Throughout the pandemic, major retailers have warned of a surge in theft and an increase in blatant shoplifting attempts. But a Walgreens executive now says the panic may be overblown.
Walgreens Chief Financial Officer James Kehoe acknowledged on Thursday’s earnings call that “maybe we cried too much last year” about merchandise losses. The company’s shrinkage rate — the loss of merchandise due to theft, fraud, damage, misscanning of items and other errors — fell to about 2.5% of total sales in the most recent quarter from 3.5% last year.
Kehoe’s information has shifted markedly from reviews of thefts at Walgreens and other retailers such as Walmart and Target over the past nearly three years.
Companies and retail industry groups are trying to draw attention to shoplifting, with “organized retail crime” gangs smashing windows and grabbing aisles stocked with merchandise, urging lawmakers to crack down. Events do happen: Many political leaders, as well as local and national news outlets, including CNN, took note of the virality of the looting.
So retailers took action. Some began locking down more products like deodorant and toothpaste, adding extra security guards and even closing stores.
Last January, Walgreens (WBA) said its shrinkage was more than 50% higher than the previous year. The company blamed part of the surge on organized retail crime and closed five San Francisco-area locations in 2021, citing theft as the reason for the closures.
“It wasn’t petty theft,” Kehoe said last January. “These gangs have literally come in and emptied our beauty product stores. It’s a real problem.”
But a year later, Kehoe said Thursday that the company had added too many extra security measures to its stores.
“Maybe we put in too much and we might back off a little bit,” he said of the security staff. The company found that private security was “largely ineffective” in deterring theft, so it is deploying more police and law enforcement.
While Walgreens may have exaggerated the threat of shoplifting over the past few years, theft has always been a problem for retailers — and during recessions and other difficult economic times, when people feel hopeless and may feel the need to turn to petty crime to maintain livelihood. What’s more, factors such as recent store shortages and self-checkouts have made it easier for thieves to steal.
The National Retail Federation estimates retailers will lose $94.5 billion in 2021 due to shrinkage, up from $61.7 billion in 2019 before the pandemic. Shoplifting doesn’t usually go to the police, but the company says thefts have been worse during the Covid crisis.
“Like other retailers, we’ve seen a significant increase in theft and organized retail crime across the enterprise,” Target (TGT) Chief Executive Brian Cornell said in November.
Walmart (WMT) CEO Doug McMillan said on CNBC last month that “theft is a problem” and “bigger than ever.” He warned that if the situation continued, stores could close.
However, it’s not clear how those numbers add up.
For example, data released by the San Francisco Police Department does not support Walgreens’ explanation that it will close five stores due to organized retail theft, the San Francisco Chronicle reported in 2021.
One of the closed stores reported just seven shoplifting incidents in 2021, compared with a total of 23 incidents since 2018, the newspaper reported. Overall, the five stores that have closed since 2018 have averaged fewer than two incidents of shoplifting per month.
Similarly, a 2021 Los Angeles Times analysis of data released by industry groups on the toll from organized retail crime found that “there is reason to wonder whether the problem is as large or widespread as they suggest.”