Target (TGT) is hitting its inventory reduction goals.
The company’s chief financial officer and chief operating officer, Michael Fidelke, told Yahoo Finance on a conference call with reporters that the company has plateaued on sales declines, including those caused by theft at retail stores.
“[Inventory shrink] “This is one of the tailwinds to our quarterly profit and as we entered the year, our goal was to stabilize contraction and improve from the deterioration we’ve seen over the past few years. Now, two quarters later, we have met and even exceeded that goal,” Fidelke said.
Impairment can occur due to a variety of factors, including theft, damage, and poor record-keeping.
Target’s second-quarter report showed gross profit margins of 28.9%, beating expectations and up from 27% in the same period last year.
Target saw its contraction increase by more than $500 million last year compared with 2022, “representing an increase in rate pressure of approximately 50 basis points,” Fidelke said on the company’s fourth-quarter earnings call in March.
The issues have resulted in a $700 million hit to profits for 2022. The company said that from 2019 to 2023, shrinkage costs reduced its operating margin by a “cumulative 1.2 percentage points.”
Working with local authorities, expanding cold cases
Target has implemented measures such as locking cases on select merchandise categories that are more susceptible to theft, as seen in this Target store in Jersey City (Photo by Brooke DiPalma/Yahoo Finance)
“What we’re pleased about is the growing collaboration at the federal, state and local levels,” Fidelke said.
However, work continues, and the company expects to continue making progress over the next few quarters.
Part of this strategy also included closing nine stores at the end of October last year.
“We cannot continue operating these stores because theft and organized retail crime are endangering the safety of our employees and customers and contributing to unsustainable business performance,” the company said in a statement at the time.
The stores that closed are one in Harlem, New York City, two in Seattle, three near San Francisco and Oakland, and three in Portland, Oregon.
Target has also installed locked bins for “highly theft” items in some of its hardest-hit stores.
Other strategies the company cited at the time included investing in additional security guards and third-party security services, as well as training store leaders and employees to “protect themselves and mitigate potential safety issues associated with organized retail crime incidents.”
The company also plans to partner with the investigative arm of the U.S. Department of Homeland Security to develop cyber defense technology that could create custom tools to analyze fraud and other crimes.
Other retailers are also sharing their progress in resolving the issue.
The story continues
Last week, Walmart (WMT) CFO John David Rainey told investors on the company’s earnings conference call that the company was seeing “some benefits from improved quarterly shrinkage” in its “core product mix,” a trend that began in the first quarter.
Dollar General (DG) converted 12,000 stores away from self-checkout this year.
“While this will be a significant change for our stores, we believe this is the right course of action to drive improved customer engagement and better position us to begin reducing sales declines in the second half of 2024, with an expected more material positive impact in 2025,” CEO Todd Vasos said in the company’s first-quarter earnings call.
TJX Companies Inc., parent of TJ Maxx, Marshalls and HomeGoods, said in the first quarter that year-over-year contraction is expected to be flat.
At the end of 2023, the discount retailer introduced body cameras for its anti-theft officers.
“When someone comes in, it’s almost like they’re less nervous and they’re less likely to do anything while they’re being videotaped, so we do believe that’s playing a role,” Chief Financial Officer John Klinger told investors.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter.Brooke DiPalma Or email me at bdipalma@yahoofinance.com
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