My answer: I would tell her she needed to go to the next level of management and report it. If she did not feel comfortable to do it alone I would stand by her. And I also would tell her I would have to report it even if she didn't, it would be my job to do so!
This one surprised me because how often do you expect to see a store manager stealing. Of course the right answer is always to contact the proper chain of command so if it was a store manager you would need to contact a rm or gm and the district loss prevention officer