Target (Minneapolis) CEO Brian Cornell says theft is expected to drain the retailer of an additional $500 million in profits compared with last year.
That figure – when combined with the $700 to $800 million loss the company sustained last year due to inventory shrink – means the retailer is expecting a $1.2 billion hit to its bottom line for the 2023 fiscal year.
“As we look ahead, we now expect shrink will reduce this year’s profitability by more than $500 million compared with last year,” Cornell said in Target’s first quarter results. “While there are many potential sources of inventory shrink, theft and organized retail crime are increasingly important drivers of the issue. We are making significant investments in strategies to prevent this from happening in our stores and protect our guests and our team.
“We’re also focused on managing the financial impact on our business so we can continue to keep our stores open, knowing they create local jobs and offer convenient access to essentials.”
As reported previously, Target is among many chains facing major difficulties with crime in its downtown San Francisco locale – a problem that has caused many prominent retailers to close up shop there in the past few years.
As for its most recent financial results, Target reported comparable sales were flat to last year in the first quarter, reflecting comparable store sales growth of 0.7 percent and comparable digital sales down (3.4) percent. Total revenue of $25.3 billion grew 0.6 percent compared with last year, reflecting total sales growth of 0.5 percent and a 10.2 percent increase in other revenue. Operating income of $1.3 billion in the first quarter of 2023 was down 1.4 percent from last year, driven by an increase in the company’s SG&A expense rate.
“We came into the year clear-eyed about the challenges consumers are facing, and we were determined to build on the trust we’ve established with our guests,” Cornell said. “It’s required agility and the ability to flex across our multi-category portfolio as we lean into value and the product categories our guests need most right now. Thanks to the team’s dedication, we saw an increase in guest traffic in Q1, with total sales increasing and profitability ahead of expectations.”