Walmart Thefts Are On The Rise, But Your Portfolio Doesn’t Have To Take The Hit, Too

Key takeaways

• Walmart CEO Dough McMillon reports that retail theft is rising at the chain’s U.S. stores
• The retailer may be forced to hike prices or close stores if the problem isn’t brought under control
• Other retailers – notably Target, as well as Home Depot, Best Buy and Rite Aid – have reported soaring retail thefts

Over the last year, shoppers in many cities have noticed that retailers are putting more items under lock and key. Putting expensive electronics or even alcohol behind glass isn’t unheard of – but now, the selection includes everything from makeup to candy.

Though customers have complained about the inconvenience, retailers have doubled down amid surging retail crime. Recent studies show that retail shrink (when stores have less stock than records show) has soared to a $100 billion problem.

Earlier this year, companies like Rite Aid and Target reported that rising retail theft has eaten into this year’s bottom lines. Now, with Walmart theft rising, too, consumers may find themselves paying the price.

Walmart thefts on the rise

On Tuesday, Walmart CEO Doug McMillon gave an interview to CNBC regarding Walmart’s rising theft situation.

McMillon reported that the retail chain’s U.S. stores are battling an increase in both shoplifting and organized retail crime (ORC). “Theft is an issue. It’s higher than what it has historically been,” he told CNBC. Leaders added that the majority of theft isn’t just shoplifting, but organized criminals strategically lifting small or high-value items.

McMillon outlined that Walmart has put in security measures to address the problem at particularly hard-hit stores. He noted that “local law enforcement being staffed and being a good partner” is also crucial to handling the issue.

But Walmart is prepared to take repercussions a step beyond putting products behind glass. If local jurisdictions can’t help the chain reduce thefts, “prices will be higher, and/or stores will close,” McMillon said.

He added that he’d like to see local law enforcement take a firmer stance on prosecuting shopliftings and organized crime. “It’s just policy consistency and clarity so we can make capital investments with some vision.”

A spreading problem

Walmart is far from the first retailer to grapple with more serious theft post-Covid.

Back in October, Rite Aid’s Chief Revenue Officer reported during the company’s earning call that the chain was looking at “literally putting everything behind showcases.” The company is considering whether drastic steps could ensure that “products are there for customers who want to buy.”

In the meantime, Rite Aid reports using off-duty police officers in some of the hardest-hit locations.

This position echoes sentiments expressed by Target last month.

CEO Brian Cornell noted that the retailer has seen “a significant increase in organized retail crime” in the last 12-18 months. CFO Michael Fiddelke reported a 50% increase in shoplifting rates amounting to $400 million in lost profits in the last fiscal year.

As with Walmart, Fiddelke added that most of Target’s problem appears due to ORC, rather than petty theft. He told analysts that this is an “industrywide problem that is often driven by criminal networks.”

Target executives expect the year’s ORC losses to total over $600 million. The company reports working with law enforcement, retail trade associations and retail trade associations to address this “growing national problem.”

Walmart thefts rising: behind the scenes

According to retail consultancy firm Strategy Resource Group, the average retailer has seen their total sales lost to shoplifting rise from 0.7-1% pre-pandemic to 2-3% now.

Another firm, the National Retail Federation, also reports on shrinkage (a measure of theft loss). And according to the NRF’s 2022 National Retail Security Survey, the problem is growing.

A growing problem – thanks to Covid

According to the NRF, the average shrink rate hit 1.4% across all brands in 2022. That accumulates to $94.5 billion in total losses, an increase over 2021’s $90.8 billion. Additionally, organized retail crime rose 26.5% over the last year.

The survey also discovered that Covid-19 appears to have contributed to rising theft. Between 87-90% of respondents reported that the pandemic increased both overall risks and violent risks.

Additionally, 73.2% noted that shoplifting increased during the pandemic. 71.4% added that organized retail crime and employee theft have both risen, too.

Respondents cite factors like labor shortages, hiring challenges and maintaining Covid-19 precautions like masking as contributing to rising crime incidents.

According to NRF vice president for research development and industry analysis Mark Matthews, ORC is a “burgeoning threat” for retailers. “These highly sophisticated criminal rings jeopardize employee and customer safety and disrupt store operations,” he said. “Retailers are bolstering security efforts to counteract these increasingly dangerous and aggressive criminal activities.”

Where is shrink actually happening?

Retailers report that ORC groups target items that are readily available, easy to grab and conceal, and may sell for higher values. Some of the most targeted categories include:

• Health and beauty
• Apparel, eyewear and footwear
• Electronics
• Groceries (both food and beverage)
• Office supplies
• Infant care and toys

The NRF survey found that retailers attribute the bulk of theft, around 37%, to external theft and organized crime. Employee theft also contributed about 28.5% of the problem. Items like bad checks, fraudulent returns and fake coupons made up another 25.7%.

Where these items actually disappear from is also interesting.

Some 42% of retailers report cargo disappearing directly from stores.

But a bigger portion – 47.4% – say that products are also disappearing on the journey between distribution centers and stores.

Another third adds that cargo has disappeared between manufacturing and distribution centers or from third-party warehouses.

Addressing the problem

Experts note that one of the biggest contributors to rising theft is the sheer lack of loss prevention personnel available to deter and catch shoplifters and fraudulent activities. That problem has also worsened in the pandemic, with nearly 70% of stores citing higher in-store fraud in the last year alone.

But now, stores are being forced to act. Many retailers in the NRF survey report plans to boost their loss prevention staffs by at least 10%. Comparatively few are prepared to shrink their staff, preferring the cost of salaries to the cost of losses.

Additionally, many companies are upgrading their electronic tools to deter or catch theft. Strategies include enhanced AI in checkout cameras, facial recognition software, and smart cameras to track product shipments.

What does Walmart’s rising theft problem have to do with you?

On its face, it might seem like rising theft at Walmart has little to do with you. But when the problem grows this big, theft doesn’t just dent a company’s bottom line.

Take Target – that $600 million annual estimated loss is nothing to sneeze at.

Writing down profits at that magnitude can hinder a company’s stock price growth, not to mention its own corporate investment potential. Plus, there’s the increased staffing and technological costs required to tackle the problem on the ground.

But on an even grander scale, widespread retail theft directly contributes to inflation. Naturally, rising prices means that inflation will go up in local areas. But if Walmart – or other chains – shut down stores, that means other companies have to pick up the slack, which could contribute to tight supply chains or higher prices in other ways.

Unfortunately for investors, there’s little you can do to stop shrinkage on your own. However, you can protect yourself financially by making prudent investments designed to maximize profits in uncertain times.

In particular, we suggest starting with Q.ai’s Inflation Kit. This Kit invests in a variety of assets designed to reduce losses and increase profits due to inflationary activities. In other words, our AI makes data-driven decisions to buoy your portfolio’s returns even in the most uncertain times.

Of course, there’s never any guarantee in investing. But if you have the choice to choose between data-backed, trend-adjusted strategies and picking stocks?

Well, we know which we’d prefer.

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