Retailers say theft is rising as more people shop in stores, cutting into profits that were already under pressure.
“We definitely had an uptick since last year,” Macy’s Chief Executive Jeff Gennette told analysts earlier this month. “It’s an industrywide trend.”
Target Corp. TGT -1.53%decrease; red down pointing triangle
said in November that it expected the problem, known in the industry as “shrink,” to reduce gross margins for the recently completed fiscal year by more than $600 million. TJX Cos.’s TJX -0.89%decrease; red down pointing triangle and Macy’s Inc. also called out higher shrink rates in recent calls with analysts.
“Theft is growing at a faster rate than sales,” said Dean Rosenblum, a senior U.S. retail analyst at Bernstein Research. Mr. Rosenblum said theft is becoming a big enough problem that it’s starting to affect margins, which is why retailers are talking about it more frequently.
Retailers typically conduct a physical count of their inventory once a year and compare it to what is recorded on their books. The difference is known as shrink, a broad term that encompasses not just internal and external theft but also process failures that could lead to inventory being lost or recorded inaccurately.
In an interview, Mr. Gennette said the shift in shoppers returning to stores after a surge in online buying during the pandemic is partly responsible for the uptick. “More theft happens in stores,” as opposed to warehouses that fulfill online orders, he said.
He added that a jump in organized retail crime in certain areas of the country is also a factor. “These are crime levels we haven’t seen before,” Mr. Gennette said.
Shrink rates declined in 2021 and are broadly in line with historical levels, after rising in 2020 and 2019, according to a survey of 63 retailers conducted by the National Retail Federation and the Loss Prevention Research Council. Figures for 2022 aren’t yet available.