Report: Wal-Mart China hid real performance, inflated sales

New York - Wal-Mart Stores Inc. has reportedly discovered discrepancies in accounting practices its China business was using that made performance look better than it really was. According to Bloomberg, shifty accounting practices included making unauthorized bulk sales to other retailers and even booking non-existent sales.

Bulk sales totaled at least $243 million and accounted for 4% of the profit Wal-Mart’s China operation reported in 2010. The impact on the business included lower margins, price markups and fewer customers. It is not certain whether any activities in China are in the scope of an investigation the Department of Justice is conducting to see if Wal-Mart violated the Foreign Corrupt Practices Act.



Internal documents indicate Wal-Mart was concerned about possible discrepancies in fiscal reports from its China business as early as 2011 and had its legal team make inquiries in May 2014. Four senior China executives left the company in 2011, and in the past month Wal-Mart has dismissed another 30 executives there. By the end of the year, Wal-Mart plans to eliminate 250 jobs, and also open nine new stores and a new distribution center in China.



In a statement to news outlets, Wal-Mart said it has implemented a prescriptive action plan in response to this discovery, including disciplinary actions and executive changes, and that none of these issues had a material effect on operations. Wal-Mart also said bulk sales are a common practice among retailers in developing markets.