What’s Behind All This ‘Shrink’?

Rather, shrink is the retail industry’s term for lost inventory — items that left a store or warehouse without being paid for.

The merchandise might have been stolen or damaged, or the company might have lost track of it because of poor stock-keeping practices.

In the past year, executives at Home Depot, Walgreens, Macy’s and Walmart have highlighted how shrink has eaten into their bottom lines or could affect pricing.

Some have brought up what’s known as organized shoplifting — in which two or more people steal items to sell them — as a particular concern, while others have pointed to individual acts of theft that have led to violence in stores.

Some critics say executives may be using shrink as an excuse to rationalize their company’s poor performance or justify closing stores in underserved communities, said Neil Saunders, managing director at the consultancy GlobalData.

“Because the term has become so generic, you can almost sweep everything into it and avoid a bit of scrutiny,” Saunders said, adding, “I feel it’s being called out a little bit more now just as a justification for perhaps declining profits and margins.”