Walmart Inc. (WMT), the world’s largest retailer, has positioned itself on the offensive against e-commerce and cloud computing giant Amazon.com Inc. (AMZN) as the Seattle-based tech titan encroaches into markets traditionally dominated by brick-and-mortar retailers. As the Bentonville, Arkansas-based company seeks to play catch up in the digital space, a former Walmart employee indicates that the firm illegally toyed with numbers to appease investors, as reported by Bloomberg. (See also: Food Wars: How Walmart Plans to Beat Amazon.)
Shares of WMT are down about 0.5% Thursday afternoon at $87.25, reflecting a 11.7% decline year-to-date (YTD) versus the S&P 500’s 2.7% increase over the same period and Amazon’s 35.3% return so far in 2018. The retail chain has had a particularly tough time as it races against Amazon to grab a hold of the booming e-commerce segment given the latter’s ability and willingness to incur short-term losses in order to experiment in new markets and reel in new consumers in exchange for a long-term revenue boost. Walmart investors have been less forgiving of such costly investments, putting greater pressure on the company’s shorter-term quarterly results.
Tri Huynh, a former director of business development at Walmart, indicated that he was fired in January 2017 “under false pretenses” after approaching management regarding the firm’s “overly aggressive push to show meteoric growth in its e-commerce business by any means possible—even illegitimate ones.” The executive filed a lawsuit Thursday indicating that his dismissal was a retaliation for warning his higher-ups about illegal actions by the firm. Huynh was forced to leave the company just a day after a retail industry publication highlighted him as one of the industry’s up-and-coming leaders.
Online Legerdemain Alleged
Walmart has funneled billions of dollars into its online strategy, offering services such as two-day free delivery and doubling down on initiatives such as new private label brands. While the company has enjoyed online revenue growth above 50% in the past few years, investors sent the stock on its worst one-day decline in history following its most recent quarterly earnings report in which the firm showed decelerated digital sales growth.
Discrediting Walmart’s recent reports, the ex-employee suggests that Walmart mislabeled products so that “third-party vendors received lower commissions, failed to process customer returns and allowed offensive items onto the site,” as reported by a Bloomberg story on March 15.
“Wal-Mart sacrificed and betrayed its founder’s key principles of integrity and honesty, pushing those core values aside in its rush to win the e-commerce war at all costs,” read the 70-page complaint. “In doing this, it realized it must silence any whistle-blower who spoke up against its ‘win at all costs’ approach.” (See also: Why Amazon’s Stock Will Rise 15% Even Amid Grocery Price Wars.)