Giant Retailer Reeling From Accounting Scandal
Dutch consumer giant Royal Ahold, the world's third largest retailer after WalMart and France's Carrefour SA, has announced an accounting irregularity in its U.S. division that amounts to at least $500 million. The company plans to restate financial statements for 2000 and 2001 and has indicated it will hold back its 2002 financial statements, originally expected to be released next week.
While a spokesman for Ahold's auditor Deloitte & Touche said, "We stand by the work we did for Ahold," Standard & Poor's took no chances and reduced the company's credit rating to B++, otherwise known as "junk." Company stock plummeted by two thirds of its value Monday to 3.59 euros. At its peak, Ahold stock traded at 38.55 euros in April 1999.
Ahold's two top executives, CEO Cees van der Hoeven and CFO Michiel Meurs, were let go by the company, with Ahold chairman Henny de Ruiter trying to hold on to the reins while replacements for the other executives are sought.
Ahold's U.S. business consists primarily of a distribution service that delivers food to restaurants, schools, and prisons. Ahold also owns the U.S. Stop & Shop chain and Giant supermarkets.
The accounting irregularities stem from local managers booking higher promotional allowances, provided by suppliers to promote their goods, than they actually received in payment. Besides the company CEO and CFO, several U.S. senior executives have been suspended pending further investigation.