Crime epidemic causing retail store closures in places like San Francisco is exaggerated, investment bank suggests

Major chains including Walmart, Walgreens, and Target have blamed rising crime for their decisions to close retail locations, with Target most recently shuttering nine stores across five cities.  

But retailers’ claims are likely exaggerated, analysts at investment bank William Blair wrote in a recent research note. Yes, crime has risen relative to pre-pandemic levels — but that’s not the only thing happening, they wrote. 

“[T]he actual increase in rates of theft seemingly does not necessarily correspond to the increase in company commentary and action—particularly one of the more dramatic initiatives to thwart crime, store closures,” they said. “[W]e have to acknowledge potentially ulterior, more opportunistic motives.” 

Back to normal

During the pandemic, product “shrink”—the industry term for losses for any reason, including external and employee theft, product damage, or paperwork errors—dropped rapidly as fewer people shopped in-person and stores reduced hours and product selection. While theft has certainly risen since then, part of the recent increase in “shrink” is merely a return to pre-pandemic levels, William Blair noted. 

Shrink, as a portion of sales, was 1.6% last year—the same as in 2019 and 2020, and up from 1.4% in 2021, according to the National Retail Federation. This year, William James estimated that shrink will make up a slightly higher portion, about 2%. That will mark a peak, the bank predicted, noting that there are “early signs of stability shrink levels already in 2023.” 

More broadly, in the…