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Bloomberg: Wal-Mart's Accounting Overstated China Business

  • Reuters

FILE - A shopping cart full of products is seen as a customer shops at a Wal-Mart store in Beijing.

FILE - A shopping cart full of products is seen as a customer shops at a Wal-Mart store in Beijing.

Wal-Mart has been using questionable accounting and unauthorized sales practices to make its retail business in China appear stronger, Bloomberg reported, citing internal documents and interviews with employees.

The sales practices, which include bulk sales to other retailers and sales being allegedly booked when no merchandise left the shelves, made business appear strong even as retail transactions slowed and unsold inventory piled up, Bloomberg reported.

Representatives at Wal-Mart did not immediately respond to a request for comment.

Wal-Mart stores in China resorted to temporary mark-ups of inventory as an accounting move to prop profit without any added sales, Bloomberg reported, citing interviews with current and former Wal-Mart employees.

Concerns about bulk sales, raised as far back as 2011 in an internal report, have been the subject of inquiries in China by Wal-Mart's legal team as recently as May, Bloomberg reported, citing an internal company email.

The world's largest retailer is battling stiff competition from local rivals in China. China is key to Wal-Mart's international ambitions but it has stumbled in a market where consumers value safe and authentic food over the low prices the retailer is famed for. Wal-Mart has been in China for 17 years.

Wal-Mart's reputation for food safety in China has come under attack after its “Five Spice” donkey meat was found to contain fox meat earlier this year. Wal-Mart also ran into trouble in 2011 when it was fined for selling expired duck meat.

In April, the retailer said it appointed Sean Clarke as Wal-Mart China CEO effective June 1.