First it was unruly customers yelling at each other about masks. Now, it's escalated to lawlessness.
It's a problem that many retailers have been forced to grapple with in recent months: changing state covid policies, rising crime rates in densely populated urban areas, and employee attrition have pushed retailers to adapt to an increasingly difficult landscape.
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Many retailers lost employees following the pandemic. Long hours, exposure to pathogens, scant benefits, and rude customers make working a retail job wholly unappealing to most people. In many cases, the solution hasn't been to pay employees more or offer better benefits to entice talent. It's been to automate more jobs and place the outstanding tasks on customers, where possible.
Automation, especially in places like self-checkout centers, has led to more passive (nonviolent) theft. It's estimated that Walmart (WMT) loses $3 billion each year due to shoplifting. But Walmart isn't the only retailer with a loss problem. One of its largest competitors, Target (TGT) has a similar, albeit much darker, problem.
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Target Struggles with Violence
Target CEO Brian Cornell told reporters and analysts in a Q1 earnings call on Wednesday that the retailer is losing millions of dollars in merchandise due to violence.
"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," he 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."
Target told listeners on the earnings call that what it calls inventory shrinkage, namely theft, would reduce earnings by up to $500 million in 2023. It lost $700 million from this issue in 2022.
Target still managed to beat Wall St expectations -- it brought in $25.3 billion in net sales versus estimates for $25.18 billion. Gross profit margin was slightly up, too, coming in at 26.3% despite estimates for 26.52% (during the year-ago period, Target's gross profit margin was 25.7%).
It's Hard to Be a Retailer Right Now
Following the recent bankruptcies of Bed Bath and Beyond (BBBY) and Christmas Tree Shops, retailers are taking different tacks to survive a post-covid era. Employees are harder to come by now that the gig economy, like driving for DoorDash (DASH) or Uber (UBER) or starting a shop on ETSY (ETSY), looks more appealing.
Not to mention, retail jobs are feeling more like sitting duck jobs as crime and violence rises across the nation. Findings from the Bureau of Labor indicate you are more likely to get injured working in retail than manufacturing. And with the rise of mass shootings (there have been 131 so far this year) in the U.S. at soft targets like strip malls and plazas, it's a wonder as many stores are staying open. Earlier in May, eight people were killed at the Allen Premium Outlets near Dallas, TX.
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