Target said it has lost a whopping $400 million in profits this year thanks to organized gangs of shoplifters who have been systematically stealing merchandise from its discount stores.
“At Target, year-to-date, incremental shortage has already reduced our gross margin by more than $400 million vs. last year,” Target CFO Michael Fiddelke said on an earnings call earlier this week, which was cited by Yahoo! Finance.
Fiddelke added that “we expect it will reduce our gross margin by more than $600 million for the full year.”
A Target spokesperson told Yahoo! Finance that the “shrinkage” which the CFO referred to was attributed specifically to “organized retail crime.”
Fiddelke said that there are “a handful of things that can drive shrink in our business and theft is certainly a key driver.”
“We know we’re not alone across retail in seeing a trend that I think has gotten increasingly worse over the last 12 to 18 months,” he said.
“So we’re taking the right actions in our stores to help curb that trend where we can, but that becomes an increasing headwind on our business and we know the business of others.”
In September, the CEO of Rite Aid said that the pharmacy chain was burdened with a $5 million year-over-year increase in “shrink” — a term in the retail industry which means losses related to theft, fraud, or administrative errors.
Rite Aid CEO Heyward Donigan told analysts that the problem was particularly acute in New York City.
“I think the headline here is the environment that we operate in, particularly in New York City, is not conducive to reducing shrink just based upon everything you read and see on social media and the news in the city,” chief retail officer Andre Persaud said.
For example, the Rite Aid at the corner of Eighth Avenue and 50th Street in Hell’s Kitchen lost more than $200,000 in stolen merchandise over just a two-month span. The store closed in February.