Target facing 'unacceptable amount' of retail theft and organized retail crime, CEO says

By James Rogers

Retailer has also seen a significant uptick in theft involving violence or threats of violence against employees

Target Corp. CEO Brian Cornell says that the company is facing an "unacceptable amount" of retail theft and organized retail crime.

Speaking on the conference call to discuss Target's (TGT)second-quarter results, Cornell reiterated his previous comments about inventory "shrink," or losses, caused by theft and organized retail crime. "Our team continues to face an unacceptable amount of retail theft and organized retail crime," he said. "Shrink remains consistent with our expectations but well above the sustainable level where we expect to operate over time, and unfortunately, safety incidents associated with theft are moving in the wrong direction."

Related: Target's stock jumps 11% premarket as earnings beat offsets revenue miss and lowered guidance

Cornell highlighted safety threats that Target employees are facing, saying that during the first five months of 2023, Target stores saw a 120% increase in theft involving violence or threats of violence.

Target has experienced more than a percentage point of cumulative profit pressure from higher shrink since 2019, he said.

Related:Home Depot looks to new law as retailers ramp up battle against organized crime

Also speaking on the conference call, Target's chief financial officer, Michael Fiddelke, discussed the company's efforts to tackle the problem. "We're working hard both inside our stores and with government and community partners to achieve lower loss rates over time, and our long-run expectation is that shrink rates will moderate from today's unsustainable levels. But so far, we've only seen indications that loss rates might soon be reaching a plateau but have not yet seen evidence that loss rates will begin to come down," he said.

Theft and organized retail crime have increasingly become a key driver of inventory shrink in recent years. Earlier this week, Home Depot Inc. (HD) discussed the ongoing "battle in retail" related to shrink. However, the home-improvement retailer said it is hopeful that a new law will aid efforts to tackle a problem that costs the sector billions of dollars a year.

Related: Target battling inventory 'shrink' caused by theft and organized retail crime, says CEO

The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act, which came into effect June 27, is designed to add more transparency to online transactions and deter criminals from acquiring stolen, counterfeit or unsafe items and selling them through online marketplaces.

Last year, the National Retail Federation reported that retail-industry shrink amounted to $94.5 billion in 2021, up from $90.8 billion in 2020, and was primarily driven by external theft, including organized retail crime. The NRF's National Retail Security Survey, which was conducted with the Loss Prevention Research Council, found that retailers, on average, saw a 26.5% increase in organized retail crime incidents in 2021. Eight in 10 retailers surveyed also reported that violence and aggression associated with organized retail crime incidents had increased.

Related:Target 'quickly made changes' to protect employees amid Pride backlash, CEO says

Target's stock rose 4.7% Wednesday, outpacing the S&P 500's SPX gain of 0.2%.

-James Rogers

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08-16-23 1038ET

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