Walgreens CFO Says He ‘May Have’ Overblown Concerns About Retail Theft
An example of why its a good idea to wait for data before making policy decisions.
In an investor call this past January, Walgreens CFO James Kehoe stated his company’s retail shrink–the industry terms for loss due to shoplifting–rose 40% to 50% “over the last two years.” Kehoe went on to state that Walgreens was then currently experiencing a “52% increase in shrink.” Social and news media were awash with footage of people brazenly shoplifting from stores. Anti-reform advocates used statements like Kehoe’s and those videos to push back against progressive prosecutors and legislation like bail reform. Even Democrats, like then NYC Mayoral Candidate Eric Adams, embraced the narrative that crime was rampant and needed to be forcefully dealt with.
At the same time, criminal legal system researchers and advocates suggested that it was important to wait for the data to come in before enacting sweeping policy changes. And yesterday we got an excellent example of why that’s important. In another call with investors, Kehoe announced that Walgreens shrinkage in 2022 represented 3.5% of sales last year and is most likey currently in the “mid twos.” He followed that up with the following statement:
“Maybe we cried too much last year,” Kehoe said. “We’re stabilized,” he added, saying the company is “quite happy with where we are.”
https://www.cnbc.com/2023/01/05/walgreens-may-have-overstated-theft-concerns.html
Granted, this is a single data point. And we need to wait for additional data to be released from other retailers to see if constitutes an industry-wide trend. Still it’s a demonstration of why it’s important to wait for additional data.
Another thing worth noting in Kehoe’s comments is that “common sense” solutions don’t always work as planned. For example, in response the assumption that retail theft was out of control, Walgreens increased the amount of store security. However, once they looked at the data, it didn’t appear that has any impact:
Kehoe said the company has spent a “fair amount” to crack down on the thefts but acknowledged the private security companies they’ve hired have been “largely ineffective.” These guards can do very little but call law enforcement or hold a suspect until police arrive.
https://www.cnbc.com/2023/01/05/walgreens-may-have-overstated-theft-concerns.html
As always, it will be interesting to see the degree to which Kehoe’s latest comments are covered by the folks who had used his previous words to argue against reform. My suspicion is that like most counterfactual data it will be at best waived away. But then again, they never have been great at following up on sensational stories. For example, a lot of folks forwarded the video of someone shoplifting in broad daylight from a San Francisco Walgreens as proof that the city was ignoring crime. Far fewer followed up to share that the individual in that video was arrested, convicted of “felony grand theft,” and incarcerated.
Addendum: Via twitter I just learned about this excellent article at The Atlantic by Amanda Mull on the difficulty of determining if there was a major surge in shoplifting. If you are interested in this topic, I highly recommend reading it.
I was in a CVS last night. They put in self-checkouts last year. I going to pick up a prescription and the pharmacy was closed even thought I was there in the posted pharmacy hours. I was looking around for some one to ask when the pharmacy would be open. There was no one in the store. After a few minutes, the lone employee came out of the back room. One employee in the whole store. I live in a pretty low crime area but this is begging for it.
Self-checkout stations don’t care if you steal.
Now I know they have camera systems but geez, walk in with a hat and a COVID mask on and you could rob the place blind.
Also using the framing of up by 50% is a lot scarier then up from 2 to 3%. Especially with an innumerate audience.
Maybe the boy who cried “wolf!” erred in not crying out “crime!”
Yup, and in an election year. MAGA’s spent the entire year harping about crime even though the data shows crime down, and the most violent crime happening in Red States.
Inflation inflation inflation (*coughPRICEGOUGINGcough*)
Crime crime crime
Woke woke woke
Hunter Biden Laptop
But Her Emails
Overblown, fearmongering bullshit designed to scare the gullible into voting for climate change denying forced birth fascists, so billionaires can rake in more corporate welfare.
Just mystifying why people keep falling for this crap.
@Rick DeMent:
I don’t know if I would go that far. I had to talk a friend out of a police station cause he did something stupid at a Target self-checkout.
As an aside, I’m not a criminal lawyer. I tell my friends I can probably talk their way out of a police station, if they get arraigned they have to call someone else.
@Beth:
Well I’m not going to try it for sure 🙂
The whole story was just grim. Imagine creating out of thin air a thriving black market in diapers and then crying about how it needs to be crushed. Not designer clothes or fancy gadgets, but diapers and toothpaste and aspirin. Is there one? Who knows? If people can’t afford to buy diapers I guess I hope they are buying them on the black market.
In our local Walgreens stores practically everything is locked up. Everything.
It’s one of the reasons I avoid Walgreens when possible and I suspect that they’re learning that excessive worry about shrinkage contributes to declining sales. Life is too short to wait for a harried, overworked clerk to open a case for you.
@Rick DeMent:
Further, they put these system in to cut labor costs. So any increase in theft they contribute to needs to be balanced against the labor savings. You can’t get the one without the other so we shouldn’t accept when they want to focus on one variable that is negative while ignoring the positive variable they chose to move and which is greatly benefiting them.
I remember hearing a long time ago that grocery stores had a nearly 10% product disappearance rate. Furthermore, I was told that the employees were in cahoots with the shoplifters often. I have no way of verifying this information.
My local Whole Foods was supposed to put an electronic check out in that would automatically record your purchases and debit your credit card; you would get your stuff and just walk out. This hasn’t happened as yet.
But we will continue to get news stories that casually mention “rising crime”, “out of control crime” or even “soaring crime” as if they were established facts rather than urban legends.
@Chip Daniels:
To make sure I am staying honest, the facts demonstrate that multiple forms of crime are above their historic lows of the late aughts. None that I know of have remotely approached their historic highs of the late nineties. Still any sustained rise in crime rates is concerning and worth investigating.
The problem right now is there’s no agreed-upon theory as to why crime rates have risen. And we’ve have had two years that had a series of once-in-a-generation events that definitely complicate analysis.
There is evidence to suggest that COVID in particular, and the related social pressures, may have accounted for a significant portion of the spike that we saw, but we won’t be able to be sure about that for a few years (which is a challenge–especially those who want fast action based on feels more than facts). To your point, a lot of those feels were due to the news media and in particular skewed coverage during the election season (I need to find that chart on the Fox News reporting spike on crime).
I wonder how much wage theft happens at Walgreens. If it’s like most of the retail industry, it’s likely greater than the shoplifting.
@Dave Schuler: Yeah I stopped going to walgreens because I got tired of being treated like a criminal by the company…
I had no idea the stupidity was being driven by the CFO though so this has been an enlightening article.
@Slugger: Based on my experiences in retail I can say that it does happen occasionally. I also know of some instances where employees would throw away items that they would then retrieve later etc.
@Matt Bernius: I’m going to go with a combination of COVID stuff upsetting social cohesion and some other factors. Everyone I know who works retail/service jobs lost income and we’re dealing with price gouging galore. So that tends to breed a mindset of “fuck you I need food/diapers/whatever” and people taking that step they normally wouldn’t of.
Maybe if the top 0.1% could let some of their pocket change actually fall into the hands of the poor we’d see less crime? Naw they gotta keep +40% of all the wealth in this country tied up in their accounts cause they earned it!! I mean after-all they gotta reach that high score of an unfathomable number of billions…
Who cares about unprecedented income inequality anyway?
@Slugger: “My local Whole Foods was supposed to put an electronic check out in that would automatically record your purchases and debit your credit card; you would get your stuff and just walk out. This hasn’t happened as yet.”
The little Amazon Go stores work that way. I’m thinking they must have run into some problems trying to scale it up to Whole Foods level — like the issue of loose produce…
Talking about thievery, I would like to know what Walgreens got out his 8 million dollar yearly salary besides bad information and poor spending.
Quick bunch of replies:
The self-checkout may not care if you steal. it also doesn’t care if you get caught. Any safeguards built into it, or deployed around it, do care. Very much.
Mike Duncan made a big deal about locked up razors when he began advertising a direct to consumer razor in his podcast. Later the spiel changed. But evidently the locks on merchandise do strike a nerve.
My experience with Walgreen’s is almost entirely in Vegas. There’s one downtown, that’s very convenient for snacks, soda, and sundries during my stay. I think some stuff maybe locked, but must isn’t. But then this is a tourist area where no one wants to drive away customers. There’s an ABC store nearby after all.
One thing that impressed me is the store branded generic over the counter meds are done in the same color scheme as the leading brands, and often displayed side by side. that struck me as very simple, very smart marketing.
But then, Walgreen’s is the company that enabled and backed Holmes and Balwani. that impressed me in a much more negative way.
@Dave Schuler: Agreed. It is quite annoying.
Visited Walgreens this week. Disheveled bare shelves. Everything more expensive than at the supermarket with less selection. Ditto for the last time I was in Rite-Aid. If it wasn’t for cigs and alcholo and pharmacy, I doubt they could survive. How I miss Woolworths. At least they always smelled of popcorn and hot coffee.