Inventory loss through theft was a hot topic for retailers in 2022. Now, Walgreens appears to be the first company considering rolling back its theft protections in the new year.
During a Q1 earnings call with investors on Thursday, a top Walgreens executive said the company potentially overreacted to concerns of theft in their stores and that shrinkage in inventory has stabilized over the last year.
Shrinkage is the difference between a company’s documented inventory and actual inventory. An example of shrinkage would be if a store has recorded in its system that they have three of a product to sell, but in reality, they only have two of the product because someone took an item without paying or the item was damaged and can no longer be sold. The cost of the item now falls back on the company and is recorded as shrinkage and a financial loss.
CNBC reports that Walgreens Chief Financial Officer James Kehoe told investors shrinkage numbers had fallen over the last year from 3.5 percent to hovering around the “mid two” percent range.
“Maybe we cried too much last year,” Kehoe said during the investor’s call, according to CNBC. “We’re stabilized,” he added, saying the company is “quite happy with where we are.”
Kehoe also informed investors that the company would consider stepping back from hiring private security for its stores.
Walgreens is one of the multiple large retailers that has been vocal about theft concerns in recent years. In December, Walmart CEO Doug McMillon said shoplifting was at historical highs and warned of future price increases and store closures to compensate for lost sales. Meanwhile, in November, Target blamed organized theft and inventory loss for over $400 million in gross revenue loss for its fiscal year.
Walgreens has hired private security companies and locked up valuable inventory in an attempt to deter shoplifters. Kehoe said security companies have been mostly ineffective as the most they can do is call the police, so Walgreens is moving to work more closely with local law enforcement.
Walgreens released its first-quarter earnings on Thursday, met industry expectations, and saw an increase in sales due to a more severe cold and flu season. The company did face a financial setback after agreeing to pay $5.2 billion in opioid lawsuits, recording $3.7 billion in losses for the first quarter.
Yahoo! Finance reports Walgreens Boots Alliance, Inc. stock fell by five percent following the earnings call.