Survey: Holiday-related return fraud to cost retailers $2.7 billion
Washington, D.C. According to NRF’s annual Return Fraud Survey, completed by loss-prevention executives at 134 retail companies, the retail industry will lose an estimated $2.7 billion in return fraud this holiday season and an estimated $9.6 billion this year.
The survey provided evidence that changing return policies are beginning to reduce the amount of return fraud in retail. According to the survey, 6.4% of holiday returns are expected to be fraudulent this year, down from 7.5% last year. Department stores and specialty stores, including children’s apparel stores, experience higher return rates; as expected, rates at grocery stores, drug stores and restaurants are lower.
“Retailers are constantly trying to fine-tune return policies to create guidelines that honest customers can live with and dishonest people can’t get around,” said Joe LaRocca, senior asset protection advisor for NRF. “Many shoppers are doing their part to help stores combat return fraud by being more conscious about saving receipts and attaching gift receipts to presents this holiday season.”
According to the survey, 93.1% of retailers said stolen merchandise has been returned to their stores in the past year, up from 88.9% in 2008. In addition, three-quarters of retailers (75.4%) say they have experienced returns of merchandise purchased with fraudulent or stolen tender, while 43.1% say they have experienced returns using counterfeit receipts. Nearly half (46.2%) also report that wardrobing — the return of used, non-defective merchandise such as special-occasion apparel and certain electronics — has been an issue for their company within the past year.
Most retailers’ holiday policies will stay consistent with last year (80.4%), while 16.9% of companies said their return policy will tighten and 3.8% said the policy will loosen. About one-third (28%) of retailers say their return policy is more flexible during the holidays than it is during the course of the year.
According to an NRF survey conducted last December, 87.2% of Americans feel retailers’ return policies are fair.
“Criminals have been fond of using a ‘woe is me’ mantra because of the economy, but the truth remains that most return fraud is more “greed” than “need”,” said LaRocca. “In many cases, return fraud is committed by people who use technology to produce counterfeit receipts or take advantage of lenient return policies by stealing large quantities of merchandise and returning it to dozens of stores without a receipt.”
Office retail results indicate weak business climate
Office Depot and OfficeMax reported a drop in third-quarter sales but eked out profits, thanks to expense control and a focus on sales in profitable categories.
At OfficeMax, same-store sales declined 11.5% and total retail segment sales decreased 11% to $923 million. Operating profits fell slightly to $28.4 million from $29.1 million. However, a reduction in expenses enabled the company to increase its operating margin rate to 3% of sales from 2.8% the prior year. The company ended the quarter with 1,010 stores in its retail division, consisting of 932 units in the United States and 78 stores in Mexico.
“While continued lower sales levels strained our profitability this quarter, we managed to mitigate the impact by reducing costs and improving our operations,” said Sam Duncan, OfficeMax chairman and CEO. “Our relentless focus on implementing disciplined growth initiatives, differentiating our business and increasing our productivity continue to significantly benefit our performance.”
Despite that assertion, the OfficeMax missed analysts’ earning per share expectations by a wide margin, reporting a seven cents a share profit that was half of what analysts were expecting.
Profit were also hard to come by at Office Depot as top line sales growth was weak. Office Depot said sales at its North American retail division declined 18% to $1.3 billion due to 117 fewer stores and a 14% same-store sales decline. Despite the reduced sales volume, the division grew operating profits to $35 million compared to $12 million the prior year due in part to a conscious effort to reduce what it called, “unacceptable margin promotions in select categories.” Reduced expenses, lower asset impairment charges and improved inventory management also contributed to improved profitability.
“We are pleased with both our operating results and cash flow performance in the third quarter,” said Mike Newman, Office Depot’s CFO. “We exceeded our expectations in the quarter as a result of strong execution across the entire enterprise.”
Office Depot reported a loss of eight cents a share, excluding special items, which exceeded analysts’ estimates for a loss of 10 cents a share.
Office Depot ended the quarter with 1,158 stores in the U.S. and Canada.
Food Lion, Kysor//Warren introduce innovative refrigeration
COLLEGE PARK, Ga. Food Lion and refrigeration manufacturer Kysor/Warren unveiled the grocery industry’s first cascading refrigeration system with naturally occurring carbon dioxide to keep frozen and fresh foods cold.
Food Lion demonstrated the system during an event held for industry peers and members of the U.S. Environmental Protection Agency’s GreenChill Advanced Refrigeration Partnership, a cooperative alliance working to reduce the use of ozone-depleting gases and curb greenhouse gas refrigerant emissions. The College Park store is Food Lion’s fourth GreenChill advanced refrigeration store and its third store to incorporate the use of CO2, which reduces the amount of refrigerants needed to keep products cool or frozen by more than 30%.
The system is Food Lion’s first “cascading” CO2 refrigeration cycle, which uses a single system and just one condensing unit to refrigerate and freeze foods. Before Kysor//Warren developed this system, grocers incorporating CO2 refrigeration systems needed two condensing units as well as a freezer-specific system and a refrigeration, medium temperature, specific system. This is Kysor//Warren’s first CO2 advanced refrigeration system in a retail grocery store setting.