Some retailers are closing stores or shifting guidance as retail crime is a g🦂rowing drag on profits.

Retail crime went up in 2022, costing businesses more than $112 billion in losses, according to a survey by the National Retail Federation (NRF). The average shrink rate—losses primarily because of theft—was 1.6% in 2022, up from 1.4% a year ago when the losses totaled 93.9 billion.

If retailers' warnings in 2023 earning calls are any indicator, the trend seems to be continuing at a fast clip.

Increasing Concern Over Retail Crime

The NRF𓆉 surveyed 177 retail brands with more than $1.6 trillion in 2022 sales, and the respondents were increasꦦingly concerned about retail crime, both as a security as well as a financial issue.

Specifically, organized retail crime (ORC) continues to be a cause of concern, alongside higher levels of violence. More than two-thirds of respondents inﷺ the survey said that violent acts and aggression from ORC🦹 were higher than a year ago.

"Retailers are seeing unprecedented levels of theft coupled with rampant crime in their stores, and the situation is only becoming more dire," said David Johnston, NRF Vice President for Asset Protection and Retail Operations.

Some Cities Are Harder Hit Than Others

Los Angeles, ﷺSan Francisco, Oakland, Houston, New York, and Seattle ꦇwere listed as the cities most affected by organized retail crime in 2022, according to the NRF.

"There are some stores that are performing just like they have historically—very, very low shrink. We have other stores that are the other end of that barbell, that have much, much higher shrink than what we've seen historically," Walmart (WMT) Chief Financiꩵal Officer John David Rainey explained on a buy-side analysts call.

"These stores tend to be located in cities where they're not prosecuting this type of crime. And so people are going in, and they know that I can steal X amount of dollars," he said. "As long as I steal that amount, and not anything more, I'm not going to get prosecuted. That creates not the best shopping experience."

Despite increasing security and asset protection, retailers also said they have been forced to close stores in particular locations (28%), reduce operating hours (45%), or alter products available in-store (30%) due to retail crime.

Losses Mount For Retailers in 2023

These losses are eating into retailers' profits.

"The impact of theft on our shrink was meaningful to both our Q2 results and our go-forward expectations for the balance of the year," said Lauren Hobart, President and CEO of Dick's Sporting Goods (DKS) in a recent earnings call.

Target (TGT) CEO Brian Cornell said organized retail crime would cost his company $500 million more this year compared to last year. The company announced the closure of nine stores across New York, Seattle, San Francisco and Portland starting Oct. 21 citing safety issues for guests and employees.