Like many retailers, Home Depot Inc. is locked in a struggle to combat inventory “shrink” caused by theft and organized retail crime, but is hopeful that a new law will aid efforts to tackle a problem that costs the sector billions of dollars a year.
“We are certainly in a battle in retail as we kind of think about shrink, but we’ve always continued to lean into initiatives that we’ve seen that can have impact to mitigate overall,” Ann-Marie Campbell, Home Depot’s executive vice president of U.S. stores and international operations said during a conference call to discuss the company’s second-quarter results Tuesday. “I know it’s early as we think about the INFORM Act but the INFORM Act is one of the key components as we think about organized retail crime that I think will help give us a little bit more visibility in some of the things that are happening out there.”
The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act, which came into effect June 27, is designed to add more transparency to online transactions and deter criminals from acquiring stolen, counterfeit or unsafe items and selling them through online marketplaces. The INFORM Consumers Act requires e-commerce sites to verify and disclose information about their high-volume third-party sellers.
Theft and organized retail crime have become an increasingly key driver of inventory shrink in recent years, a problem that has been highlighted by a host of companies, such as Target Corp. Walmart Inc. and BJ’s Wholesale Club Holdings Inc.
Speaking during the conference call, Campbell noted that Home Depot’s shrink has largely been in line with what the company has seen in the last several quarters. “We certainly have key initiatives to help mitigate that,” she added. The executive also said that the retail sector needs its government partners “to help on their end as well to help us in retail to really mitigate what we’re seeing out there.”
In the second quarter, Home Depot’s gross margin was 33%, a decrease of 8 basis points from the same period last year. During the conference call to discuss the results, Home Depot’s CFO Richard McPhail said this was primarily driven by pressure from shrink.
Last year the National Retail Federation reported that retail industry shrink was $94.5 billion in 2021, up from $90.8 billion in 2020 — primarily driven by external theft, including organized retail crime. The NRF’s National Retail Security Survey, which was conducted with the Loss Prevention Research Council, found that retailers, on average, saw a 26.5% increase in organized retail crime incidents in 2021. Eight in 10 retailers surveyed also reported that the violence and aggression associated with organized retail crime incidents increased.
Home Depot’s shares fell 0.3% Tuesday, compared with the S&P 500 index’s decline of 0.7%.
