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How much shrink and retail theft cost Lowe’s, Target, Macy’s

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A range of retailers are again blaming shrink as one of the reasons they saw another quarter of lackluster profits.

But some of those companies have started to offer more detail than ever on how much shrink, or items lost to factors like external or employee theft, damage or vendor fraud, is cutting into their bottom lines.

At the same time, certain retailers pulled back on their contention that organized theft is a primary cause of losses, as scrutiny grows over claims about how much crime contributes to their struggles.

During second-quarter earnings reports in August and September, nearly two dozen retailers said shrink has continued to weigh on profits. But the details each company provided, and the explanations they gave for losses, varied widely.

Many of them said that shrink is at an all-time high and said the industry is struggling to control it. Still, it’s difficult to compare the losses to past years because most of the companies have never previously disclosed how much shrink cost them.

Generally, the inventory losses are only a small fraction of the retailers’ net sales. They also pale in comparison to other factors squeezing margins, such as excessive discounting and promotions, according to a CNBC analysis of their balance sheets. While shrink is growing for some companies, losses are generally in line with the retail industry standard of 1% to 1.5% of sales — signaling the problem may not be as dire as certain retailers and trade associations have suggested.

Anti-theft locked beauty products with customer service button at Walgreens pharmacy, Queens, New York.

Lindsey Nicholson | Universal Images Group | Getty Images

When they reported second-quarter results, some companies like Target and Dick’s Sporting Goods offered clues into how much shrink is costing them and squarely blamed theft. Target lost about $219.5 million to shrink during the three months ended July 29, while Dick’s lost about $27.1 million during the same period, according to a CNBC analysis.

Meanwhile, Ulta and Foot Locker, which both blamed “organized retail crime” for losses in May, did not mention theft during their most recent results. They only used the term “shrink” when discussing how it squeezed margins.

Lowe’s has some of the highest shrink numbers among the companies analyzed by CNBC. It has blamed a range of factors for the losses. Sometimes it has said organized retail crime cut into profits, but in other cases, it blamed weather-related damages.

During its second quarter earnings call with analysts, the company said shrink was in line with the year-ago period. But its annual securities filing offered more detail: the retailer revealed that its shrink in fiscal 2022 ballooned to $997 million, up from $796 million in fiscal 2021.

Other companies, like Walmart, noted that shrink isn’t always related to retail theft when reporting second-quarter earnings. It said it remains focused on other causes of inventory losses that are “more controllable.”

Over the last few quarters, more and more retailers have called out shrink as a drain on profits and blamed theft for those losses. But they have offered few details about how much inventory losses are actually costing them. Experts have said some companies could be using crime as an excuse to distract from other operational challenges that drive shrink, such as poor inventory management and staffing issues. 

Retailers are asking lawmakers to help crack down on product theft

Companies that have disclosed shrink numbers and explained to investors how they’re working to solve it show that they have a grasp on the problem, Sonia Lapinsky, a partner and managing director with AlixPartners’ retail practice, told CNBC. Others that loosely blame shrink and theft for plummeting profits without providing much more explanation may be trying to obfuscate internal issues, said Lapinsky. 

“Are you clearing way more inventory because you mis-planned it and you mis-bought it and that’s what’s really getting a bigger profitability hit?” said Lapinksy. “But because everybody’s saying ‘let’s just blame the theft that’s increased and that’s out of my control,’ let me tell the Street that that’s why it’s happening and not disclose what’s really going on in operation.” 

CNBC analyzed securities filings, earnings calls, press releases and other publicly available records to try to quantify how much shrink is costing retailers and how it compares to losses from other factors, such as excessive discounts.

No retailer explicitly disclosed their second-quarter shrink. Some revealed inventory losses as a percentage of sales, while others said how much they grew compared to the prior year. Using those clues, CNBC calculated shrink estimates for seven companies.

Here’s how much shrink is costing those retailers, based on a CNBC analysis.


The inventory losses are still in line with the industry standard of about 1% to 1.5% of sales and tend to be less than profit drains from other factors.

For example, shrink during fiscal 2022 hit Lowe’s gross margin by 0.2 percentage points and was $201 million higher than the year-ago period. But high transportation costs and expenses associated with expanding its supply chain network squeezed profits by 0.3 percentage points. When taken as a percentage of sales, those costs came in at about $291 million.


The company noted in its annual securities filing that “merchandising” hit its gross margin by about 3.4 percentage points, which amounted to about $3.66 billion shaved off of profits. Those costs included all of the promotion and markdowns Target took to clear out excess discretionary merchandise, plus higher product and freight costs.

Target’s margins have improved this year from fewer markdowns, lower freight costs and price increases.


During the prior quarter, Macy’s reduced its annual outlook in part because it expects higher costs from shrink. The retailer reduced its expected earnings per share by nearly a dollar to $2.70 to $3.20, down from a prior range of $3.67 to $4.11.

The retailer attributed the slashed outlook to “heightened macro pressures” but also an expected 12 cent impact from “increased [shrink] relative to our previous expectations.” That would amount to a projected shrink loss of about $33.5 million for the year.

During an interview with CNBC’s Courtney Reagan last month, Macy’s CEO Jeff Gennette said that shrink hit record levels in 2022 and it’s “going to be higher in 2023.” He attributed the uptick largely to “the change in organized theft.”

During Macy’s fourth-quarter earnings call in March, Gennette blamed the shrink increase on a sales channel shift from digital back to stores, along with increased theft.

TJX Companies 


Dick’s Sporting Goods

Dick’s reduced its full-year outlook in part because of shrink. It expects sales of about $12.68 billion to $12.92 billion will be reduced by 0.5 percentage points, which would result in full-year profits being about $63.4 million to $64.6 million lower for the year due to shrink.

It’s now expecting earnings per share of $11.33 to $12.13, compared to a previous range of $12.90 to $13.80. The reduced outlook takes into account the retailer’s second-quarter results, increased shrink and higher selling, general and administrative expenses, which includes items like payroll and advertising.

Dollar Tree

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