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level in determining Superx's shrinkage accrual rate. Individual
store managers could not use a different rate. Between 1981 and
1986, shrinkage accrual rates, as a percentage of gross sales,
varied between 2.1 percent and 2.5 percent.
C. Management of Shrinkage
Controlling shrinkage factors was a significant concern of
Superx management. Store managers could be fired, or their
compensation reduced, for failure to control shrinkage factors.
Superx maintained a risk management department, which performed
field audits to see that procedures to reduce shrinkage factors
were in place and performed analyses of shrinkage factors to aid
in control of such factors.
D. Physical Inventories
During 1983 and 1984, Superx conducted an average of 1.7
physical inventories a year in each store. In 1985, the average
was 1.6 inventories a store.
OPINION
I. Introduction
Petitioner’s principal business activities are the operation
of supermarkets and convenience stores and the distribution and
sale of drug and general merchandise. We are concerned here with
(1) the Kroger Food Stores Division of Kroger (the KFS division),
(2) Florida Choice, a division of Superx, which operated a chain
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