Theft has been a major story for 2023, with many big-box retailers citing challenges surrounding retail theft on earnings calls. Target (TGT), for example, closed nine stores nationwide due to theft.

Yahoo Finance's Brooke DiPalma reports on this story—breaking down the potential financial impact in the coming year.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

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SEANA SMITH: We are counting down the top 10 stories of the year here at Yahoo Finance. And coming in at number 6 is retail theft. Target, Walmart, Walgreens, Home Depot all calling out theft as a real threat to their business.

MARK MATHEWS: It's a $100-billion problem for our industry as a whole. So it's a big problem.

BRAD SMITH: Shrink though, has been one of the common lines and threads that we've been able to draw, unfortunately, through many of these retail earnings this season.

MARO CLAXTON: They're in a position now where these type of flash robberies, these smash and grabs or they've been called mobberies are very lucrative and very successful for them.

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SEANA SMITH: Well, retailers sounded the alarm in 2023 as retail theft climbed in the headlines with giants like Walmart, Target, Home Depot, Nordstrom, and others all mentioning it as an issue. But how much of it is actual theft? Brooke DiPalma joins us now with more on that. Hey, Brooke.

BROOKE DIPALMA: Good morning, Seana. Well, inventory shrinkage is really that overarching term that includes the loss of items to retail theft, organized crime, internal theft like employees stealing, errors among other factors. And while retail theft certainly garnered attention across Main Street and Wall Street in 2023, we actually won't know the true financial impact until next year once all retailers' fiscal years have ended. But what we do know now is that in fiscal year 2022, there already was a 1.6% increase accounting for $112.1 billion in losses.

Now, previously, it was believed that the majority of that theft was from organized retail groups, but we now know is that the majority of shrink is from both organized retail crime and employee theft. That's followed by errors that make up about 27% of total shrink and unknown or other reasons after that. But retailers have gotten so many questions about what exactly this means for the company's bottom line.

Target CEO said earlier this year, there was a 120% increase in the first five months of 2023 involving violence and threats. And that ultimately led to the retail giant closing nine stores in October, blaming theft and organized retail crime for contributing to an unsustainable business performance at those stores. Now, Target expects inventory shrinkage, but mostly theft to cut profits by $500 million in total this year. Meanwhile, at stores that remain open that tend to be hit by theft, Target installed things like locked cases, additional security, and is even training store leaders and employees to combat this.