Target (TGT) CFO Michael Fiddelke says inventory shrinkage due to organized theft is affecting retail companies’ bottom-lines, evaporating hundreds of millions of dollars of profits per year.
In an interview with Yahoo Finance, Fiddelke said, “It [inventory shrinkage] was certainly a headwind [last year]. “We know we’re not alone in seeing elevated levels of shrink and organized retail crime driving some of that theft.”
He noted, as a result, retail companies are seeing, “hundreds of millions of dollars of headwind.” He noted it is likely to be a major factor in Target’s bottom line in 2023.
In 2021, stolen goods, a major source of inventory shrinkage, generated $94.5 billion in losses, an increase from 2020’s $90.8 billion according to the National Retail Federation’s 2022 report on retail theft.
Roughly 32.8% of surveyed retailers noted that organized retail crime had become more of a factor in their operation over the last five years.
Retailers have had to enact additional measures due to the theft, including hiring more security personnel and locking up items prone to retail theft, such as household essentials, like toothpaste.
Mark Mathews, NRF vice president for research development and industry analysis, wrote in the report, “These highly sophisticated criminal rings jeopardize employee and customer safety and disrupt store operations. Retailers are bolstering security efforts to counteract these increasingly dangerous and aggressive criminal activities.”
Not all retailers are in crisis however. At Walgreens, the problem seems to be abating.
Walgreens CFO James Kehoe, in an early January earnings call, noted inventory shrinkage had fallen to about the “mid-twos” as a percentage of sales. That number was roughly 3.5% in 2022.
He added, “Maybe we cried too much last year when we were hitting numbers that were 3.5% of sales. 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.”
Some retailers are taking unique measures however. In a New York Post report, one New York City retail trade group has begun using trained security dogs to deter retail theft.
The 34th Street Partnership, in partnership with Stapleton Security Services, began deploying security personnel with trained security dogs this month at a local CVS.
Although the dogs will not engage in pursuits, their mere presence, and the threat of a conflict with their handlers, has deterred thefts.
Kevin Ward, vice president of security for the 34th Street Partnership, said, “It’s effective so far. We’ve had a couple of people who were known shoplifters who saw the dog and walked out without stealing anything.”
