In an earnings call, Target officials revealed that inventory theft has reduced the overall profit margin by a staggering $400 million.
Key Details
- Inventory shrinkage, or the disappearance of merchandise in the store, is cutting into Target’s bottom line.
- While discussing third-quarter earnings results, Target representatives says that the losses have cut into its gross profit margin by about $400 million compared to last year—and that number is expected to grow.
- On the call, Target CFO Michael Fiddelke said that theft is one of the main causes of inventory shrinkage and the stores are taking steps to prevent further theft.
Why it’s news
Target officials claim that the increased inventory losses are largely due to “organized retail crime.” A spate of retail theft isn’t just affecting Target. Major retailers like Best Buy and Rite-Aid have also been affected.
In the past couple of years, retailers have seen an uptick of retail theft—sometimes in organized groups. In 2021, around $94.5 billion in goods were lost to retail theft. That’s an increase from 2020 when around $90.8 billion was lost according to a report from the National Retail Federation.
The report also found that retailers are seeing a rise in violence between guests and associates. Some of the increased tension is due to low staffing from labor shortages and enforcement of COVID-19 precautions.
Shoppers may notice that an increased number of items have security tags or are behind a locked glass. While this method may help deter theft, it has increased frustration among customers as they now need to find an employee in order to complete what may have previously been a quick errand.
Short staffing will likely contribute to customer frustration as they struggle to find available employees.
Backing up a bit
As the holiday shopping season arrives, retailers are having difficulty finding additional staff to help during the rush.
Retail positions are especially hard to fill with around 60% of retailers reporting that they were having difficulty finding staff.
Other positions within the store are difficult to fill as well. Around 45% of retailers are also struggling to staff contact center and office positions in their stores.
While nearly all retailers have plans to hire staff before the holiday rush begins, 30% say that they do not have adequate Human Resources staff to conduct the hiring process.
