Target (TGT) is trying to address a long-standing problem in the retail industry: theft in its stores.
“I feel much better today than I did a year ago,” Target CEO Brian Cornell said in an interview with Yahoo Finance for its “Lead This Way” series. “It goes back to support at the federal level, state level and local level.”
The federal INFORM Consumer Act, which went into effect in June 2023, helps deter theft by making it more difficult to resell stolen goods online. Under the law, companies operating “high-volume third-party marketplaces” like Amazon (AMZN) and eBay (EBAY) would be required to “collect, verify, and disclose certain information about their sellers.” There is. Violations will result in a fine of $50,120 for each violation.
The bill “starts to crack down on some of the abuses that were taking place in the marketplace,” Cornell said. He also said “some action is being taken” regarding state laws, particularly in California.
California Governor Gavin Newsom recently signed 10 bills to crack down on retail theft, including tougher penalties for those involved in retail theft and organized retail crime. There are also new penalties for “smash-and-grabs” or “flash lobs” like the one seen at Nordstrom (JWN) last year that resulted in the loss of about $300,000 in merchandise.
The ultimate fix won’t happen overnight. “It’s going to take several years. We’re trying to make sure we control what we can control,” Cornell said.
In its second-quarter report, Target said its gross margins reflected about 90 basis points of “benefit from inventory reduction.” This compares to a 20 basis point increase in the first quarter. That guidance assumes that benefits will increase each year.
“We expect shrink costs to be broadly flat compared to last year. It is encouraging to see this progress, but given the rapid increase in shrink rates, we will continue to drive shrink rates to more sustainable levels over the next few years. We’ll continue to work to bring it down.”Our business has been absorbed over the last five years,” CFO Michael Fidelke said on a call with investors.
Target CEO Brian Cornell over locked case.
As part of its strategy to combat the problem, the company decided to close nine unprofitable stores at the end of October last year. Target has introduced lockable cases at some hard-hit stores to store “vulnerable” items such as soap, shampoo, razors and even socks and underwear.
“To be clear, we don’t like locking up our products, but we like running stores and we want to keep them open. We want to make sure our stores are safe. ,” Cornell said.
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Waiting for a store clerk to unlock your item may be an inconvenience, but it’s a necessary nuisance, David Johnston of the National Retail Federation told Yahoo Finance last year.
“If a mother of a newborn goes to get formula and the product is just swept off the shelf and isn’t there, think about it the other way around,” he says.
Cornell said he is “certainly (hopeful)” that Target will remove the incident at some point, and reiterated that the company is awaiting the outcome of federal, state and local government involvement.
Targets place their socks and underwear behind a locked case to prevent theft. (Yahoo Finance)
Having a proper self-checkout process in place can also help resolve the issue. Cornell University said it was a matter of trial and error.
The company expanded its self-checkouts during the pandemic to include larger baskets, but has since reduced the number of items to 10 items.
“We are moving back to how self-checkouts should be used, with more team members running service belted lanes and using self-checkouts there for smaller baskets, 10 or fewer items. “This is the right balance and gives you better interaction,” Cornell said.
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter @brooke di palma Or email bdipalma@yahoofinance.com.
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