Retailers howled about theft last year. Why not now?

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Medications are locked in a glass cabinet at a supermarket. / AP

For much of the past year or so, executives at big retailers did something unusual: They talked about theft in their stores. A lot.

Walmart's CEO warned it could lead to store closures and higher prices. Target's CEO said it was costing the chain upward of a billion dollars. Home Depot's finance chief called it a "consistent pressure" that the chain is "tackling every day."

With a backdrop of viral videos showing brazen and violent thieves, crime became a common theme on retailers' typically dry quarterly earnings calls. Executives often mentioned "shrink" — inventory missing for one reason or another — as a factor behind declining profits. The list grew long: Macy's, Best Buy, Dick's Sporting Goods, T.J.Maxx, Dollar General.

Fast-forward to this year, and the fever pitch seems to be fading.

So far this earnings season: Walgreens said the problem remains — and is really bad in some places. But Foot Locker described changes in shrink as "relatively neutral." T.J.Maxx's parent company found it better than expected. Target cited "really solid progress." Many didn't mention shrink at all. Two retailers hurt by theft in the past — Ulta and Dick's Sporting Goods — will address investors on Thursday.

What has changed?

Retailers cite a few things: Federal and state lawmakers have drafted new crime bills, and some have become law. Many stores have scaled back self-checkout options and locked away more products behind glass doors; their security investments are starting to bear fruit.

But one thing remains the same: Crime data has yet to indicate a nationwide epidemic of theft, leaving us only to guess at the true scale of the problem — then and now.

How big of a problem is retail theft?

Most retailers say their top worry is "organized retail crime" — coordinated operations in which people tend to steal and offload in bulk, often through online stores. Security experts argue that criminal rings proliferated as the COVID-19 pandemic ebbed, in part thanks to understaffed stores and soaring online demand.

But companies do not share data on goods stolen, let alone stolen in a specific manner. And individual stores often don't report incidents to the police.

Instead, the most commonly cited figure comes from an annual National Retail Federation survey that asks retailers to assess "shrink," a much broader measure. Overall, the latest survey attributes about 36% of shrink to shoplifting and organized theft, 29% to theft by employees and 27% to mistakes in tracking, accounting or other errors.

The survey makes eye-popping estimates: Retailers lost $112 billion to shrink in 2022, the most recent figure. Using the given breakdown, this could mean stores lost over $40 billion that year to outside theft.

But the picture is not that clear. For one thing, the dollar value of shrink is calculated based on a percentage of retailers' sales, and in 2022 shoppers went on a record buying spree.

The survey shows the scale of shrink has barely changed in the past decade. In 2022, retailers on average said shrink affected 1.6% of sales — the same as in 2020 and 2019. In other years, the average hovered around 1.4%, which at one point was reported as the lowest rate in two decades.

When the next survey is released in the coming months, it may show shrink was a substantially bigger problem last year, at around 2% of sales, according to a report by the investment bank William Blair.

Still, the analysts surmised that retailers also likely used crime as a cover for closures of underperforming locations and lackluster financial results, making up for shoppers' tightening budgets, for example, or a glut of unpopular products.

"While theft is likely elevated," the report said, "companies are also likely using the opportunity to draw attention away from margin headwinds," meaning other factors that eroded their profits, such as deeper discounts or poor management of inventory.

What happened at Walgreens and Target

Walgreens and Target illustrate how opaque and complicated the question of theft can be.

In late 2021, Walgreens shut down five stores in San Francisco, citing skyrocketing organized retail crime. One of the stores appeared in a viral video of a thief loading up a trash bag while being filmed by several people, including a security guard. Later, a San Francisco Chronicle data analysis found that one of the closing stores had reported only seven shoplifting incidents that year, fewer than in 2018.

Then, in January 2023, Walgreens' finance chief shocked the industry by saying "maybe we cried too much last year" over thefts. He said shrink had declined. The chain would scale back anti-theft spending and rely more on law enforcement than "largely ineffective" security companies.

Now the company's leadership has changed. New finance chief Manmohan Mahajan told investors in January that shrink "continues to be a systemic issue" for retailers. Later, new CEO Tim Wentworth said he didn't expect things to improve in 2024.

"Let me be clear. It is very real — it is an industry problem," Wentworth said at an industry conference. "The urban area in particular in some cities is challenged, some more than others. We believe that it's something that is going to take some time."

Target took center stage on retail crime after November 2022, when executives got specific: They said shrink could cost the chain $600 million over the year.

They kept focusing on it. In May 2023, they said shrink would reduce Target's annual profits by over $500 million from a year earlier. In August, CEO Brian Cornell said violent thefts at stores increased 120% in the first five months of 2023, compared with the same period in 2022.

In September, Target announced it was closing nine locations in New York City, Seattle, the San Francisco Bay Area and Portland, Ore., because of theft and organized retail crime. Later, data analysis by CNBC showed that as Target closed those stores, it chose to keep operating nearby locations that had reported more crime incidents but that also served more and wealthier shoppers.

Target described numerous anti-theft investments, including locked merchandise, de-escalation training and more security staff. The chain was also delivering disappointing financial reports: Inflation had shoppers prioritizing necessities, and Target took a big hit. Sales barely grew in 2022 and declined in 2023 for the first time in years.

Safety measures turn off shoppers

Of course, big-picture statistics can mask trouble in specific places.

Shoplifting, for example, rose between 2019 and 2023 in New York City, Los Angeles, Virginia Beach and Dallas, while declining in over a dozen other cities, according to a November report by the Council on Criminal Justice, a nonpartisan think tank.

And shoppers often encounter a clear sign of stepped-up security: products like makeup, baby formula and laundry detergent locked behind plexiglass or even replaced with photographs. Katherine Black at the consulting firm Kearney said stores would not choose this if they didn't have to.

"To combat this problem, inherently, they're putting in place measures that detract sales," Black explained.

Almost a third of shoppers say locked-up products hurt their perception of a store, according to Kearney's October survey of 500 adults in the U.S. and Canada. More than a quarter say this prompts them to abandon the purchase and 46% say they end up buying somewhere else.

No major retailer has disclosed sales lost over heightened security so far. During Target's latest earnings call, one analyst asked executives about this, but they did not respond directly.

"When I think about shrink, I'll start with the word 'progress,'" Cornell said. "I think we're seeing really solid progress and greater awareness at the national, state and local level."

Retailers have long lobbied for tougher prosecution of shoplifters and a crackdown on online platforms used by resellers, including Amazon and Facebook Marketplace.

Over the past year, several states have gone after organized retail crime with new laws. Leaders in California, New York and other places have put funding priority on "smash-and-grab" crimes. Congress passed a law requiring online marketplaces to verify the identities of high-volume sellers.

Retailers also claim their security investments are starting to show results.

This can include tracking alarms or moving high-risk products closer to registers. Many stores began restricting the use of self-checkout, including Walmart and Target. More retailers weighed changing the layout of some stores to funnel all shoppers through a single entrance, a staple security protocol at Best Buy and Costco. Best Buy at one point said it added more workers to walk the floor, which experts say helps deter many criminals.