Target expects to take a more than $500 million hit in profits this year due to brazen retail theft that's worsening at its stores, CEO Brian Cornell warned Wednesday.
"Worsening shrink rates are putting significant pressure on our financial results," Cornell told analysts on an earnings call, adding that "when products are stolen, simply put, they're no longer available for our guests who depend on them."
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During its last fiscal year, the company faced $750 million in losses due to shrink, which refers to the loss of inventory due to circumstances including theft.
"Violent incidents are increasing" at Target, and throughout the retail industry, Cornell said.
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To mitigate the worsening issue, Target said it "engaged in a variety of mitigation efforts which begin with significant resource investments to protect our team and our guests." The company is also installing fixtures to protect merchandise and adjusting its assortment in affected stores.
However, Cornell said this is an issue that can't be solved by a single retailer, which is why the company is "actively collaborating with legislators, law enforcement and retail industry partners to advocate for public policy solutions so that organized retail crime."
Still, the company doesn't want to close stores, saying it would hurt communities that rely on them as well as its employees.
While it continues to "contend with significant headwinds caused by inventory shrink," Cornell said the company is still focused on keeping stores open in affected markets.
He noted how critical these locations are saying they "create jobs, serve local shoppers, and act as critical hubs in communities across the country."
"We'll continue to do everything in our power to keep our doors open," Cornell said. "At the same time, we'll be closely monitoring the safety of our team and guests, as well as the financial impact to our business as we determine the right path forward at Target."
This also marked the fifth-consecutive quarter that the retailer’s profit has fallen.
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First-quarter net income slipped nearly 6% to $950 million, or $2.05 per share, for the three-month period ended April 29. Sales rose 0.6% to $25.32 billion in the quarter, up from $25.17 billion in the year-ago quarter.
Target projects earnings per share to be in a range from $1.30 to $1.70 in the current quarter. Analysts were expecting $1.95 per share, according to FactSet. For the full year, the company is maintaining its prior guidance of $7.75 per share to $8.75 per share. Analysts are expecting $8.36 per share, according to FactSet.
The Associated Press contributed to this report.
