Target, Walmart and TJX Companies Say Organized Retail Crime Is Cutting Into Profit
Retail shrink is taking a bite out of company profits this quarter.
In their most recent earnings calls, CEOs from Target, Walmart and TJX Companies discussed how retail theft has hit their businesses in the last quarter and how the industry needs to come together to combat the growing problem.
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“It’s an urgent issue, not just for Target, but across the entire retail industry,” said Target CEO Brian Cornell in a call with investors on Wednesday. “It is a problem that impacts availability of product, the shopping conditions are less convenient and, unfortunately, what I’m most concerned with is it puts our team and our guests in harm’s way.”
In a release discussing its first-quarter results, Target said retail shrink — or when stores have fewer products than recorded in inventory books — has intensified across its store base, largely driven by organized retail crime. The company said it expects a $500 million hit to profitability this year compared with the prior year. Last year, Target noted that shrink impacted its gross margin by at least $400 million.
Cornell also noted that “violent incidents” have increased at Target stores and elsewhere across the industry.
Other large chains are in a similar position. The National Retail Federation’s 2022 National Retail Security Survey found that retail shrink, when taken as a percentage of total sales in 2021, accounted for $94.5 billion in losses in 2021.
TJX Companies, which owns T.J. Maxx, Marshalls and HomeGoods, also highlighted headwinds from retail shrink in its first-quarter earnings call on Wednesday and projected impacts to profit in a similar range to the prior year.
“We are laser-focused on our shrink initiatives, which are the increase of tagging, tethering, the use of hard cases and increased loss prevention presence,” said TJX EVP and CFO John Klinger in a call with analysts. “We’re continuing to look for newer ways to protect our merchandise. And then, of course, we are also very focused on the employee and customer safety in our stores, along with the customer satisfaction.”
In certain markets like Portland, Ore., and San Francisco, waves of crime have prompted some retailers to wind down their businesses there.
Walmart said in March that it would close the last two of its stores in Portland by March 24. The news came months after Walmart CEO Doug McMillon told CNBC that its stores were grappling with an increase in organized retail crime. (Walmart’s U.S. communications director said these stores, located at Hayden Meadows and East Port Plaza, were underperforming and did not confirm if the closures were a result of increased retail crime in the city.)
Like Target, Walmart noted that the solution to combating the issue needs to be a collaborative process across retail.
“It’s been challenging really for all of retail,” said Walmart’s U.S. CEO and president, John Furner, in a Thursday call with analysts discussing the company’s first-quarter earnings results. “We know a lot of communities have been affected by this, but it’s also important to note that retail can’t solve this issue all on its own. It will take communities stepping up and enforcing the law to be able to bring this issue back under control.”
A Nike Community Store in Northeast Portland was also reportedly impacted by waves of crime in the region, which likely prompted the closure of the store for weeks, between October and November, KGW8 reported. FN has reached out to Nike for a comment regarding the status of this store. (Its website currently leads to a dead end.)
Earlier this month, Nordstrom said it would close two stores in downtown San Francisco, citing changing dynamics in the city’s market.
In New York City, mayor Eric Adams on Wednesday outlined a plan to combat retail theft and organized crime rings. The initiative was rolled out after more than 70 retailers, law enforcement officials, union leaders and business improvement districts convened in December to discuss a solution to retail theft.
The city’s plan combines increased law enforcement efforts and enhanced social service programming designed to prevent shoplifting, particularly by individuals struggling with substance use disorders, serious mental illness, homelessness or poverty.
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