Last week Bloomberg News published a story about the pervasiveness of reports that Walmart stores across the country are experiencing empty shelves and poor service from a shortage of employees. The total number of Walmart employees has stagnated compared to the number new stores that they have opened.
There is possibly another contributing factor to all the reports of empty Walmart shelves that could indicate accounting fraud. In a civil suit a fired manager claims that all the managers in his district were pressured to falsify inventory reports to keep inventory shrinkage under control. An expert witness hired by the former employee has testified in deposition that the numbers he was able to examine showed that not only were stores having little or no shrinkage during the time in question but many had overages. Walmart provided no explanation in accounting reports how this was possible even though they included the numbers in audit report totals.
Inventory reports affect the bottom line of a retailer quarter to quarter. If Walmart corporation has been doing this chain wide in order to appear profitable during a time when profits were very slim during the Bush recession (that hasn't really ended for Walmart) it could constitute securities fraud.
Under the sort of 'just in time' inventory control system that Walmart brags about, a practice of 'cooking the books' over any length of time would start to show up with stores not having enough inventory to keep the shelves full. Even a small amount each quarter would eventually add up to significant numbers as the only way to get back to zero would be to start showing really large amounts of shrinkage.
Walmart still isn't having good quarters even as the economy is slowly picking up, so maybe they have been able to hide it all successfully. It's hard to believe a company the size of Walmart could get itself in that much trouble, but major retailers have disappeared in the past from doing just this sort of thing. www.prairie2.com and twitter @BruceEnberg