'We Cried Too Much': Walgreens CFO Says Retail Theft Maybe Isn't the Crisis It Portrayed

A top Walgreens executive admitted on Thursday that the U.S.’s second-largest pharmacy chain may have overstated its concerns about retail theft in stores.  

In an earnings call, as reported by CNBC, Walgreen’s chief financial officer James Kehoe said that the company’s retail theft numbers have dropped significantly and that it is now considering pulling back some of the additional store security measures. 

“Maybe we cried too much last year,” Kehoe said. “We’re stabilized.” 

Kehoe said that shrinkage, which refers to the inventory losses that companies account for due to factors such as theft, product damage, and vendor fraud, is now down to 2.5 percent from 3.5 percent last year. 

The executive admitted that the private security companies that were hired to address retail thefts have been “largely ineffective” and said the company could dial back those measures. “We’ve put in incremental security in the stores in the first quarter. Actually, probably we put in too much. We might step back a little bit from that,” he said on the call. 

Kehoe’s admission comes after the company claimed that organized retail crime was greatly affecting its business, a line that helped stoke a nationwide moral panic over a supposed wave of shoplifting. In 2021, Walgreens closed five locations in San Francisco, citing organized theft, which led politicians, such as California Gov. Gavin Newsom, to take action by increasing the budget of the government’s Organized Retail Theft task force. 

There have long been indications that things weren't quite what they appeared. In 2021, the San Francisco Chronicle revealed that Walgreens's claims were unfounded, as the city’s Police Department had only a total of 23 shoplifting incidents since 2018. The Los Angeles Times further reported that Walgreens had already planned on closing some stores as early as 2019 due to its “real estate footprint,” unrelated to shoplifting concerns. 

In response to Kehoe's comments, a spokesperson from Walgreens told Motherboard, “Although we are pleased to see retail shrink levels stabilize, this is still a serious national problem affecting all us and all retailers. We have taken a number of steps to address this issue and, most importantly, protect the safety of our customers and team members, including our highly-valued partnerships with law enforcement and security professionals.”

Kehoe's acknowledgment that retailers may sometimes overestimate the shrinkage that occurs due to shoplifting follows the recent wave of major retailers, which, along with Walgreens, have been voicing their concerns about retail theft. 

In September 2022, retailers Best Buy and Home Depot began locking up more items to prevent shoplifters after company executives said that shoplifting incidents were steadily increasing compared to before the pandemic. Target CEO Brian Cornell said in a November earnings call that the retailer lost $400 million dollars and blamed it on organized crime. 

"Along with other retailers, we've seen a significant increase in theft and organized retail crime across our business," Cornell said. 

Walmart CEO, Doug McMillon, had similar sentiments, telling CNBC that “theft is an issue.” He said in a December 2022 interview that if shoplifting isn’t “corrected over time, prices will be higher, and/or stores will close.” 

The Walgreens spokesperson told Motherboard that an act called the INFORM Consumers Act, which was lobbied by a number of big retailers, was recently passed as part of a bill in December. “This legislation will aid law enforcement in their efforts to track organized crime, making it more difficult for bad actors to build illegal businesses and profit by selling stolen or counterfeit merchandise,” the spokesperson said. 

While shrinkage rates have increased since the pandemic, the National Retail Federation released a study in December that revealed that the average shrink rate in 2021 was 1.4 percent of retail revenue or $94.5 billion, similar to the last five years. Out of that percentage, only 37 percent of the shrink was due to external theft, including organized retail crime.