Walgreens’s CFO admitted to inflating the scope of its theft problem, underscoring questions around the validity of retail’s moral panic
“Maybe we cried too much last year,” James Kehoe, Walgreens’s CFO, remarked during an earnings call. In October 2021, the retailer cited “organized” shoplifting as the reason why it shut down five stores in San Francisco. Kehoe now says that it was probably actually overspending on security measures that prompted the closures, and that Walgreens may have misrepresented how much theft took place (a claim that was never supported by the city’s police department’s records, which documented only 23 shoplifting incidents from 2018 to 2021).
Walgreens’s alleged claims aren’t inconsequential: The San Francisco store closures prompted California Governor Gavin Newsom to increase the government’s budget for its Organized Retail Theft task force, and the supposed correlation between shoplifting and business failure fueled a larger moral panic around theft. Walmart’s CEO claimed that, if theft continues, prices could jump or stores could close. Other major retailers have similarly cited shoplifting problems, with many employing (or claiming to employ) facial recognition software that would compile data on shoplifters, which could ultimately lead to prosecution.
The technology is controversial, as it’s (unsurprisingly) inaccurate in its identification of people of color and women—at its worst, the software has an error rate of 35 percent when identifying darker-skinned females, and less than one percent when identifying lighter-skinned men. (This is because early forms of the technology were trained with images of celebrities that skewed white and male.) While some of the technology has improved, its racial bias is still concerningly prevalent. And despite its flaws, many retailers are eagerly adopting it.
Walgreens says it might scale back its surveillance efforts. Kehoe admitted that private security proved largely ineffective in addressing shoplifting. External theft (including organized retail crime), it seems, may not even be a major root of the losses, accounting for only 1.4 percent of the shrinkage rate, or inventory costs that encompass theft, damage, and fraud. The expansive adoption of often-expensive security measures suggests that, perhaps, the misguided moral panic that retailers initiated has permeated so profusely that they believe it themselves. Maybe the cost of preventing shoplifting is the real financial burden.