Retailers are facing more attacks from organized crime groups, which buy high-value merchandise and resell it online for a profit.
Getty ImagesTarget is facing a sharp rise in theft at its stores, saying that it has lost $400 million in gross profit margin this year as goods disappear from shelves.
“We have seen a dramatic rise in crime,” CEO Brian Cornell told analysts and investors on a Wednesday call to discuss its latest quarterly results.
The big-box retailer said things have gotten increasingly worse in the last 12 to 18 months, with theft starting in “localized geographies,” but then noting that the “circles are expanding and expanding,” and the impact is continuing to grow.
Target said it’s making significant investments to train employees and implement technology in its stores to prevent theft. Its No. 1 goal is the safety of its employees and customers, it said. It acknowledged that as it deploys theft prevention measures in more stores, it creates a shopping experience that’s less pleasant for customers.
Target is not alone in facing a rise in theft, particularly from organized groups that coordinate attacks on stores where they steal high-value merchandise and resell it online for a profit. Nearly 70% of retailers reported a rise in organized retail crime last year, contributing to theft and losses of as much as $69 billion a year, according to the Retail Industry Leaders Association and the Buy Safe America Coalition.
Best Buy CEO Corie Barry noted last year that a rise in theft had been “traumatizing” to employees, and that she worried it could make it more difficult for the electronics chain to hire people. Rite Aid said it lost $5 million from theft in its New York City stores alone in its latest quarter.
Many retailers have begun locking up more items, from razors to ice cream to pistachios, which helps deter thieves but also frustrates regular shoppers who need to request assistance from an employee. Retailers are also bulking up their security presence, including adding more armed guards to stores.
The theft is further dampening Target’s profits, which are already taking a hit from higher costs and more frequent promotions. Target said that its operating margins fell to 3.9% in the third quarter, down sharply from 7.8% in the same period a year ago.
