Lowe's CEO says the 'greatest deterrent' for retail theft is hiring and training workers

• Incidents of retail theft appear to be rising, but some companies are managing to avoid the trend.
• Although Lowe's has reported an increase in inventory shrink, it's not expected to hurt profits.
• CEO Marvin Ellison attributed low theft rates to investing in the company's workers.

Like many retailers, home improvement giant Lowe's has reported increased losses from missing or damaged inventory over the past few years, reaching nearly $1 billion by one estimate.

But unlike dozens of other retail executives, Lowe's CEO Marvin Ellison says the losses from retail theft this year are not expected to have a material impact on the company's profits.

"It is one of the areas of the business that we're most pleased with as a major big box retailer," Ellison said during a retail conference this week.

Lowe's inventory shrink as a percentage of sales last year was just over 1% — at the low end of the typical industry range of 1% to 1.4% — and that's after an uptick from a 2016 low of 0.57%, per an analysis by CNBC.

"It's not by accident," Ellison said, highlighting technology investments and his stores' more rural and suburban locations as factors that help reduce shoplifting and organized retail crime.

More than the cameras, sensors, and secure merchandising displays, Ellison said investing in human capital provides the most bang for retailers' buck in keeping crime out of stores.

"Having spent my entire adult life in retail at every level, the one thing that I understand clearly is that the greatest deterrent for any type of theft activity is effective customer service," he said.

In other words, having more employees engaging with customers in stores goes a long way toward preventing losses, a point made in recent weeks by leaders at Tractor Supply Co. and Best Buy.

Earlier this year, Ellison said Lowe's spending on employee compensation had increased by $3 billion since 2018, and would grow by another $1 billion over the next three years. He also said that Lowe's is the highest-paying retailer in certain smaller markets.

Lowe's spends "a lot of time" training employees, Ellison said this week, and he described the company's asset protection team as "best-in-class in retail." Strong local partnerships with law enforcement also factor into the equation.

"So when you take all of those things together, they've been incredibly beneficial to us even in the second quarter," he continued. "It's a difficult environment — I've never seen anything like it — and we're incredibly pleased that we're able to have a differentiated performance relative to the other major retailers."