Updated LP Awareness Guide

AWARENESS GUIDE AN INTRODUCTION TO LOSS PREVENTION

LOSS PREVENTION: AN INTRODUCTION

Dear Associate, Loss is a significant problem for retail companies and unfortunately our Company is no exception. We experience loss caused by theft and errors just like every other retailer.

Loss prevents us from increasing our profitability and providing new opportunities for associates, completing remodels, and/or opening new locations.

To assist us in loss prevention, we have partnered with DTiQ Technologies, a loss prevention outsourcing company that provides services tailored to meet our specific needs. DTiQ will introduce us to new programs and concepts. Understanding loss prevention and how loss occurs allows you to be part of a team with other associates, your store and our Company in promoting a positive and profitable work environment.

We rely on you to prevent loss and communicate concerns.

Do not hesitate to contact management, your District Leader, and/or Associate Relations with any questions or concerns regarding the information covered in this guide.

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How does loss occur?

Loss occurs through three areas: • Internal Dishonesty, External Theft, and Paperwork Errors.

Historical Breakdown of Loss by Category Paperwork Errors 18% Internal Theft 47%

External Theft 35%

NATIONWIDE STAND OUT FOR GOOD LOSES MILLIONS OF DOLLARS IN INVENTORY EACH YEAR.

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LOSS: EXPAND YOUR KNOWLEDGE

Causes of Loss: Internal theft is loss caused by associates. This form of theft represents the largest percentage of a store’s loss. Some examples of internal theft include: fraudulent refunds, pass-offs of merchandise and theft of cash from the register or deposits.

External theft is loss caused by someone other than our own associates; such as guests, vendors, and/or maintenance personnel. This loss can occur through various methods, including shoplifting, credit card fraud and passing counterfeit bills, just to name a few.

Paperwork errors occur due to carelessness, making assumptions and/or neglecting to follow company procedures, thus causing a loss. These mistakes can occur while shipping and receiving merchandise, processing markdowns, and performing price adjustments and inventory counts.

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Our Company believes the majority of associates are dedicated, honest and hard working. Unfortunately, each year a small percentage of associates decide to steal. Dishonest behavior negatively impacts individual growth opportunities, benefits and morale. The personal consequence for those who engage in theft are equally severe and include: termination, restitution, civil demand, prosecution and a criminal record.

APPROXIMATELY 50% OF ALL RETAIL LOSS IS CAUSED BY INTERNAL THEFT, WHICH AMOUNTS TO MILLIONS OF DOLLARS EACH YEAR.

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INTERNAL LOSS: TOOLS AND INDICATORS

The prevention of internal theft is everyone’s responsibility.

The first step in prevention is being aware an issue may exist.

You can help by observing and reporting potential signs of dishonesty.

Potential internal theft indicators: • • • • •

Frequent register or safe/deposit shortages Guests frequently asking for one particular associate Excessive voids, returns or other non-sale transactions Empty packaging or tickets in the back room Associates who wear or use, but never purchase merchandise

While it may not be possible to completely prevent associates from creating loss, there are controls in place to help identify and deter internal theft.

Tools to identify internal theft: • Operational audits used to measure adherence to policies and procedures • Exception-based reporting on register transactions • Cameras to monitor store activity • Mystery shops to evaluate store operations and guest service • Anonymous Hotline to report concerns • Loss Investigations 06

LOSS PREVENTION: SHRINK AWARENESS

The prevention of internal theft is everyone’s responsibility. Elevating the shrink awareness on your team will assist in the efforts to minimize loss.

The Loss Prevention Audit shrink awareness section will prompt the auditor to engage associates for knowledge and to help teach and train on the following: • Knowledge of the monthly awareness topics • Aware of previous inventory results (units and dollars lost per day) • Understanding of the steps should/should not be taken if a guest attempts to leave the store without paying for merchandise • Awareness of the three primary resources of of shrink and the behavioral clues of a shoplifter • Use of recovery statements when dealing with a potential shoplifter • Identify three primary sources of shrink and provide examples • The behavioral clues of a potential shoplifter • Proper response to an active shooter situation • Aware of exception-based reporting and how it is used • Store’s % of returns to sales • Associate discount policy and who is eligible to receive • How to handle a no receipt refund • Proper ways to enter and exit the store Partner with your leaders to discuss the topics above to raise awareness and to be prepared for situations that may occur in your store.

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We can prevent most external theft through attentive guest service, being knowledgeable of methods dishonest guests use, and by staying alert to potential dishonest behavior.

The most common form of external theft is shoplifting.

While there are no physical characteristics to identify a potential shoplifter, there are behavioral clues that may indicate a guest attempting theft in your store.

STUDIES SUGGEST THAT AS MANY AS 1 IN 11 AMERICANS HAVE SHOPLIFTED.

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EXTERNAL LOSS: PRACTICES AND BEHAVIORS

Behavioral clues of a potential shoplifter: • • • • • • • • •

Inappropriate clothing i.e. overcoat on a hot day or a raincoat when it is sunny Carrying empty bags, boxes that can be used to conceal stolen merchandise Taking merchandise to secluded areas of the store Constantly looking around instead of at merchandise on the shelf or in their hands Walking into the stockrooms, behind counters or other places barred to the public Monitoring the movements of employees Repeatedly sending associates to look for products Looking up/around for security devices, especially CCTV Removing product from packaging

Other examples of external theft include credit card/check fraud, quick-change artists, burglary and robbery. Although these may happen less frequently, you should be aware of them and follow the policies and procedures to prevent them.

When confronted with a shoplifting situation: Always: • • •

Discreetly alert management Provide great guest service Document the specifics of the incident

Never: • • • •

Lose sight of a shoplifter Accuse a guest Follow a shoplifter out of the store Detain a shoplifter 08

Loss caused by error is completely preventable. Most errors occur when we fail to follow the correct procedure, attempt to take a shortcut, or are careless. To avoid mistakes each associate must know how to perform a task, where to find descriptions of policies or procedures and who to ask for guidance. If you discover an error, please correct it as soon as possible and alert a member of management.

20% OF ALL LOSS IS ATTRIBUTED TO PAPERWORK MISTAKES. THIS LOSS CAN BE PREVENTED BY ALWAYS DOUBLE CHECKING YOUR WORK.

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PAPERWORK ERRORS: PATIENCE AND CAUTION

Several areas where mistakes commonly occur: • • • • • • •

Processing shipments Transferring merchandise Markdowns/price changes Processing damages Providing guest’s change Processing discounts SKU Integrity

Steps to help reduce loss: • Double-check your work • Never make assumptions • Ask for assistance if you find an error and cannot correct the problem • Keep informed of policies, procedures and updates • Allow enough time to perform a task accurately without being rushed

Avoid the temptation of shortcuts!

The easier way of getting things done is not always the best or most accurate. Paperwork accuracy takes patience and a thorough understanding of store policies and procedures.

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We are dedicated to providing a safe, productive and theft-free environment for all associates, but we need YOU to help us identify and report issues.

If you witness or suspect dishonest activity, policy violations or behaviors detrimental to our Company environment, notify management or Human Resources. If you feel uncomfortable or unable to speak freely with management or Human Resources, call the Anonymous Hotline. Information can be reported at any time and will be kept completely confidential.

Assist in our growth & prosperity by reporting company policy violations or incidents anonymously 24/7 to: Anonymous Hotline

1 (888) 662-5025

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HELP: HANDLING & REPORTING SUSPICIONS

Information provided to the Anonymous Hotline is treated seriously and will be forwarded to the appropriate people to determine the best course of action. This may include further research or a thorough investigation to help resolve the reported issue. While communication is key to the reduction of loss, the manner in which we report concerns is equally important to our work environment. To ensure a workplace of mutual respect, please take action.

Before and after reporting a suspicion: • Report information when you have the privacy to speak freely.

• Do not discuss suspicions with co-workers; confidentiality is crucial to ensure fair treatment of everyone, including those potentially involved in inappropriate behavior.

• Avoid treating suspected associates differently.

• Follow the instructions given by management or the operator of the Anonymous Hotline.

We all play a role in loss prevention. Through awareness, action and communication, we can work together to reduce loss. We appreciate your time and attention to these concerns and hope your career with us is a successful, educational and fulfilling endeavor.

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The Anonymous Hotline is a toll free line that provides an avenue to report business abuse concerns.

Your manager is always here to help! Please feel free to reach out to him or her directly. If you are not comfortable speaking with your manager, please reach out to the HR Department or the Anonymous Hotline.

Contact information is for the Anonymous Hotline is listed on the LP Awareness board posted in the stockroom.

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ANONYMOUS HOTLINE: ANY DAY – ANY NIGHT

Anonymous Hotline 1 (888) 662-5025 This line can be used to report suspicious behaviors such as: • • • • •

Internal/External theft Harassment Discount Abuse Employee Relations Policy & Procedure Violations

• • • •

Unsafe Working Conditions Time & Attendance Abuse Improper Cash Handling/ Theft Operational Deficiencies

This guide is an introduction to shrink awareness and loss prevention and is designed to provide associates with an overview of the definition and causes of loss. Prevention of cash and merchandise loss requires everyone’s efforts.

Participation in loss reduction needs to be part of your daily contribution to overall store operation. Please ask questions and seek clarification as needed.

I have received a copy of the Awareness Guide that provides an overview of the definition and causes of loss. I acknowledge that I have read and understand the concepts presented. I understand the guidebook is not all-inclusive and serves as an introduction to the topic of loss prevention. I realize that resources are available to gain further information on this subject.

Date:

/ /

Store Number: Associate:

Signature:

Manager Name: Manager Signature: 14