Target CFO: 'Organized retail crime' contributed to hundreds of millions in lost profits in 2022

Retailers like Target and Walgreens have felt the sting in the past year.

Brian Sozzi
·Executive Editor
Updated ·2 min read
82

With all due respect to Walgreens CFO James Kehoe, inventory shrinkage mostly at the hands of organized retail crime is still worth crying over if you are a retailer.

Take Target (TGT), for example.

"It [inventory shrinkage] was certainly a headwind [last year]," Target CFO Michael Fiddelke told Yahoo Finance on Tuesday (video above). "We know we're not alone in seeing elevated levels of shrink and organized retail crime driving some of that theft."

Fiddelke said the profit impact amounted to "hundreds of millions of dollars of headwind." The issue is likely to challenge Target's bottom line in 2023, he added.

In this Oct. 3, 2010 photo, a customer purchases an Apple iPad at a Target store in Cupertino, Calif. Target Corp. said Thursday, Oct. 7, a key revenue measurement rose 1.3 percent in September, missing Wall Street's expectations. (AP Photo/Paul Sakuma)
In this Oct. 3, 2010 photo, a customer purchases an Apple iPad at a Target store in Cupertino, Calif. (AP Photo/Paul Sakuma)

Goods stolen from stores, which contributes to inventory shrinkage, led to $94.5 billion in losses in 2021, up from $90.8 billion in 2020, according to a late 2022 study by the National Retail Federation (NRF).

About 32.8% of retailers surveyed called out organized retail crime as becoming "much more" of a concern in the last five years.

The increased amount of theft has caused retailers to take additional measures, such as hiring more security guards and locking up easy-to-shoplift items, notably household essentials such as toothpaste.

Locked up merchandise, to prevent theft in Target store, Queens, New York. (Photo by: Lindsey Nicholson/UCG/Universal Images Group via Getty Images)
Locked up merchandise, to prevent theft in Target store, Queens, New York. (Photo by: Lindsey Nicholson/UCG/Universal Images Group via Getty Images)

“These highly sophisticated criminal rings jeopardize employee and customer safety and disrupt store operations," Mark Mathews, NRF vice president for research development and industry analysis, wrote in the report. "Retailers are bolstering security efforts to counteract these increasingly dangerous and aggressive criminal activities."

While Target and other retailers are still pulling out all the stops to prevent organized retail theft in their stores, Walgreens (WBA) appears to be over the matter.

During an early January earnings call, Walgreens' Kehoe said inventory shrinkage was down to about "mid-twos" in terms of a percentage of sales. In 2022, the number was closer to 3.5%.

"Maybe we cried too much last year when we were hitting numbers that were 3.5% of sales," Kehoe crowed. "We've put in incremental security in the stores in the first quarter. Actually, probably we put in too much, and we might step back a little bit from that."

Send those security folks over to Target, James.

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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