Target has reported that its “shrink” – the industry term for lost inventory due to shoplifting, damage and errors – has returned to pre-pandemic levels after years of elevated losses.
Chief Financial Officer Jim Lee told investors on 3 March that the reduction was “a testament to the great work of our team, along with the industry and community efforts to combat retail theft across the country.” Shrink measures the difference between recorded inventory and actual stock on shelves.
Independent retail consultant Brand Elverston noted that shrink has been declining across major retailers for at least a year, attributing the trend to improved inventory predictability and stability. However, he warned that tariffs and price increases could reverse the progress. He also suggested that the widely-reported thefts may be overblown, with operational errors accounting for a significant portion of losses.
The pandemic caused supply chain disruptions, leading retailers to over-order inventory, which inflated shrink numbers. Target’s inventory was 43 per cent higher in 2022 than the previous year, prompting price cuts. Now, the company says it has “healthy underlying margin rates and appropriate inventory levels.”
Despite the improvement in shrink, Target continues to face declining sales and profits. New CEO Michael Fiddelke has pledged billions to boost sales and refresh the retailer’s image, while plans to open more than 30 new US stores, including its 2,000th location, are underway.
