Walgreens executive says ‘probably cried too much’ over shoplifting.

CNN
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In the wake of the outbreak, major retailers have warned of an increase in theft and attempted shoplifting. But a senior Walgreens executive now says the fears may be overblown.

“We probably cried too much last year,” Walgreens Chief Financial Officer James Kehoe admitted Thursday on an earnings call. The company’s shrinkage rate — merchandise losses due to theft, fraud, damage, misscanned items and other errors — dropped from 3.5% of total sales to about 2.5% last year.

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

Companies and retail industry groups have tried to draw attention to shoplifting and “organized retail crime” rings that break windows and grab merchandise from shelves, asking lawmakers to crack down. Incidents have certainly occurred: many political leaders and local and national news outlets, including CNN, have taken incidents of hoarding and looting viral.

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

Last January, Walgreens ( WBA ) posted a 50% increase in sales compared to last year. The company has blamed that increase in part on organized retail crime and has closed five locations in the San Francisco area in 2021, citing theft as a reason for closing.

“This is not petty theft,” Kehoe said last January. “These are the gangs that come in and empty out our beauty supply stores. And that’s really the case.”

But a year later, Kehoe said Thursday, the company has added a lot more security to its stores.

“We probably put too much in, and then we’re going to pull back a little bit,” he said of the security staff. The company says private security guards are “largely ineffective” at preventing theft, so it’s hiring more police and law enforcement officers instead.

Although Walgreens may have overplayed the threat of shoplifting in the past few years, theft has always been a problem for retailers — and that’s often true during recessions and other economic hardships when people feel desperate and needy. They turn to petty crime to save themselves. What’s more, recent trends like short-staffed stores and self-checkout make it easier for thieves to steal.

The National Retail Federation It estimates retail sales will drop to $94.5 billion in 2021 from $61.7 billion before the pandemic. Shoplifting is often not reported to the police, but companies say theft has increased during the Covid crisis.

“We’ve seen a significant increase in theft and organized retail crime in our business, along with other retailers,” Target (TGT) CEO Brian Cornell said in November.

Walmart ( WMT ) CEO Doug McMillon said on CNBC last month that “theft is a problem” and “it’s higher than it’s ever been in history.” He warned that stores may be closed if it continues.

However, it is not clear that the numbers will increase.

For example, information released by the San Francisco Police Department does not support Walgreens’ explanation that it is closing 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, up from a total of 23 since 2018, the newspaper reported. Overall, the five stores that closed had an average of fewer than two reported shoplifting incidents per month since 2018.

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