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Dr. Fienberg's testimony to argue that such a relationship does
not exist. We do not find this testimony to be persuasive. We
read the record to support a finding of a relationship between
shrinkage and sales under which a store's shrinkage will increase
or decrease in accordance with its sales. An increase in sales,
for example, results in an increase in purchases, and, as
purchases rise, so do the goods lost in shipment or through
paperwork errors. An increase in sales results in more inventory
being placed on the shelves for sale, and, as the shelf inventory
increases, so do the goods lost through breakage, theft, and
erroneous price changes. An increase in sales results in greater
customer traffic in the store, and, as more customers enter the
store, the ratio of sales personnel to customers declines, making
it more difficult to detect theft. An increase in sales results
in the employment of additional sales personnel, and, as sales
personnel increase, so does employee theft.
With this relationship in mind, we find that the
reasonableness of petitioners' shrinkage estimates is seen
further by comparing: (1) The retail value of shrinkage
estimates for the stub period to the verified shrinkage for the
same period and (2) the individual stub period estimates to the
shrinkage that was attributable to the stub period and that was
verified by a physical count in the next year.9 The verified
9 We compare the following year's physical inventory because
stub period shrinkage is verified through physical inventories
(continued...)
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