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Home Gains At Wal-Mart But Mexico Troubles Could Hamper Operations

Wal-Mart Stores, Inc. is warning that it faces losses related to bribery allegations in Mexico, according to a document filed yesterday with the United States Security and Exchange Commission. The filing also indicated that home became a bigger part of the retailer’s business in the most recently completed 2013 fiscal year.

The company told the SEC that the Home strategic business unit represented 7% of net sales, including those executed online, in 2013, up from 6% a year earlier. Other segments remained the same year-over-year, with Grocery at 55% of net sales, Health & Wellness at 11%, Hardlines at 9% and Apparel at 7%. The exception was Entertainment, at 11%, down from 12% in the year earlier.

As regards the investigations related to the Mexico matter, according to the Wal-Mart filing: “In November 2011, we voluntarily disclosed our investigative activity to the U.S. Department of Justice and the SEC, and we have been informed by the DOJ and the SEC that we are the subject of their respective investigations into possible violations of the FCPA. A number of federal and local government agencies in Mexico have also initiated investigations of these matters. Furthermore, lawsuits relating to the matters under investigation have been filed by several of our shareholders against us, certain of our current and former directors and officers and certain of Walmex’s current and former officers. We could be exposed to a variety of negative consequences as a result of these matters. One or more enforcement actions could be instituted in respect of the matters that are the subject of some or all of the on-going government investigations, and such actions, if brought, may result in judgments, settlements, fines, penalties, injunctions, cease and desist orders, debarment or other relief, criminal convictions and/or penalties. The existing and any additional shareholder lawsuits may result in judgments against us and our current and former directors and officers named in those proceedings. We cannot predict at this time the outcome or impact of the government investigations, the shareholder lawsuits, or our own internal investigations and review. Moreover, we expect to continue to incur costs (in addition to the $157 million of costs incurred in fiscal 2013) in conducting our on-going review and investigations and in responding to requests for information or subpoenas seeking documents, testimony and other information in connection with the government investigations and in defending the existing and any additional shareholder lawsuits and any governmental proceedings that are instituted against us or any of our current or former officers. These matters may require the involvement of certain members of our senior management that could impinge on the time they have available to devote to other matters relating to our business. We also expect that there will be ongoing media and governmental interest, including additional news articles from media publications on these matters that could impact the perception of our role as a corporate citizen among certain audiences.”