One alarming reason why Wal-Mart's profit is down

Wal-Mart’s theft problem is getting worse.

Wal-Mart US President Greg Foran said Tuesday that theft, which the company calls shrinkage, is one of three major factors behind the retailer’s drop in profit in the most recent quarter.

“Inventory shrinkage was meaningfully higher than planned for the quarter,” Foran said in an earnings call.

likely loses about 1% of its US revenue — or roughly $US3 billion dollars every year — to stealing by customers and employees.

The other factors contributing to Wal-Mart’s profit decline are a drop in gross margin, primarily related to lower than expected pharmacy reimbursements, and higher wages, Foran said.

“I want to be straightforward: These issues will present continuing profit challenges for the remainder of the year,” he said. “We are certainly disappointed. But we are not standing still. We know we can do better, and we will.”

Wal-Mart’s profit fell to $US3.48 billion, or $US1.08 a share, in the quarter ending July 31, from $US4.09 billion, or $US1.26 a share, a year earlier, the company reported Tuesday.

Wal-Mart shopper

Wal-Mart recently brought back employees known as “greeters” to its store entrances to help combat its theft problems.

The company also added a fleet of “asset-protection customer specialists,” who will check receipts as shoppers leave, The Wall Street Journal reported.

Wal-Mart is testing the added door presence in 300 of its 4,500 US stores.

The company is also “reviewing the end-to-end inventory management process with a special focus on shrinkage” and increasing staffing in areas of the store where theft is most common, Foran said.

“But it will take time to see results, so this will impact us… for the rest of the year,” he said.

In an earnings call earlier this year, Foran said half of the theft at Wal-Mart occurs in the food departments.

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