Walgreens says it's closing five SF stores due to crime. Where's the data?

By The Examiner Editorial Board

Walgreens made national headlines last week when it announced plans to close five stores in San Francisco, allegedly due to a surge in organized retail theft. The announcement boosted The City's haters, especially the right-wing types who come to feast whenever the spotlight shines on San Francisco's problems.

Without a doubt, crime can make life harder for businesses in San Francisco. But Walgreens has been less than transparent about the data it claims is driving its decision to close stores. Further, the company's claims about a major increase in theft at its stores do not match publicly available information. Critics say the drugstore chain may be scapegoating others for the company's challenges.

"Data released by the San Francisco Police Department does not support the explanation announced by Walgreens that it is closing five stores because of organized, rampant retail theft," reports the San Francisco Chronicle. "One of the stores set to close, on Ocean Avenue, had only seven reported shoplifting incidents this year and a total of 23 since 2018, the data showed. While not all shoplifting incidents are reported to police, the five stores slated to close had fewer than two recorded shoplifting incidents a month on average since 2018."

In a statement provided to The Examiner, Walgreens also blamed increased security costs for the closures.

Company spokesman Phil Caruso said in an email that the company has "increased our investments in security measures in stores across The City to 46 times our chain average in an effort to provide a safe environment. This is primarily a result of our participation in The City's 10B program to hire off-duty San Francisco Police Department officers to have a presence in our stores."

Mayor London Breed and District 5 Supervisor Dean Preston have both questioned Walgreens' explanation. Preston pointed out that Walgreens has been closing hundreds of stores nationwide due to a major corporate streamlining.

"Walgreens has long planned to close hundreds of locations," wrote Preston on Twitter. "In an SEC (U.S. Securities and Exchange Commission) filing in August 2019, Walgreens stated that it planned to close approximately 200 U.S. stores following 'a review of the real estate footprint in the United States.' So is Walgreens closing stores because of theft or because of a pre-existing business plan to cut costs and increase profits by consolidating stores and shifting customers to online purchases?"

"As previously announced, we are undertaking a transformational cost management program to accelerate the ongoing transformation of our business, enable investments in key areas and to become a more efficient enterprise," a Walgreens spokesperson told Pacific Business News of plans to close a location in Hilo, Hawaii, next month.

For years, Walgreens has engaged in a fierce battle for dominance with its chief rival, CVS.

"During its third quarter, CVS said it filled more than 352 million prescriptions," reported the Chicago Tribune in 2019. "Walgreens, on the other hand, plans to close 200 stores beginning this fall."

The story detailed how CVS had outperformed Walgreens, raking in more profits in addition to filling more subscriptions. Both stores are also pursuing expansions into a range of health care services. In 2017, for example, Walgreens acquired nearly 2,000 Rite Aid stores. In 2018, CVS acquired health insurance provider Aetna for $69 billion.

Walgreens also invested $140 million in an ambitious but ill-fated partnership with Theranos, the now-defunct fraudulent blood testing startup. Mandatory COVID pandemic shutdowns also took a big bite out of the the chain's profits.

Therefore, it's not surprising that the company may need to trim. Walgreens has 53 stores in The City, compared to only 22 for CVS, according to an analysis by the Chronicle.

To be clear, organized retail crime presents a serious threat to businesses in The City. High-profile instances of theft have garnered significant media attention and even forced some local Target locations to shorten business hours in The City. Last summer, a viral video showed a man on a bicycle wheeling out of a Walgreens on Gough Street with a bag of stolen loot. Police arrested the suspect after he attempted a similar heist at a Haight Street Walgreens a few days later.

Such crimes have forced some retail companies to increase security and invest in strategies to counter professional theft rings. In September, Mayor Breed announced an Organized Retail Crime Initiative to deploy more police resources to focus on the problem.

Organized retail crime poses a significant challenge to businesses, which is why Walgreens should embrace transparency and detail precisely what led to the closure of the five stores. A more transparent approach would help shed light on the extent of the organized retail crime problem and whether companies have given up on reporting crimes. It would also help pressure city leaders to increase their response to the problem, if necessary.

Unfortunately, Walgreens' opaque approach leaves it vulnerable to claims that factors other than shoplifting may be driving the company's shrinkage.