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'Maybe we cried too much' over shoplifting, says Walgreens executive

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CNN

During the pandemic, major retailers have warned of an increase in theft and blatant attempted shoplifting. But a senior Walgreens executive now says the outbreak may have been exaggerated.

“Maybe we cried too much last year” about merchandise losses, Walgreens chief financial officer James Kehoe acknowledged Thursday on an earnings call. The company’s shrinkage rate – merchandise losses due to theft, fraud, damage, mis-scanned items and other errors – has dropped from 3.5% of total sales last year to about 2.5% in the last quarter.

Kehoe’s message is a notable departure from comments about theft by Walgreens and other retailers like Walmart and Target over the past three years.

Companies and groups in the retail sector have tried to draw attention to shoplifting and “organized retail crime” groups by smashing shop windows and grabbing aisles full of merchandise from shelves, urging lawmakers to crack down. Incidents certainly happened: many political leaders and local and national news outlets, including CNN, picked up on viral incidents of destructive thefts.

Walgreens says it may have gone too far on security.

So retailers acted. Some have started locking up more products like deodorant and toothpaste, adding extra security guards and even closing stores.

Last January, Walgreens (WBA) said its markdown was up more than 50% year-over-year. The company blamed some of this increase on organized retail crime and closed five San Francisco-area locations in 2021, citing theft as the reason for closing.

“This is not petty theft,” Kehoe said last January. “It’s gangs that actually come in and empty our beauty supply stores. And it’s a real problem.”

But a year later, Kehoe said Thursday that the company has added a lot of extra security to stores.

“We’ve probably invested too much and we can get away from that a little bit,” he said of the security team. The company has found that private security guards are “fairly ineffective” at stopping theft, so instead it’s hiring more officers and police.

While Walgreens may have exaggerated the threat of shoplifting in recent years, it’s true that theft has always been a problem for retailers – and that it often increases during recessions and other tough economic times, when people are desperate and may feel the need to resort to petty crime to support themselves. In addition, recent factors such as understaffed stores and ATMs can make it easier for thieves to steal.

The National Retail Federation estimated that downsizing cost retailers $94.5 billion in 2021, up from $61.7 billion in 2019 before the pandemic. Shoplifting is generally not reported to the police, but businesses have said shoplifting has worsened during the Covid crisis.

“Along with other retailers, we have seen a significant increase in theft and organized retail crime across our business,” said Target (TGT) CEO Brian Cornell in November.

Walmart (WMT) CEO Doug McMillon said last month on CNBC that “theft is a problem” and “bigger than historically.” He warned that stores could close if it continues.

However, it’s unclear if the numbers add up.

For example, data released by the San Francisco Police Department does not support Walgreens’ explanation that it was closing five stores because of organized retail theft, the San Francisco Chronicle reported in 2021.

One of the shuttered stores that closed had just seven thefts recorded in 2021 and a total of 23 since 2018, according to the paper. Overall, the five stores that closed had fewer than two reported thefts per month on average since 2018.

Likewise, a 2021 Los Angeles Times analysis of figures released by industry groups on losses due to organized retail crime found that “there is reason to doubt that the problem is as large or widespread as they say.”

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