During the pandemic, major retailers have warned of rising thefts and an increase in brazen shoplifting attempts. But a top Walgreens executive now says the frenzy may have been overblown.
“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 lost due to theft, fraud, damage, improperly scanned items and other errors — fell from 3.5 percent of total sales last year to about 2.5 percent last quarter.
Kehoe’s message is a marked change 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 tried to draw attention to shoplifting and “organized retail crime” groups smashing windows and grabbing aisles full of goods from shelves, calling on lawmakers to take action. Incidents have certainly occurred: many political leaders and local and national news outletsincluding CNN, have picked up on viral smash-and-grab robbery incidents.
So retailers took action. Some have started locking more products like deodorant and toothpasteadding extra security and even closing warehouses.
Last January, Walgreens
(WBA) said its contraction was up more than 50% from the previous year. The company blamed part of that surge on organized retail crime and closed five San Francisco-area locations 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 that’s a real problem.”
But a year later, Kehoe said Thursday that the company has added too much extra security to stores.
“We’ve probably put too much in and we might back off a little bit,” he said of security officials. The company found that private security guards were “largely ineffective” at deterring theft, so it hired more police and law enforcement officers instead.
While Walgreens may have exaggerated the threat of shoplifting over the past few years, it’s true that shoplifting has always been a problem for retailers—and that it often increases during recessions and other periods of economic hardship when people are desperate and may feel the need to turn to petty crime to support themselves. What’s more, recent factors such as understaffed stores and self-checkout can succeed thieves steal more easily.
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 said thefts have 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.
It’s not clear the numbers add up, though.
For example, data released by the San Francisco Police Department does not support the explanation given by Walgreens that it is closing five stores due to organized retail theft, San Francisco Chronicle reported in 2021
One of the shuttered stores that closed had only seven reported shoplifting incidents in 2021 and a total of 23 since 2018, according to the newspaper. Overall, the five closed stores averaged fewer than two reported theft incidents per month since 2018.
Likewise, 2021 Los Angeles Times analysis of data published by industry groups on losses due to organized retail crime found that “there is reason to doubt that the problem is anywhere near as big or widespread as they say”.
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