Wed, November 16, 2022 at 6:31 AM · 3 min read

Target stores are getting looted, and it's taking a huge bite out of profits. ... The discount retailer told reporters on a call to discuss its third quarter earnings results that inventory shrinkage — or the disappearance of merchandise — has reduced its gross profit margin by $400 million so far in 2022 compared to 2021.

"At Target, year-to-date, incremental shortage has already reduced our gross margin by more than $400 million vs. last year," Target CFO Michael Fiddelke said on the earnings call, "and we expect it will reduce our gross margin by more than $600 million for the full year."

Fiddelke detailed how there are "a handful of things that can drive shrink in our business and theft is certainly a key driver. We know we're not alone across retail in seeing a trend that I think has gotten increasingly worse over the last 12 to 18 months. So we're taking the right actions in our stores to help curb that trend where we can, but that becomes an increasing headwind on our business and we know the business of others."

A Target spokesperson told Yahoo Finance via email after the call the shrinkage was mostly specifically attributed to "organized retail crime."

{snip}

[elleng]

1. 'disappearance of merchandise -- has reduced its gross profit

margin by $400 million so far in 2022 compared to 2021.'

[LisaM]

2. Get rid of self checkout.

I don't like self checkout, though I know others do, but it apparently leads to more theft at stores like Target.

It isn't the only part of the problem, but it's some of it.

[mn9driver]

3. The pre-Pandemic retail model needs changing.

Pre-pandemic, big box stores had all their merchandise laid out with only a minimum staff running the store. The pandemic changed behaviors.

These stores will probably need to make merchandise less accessible and increase staffing to compensate. A sign of the times.

[progree]

4. Interesting - I read an article about Target in Minneapolis putting whole bunch of stuff in

locked plexiglass cases -- they showed pictures of practically every personal care item in locked plexiglass cases that one has to summon a store clerk in order to buy. This is the downtown Minneapolis store.

https://img-s-msn-com.akamaized.net/tenant/amp/entityid/AA139JX3.img?w=620&h=422&m=6

I read in another article that when you have to do that, besides the expense of the cases and the extra store workers, there is a 5 to 25% reduction in sales for anything locked up like that. I'm surprised it's not a lot higher than 5 to 25%.

So much for shopping downtown. Shrug. Trouble is, without a car, and with SEVERE cuts to bus service (due to a SEVERE shortage of drivers), options are limited.

The labor force participation rate has been dwindling from a high point of about 67.3% in 2000 to 62.2% now. (It was 62.2% in January, so there hasn't been any progress in that all year). So solutions to the store security problems that include a lot of extra store workers running around fetching toothpaste and deodorant one item at a time are not sustainable real-world solutions to the problem. Times they are a-changing.

Edited to correct the Labor force participation rate link

Labor force participation rate: http://data.bls.gov/timeseries/LNS11300000

Labor force in thousands: http://data.bls.gov/timeseries/LNS11000000

Meanwhile the population of elderly (such as me) needing more and more service (me not yet but soon) grows.

Target puts toothbrushes, toothpaste behind security glass at downtown store ((and a hell of a lot more -Progree). Bring Me The News, 10/19/22

Other items previously placed behind security glass – requiring an employee to open it – include shampoo, conditioner, body wash, deodorant, shaving cream and other toiletries.

The store has picked up security efforts ever since riots hit the Twin Cities in the wake of George Floyd's killing in 2020. The location was looted after a man shot himself in August 2020, sparking brief rioting during which a St. Paul man committed arson at the downtown headquarters building, located about a block away from the store.

The store has since shortened its hours, operating from 8 a.m. to 6 p.m. everyday, prompting relatively regular complaints on social media from those who live downtown. The store was open until 9 p.m. before the changes.

More: https://www.msn.com/en-us/news/us/target-puts-toothbrushes-toothpaste-behind-security-glass-at-downtown-store/ar-AA139JX8?ocid=msedgntp&cvid=f2fcf32300a249b994d36c51d1c3b952

[bucolic_frolic]

5. I went into a Dollar Tree this week

Surprised there's not much value around now that it's all $1.25. The good items haven't returned (at least the ones I looked for), and the merchadise was picked over, and the sizes haven't increased. What was good at $1 ain't so valuable at the higher price.

But what really caught my attention and the reason I post is I didn't buy anything and WOW do the employees look you over when you walk out of the store without buying anything. They must have been told to look for thiefs.

[MichMan]

6. They just make everyone else pay more to make up for the losses.