I’ve lost all patience with the gaslighting about shoplifting—it’s just 1% of revenue, it doesn’t hurt anyone but rich investors, blah blah blah.
Using numbers from Lowe's 2022 10-K, here's a quick analysis showing how destructive it really is, including ki-ling 1,500+ jobs. 👇
(1) For retail chains, 1% of revenue is an absolutely massive number. In the case of Lowe’s, inventory shrinkage—most of which is consumer shoplifting or employee theft—cost the company $997M in 2022.
That’s right: One company lost nearly a billion dollars from theft. In one year. If that $1B were the revenue of a company in its own right, it would be large enough to be publicly traded.
And, again, this is just Lowe’s. Think of the scale if you added in Walmart, Target, Home Depot, Di-k’s Sporting Goods, and all the grocery stores and dr-g stores across the country. Imagine how many billions of dollars that must be.
All of a sudden, 1% doesn’t seem that trivial anymore, does it?
(2) Even if you still believe that 1% of revenue isn’t that big a deal, let’s look at it in terms of earnings. In 2022, Lowe’s generated $11.9B in EBITDA and $6.4B in net income. That $1B in shrinkage represents 8.4% and 15.5% of those numbers, respectively.
In other words, for every $6.50 in earnings for Lowe’s shareholders, they’re losing roughly $1.00 due to theft.
If Lowe’s were able to eliminate all shrinkage, EBITDA would grow more than 8%, and net income would grow 11%. The company would generate an extra $710M in earnings, all without having other sell a single extra item or grow sales by even a dollar.
(3) For investors, that $710M of foregone net income is massive. In 2022, Lowe’s paid out 36.8% of net income in the form of shareholder dividends—actual cash payments to its owners, including mom-and-pop retail investors and the pension funds that represent a large portion of its shareholder base. Assuming that Lowe’s kept the same payout ratio, eliminating shrinkage would create another $261M available for dividend payments.
(4) More important, though, is the earnings that Lowe’s doesn’t distribute—the cash they reinvest back into their business. In 2022, Lowe’s had $1.8B in capex, in the form of new stores, improvements to existing stores, and other strategic initiatives. This $1.8B represented 28.4% of earnings.
If Lowe’s kept the same ratio and applied it to an incremental $710M in net income, that would represent an extra $202M available for capex. It costs Lowe’s about $22M to build and stock a new store, and the company has an average of 173 employees per store (inclusive of employees working in corporate-overhead positions).
In other words, stolen merchandise is costing the company the opportunity to build another nine stores, which would create 1,500+ new jobs.
(5) To summarize: $997M in shrinkage turns into $710M in foregone net income. This foregone net income, using 2022’s ratios, means $261M in shareholder dividends missed out on, nine stores not built, and 1,500+ jobs not created.
So you really want to say that shoplifting isn’t a big deal? You really want to justify it and say that it’s a victimless crime?
Go tell that to the senior citizens not getting the dividend checks that they otherwise would have received. Go to nine mid-size towns without a Lowe’s and tell them that. Go find 1,500 people looking for retail jobs and tell them that the only people getting hurt here are fat-cat shareholders.
Really, go on.