A single brazen episode of shoplifting at a Walgreens store in San Francisco in 2021 became a symbol of a supposed outbreak of lawlessness. Walgreens, which closed five stores in the city amid the uproar, is now telling a different story.
The company’s chief financial officer James Kehoe recently admitted that the pharmacy chain got carried away, saying “maybe we cried too much last year” about inventory loss.
Walgreens had claimed it was experiencing a 50% increase in losses from retail theft compared to years prior. In its latest quarter, however, actual shrinkage numbers—loss of stock inventory due to shoplifting, employee theft, vendor fraud, or product damage—fell to 2.5% from 3.5% the year prior. Kehoe added that the company spent too much on incremental security measures in its stores and is planning to limit the use of private security guards.
Others have also raised questions about the supposed explosion of shoplifting. A recent piece by CNN pointed out that when the amount of shrinkage is compared to the retail sales, the percentage has remained pretty constant for the past decade. “We’re stabilized,” Kehoe revealed, further adding that the company is “quite happy with where we are.”
There is good reason to believe that retailers over-hyped the shoplifting problem as a way to divert attention from their own strategic mistakes, including over-expansion. Walgreens had planned to close 200 stores as early as 2019 as part of a cost-saving initiative. The shift in the retail landscape to online shopping means that retailers need to rethink brick-and-mortar operations.
While the significance of shoplifting may have been exaggerated, another form of larceny remains widespread: the wage theft committed by the retailers themselves.
One indicator of this can be found in Violation Tracker, which documents penalties paid by employers for cheating their employees on wage rates and overtime pay. Those penalties include fines paid to federal, state and local regulatory agencies as well as class action lawsuit settlements.
The annual total of these penalties has remained above $700 million since 2007. Big retailers are among the leading culprits.
As shown in Violation Tracker, Walmart remains the most penalized employer for wage and hour violations across all industries with fines and settlements totaling $1.5 billion. These come from 45 separate cases, including one mega-settlement of $640 million that covered more than 60 separate lawsuits. Other large retailers with big wage theft penalty totals include Albertsons ($116 million), CVS Health ($108 million), Walgreens ($70 million), Dollar Tree ($69 million), Lowe’s ($52 million), and Target ($22 million).
Many of these large companies engage in wage theft when they are unable to reach their earnings expectations and need to squeeze their employees to improve profitability. Yet the drive to reduce labor costs has unintentionally made stores more vulnerable to theft.
Shifting the blame to the public is a convenient way for these large retailers to skirt accountability for their own shortcomings.