TARGET blames massive shoplifting for lost profits; Locks up toothpaste

Target is the latest big retailer that is blaming shoplifting for putting a big hit on its profits.  The company said its gross margin rate dropped from 28 percent in last year’s 3rd quarter to 24.7 percent this year.  Along with shoplifting, referred to as shrink in the industry, the company blamed higher markdown rates and freight costs for dragging down profits.

The company says “inventory shortage or shrink” is a major drain on profits and it “is a growing problem.”  Target expects theft to cost it $600 million in lost profits this year.

“At Target, year-to-date, incremental shortage has already reduced our gross margin by more than $400 million vs. last year and we expect it will reduce our gross margin by more than $600 million for the full year,” company CFO Michael Fiddelke said in an earning conference call this week.  “This is an industry-wide problem that is often driven by criminal networks.”