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Loblaw locking up certain items in response to 'professional thieves'

Shoplifting has risen across all categories, including food, apparel and footwear

A pedestrian walks past a Shoppers Drug Mart in Ottawa November 10, 2010. Canada's No.1 pharmacy chain, on Wednesday reported a 7 percent drop in third-quarter profit and said it is facing new pressures on pricing and government reimbursement. 
 
   REUTERS/Chris Wattie       (CANADA - Tags: BUSINESS)
Loblaw says it is locking up certain items at Shoppers Drug Mart stores that have been targeted by “professional thieves” as it invests more money and labour to deal with inventory losses. (REUTERS/Chris Wattie) (Chris Wattie / Reuters)

Loblaw (L.TO) says it is locking up certain items at Shoppers Drug Mart stores that have been targeted by "professional thieves" as it invests more money and labour to deal with inventory losses.

Canada's largest grocery retailer says retail gross margins – the amount of profit made on goods measured as a percentage – declined slightly in the second quarter of the year due to higher supplier costs and higher shrink. Shrink is when a company loses inventory due to factors including theft, product damage, and fraud, among others.

If shrink had been excluded from gross margins calculations at the company's Shoppers Drug Mart business, Loblaw's chief financial officer Richard Dufresne told analysts on a conference call Wednesday that gross margins would have been up at the drug retail business in the quarter.

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"So it was a factor. That's an area we have spent a lot of effort (on)," Dufresne said on the call following the release of second-quarter results.

"If you go in-store, you will see what we refer to as fragrance lockups. That's where professional thieves have been focused on, so we've locked up many of these fragrances. You're going to see more of those over the coming months. Those are high-priced items, which when they go, it hurts the bottom line. As we put that (in), it will definitely help (with) shrink."

Loblaw spokesperson Catherine Thomas says in an emailed statement that the comments were not regarding shoplifting, but "organized retail crime."

"High-value fragrances in our Shoppers stores have been a target, as well as cosmetics, baby formula and even carts full of thousands of dollars of products pushed right out the front door," Thomas said.

"We've had to make some changes in how our stores operate to stop this crime – adding locked cabinets, time-delay safes and security gates – while at the same time maintaining a welcoming and convenient customer experience. As we are working to find the right balance, we welcome our customers' input and as always, appreciate their understanding."

Loss-prevention strategies

Many retailers have been grappling with rising theft in the wake of stubbornly high inflation. Dollarama said in June that retail shrink has been increasing over the past few quarters. U.S. retailer Target says inventory shrinkage – mostly the theft of merchandise – would dent profits by $500 million in 2023.

"Worsening shrink rates are putting significant pressure on our financial results," Target chairman and CEO Brian Cornell said in May.

The Retail Council of Canada (RCC), an industry group that lobbies on behalf of retailers, says shoplifting has increased across all categories including food, apparel and footwear merchandise. The group says it has been working with retailers to help implement loss-prevention strategies.

"Some retailers have added security guards in their stores or have hired off-duty police officers. Additional training for their staff on de-escalation is also important," an RCC spokesperson said in an emailed statement.

"People often think that retail crime is a victimless crime, but it's not. Theft costs Canadian retailers billions of dollars a year, costs that are passed on to you and I as consumers when we go shopping."

Dufresne says Loblaw has been "investing capital and labour in-store for close to a year now" to deal with shrink, and that the company expects it is "peaking."

"We've got indicators that are telling us that it is peaking and in certain instances it's getting a little bit better," he said, adding that the company expects to have more information about the progress on shrink in its next quarterly results.

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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