Target expects shoplifting to remain ‘significant financial headwind’ despite closing troubled stores
Target said it expects shoplifting will continue to be a “significant financial headwind” despite the big discounter’s recent move to shutter locations popular with pillagers — including a store in New York City.
“We think progress there probably doesn’t happen quickly,” chief financial officer Michael Fiddelke said on a Wednesday earnings call with Wall Street analysts.
In September, Target revealed a surprise move to close nine urban stores by Oct. 21, including in San Francisco, Seattle, Portland, Ore., and one in Harlem that had been a magnet for organized crime.
At the time, the company cited the “safety” of its employees amidst increasingly violent incidents.
On Wednesday, top management admitted that Target’s theft problem — known as “shrink” in industry parlance, continues to dog its 1,956 stores nationwide with no end in sight.
“We’re focused on progress over time,” Fiddelke added. “It’s not one that we’d expect overnight.”
“Growth in shrink remains a significant financial headwind and we’re determined to continue making progress in the years head,” Fiddelke added.
On the positive side, the company said shrink in the most recent quarter was “smaller than expected” and “better than we faced earlier in the year.”
The Minneapolis-based chain said its comparable sales dropped 4.9% versus a year ago, although its stock surged 17% after it delivered higher-than-expected profits for the third quarter quarter – up 36% per share.
Target on Wednesday also reported a 6% increase in customers checking out with a cashier versus self check-out, chief operating officer John Mulligan said on the call. Top management didn’t say whether the bump is related to a slight decline in shrink during the quarter.
Like most big chains, Target locks up merchandise that is most frequently stolen, but Chief Executive Brian Cornell insists that shoppers aren’t upset about having to wait for a store clerk to unlock the cases.
“What we hear from the guests is a big thank you, because we are in stock with the brands that they need when they’re shopping in our stores,” Cornell told CNBC on Wednesday.
“And because we’ve invested in team member labor in those aisles and make sure we’re there to greet that guest, open up those cases and provide them the items they’re looking for.”
Cornell’s comments fly in the face of surveys and social media posts showing that shoppers are fed up with locked-up merchandise.
A Coresight Research report found that 26% of consumers said they’d shop elsewhere if their local store put items under lock and key.
“Target claims shoppers are just happy to have things in stock, even if that means everything is locked up. Wild that we are already starting to accept the wild amounts of theft and criminality as normal,” according to a tweet on Wednesday.
Cornell also said on the earnings call that customers were holding off longer than usual on seasonal purchases including “guests who previously bought sweatshirts or denim in August or September are deciding to wait until the weather turns cold.”
