Whether or not crime pushed them there, it seems clear that Target Corporation has arrived at a crossroads.
There’s evidence pointing both ways.
In favor of crime, the Minneapolis-based retail giant announced in September that it would close nine stores, citing organized retail theft as the key reason. Arguing the other way, in response to financials going in the wrong direction, is the downward drift of Target’s net earnings and stock price.
“The growth rate going forward is a lot more modest,” said Neil Saunders, a managing director at GlobalData, a business intelligence service. “They’ve picked a lot of the low-hanging fruit. There is a difference now in terms of where people are shopping. The development of retail is a lot more selective. The opportunity to develop new ones [malls and other shopping-centered developments] are few and far between.”
The numbers are these: According to Target’s own quarterly report, in the first quarter of this year net earnings were $876 million on revenue of $31 billion. During the same period a year ago, earnings were $1.54 billion on revenue of $30.6 billion, a 43 percent fall. This comes after net earnings were $2.8 billion in 2022 on revenue of $109 billion, compared to earnings of $6.8 billion on revenue of $106 billion 2021. And Target’s stock has dropped. Recently, it’s been trading around $110 a share. In late 2021, it was around $250 a share.
“The year-over-year comparable store sales declines are more dramatic than during the 2008-2009 recession, and earnings before interest and taxes margins are worse,” analyst William Kirk of investment bank Roth Capital Partners wrote in an Aug. 16 research note. “Competitors continue to grow and consumer habits are being reformed. A return to comparable store sales growth is uncertain.”
Target, with 450,000 employees, is the fifth-largest company in the Fortune 500, per investment manager U.S. Global Investors in an October 2022 survey. So, as Target goes, so goes a large chunk of America.
“It’s important to neighborhoods, it’s important as an operator that has a huge number of workers,” said Joanne Podell, vice chair for retail services at Cushman & Wakefield. “It’s got a following.”
Podell noted that net profit for a Target store is quite low, around 2.58 percent, which wouldn’t do for a smaller retail chain.
“I think they’ve done a lot of growth in a very short time,” Podell said. “Maybe they are going to slow down a little bit. I think it’s smart.”
But when large retail chains go bad, they go bad. Business graveyards are littered with their bodies. The prime example of what not to be is Sears & Roebuck, once ubiquitous in America. But there’s also Kmart, Bed Bath & Beyond and Linens ‘N Things, to name a few.
On Sept. 26, Target issued a statement saying it planned to close nine stores across four states, effective Oct. 21. It has 1,958 stores just in the U.S., according to its own website. “We cannot continue operating these stores because theft and organized retail crime are threatening the safety of our team and guests, and contributing to unsustainable business performance,” the company said in the statement.
The announcement resulted in a spate of bad press for Target, as reporters found that some of the stores slated for closing had lower rates of theft than others it planned to keep open. “Publicly available crime stats do not appear to support the company’s claim that incidents of nonviolent shoplifting or violent robberies are trending up,” wrote Business Insider in an Oct. 7 story. “The data does not indicate that closing stores are in areas hit harder by shoplifting than nearby stores the company plans to keep open.”
One of the stores slated to close was at 517 East 117th Street in East Harlem. It and other retailers in the area reported 201 incidents in the first six months of 2023, according to an analysis of New York Police Department data per the website Popular Information. During the same period, the area around the Target store at 150 East 86th Street had 327 such incidents, and the area around the Target at 795 Columbus Avenue had 232 such incidents. Those stores are staying open. The company also plans to open a store on 125th Street, Harlem’s top retail thoroughfare.
Theft may be a factor in closures, but “I don’t think that that by itself is the only decision-maker,” Podell said of Target. “They look at communities. They looked at Harlem and said, ‘Hey, I can be there anyway.’”
Target did not return requests for comment for this article.
In addition to the East Harlem store, Target planned to close two stores in Seattle, one in San Francisco, one in Oakland, another in Pittsfield, Calif., and two in Portland, Ore. In August, Target CEO Brian Cornell said on an earnings call that the company “continues to face an unacceptable amount of retail theft and organized retail crime. During the first five months of this year, our stores saw a 120 percent increase in theft incidents.”
Cornell is also working with the National Retail Federation, which is putting pressure on Congress to do something to combat the threat of organized retail crime to bottom lines throughout the industry. In late September, the trade group put out a statement saying crime accounted for $112 billion of losses to the retail industry last year, up from almost $94 billion in 2021.
Again, though, as Podell noted, theft is rarely the sole deciding factor in closing a store. “The investment in building a store, leasing it, hiring people, maintaining inventory — it’s a fortune,” she said. “Maybe they have to take a look at where they’re placing stores, maybe they’re too close. Maybe they’re looking at ways to make themselves more profitable, and closing stores is certainly one way to get there.”
“I think they certainly suffered from theft,” he said. “That most certainly plays a role in closing some of the stores that they have. If that were completely untrue, they could be in very serious trouble with investors. They’re a public company, they have to have at least some veracity in the things that they say. But I think it’s a lot more complex than just about crime. I think there’s a whole range of different factors, and there are a lot of things that aren’t necessarily discussed. Example: How successful were those stores in the first place?”
Patrick Tormey also agreed. He’s an adjunct professor at Lehman College’s Management and Business Innovation program, part of the City University of New York.
“I think it’s a combination of both,” Tormey said of theft and financial distress. “Shoplifting is becoming a headache. There was a recent article — they said for every billion dollars [of sales], they’re losing about $700,000 to $800,000. … Most of it is actually employee theft. It’s probably 37 percent employee theft, 23 percent outside [theft], and some it is just miscounting and just poor management of inventory.”
Tormey said its nearby residents who really suffer when a store like Target shutters.
“They pay higher prices,” he said. “If you have to buy merchandise like in a bodega, and you’re living in an apartment building in the inner city, and you have to shop in a small store, you’re paying higher prices. They don’t have the buying power.”