Target, other major retailers losing hundreds of millions in ‘inventory shrink,’ blame organized crime

Target reported this week that it has experienced a high amount of inventory shrink in 2022, which has resulted in $400 million in losses so far this year, and may end up costing the retailer up to $600 million by the end of the year.

Target blames their annual losses on a variety of issues including damaged items, human inventory counting errors, and employee theft, but says the main culprit of the losses is “inventory shrink,” which occurs when there are fewer items in store than listed on their inventory lists.

Target’s report this week blames organized retail crime for the bulk of the inventory shrink this year.

Target CEO Brian Cornell told company execs in its most recent quarterly earnings call that “Along with other retailers, [Target has] seen a significant increase in theft and organized retail crime across our business.”

CFO Michael Fiddelke said on the same call, “At Target, year-to-date, incremental shortage has already reduced our gross margin by more than $400 million vs. last year.”

Fiddelke added, “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. 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.”

Other retailers including JCPenney, Rite Aid and Walgreens have also reported high shrinkage in 2022. According to the National Retail Federation, US retailers experienced a 26.5 percent average increase in organized retail crime in 2021.