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Retail giant Wal-Mart shed 10 billion U.S. dollars off its market value on Monday, on concerns a bribery investigation in Mexico could prove very costly, and hinder the companys growth outlook. The scandal could have huge implications for the worlds biggest retailer and its executives.
Investors rolled back prices on Wal-Mart stock Monday. The company under fire after a New York Times article over the weekend claimed the company stymied an internal investigation into allegations of $24 million dollars of bribery at its Mexico unit. If true, it could be in violation of a U.S. law that forbids bribes to foreign government officials.
The stock took an almost five percent hit on the news. Shares of Wal-mart de Mexico, or WalMex down even more.
Michael Keara, equities analyst with Morningstar said, "I still think that sales trends at U.S. stores are going to determine the real long term performance of the stock. For example if they come out in the next quarter and they report, say, U.S. comp sales 3% or higher I think they will regain all the loss theyve seen today stemming from the recent bribery case in Mexico."
The company said it was deeply concerned about the allegations and released this video press statement with Communications VP David Tovar.
David Tovar said, "If these allegations are true, it is not a reflection of who we are or what we stand for."
The California State Teachers Retirement System- a major shareholder- says while the allegations are very serious it is holding onto its 5.5 million shares until more is known.
Analysts say the probe could badly hamper the company for years- potentially leading to substantial financial penalties- and management shakeups.
All that could impact its appeal to investors, especially those focused on the companys international expansion plans.
ichael Keara said, "And any time you see some of these questionable practices at one international segment then that sort of raises questions on how can these guys grow at other international segments if they relied on say you know those types of business practices to grow that business. It clearly questions some of the growth prospects in some of those other countries say China or India."
And those countries play a vital role in Wal-Marts growth strategy. International sales made up about a one-quarter of total sales in fiscal year 2011, but operating income overseas far outpaced the U.S. during the crucial fourth quarter. |
