Target Faces Profit Losses, Rethinks In-Store Operations Amid Rising Retail Crime

Big box retailer Target has become a focal point for significant theft incidents, which has left a considerable dent in its profits.

Consequently, the retailer, along with others, is reassessing its approach to in-store operations.

According to its recent earnings release on Wednesday (May 17), Target projected a staggering $500 million drop in profits for the current year, primarily due to inventory shrinkage, which includes merchandise theft. Considering the estimated $700 million profit loss from inventory shrinkage in 2022, the Washington Post said Target is now facing the alarming prospect of witnessing $1.2 billion in profits vanish, primarily due to the impact of organized retail crime.

During the call, Target Chairman and CEO Brian Cornell expressed his concerns about the escalating issue, highlighting its nationwide impact across multiple merchandise departments. Cornell said that the problem was not improving but rather intensifying over time.

“The unfortunate fact is violent incidents are increasing at our stores and across the entire retail industry. And when products are stolen, simply put they are no longer available for guests who depend on them,” Cornell said. “Left unchecked, organized retail crime degrades the communities we call home. As we work to address this problem, the safety of our guests and our team members will always be our primary concern. Beyond safety concerns, worsening shrink rates are putting significant pressure on our financial results.”

Cornell further addressed the growing concern of increased crime rates, highlighting its prevalence among retail leaders. While the severity of the issue may vary across different markets and individual stores, the overall patterns of theft have continued to persist over time.

“Year on year we continue to see increases [in theft],” Cornell said.

The data behind retail theft in a late 2022 report revealed that the value of stolen goods from stores, contributing to inventory shrinkage, surged to $94.5 billion in losses in 2021. This marked an increase compared to the previous year, where losses amounted to $90.8 billion. Moreover, the report highlighted that approximately 32.8% of respondents recognized organized retail crime as a growing concern over the past five years.

According to a separate report released by the National Retail Federation, an analysis of 132 crime groups involved in booster operations from 2014 to 2022 revealed that 16% employed at least one violent tactic within stores. These tactics encompassed actions such as smash and grab, the use of firearms or other weapons, battery, flash mob strategies, or threats of violence against store employees.

That said, the increasing severity of the issue has led major retailers to decide to withdraw from cities with high crime rates, as exemplified by San Francisco in 2023.

Retailers That Have Fled San Francisco

As crime rates continue to increase in San Francisco, retailers such as Nordstrom, Whole Foods, Saks Off Fifth, Anthropologie and Office Depot have left the city.

Nordstrom officials have announced that their Nordstrom and Nordstrom Rack locations at San Francisco Centre would be closing this summer, marking the end of Nordstrom’s presence in San Francisco since its establishment in 1988. Jamie Nordstrom, the Chief Stores Officer, attributed the closure of Nordstrom’s San Francisco Centre locations to the evolving dynamics of downtown San Francisco and the noticeable decline in foot traffic.

Meanwhile, just under a year after its opening, Whole Foods decided to close its doors at the Mid-Market location in April.

According to reports, Saks Off 5th has announced the closure of its Market Street location in the coming fall, while Anthropologie revealed the closure of its Market Street store with its final day of operation scheduled for May 13.

Additionally, as part of a restructuring plan announced in 2020, the Office Depot located on Third Street near Yerba Buena Park in San Francisco will be closing its doors. The San Francisco Business Times reported that this closure is part of a broader initiative involving the indefinite closure of several stores nationwide by the end of 2023.

Moreover, joining the growing list of departing large retailers are prominent brands such as Abercrombie & Fitch, H&M, and Uniqlo.

Target Thinks Leaner With New Retail Approach

In response to the surge in retail crime, changing consumer trends and lessons learned from previous quarters of excess inventory, Target is adopting a leaner approach to its inventory management.

“We will continue this steady drumbeat of newness and value, all while maintaining a cautious inventory ownership position in our discretionary categories,” said the company on the call.

The move falls in line with various other retailers looking to take the same approach, keeping consumer demand at top of mind.

Century 21, the department store chain known for its heavily discounted designer clothing, has returned after its closure in 2020. With a revitalized strategy, Century 21 is embracing a streamlined approach to retail as it works to regain market share.

Named “Century 21 Light” by The Wall Street Journal, the flagship store will focus on mid-tier and high-end designer apparel, deliberately omitting budget items that are readily available at other off-price retailers.

In line with its new strategy, the retailer has decided to discontinue certain product categories like home décor and full-price makeup counters. This move is aimed at streamlining its offerings and shifting focus towards a meticulously curated selection of highly sought-after designer clothing.

See also: Century 21 and Macy’s Embrace Inventory Lightness as Premium Label Stores Downsize

Similarly, Macy’s has introduced two smaller store formats, Bloomie’s and Market by Macy’s. These stores occupy approximately one-fifth of the space compared to the company’s conventional Macy’s and Bloomingdale’s locations.

See also: Macy’s Expands to Strip Malls With Smaller Stores and Leaner Inventory

Target’s Future in High-Crime Areas

Target has chosen not to disclose any intentions of closing stores in cities with high crime rates. Instead, the company emphasized the importance of these stores to the local community.

As Target contemplates its course of action regarding these high-crime areas, the company has laid out its strategies to bolster worker training and augment the presence of “asset protection” employees at these locations.

Following a similar approach taken by other major retail chains, Target has implemented measures such as securing items like mouthwash behind locked displays to minimize theft incidents.

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