Walgreens CFO Acknowledges Overblowing Concerns Over Theft — Retail Bum

Walgreens finance chief James Kehoe acknowledged that the company might have overblown in-store theft concerns last year.

During the company’s earnings call, Kehoe noted that shrinkage was recorded at about 3.5% of sales in 2022, but it has since stabilized to “mid-twos.” The company is thus considering plans to stop hiring private security guards.

Shrinkage refers to the difference between the total recorded inventory on the balance sheet and its actual inventory. The contrast highlights losses relating to shoplifting and inventory lost, damaged, or stolen by employees.

“Maybe we cried too much last year,” he said. “We’re stabilized,” he added, adding that the company is “quite happy with where we are.”

Over the past 24 months, the company has made substantial investments in increasing security presence and locking up expensive items behind shelves. However, the approach has largely proven ineffective as security guards cannot do much when shoplifting occurs except call law enforcement or hold a suspect until the police arrive, CNBC reported.

“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,” Kehoe said, adding that the company has been relying more on law enforcement than private security.

Walgreens is far from being the only retailer that has struggled with an increase in shoplifting. Last month, Walmart CEO Doug McMillion warned that a rise in shoplifting across the company’s U.S. stores could lead to higher prices for customers and store closures. Meanwhile, Target reported a $400 million loss due to shrinkage in its last earnings report.

Originally published at https://retailbum.com on January 6, 2023.