Walgreens ‘maybe cried too much’ about shoplifting concerns last year, executive says
A Walgreens executive said Thursday that the drugstore chain may have overplayed concerns about shoplifting at its stores in 2022.
“Maybe we cried too much last year,” Walgreens’ global Chief Financial Officer James Kehoe told investors on an earnings call. Walgreens and other retailers have sounded the alarm in recent years about the threat of organized shoplifting to their bottom lines as viral videos of brazen shoplifting raids have swept the internet.
Walgreens in 2021 said it shuttered five San Francisco stores, citing disputed claims about an uptick in theft.
A year ago, Kehoe told investors the company in 2020 and 2021 experienced a 52% increase in shrink – an industry term that refers to lost inventory, either by mismanagement or theft – compared to pre-2020 levels, attributing it to “organized crime.”
“It’s not somebody who can’t afford to eat tomorrow,” Kehoe said in a Jan. 2022 conference call. “These are gangs that actually go in and empty our stores of beauty products,” adding that the issue was felt across the retail industry.
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But shrink at Walgreens recently has come down to 2.5-2.6% of sales from 3.5% in 2022, according to Kehoe, who said Thursday he was “quite happy” with current shrink levels.
Kehoe said Walgreens would consider rolling back investments it made to beef up its stores’ private security, which he called “largely ineffective.” It would instead look to further partner with law enforcement, he said.
Even as retailers tout a shoplifting crisis that threatens business, shrink has remained largely unchanged industry-wide in the last five years, according to the National Retail Federation.
The median retail shrink percentage was 1.2% in 2021, the same as in 2016, according to the NRF’s 2022 retail security survey.
Still, 70.7% of retailers in the survey said stopping theft, including organized retail crime, had become more of a priority in the last five years. The survey found that shoplifting accounted for 37% of shrink in 2021, and retailers reported a 26.5% increase in “organized retail crime incidents.”
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Overall, shrink accounted for a $94.5 billion loss industry-wide in 2021, according to the report.
While Walgreens signaled its retail theft concerns might be allayed, other big name stores have continued to portray shoplifting as a major existential threat.
During an interview with CNBC last month. Walmart CEO Doug McMillon said theft was “higher than it has historically been,” and “prices would be higher and/or stores will close.”
Rite Aid said it lost $5 million more from shrink in September than it did in the same period a year earlier, and weighed putting all items behind showcases or reducing store operations in some communities to offer pharmacy services only.
Target similarly reported a $400 million loss due to shrinkage in November.
Big name retailers had lobbied Congress to pass the INFORM Act, which aims to combat retail crime by requiring verification of high-volume online sellers who may offer stolen goods. President Joe Bidensigned the bill into law last month as part of a larger government funding bill.
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Contributing: Associated Press