Target revealed to reporters on a Wednesday earnings call that "organized retail crime" is responsible for a $400 million reduction in gross profit this year compared to 2021, Yahoo Finance reported.
Target Chief Financial Officer Michael Fiddelke stressed that theft was a critical driver of the retail company's profit losses, and it has only worsened "over the last 12 to 18 months," as crime continues to skyrocket across U.S. cities.
"We expect it will reduce our gross margin by more than $600 million for the full year." Fiddelke stated, adding that Target is taking action "to help curb that trend" as it "becomes an increasing headwind" on the business.
The phenomenon is nowhere near exclusive to just Target, with a National Retail Federation report from September showing 2021's average inventory shrinkage rate was 1.44%. That's in line with the 1.5% average decline over the past five years.
"Most of the retailers surveyed report in-store, e-commerce and omni-channel fraud are all on the rise," the NRF wrote. "The majority of respondents also reported that guest-on-associate violence, external theft, ORC [organized retail crime], and cybercrimes have become higher priorities for their organizations.
"Challenges with labor shortages, employee retention and hiring — as well as issues related to masking and maintaining COVID precautions — have contributed to the risks of violence and hostility."
The numbers, which suggest retail crime hasn't risen substantially, have been challenged by retailers in some of America's biggest cities, who argue the problem is out of control, according to The Mercury News.
"I think we're seeing more and more use of social media that can coordinate these brazen crimes," California Retailers' Association President Rachel Michelin stated. "In addition, we're seeing more and more of these products showing up on online marketplaces."
Michelin estimates that $3.6 billion was lost to organized retail crime in the San Francisco and Oakland, California, areas last year, with $275 million in lost sales tax revenue to local municipalities and the state.
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