Retail Shrink Has Become a Billion Dollar Problem

Retailers across the country have been contending with a rise in retail shrink which has weighed heavily on company's bottom lines. Retail shrink refers to the loss of inventory from a myriad of factors, including employee theft, shoplifting, administrative error, damage or vendor fraud. 

Companies like Target  (TGT) - Get Free Report, Foot Locker  (FL) - Get Free Report, Kohl's  (KSS) - Get Free Report and TJ Maxx  (TJX) - Get Free Report have all reported steep losses from a rise in retail shrink and theft. Target in particular reported a $763 billion loss due to shrink in its last fiscal year, with forecasts that shrink will cut more than $1 billion off its profits this year. 

According to the National Retail Federation, retail shrink caused up to $100 billion in losses for retailers in 2021.

In this edition of StreetSlang, J.D. Durkin breaks down the term retail shrink and why it is weighing so heavily on company profits.

Full Video Transcript Below:

J.D. DURKIN: Shrinkage is a big problem for major retailers that you may not be all that familiar with. It refers to things like shoplifting, vendor fraud, even employee theft that all result in a difference between the inventory that a retailer is supposed to have… and what it actually does. 

Stores across the country have made headlines recently for the billions of dollars they’re expected to lose due to retail shrinkage. But it’s not always bad actors who are responsible for the big box shrink. Sometimes, it’s simply administrative or accounting errors, even things like typos that can lead to a financial discrepancy.