The weakening economy and rising inflation are hurting many people. For those in despair, retail theft rose in 2022 by nearly 20%.
The National Retail Federation said that retail sales firms lost $112.1 billion from shrink (or retail theft). This is up from $93.9B in 2021.
Retailers need to adjust to the new reality of higher crime rates. Target (TGT) plans to close nine stores in major U.S. cities. It cited the increase in violence and organized retail crime.
In their quarterly earnings reports, Dick’s Sporting Goods (DKS), Macy’s (M), and Lowe’s (LOW) said that crime was one of the reasons their earnings weakened.
Pharmacies like Walgreens (WBA) and CVS Health (CVS) are closing store locations in places where theft levels are high. CVS even locks up products like toothpaste behind transparent casings to prevent theft.
Investors should avoid most retail stocks. Gap (GPS) and Nike (NKE) are exceptions. Their stock rebounded recently. Conversely, Home Depot (HD), Best Buy (BBY), Ulta Beauty (ULTA). and Advance Auto Parts (AAP) are either underperforming or reported weak results.
Consumers have less disposable income. Wages are growing slowly compared to inflation. They must spend less at stores as a result. This hurts the profitability of many retailers.
