Target CEO Raises Concerns over Retail Theft and Organized Crime

In a recent conference call to discuss Target’s second-quarter results, CEO Brian Cornell expressed deep concern over the “unacceptable amount” of retail theft and organized crime that the company is currently facing.

Persistent Inventory “Shrink”

Cornell reiterated his previous remarks on inventory “shrink,” which refers to losses resulting from theft and organized retail crime. Despite the team’s efforts, Cornell stated that the level of shrink remains well above what is sustainable in the long run. He also highlighted the unfortunate rise in safety incidents associated with theft.

Alarming Rise in Violence

The safety of Target employees has become a serious concern. Cornell revealed that during the first five months of 2023, Target stores witnessed a staggering 120% increase in theft cases involving violence or threats of violence.

Impact on Profits

The company has experienced more than a percentage point of cumulative profit pressure due to higher shrink since 2019. This ongoing issue is taking a toll on Target’s financial performance.

Tackling the Problem

Michael Fiddelke, Target’s chief financial officer, shared insights into the company’s efforts to address this pressing issue. Collaborating with government and community partners, Target is working diligently both within its stores and externally to reduce loss rates over time. Fiddelke added that the long-term expectation is for shrink rates to moderate, but concrete evidence of decline is yet to be observed.

Target remains committed to safeguarding its employees and customers while implementing initiatives to combat retail theft and organized crime. The company’s focus on this matter demonstrates its proactive stance in ensuring a secure and sustainable retail environment.

Theft and Organized Retail Crime Driving Inventory Shrink

In recent years, theft and organized retail crime have emerged as significant factors contributing to inventory shrink. Home Depot Inc. highlighted this ongoing issue and expressed hope that a new law will help combat this problem, which costs the retail sector billions of dollars annually.

The Importance of Transparency in Online Retail Marketplaces

The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act, which became effective on June 27, aims to increase transparency in online transactions. The law also seeks to deter criminals from selling stolen, counterfeit, or unsafe items through online marketplaces.

Rise in Retail Shrink: A Cause for Concern

According to the National Retail Federation, retail-industry shrink amounted to $94.5 billion in 2021, up from $90.8 billion in 2020. This increase was mainly driven by external theft, including organized retail crime. The NRF’s National Retail Security Survey, conducted in collaboration with the Loss Prevention Research Council, revealed that retailers experienced a 26.5% surge in organized retail crime incidents in 2021. Furthermore, eight in 10 retailers reported an escalation in violence and aggression associated with these incidents.

Positive Market Response for Target amidst Ongoing Challenges

Target witnessed a 4.7% increase in its stock value on Wednesday, surpassing the S&P 500’s gain of 0.2%.