Wal-Mart's US chief takes aim at urgent item: Theft

Shoppers at a Walmart store in Los Angeles.
Jonathan Alcorn | Reuters

Wal-Mart Stores has a new priority: reducing theft.

Greg Foran, head of the retailer's U.S. operations, told a media briefing on Thursday he added theft and other forms of "unknown shrinkage" to a list of urgent items to be tackled at Wal-Mart's 4,555 stores across the United States.

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Foran said he saw an opportunity to boost margins by putting a dent in a problem that typically represents 1 percent for any retailer's sales. He noted that Wal-Mart generated nearly $300 billion in revenues in the United States in the past fiscal year.

"One percent of $300 billion is quite a lot of money. If you can save 10 basis points of it - boy I'll take it every day of the week and put it into lower prices for customers," Foran told Reuters after the briefing.

One basis point is equal to one hundredth of 1 percent, meaning that 10 basis points—or 0.1 percent—of $300 billion would be equal to $30 million.

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Wal-Mart had flagged the issue when it announced its first quarter earnings last month, saying that "shrink" was a major contributor to a 13 basis point decline in its gross profit margin. It said half of the problem was related to food.

Foran said unknown shrinkage could include problems like mistakes in inventory record-keeping in addition to stealing by customers or employees.

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He said the problem was not necessarily growing, but he decided to focus on it given the potential margin boost.

After Foran took over as head of the U.S. business in August, he instituted a series of "urgent agenda" items aimed at improving store management. Foran said he had taken two projects off that list and added two more, including the focus on shrinkage. He did not provide further details.