Dive Brief:
- Target expects retail theft will reduce its 2023 profitability by more than $500 million compared to last year, according to the retailer’s Q1 earnings report.
- Target has adopted numerous mitigation efforts, including investing in safety resources, installing fixtures to protect merchandise, adjusting product assortment, and collaborating with legislators, law enforcement and retail industry experts, Brain Cornell, Target’s chairman and CEO, said during Wednesday’s earnings call.
- More retailers are bringing organized retail crime (ORC) prevention efforts to the forefront as the issue continues to plague the retail and grocery industry, contributing to nearly $100 billion in shrink experienced annually in the U.S.
Dive Insight:
Target’s CEO noted ORC is an “urgent issue, not just for Target, but across the entire retail industry,” impacting product availability, the shopping experience and the safety of team members and customers as in-store violent incidents are also on the rise.
Target’s first quarter gross margin rate was 26.3% compared with 25.7% in 2022, but benefits driving this uptick were somewhat offset by higher inventory shrink, Target stated in its earnings report.
“While shrink can be driven by multiple factors, theft and organized retail crime are increasingly urgent issues, impacting the team and our guest and other retailers,” Cornell said during the Wednesday call.
Cornell also noted that Target is advocating for public policy changes around ORC by working with fellow retailers, the National Retail Federation and its partners at the Retail Industry Leaders Association to speak with legislators and work with law enforcement.
Target noted in its earnings report that it is investing in numerous in-house strategies to prevent ORC, limit theft and protect guests and team members, but did not delve into specifics. But Cornell stressed that the retailer is doing everything it can to keep stores open in areas where ORC is high.
A number of retailers have started assembling ORC teams in order to combat shrink caused by theft. Albertsons, Kroger and Weis Market all have job postings looking for loss prevention, asset prevention and ORC investigators.
Target said strength in its beauty, food and beverage and household essential categories offset softness in discretionary purchases in Q1. The company reported flat sales for the first quarter, with growth of 0.5%, while comp store sales grew 0.7% year over year but were offset by a decline in comparable digital sales, which were down 3.4%.
