Target pulled Pride merchandise in June after a right-wing backlash full of unsubstantiated claims of grooming and child endangerment filled the conservative corners of social media.
During the chain's second-quarter-earnings call, Chief Executive Brian Cornell noted that the boycotts had hurt sales, and he explained why Target (TGT) -) pulled Pride merchandise from its shelves in response to the right-wing outcry. He also noted that Target has featured Pride collections for a decade.
"After the launch of the assortment this year, members of our team began experiencing threats and aggressive actions that affected their sense of safety and well-being while at work," he said. "I want to make it clear: We denounce violence and hate of all kinds. And the safety of our team and our guests is our top priority."
To ensure that safety, the company was forced to make some changes to its store shelves.
"To protect the team in the face of these threatening circumstances, we quickly made changes, including the removal of items through the center of the most significant confrontational behavior," he said.
That controversy and the related boycotts were not what caused the chain to see comparable-store sales drop 5.4% and overall sales fall 4.9%. Cornell blamed shifting consumer habits.
“Consumers are choosing to increase spending on services like leisure travel, entertainment, and food away from home, putting near-term pressure on discretionary products,” he said.
The CEO and others on the call also repeatedly mentioned another issue -- increased and increasingly better-organized theft.
Image source: BRYAN R. SMITH/AFP via Getty Images
Walmart and Target have a theft problem
Both Walmart and Target have experienced a rise in theft. Cornell talked about it during the Q2 earnings call.
"In addition to these more recent challenges, our team continues to face an unacceptable amount of retail theft and organized retail crime. ... Shrink in the second quarter remains consistent with our expectations, but well above the sustainable level where we expect to operate over time," he said. (The industry term for theft is "shrink.")
Walmart President John Furner also acknowledged the problem in the company's second-quarter-earnings call.
"Shrink has increased a bit this year. It increased last year. It's uneven across the country. It's not in every market. Some markets are higher than others."
Walmart CEO Doug McMillon had harsher comments when he addressed the issue in December 2022.
“Theft is an issue. It’s higher than what it has historically been,” he told CNBC’s “Squawk Box.“ "We’ve got safety measures, security measures that we’ve put in place by store location. I think local law enforcement being staffed and being a good partner is part of that equation, and that’s normally how we approach it,”
McMillon also said that a lack of cooperation from local law enforcement could lead to higher prices or even store closures.
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Target sees increases in theft and violence
While McMillon in recent calls has softened his tone on the theft/shrink problem, Cornell took up the cause during his company's most recent call.
"And unfortunately, safety incidents associated with theft are moving in the wrong direction. During the first five months of this year, our store saw a 120% increase in theft incidents involving violence or threats of violence," he said.
There's no easy answer to the problem -- although the increasing use of self-checkout isn't helping the issue, which neither company acknowledges.
"As part of an industry-funded study published in 2022, Beck surveyed 93 retailers (he wouldn't provide names) spread across 25 countries that have incorporated self-checkout technology," the CBC reported. "According to the study, retailers estimated that as much as 23% of their store losses were due to a combination of theft and customer error at self-checkouts."
Neither company used the words "self-checkout" in their calls or addressed its role in increased theft. Cornell instead offered this statement.
"We're continuing to work tirelessly with retail industry groups and community partners to find solutions to promote safety for our store teams and our guests," he said.
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