Walgreens lost more income to theft and damaged items in 2021 than it did in 2020 and is " absorbing a 52% increase in shrink."
That's according to Walgreens Boots Alliance CFO James Kehoe. On a January 6 call with investors, Kehoe said that Walgreens' shrink rate, or the loss of inventory attributed to theft, fraud, and damage, is currently about 3.25%. The company's shrink rate had been a little over 2% 10 years ago, he added.
Kehoe said organized crime has played a part in driving shrink up 40% to 50% "over the last two years."
"This is not petty theft," he said on a January 6 call with investors. "It's not somebody who can't afford to eat tomorrow. These are gangs that actually go in and empty our stores of beauty products. And it's a real issue."
Walgreens reported a net earnings from continuing operations of $2 billion in the 12 months ending August 31. With a shrink rate of 3.25%, the company's could have lost $65 million from its net earnings last year because of theft.
US retailers lost an estimated 1.62% of revenues to shrinkage in 2020, totalling an record $61.7 billion, according to the National Retail Federation.
Retailers said the growth of third-party e-commerce stores exacerbated retail crime. Two retail spokespeople told Insider's Áine Cain anonymous online merchants can make it easier for thieves to market their loot without drawing suspicion.
Twenty retailers, including Target, Best Buy, and Kroger, have asked Congress to pass legislation to curb illegal business activity by anonymous vendors online.
"Not only is the retailer having the merchandise stolen from them, but then somebody is competing with them online by selling the same product for half the price because it's stolen," Scott Glenn, Home Depot's vice president of asset protection told Insider. "So it really hits retailers from multiple directions."
Some have questioned whether retailers were being honest about the scope of retail theft.
FBI crime statistics showed that burglary, robbery, and larceny hit all-time lows in 2020. The San Francisco Chronicle found San Francisco Police data did not support Walgreens' explanation that it is closing five stores due to organized retail theft. The stores slated to close had "fewer than two recorded shoplifting incidents a month on average since 2018," according to the report.
Correction: A previous version of this story attributed statements made by Walgreens CFO James Kehoe to Walgreens CEO Roz Brewer.
