Walgreens Reevaluates Shoplifting Prevention as Theft Losses Decrease

Walgreens Boots Alliance Inc. (WBA) is a global pharmacy-led, health and wellbeing enterprise.

Some people have said that the store's anti-shoplifting efforts may have gone too far.

The nation's second-largest U.S. pharmacy chain by locations invested heavily in additional security measures last year, some of which executives said were ineffective. Now, with losses from theft having dropped significantly, the company is considering cutting back on security spending, finance chief James Kehoe said Thursday.

"We might have cried too much last year over theft losses," Mr. Kehoe said on a call with analysts to discuss Walgreens' quarterly results. "We probably put in too much security-wise, and we might step back," he said.

According to Mr. Kehoe, so-called shrinkage, which reflects inventory losses due to factors such as theft, fraud or damage, is now around 2.5% of retail sales, down from 3.5% at times last year.

Executives said that the company's increased revenue forecast for the current fiscal year was due in part to lower levels of theft. The company expects to generate between $133.5 billion and $137.5 billion in full-year revenue, much of which will come from its U.S. retail pharmacies.

Mr. Kehoe said that Walgreens has spent a significant amount on theft prevention, which has contributed to higher costs overall during the latest quarter. He said that the company is tweaking its strategy, but did not disclose any details about its antitheft expenses.

One of the proposed changes is to rely more on law enforcement rather than private security. According to Mr. Kehoe, private security companies have proven to be largely ineffective.

CVS Health Corp. declined to comment when asked for input on this article.

Walgreens has changed its security strategy from targeting specific high-price items to securing entire product categories. The company said this change is designed to thwart organized-crime rings that steal items in bulk and then resell them online.

In 2021, the chain closed five locations in San Francisco, citing organized retail crime. Walgreens Chief Executive Officer Roz Brewer recently called for legislation that would make it harder to sell stolen products online and lower the threshold for how much a person must steal before charges become more serious.

Many retailers say that theft has risen in recent years, but that it is lower now than during the early years of the pandemic. At that time, crime surged in part because online sales soared and created higher demand for stolen goods through e-commerce vendors. Retailers selling everything from deodorant to power tools have increased efforts to reduce theft, including bulking up security and locking up more items as a quick fix while researching alternatives.

Retail shrinkage increased to $94.5 billion in 2021, up from $90.8 billion in 2020, according to a survey of 63 retailers conducted by the National Retail Federation last year. Around 37% of shrinkage was due to external sources such as organized theft groups, while 26% was related to retailers’ own employees, according to the survey.

Last fall, executives at Home Depot Inc. said that the home-improvement retailer had been locking up more products during the past 12 months as a stopgap measure while testing other, more high-tech approaches.

"It's a triage-type scenario," Scott Glenn, vice president of asset protection for Home Depot, said at the time. "It's stop the bleeding and give yourself some time."

Home Depot tries to avoid locking up items because it generally makes customers unhappy, even though it can lead to increased sales. The company believes that customers should be able to access the items they need without having to go through a locked door.

Target Corp. said in November that it was dealing with more theft in its stores, blaming criminal networks for thefts and inventory shortages that ate into profits. The company said it expected the shortages to reduce the retailer’s gross margin by more than $600 million in the current fiscal year compared with the year before.

Target CEO Brian Cornell said last year that the company has seen a significant increase in theft and organized retail crime. This is a problem that many retailers are facing, and it is something that Target is working hard to combat.

Best Buy Co. CEO Corie Barry told reporters in November that shrink as a percentage of revenue is elevated compared with 2019, but is better than in the early years of the pandemic. Ms. Barry said the slowdown in theft is partly related to the retailer’s efforts, such as more visible security.

The electronics retailer is increasingly using what it believes are more customer-friendly theft deterrents, such as allowing shoppers to scan a code on a shelf for immediate pickup of theft-prone items at a register.

"We've been working hard on this for the past two years," said Ms. Barry.