Target^® Closing Stores

Target's recent financial success has sparked conversation in the retail world, showing that store closures might be the key to reviving sales in crime-heavy areas. After shutting down nine locations that were plagued by shoplifting and crime, Target^® saw a notable improvement in both earnings and foot traffic. As other big-name retailers face similar challenges, many wonder if Target's strategy will become a wider trend in the industry.

How Crime Hurt Target's Profits

The impact of organized retail crime has been staggering. In 2022, theft caused an estimated $700 million loss for Target, with shrinkage continuing to be a major issue. By 2023, losses from inventory shrinking were still significant, amounting to $500 million. These staggering figures made it clear that Target needed a strategy to protect its profits and staff. Closing nine stores in high-crime areas, including cities like New York City, Seattle, and the Bay Area was one solution aimed at curbing theft.

Some have questioned whether it was the high crime rates or the smaller format of the stores themselves.

The Financial Turnaround

Whatever the issue with these stores, Target's bold decision appears to have paid off. In 2024, after the closures, Target's earnings beat Wall Street's expectations, with customer traffic and revenues showing notable increases. A significant factor in this rebound was a reduction in inventory shrinkage. Without the constant drain of theft and loss, Target could maintain healthier financial margins and focus on meeting the needs of inflation-weary customers.

Other major retailers, including CVS^® and Walgreens^®, have also closed stores in recent years, though not always attributing these decisions solely to theft. However, the overall trend suggests that more companies might follow Target's lead if crime levels continue to rise.

The Risk of Retail Deserts

While Target's store closures might have helped the company's bottom line, they come with unintended social consequences. Experts warn that shutting down stores in crime-prone areas could lead to "retail deserts," a similar concept to food desert. These are regions where access to essential goods becomes scarce.

Without nearby stores, residents may struggle to find affordable groceries, clothing, and prescription medications. These closures don't just inconvenience shoppers; they also result in fewer local jobs, as stores have long been reliable sources of employment in many communities.

The Future of Retail Strategy

Target's recovery demonstrates how retailers can potentially improve their finances by retreating from high-crime locations. However, this trend could lead to a growing divide between well-served neighborhoods and those left behind. In cities already grappling with high crime rates, residents may find themselves with fewer shopping options and growing challenges in accessing everyday essentials. While retailers like Target have succeeded in turning around their financial fortunes, they are also creating ripples that could reshape urban landscapes for years to come.

In the end, while Target's decision to close crime-prone stores may have improved its financial standing, the broader consequences — including the potential creation of retail deserts — remain a looming concern.

References: Target's sales bounced back after closing crime-prone stores — and other chains could do the same | Target closed crime-prone stores and it appears to have paid off. Why that may result in future 'retail deserts.'