Target announced on Tuesday its decision to shut down nine stores in prominent urban areas throughout the nation. The reason behind this move is attributed to incidents of violence, theft, and organized retail crime.

The organization has made the decision to permanently close one retail establishment in the Harlem district of New York City, as well as two branches in Seattle, three stores in the San Francisco-Oakland region, and an additional three stores in Portland, Oregon. These closures are scheduled to take place on October 21st, and will mark the permanent end of operations for these particular locations.

Target announced in a press release that they are unable to maintain operations of certain stores due to the escalating concerns of theft and organized retail crime. This predicament not only jeopardizes the safety of their employees and customers but also negatively impacts their overall business performance.

“We know that our stores serve an important role in their communities, but we can only be successful if the working and shopping environment is safe for all.”

Target, a retail giant with an extensive presence of around 2,000 stores across the United States, has been vocal about the issue of organized retail crime within its establishments. The company has expressed how theft incidents have resulted in an increase in shrink, which refers to the losses incurred from goods that have been damaged, misplaced, or stolen.

Target’s recent announcement sets it apart from other retailers by taking the unique approach of closing stores and directly attributing this decision to retail crime.

During the announcement of Target’s fiscal second-quarter earnings in mid-May, CEO Brian Cornell highlighted a significant increase in organized retail crime incidents taking place at their stores. He further underscored that the overall shrinkage of merchandise is anticipated to negatively impact Target’s profitability for the entire year, resulting in a decrease of over $500 million compared to the same period last year.

Target’s CEO, Brian Cornell, emphasized that the company is hesitant to close stores in response to increasing shrinkage when questioned about their plans.

“We’ll continue to do everything in our power to keep our doors open… At the same time, we’ll be closely monitoring the safety of our team and guests as well as the financial impact to our business as we determine the right path forward at Target.”

Target CEO, Brian Cornell

He further mentioned that they will exert maximum effort to maintain their stores’ operations while simultaneously keeping a close watch on the safety of their staff and customers, along with assessing how it affects the financial aspect of their business. This evaluation will guide their decisions for Target’s future direction.

The remarks made by the retail executive prompted other companies to address the issue and support the need for legislative changes. With the introduction of the Inform Act, online marketplaces are now obligated to disclose the identities of high-volume sellers to discourage the sale of stolen and counterfeit products. As a result, retailers and trade associations are now advocating for the passage of another bill known as the Combating Organized Retail Crime Act.

The proposed bill, which Target expressed its support for in a recent news release, aims to increase penalties for theft offenses and modify the requirements for prosecuting federal theft cases. In addition, the bill seeks to establish a designated platform, known as the Organized Retail Crime Coordination Center, where retailers can collaboratively share information with each other and law enforcement authorities.

Since 2022, a total of nine states, with six of them passing such laws this year, have implemented legislation to enforce stricter punishments for offenses related to organized retail crime. The driving force behind the enactment of these laws comes from retailers and trade associations working collectively to lobby for the drafting and successful passage of these bills.

Store closures, or the possibility of them occurring, have played a significant role in retailers persuading legislators to support their cause, as indicated by policy experts in the past.

Target is facing more challenges than just theft.

Target has faced various difficulties in its business for over a year, which are specific to the company itself. These challenges include having an excess of unsold inventory, facing criticism for its Pride merchandise collection, and experiencing a decline in consumer spending on discretionary items like clothing and household goods.

During the past 20 years, Target did not explicitly address the impact of shrinkage on its profit margins in its earnings calls. However, in August 2022, the company acknowledged shrinkage as a contributing factor to reduced profits, along with other retailers. This occurred as a result of increased markdowns and the challenge of selling off unwanted merchandise. According to industry specialists interviewed by CNBC, when inventory levels rise, shrinkage typically follows suit.

The company has previously stated that the rates of shrinkage vary significantly depending on the location and are not directly linked to inventory levels.

Target announced on Tuesday that it has implemented several initiatives to combat criminal activities within its stores. These measures encompass the installation of secure cases for certain products, the engagement of third-party security services, providing training to store leaders on diffusing potentially hazardous situations, and investing in cyber defenses to prevent fraud and organized criminal activities.

However, Target stated that despite implementing additional security staff and theft prevention measures, these measures alone did not prove sufficient at the impacted stores.

Target expresses its ongoing struggle with operational safety and success for its stores, stating that despite its relentless efforts, it still encounters significant obstacles.

The company has announced its commitment to assisting employees affected by store closures by facilitating opportunities for them to transfer to another Target location.

The company’s steps towards enhancing inventory management remain unclear.

Despite the closure of stores, the available data on shrinkage remains unclear.

Target revealed its plans to close stores concurrently with the publication of the most recent National Retail Security Survey by the National Retail Federation, the leading trade association in the industry. According to the survey, the impact of theft on retailers’ profitability remains consistent with previous years.

Total retail shrinkage increased to over $112 billion in 2022, a rise from the previous year’s $93.9 billion, as reported by the survey. The measurement is determined by considering the total retail sales in the United States and typically follows an upward trend as retail sales continue to grow.

When expressed as a proportion of sales, as is frequently practiced, the average annual shrinkage rose to 1.57% from 1.44% in 2021. This figure aligns closely with previous years and is typically regarded as a standard and acceptable level of shrinkage by industry professionals. Retailers generally anticipate experiencing approximately 1% to 2% shrinkage annually.

Target is now among the numerous retailers that have decided to close their stores in major urban areas, joining the likes of Walmart.

The Nordstrom flagship store and Nordstrom Rack location in San Francisco were closed during the summer, marking the end of over 35 years of operations in the city.

However, instead of attributing the decline to criminal activity, the company attributed it to market dynamics. In a communication to employees, Jamie Nordstrom, the former Chief Stores Officer, explained that the changes in downtown San Francisco had negatively impacted customer foot traffic and the overall success of their operations.

In August, there was a bold robbery at another Nordstrom store in Los Angeles, which gained widespread attention across the country.

During a recent earnings call, the company was questioned regarding a viral video depicting a criminal act. CEO Erik Nordstrom expressed his concern, describing the incident as unsettling for everyone involved. He also acknowledged that theft-related losses have reached unprecedented levels but assured that these losses are within the company’s expectations as outlined in their guidance.

Doug McMillon, the CEO of Walmart, emphasized the need for strict prosecution of shoplifters, stating that failure to do so could result in store closures.

Walmart has also shuttered a number of its stores in April, specifically four in Chicago, however, the company did not attribute these closures to theft. In an official statement, Walmart acknowledged the difficulties it has faced in generating profit from these locations, with challenges continuing to mount. The company reported that these stores have been experiencing significant financial losses, amounting to tens of millions of dollars annually, and their yearly deficits have nearly doubled in just the past five years.

Walgreens, much like Target, attributed the closure of certain San Francisco stores in 2021 to the prevalence of organized retail crime.