‘Maybe we cried too much’ over shoplifting, Walgreens executive says

CNN –

Throughout the pandemic, major retailers have warned of increased theft and an increase in brazen shoplifting attempts. But a senior Walgreens executive now says the deception may have been overblown.

“We probably cried a lot last year” about merchandise losses, Walgreens Chief Financial Officer James Kehoe acknowledged Thursday on an earnings call. The company’s shrinkage rate — losses of merchandise due to theft, fraud, damage, misscanned items and other errors — fell from 3.5% of total sales last year to about 2.5% during the latest quarter.

Kehoe’s message is a marked departure from comments about thefts from Walgreens and other retailers such as Walmart and Target over the past nearly three years.

Retail industry companies and groups have tried to draw attention to shoplifting and “organized retail crime” rings, smashing windows and grabbing aisles full of merchandise from shelves, urging lawmakers to crack down. Incidents have certainly occurred: many political leaders and local and national news outlets, including CNN, have revealed viral incidents of hacking and kidnapping.

So retailers took action. Some began closing more products like deodorant and toothpaste, adding extra security guards and even closing stores.

Last January, Walgreens ( WBA ) said its shrinkage had increased by more than 50% from a year ago. The company blamed some of this increase on organized retail crime and closed five locations in the San Francisco area in 2021, citing theft as the reason for the closures.

“This is not petty theft,” Kehoe said last January. “These are gangs that actually come in and empty our stores of beauty products. And it’s a real issue.”

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

“Maybe we put in too much and we can pull back a little bit from that,” he said of the security personnel. The company has found that private security guards are “largely ineffective” at preventing theft, so it is deploying more police and law enforcement officers instead.

Although Walgreens may have outgrown the threat of shoplifting in recent years, it’s true that shoplifting has always been a problem for retailers — and that it often increases during recessions and other times of economic hardship when people are desperate. and may feel the need to turn to petty crimes to support themselves. Additionally, recent factors such as short-staffed stores and the checkout itself can make it easier for thieves to steal.

The National Retail Federation estimated that the contraction cost retailers $94.5 billion in 2021, up from $61.7 billion in 2019 before the pandemic. Shoplifting often goes unreported to the police, but companies have said theft 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,” Target ( TGT ) CEO Brian Cornell said in November.

Walmart ( WMT ) CEO Doug McMillon said last month on CNBC that “theft is an issue” and “higher than it has been historically.” He warned that shops could close if it continued.

However, it is not clear that the numbers add up.

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

According to the paper, one of the shuttered stores that closed had only seven reported shoplifting incidents in 2021 and a total of 23 since 2018. Overall, the five stores that closed averaged less than two shoplifting incidents per month since 2018.

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