Accounting Scandal Will Cost Ahold $117.2 Million
Dutch food giant Ahold will spend more than $117.2 million on the billion-dollar accounting scandal that has engulfed the world’s third largest retailer.
Ahold on Tuesday announced what it expected to pay in fees to lawyers, accountants and external consultants for 2003, along with unaudited third-quarter sales of $15.2 billion, which is down 7 percent from 2002.
The company predicted its earnings in 2003 would be hurt not only by the millions in professional costs, but by pressure on its margins, particularly at subsidiary US Foodservice.
The company had estimated worldwide accounting irregularities at more than $1 billion in 2000-2002, mainly because sales were inflated at US Foodservice. The company showed a loss of $5 billion under U.S. accounting rules when correct audited statements for 2002 were released last month.
Investigations into Ahold’s accounting procedures are being conducted by the U.S. Securities and Exchange Commission, U.S. Justice Department and Dutch regulators.
The accounting irregularities stem from local managers booking higher promotional payments—provided by suppliers to promote their goods—than they actually received. Ahold's U.S. business consists primarily of a distribution service that delivers food to restaurants, schools and prisons. Ahold also owns the Stop & Shop and Giant supermarkets.
The company also announced quarterly sales at Foodservice rose 6 percent, partly because of acquisitions made last year. Ahold said that only the weak dollar kept it from increasing sales companywide in the third quarter.
Audited earnings for the first half of 2003 are set to be released on Nov. 7.