Target says it will close nine stores in major cities across US, citing violence and theft. ‘Unprecedented’ theft contributed to $112 billion in retai

[beijingwalker]

Target says it will close nine stores in major cities across US, citing violence and theft​

PUBLISHED TUE, SEP 26 20233:00 PM EDT

KEY POINTS

• Target said it will close nine stores across the country after struggling with crime and safety threats at those locations.
• Target, which has nearly 2,000 stores in the U.S., has been outspoken about organized retail crime at its stores and said theft has driven higher levels of shrink.
• Target is closing locations in New York City, Seattle, San Francisco and Portland.

A Target department store in North Miami Beach, Florida, on May 17, 2023.
Joe Raedle | Getty Images

Target said Tuesday that it will close nine stores in major cities across the country, citing violence, theft and organized retail crime.
The company will close one store in New York City’s Harlem neighborhood, two locations in Seattle, three stores in the San Francisco-Oakland area and three more in Portland, Oregon. The discounter said it will shutter the stores for good on Oct. 21.

“We cannot continue operating these stores because theft and organized retail crime are threatening the safety of our team and guests, and contributing to unsustainable business performance,” Target said in a news release.

“We know that our stores serve an important role in their communities, but we can only be successful if the working and shopping environment is safe for all.”

Target, which has nearly 2,000 stores in the U.S., has been outspoken about organized retail crime at its stores. It has said theft has driven higher levels of shrink, an industry term used to describe losses from goods that were damaged, misplaced or stolen.

With its announcement Tuesday, Target also stands apart in its decision to both shutter stores and to explicitly blame that decision on retail crime.

When the company reported fiscal second-quarter earnings in mid-May, CEO Brian Cornell said organized retail crime had shot up at its stores. He added shrink overall is expected to reduce Target’s full-year profitability by more than $500 million compared to the year-ago period.

When asked if the company plans to close stores because of rising shrink, Cornell stressed Target’s reluctance to shutter locations.

“We do not want to close stores. We know how important our stores are. They create local jobs, they generate taxes, they’re very important for those local shoppers, and they play a critical role in communities across the country,” Cornell said on a call with reporters in May.

“We’ll continue to do everything in our power to keep our doors open,” he added. “At the same time, we’ll be closely monitoring the safety of our team and guests as well as the financial impact to our business as we determine the right path forward at Target.”

The retail executive’s comments led other companies to speak out on the problem, too, and to advocate for legislative reform. Following the passage of the Inform Act, which requires online marketplaces to disclose the identities of certain high-volume sellers to deter the sale of stolen and counterfeit goods, retailers and trade associations are now pushing for the passage of another bill called the Combating Organized Retail Crime Act.

The bill, which Target said it supports in Tuesday’s news release, proposes stiffer penalties for theft offenses and calls for a change in the threshold prosecutors must meet before bringing federal theft cases. It would also provide retailers with a formal venue to exchange information with one another and law enforcement through the proposed Organized Retail Crime Coordination Center.

Since 2022, at least nine states — six so far this year — have passed similar laws to impose harsher penalties for organized retail crime offenses. Behind the sweep of legislation are retailers and trade associations, which are using their collective power to get the bills written and past the finish line.

Store closures, or the threat of them, have been a major factor in retailers convincing lawmakers to get on board, policy experts previously told CNBC.

Target’s mounting struggles go deeper than theft​

Target’s business has struggled for more than a year with company-specific challenges, including a glut of unsold inventory, backlash to its Pride merchandise collection and a pullback in consumer spending on discretionary items such as apparel and home goods.

Over the past two decades, Target had not mentioned shrink hitting its margins during earnings calls until August 2022, when the company’s and other retailers’ profits were getting hurt by higher markdowns while trying to unload unwanted merchandise, CNBC previously reported. When inventories rise, shrink tends to increase as well, industry experts told CNBC.

The company previously said its shrink numbers vary widely by location and do not correlate with inventory levels.

Target said Tuesday that it has taken a variety of steps to stop crime at its stores. Those measures include adding locked cases for some merchandise, hiring third-party guard services, training store leaders about how to de-escalate potentially dangerous situations and investing in cyber defense to stop fraud or organized crime.

Yet, Target said at the affected stores, a larger security team and theft-deterrent tools weren’t enough.

“Despite our efforts, unfortunately, we continue to face fundamental challenges to operating these stores safely and successfully,” Target said in the release.
The company said it will work with employees at the closed stores to give them an opportunity to transfer to another Target location.
It’s not clear what actions the company is taking to improve inventory management.

Despite store closures, shrink data is murky​

Target announced the store closures on the same day the National Retail Federation, the industry’s major trade association, released its latest National Retail Security Survey. The survey found the effect of theft on retailers’ bottom lines is about the same as it has been for years.

Total retail shrink grew to more than $112 billion in 2022, up from $93.9 billion the year before, according to the survey. The metric is calculated using total U.S. retail sales and generally rises as retail sales climb.

When reported as a percentage of sales as is commonly done, average annual shrink increased to 1.57%, up from 1.44% in 2021. The share is largely in line with past years and is considered a normal and healthy level of shrink by industry experts. Generally, retailers plan for about 1% to 2% of shrink each year.

Target joins a growing list of retailers that have shuttered stores in major cities, including Walmart, Nordstrom and Walgreens Boots Alliance.

Nordstrom closed its San Francisco flagship store and Nordstrom Rack location in the city this summer after operating there for more than 35 years.

Yet, the company cited market dynamics rather than crime. In a message to employees at the time, then-Chief Stores Officer Jamie Nordstrom said changes in downtown San Francisco had hurt “customer foot traffic to our stores and our ability to operate successfully.”

A brazen smash and grab in August at one of Nordstrom’s other locations, a store in Los Angeles, made national headlines.

On an earnings call in late August, the company was asked about the widely circulated video of the crime. CEO Erik Nordstrom described the incident as “disturbing to all of us,” and said losses from theft are “at historical highs.” But, he added, theft is included in company guidance and not higher than expected.

In a December interview with CNBC, Walmart CEO Doug McMillon warned that stores will close if shoplifters aren’t aggressively prosecuted.

Walmart has also closed some stores, including four in Chicago in April, but didn’t blame theft. In a news release at the time, the retailer said it has struggled to make the locations profitable and challenges have intensified. It said the stores “lose tens of millions of dollars a year, and their annual losses nearly doubled in just the last five years.”

Walgreens, similar to Target, specifically pointed to organized retail crime as the reason for shuttering some stores in San Francisco in 2021.

Target says it will close nine stores in major cities, citing violence and theft

It's the latest move related to theft for Target, which has been outspoken about the industrywide problem of organized retail crime.

www.cnbc.com

 

[beijingwalker]

‘Unprecedented’ theft contributed to $112 billion in retail losses last year​

BY CARLY OLSONSTAFF WRITER
SEPT. 26, 2023 12:37 PM PT

Losses from retail crime ticked up in 2022, causing many retailers across the country to change the way they do business, according to a survey released on Tuesday by the National Retail Federation.

“Retailers are seeing unprecedented levels of theft coupled with rampant crime in their stores, and the situation is only becoming more dire,” David Johnston, NRF’s vice president for asset protection and retail operations, said in a statement.

The annual survey by the trade group collected insights from 177 retail brands across 28 different retail sectors — including apparel, jewelry, grocery, and department stores — and accounted for more than 97,000 retail locations and $1.6 trillion in annual retail sales.

Shrink — a measurement of lost inventory — for total retail sales in 2022 reached $112.1 billion, up from $93.9 billion in losses in 2021, according to the survey.

It’s worth noting that when retail sales go up, as they did in 2022, shrink also tends to rise. The average shrink rate in the 2022 fiscal year was 1.6%, up from 1.4% the year before. The latest figure is in line with shrink rates from 2019 and 2020.

Theft of all kinds accounted for 65% of retail shrink in 2022, similar to previous years.

External theft — including organized retail crime — caused 36% of losses, while employee theft caused 29%, the survey said. “Process, control failures and errors” caused 27%, while the final 7% was “other” or “unknown.”

Many retailers who participated in the survey said they had increased spending on loss prevention in 2022. Forty-six percent said they increased the use of third-party security personnel in their stores, and 34% said they “increased payroll to support their risk efforts.”

Fifty-three percent said they have increased, or are increasing, employee workplace violence training to mitigate the risk of violent encounters associated with theft or crime.

In-store violence is a top concern. Eighty-eight percent of retailers surveyed said that shoplifters were “somewhat more or much more aggressive and violent compared with one year ago,” according to the survey.

“Far beyond the financial impact of these crimes, the violence and concerns over safety continue to be the priority for all retailers, regardless of size or category,” Johnston said.

Some businesses have taken more drastic measures to protect their assets or cut their losses. When asked if they had taken any specific actions “due to retail crime, social and/or physical disorder, or violence,” the survey found that 45% of retailers reduced their operating hours, 30% reduced or altered their in-store product selection and 28% said they were forced to close a store location. Target said on Tuesday it plans to close nine stores in major cities, including three in the San Francisco Bay Area, due to violence and theft.

Los Angeles was the metro area most affected by organized retail crime in the country, followed by San Francisco and Oakland, the report said. Houston and New York City ranked third and fourth, respectively.

The percentage of thefts caused by organized retail crime — burglary groups running sophisticated reselling enterprises — was not specified in the survey. Organized retail crime does not include one-off shoplifting, fraud or employee theft.

Some critics have said there is excessive attention on this type of theft. Despite the headlines they generate, gangs are not responsible for large numbers of retail losses.

In June, Atty. Gen. Rob Bonta announced a new initiative to crack down on organized retail crime in California. More than a dozen retailers and online marketplaces, including Target, Albertsons and Amazon, signed a pledge that “increases information sharing” among law enforcement, retailers that experience theft and online marketplaces where stolen merchandise can be resold. The partnership is designed to aid in the prosecution of organized retail crime.

Bonta emphasized that the agreement does not target traditional shoplifting.

“It’s not about the occasional smash-and-grab at the local big-box store,” he said at a news conference announcing the agreement. “This is about a multibillion-dollar criminal enterprise — criminal schemes that are complex, orchestrated and incredibly organized.”

'Unprecedented' theft contributed to $112 billion in retail losses last year

Retailers say they're seeing theft and rampant crime soar in their stores, prompting them to rethink how they operate, according to a new survey.

www.latimes.com