Walgreens says the increase in shoplifting at its drugstores may have been blown out of proportion.
“Maybe we cried too much last year,” Walgreens CFO James Kehoe said, referencing shoplifting on its first-quarter earnings call last week.
Walgreens closed five stores in San Francisco, citing a now disputed claim about a rise in theft, according to USA Today.
Last year, Kehoe said the company saw a 52% increase in lost inventory, by either mismanagement or theft, compared to pre-2020 levels, and attributed it to “organized crime.” Several viral videos of robberies at Walgreens stores certainly fueled the sentiment.
“It’s not somebody who can’t afford to eat tomorrow,” Kehoe said in January 2022. “These are gangs that actually go in and empty our stores of beauty products.”
Lost inventory has come down to 2.5-2.6% of sales from 3.5% in 2022, and Kehoe now says he is “quite happy” with current levels. The CFO also said the company is considering rolling back investments in private security, a decision that he called “largely ineffective.” Instead, the company looks to partner with law enforcement, he said.
Shrink, an industry term that describes the loss of inventory due to theft or mismanagement, has remained unchanged-industry-wide from 2016 to 2021, according to the National Retail Federation. The median retail shrink percentage was 1.2% in 2021, the same as in 2016, according to NRF’s 2022 retail security survey. Shrink includes inventory that was bought but cannot be resold due to shoplifting but also damaged and theft by employees or vendor fraud, according to the New York Times.
Although shrink levels are relatively stable, the amount of retailers prioritizing stopping theft is on the rise. More than 70% of retailers in the survey said stopping theft has been more of a priority, with shoplifting accounting for 37% of shrink in 2021, and retailers said they saw a 26.5% increase in “organized retail crime incidents.”
Shrink accounted for $94.5 billion in losses industry-wide in 2021, according to the report.
Walgreens may be reversing course on fears of shoplifting, but other retailers have been expressing their concerns about theft.
Walmart CEO Doug McMillon said in an interview with CNBC in December that thefts were higher than they have historically been and that “prices would be higher and/or stores will close”. Walmart has also blamed self-checkout for the rise in theft at its stores.
Rite Aid said it lost $5 million more from shrink in September than in the same period in the prior year. The company said it considered putting all items behind showcases or reducing store operations in some communities to offer pharmacy services only, according to USA Today.
Target also reported a $400 million loss due to the reduction in November.
This led retailers to lobby Congress to pass the INFORM Act to combat retail crime by requiring verification of high-volume online sellers who may offer stolen goods, according to USA Today. President Joe Biden signed the bill into law last month.
