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.”US retail chain market Target is seen on December 23, 2013 in New York, NY. (Photo by Mucahit Oktay/Anadolu Agency/Getty Images)
Organized retail crime is not just a Target issue as it has impacted other big name 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 one. To some degree it’s a reflection of our times. Simply put, America’s social contract is straining. Until recently we’ve been able to lay out goods—often in mammoth, big box stores with only a handful of employees. When our social contract is strong—i.e people are getting a fair shake—it’s a model that works. Now it seems more people are stealing instead. (BTW, our stressed social contract may be capping how far we can push this people-light, technology-heavy model. Last month Wegman’s ended its scan-and-go shopping app. Why? Shrinkage, of course.)