Key Words: Walgreens may have ‘cried too much last year’ about theft, CFO says

by | Jan 9, 2023 | Stock Market

After worries in the retail world about a rise in theft, at least one company — Walgreens Boots Alliance Inc. — said it may have been overreacting.

“ ‘Maybe we cried too much last year when we were hitting numbers that were 3.5% of sales.’ ”

— James Kehoe, CFO of Walgreens

The drugstore chain’s chief financial officer, James Kehoe, said during the company’s first-quarter earnings call on Thursday that so-called “shrinkage” — a measure of the inventory a retailer loses due to things like theft — was trending lower.

“Maybe we cried too much last year when we were hitting numbers that were 3.5% of sales,” he said of the company’s “shrink” levels. “We’re down in the lower twos, call it the mid-2.5%, 2.6% kind of range now. And we’re stabilized.” He said that Walgreens
WBA,
+4.04%
during the quarter staffed its stores with “incremental” levels of security. But he said the company might pull back on those levels slightly, and that different types of security have been better than others. “We’re putting in more law enforcement as opposed to security companies,” he said. “The security companies are proven to be largely ineffective.” Kehoe made the remarks amid heightened anxiety over organized theft at retail stores in the pandemic era. Along with heists at physical stores, retailers have complained that weak online verification protocols have allowed illicit sales to proliferate. Target Corp.
TGT,
+3.82%,
in November, said that “shrinkage” had reduced its gross margin by more than $400 year-to-date. Chief Executive Brian Cornell said the chain, as with others, had seen a “significant increase in theft and organized retail crime across our business.” In late 2021, chief executives from 20 big retailers, in a letter to Congress, aired their concerns about rising crime and called for more legislation that would crack down on counterfeit online sales. Around that time, the National Retail Federation, a large industry group, said that organized retail crime costs retailers an average of $700,000 per $1 billion in sales. Walgreens stock was up 3.6% on Friday.

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