In Walmart's New Success, Mexico Scandal Forgotten

Wal-Mart Stores Inc. (NYSE: WMT) shares reached an all-time high as management described the company’s plans to challenge Amazon.com Inc.’s (NASDAQ: AMZN) same-day delivery, its plan for more small stores to drive up sales per foot, and its sustained success in the United States ahead of the holiday shopping season. In the enthusiasm about these programs, the firm’s bribery scandal in Mexico, revealed in The New York Times in April, has been all but forgotten.

The scandal threatened to scuttle the careers of Walmart CEO Mike Duke and Chairman Robson Walton. Each had known about the problems in Mexico, it was alleged, and did nothing.

Walmex, the Walmart unit in Mexico, recently reported that September sales increased 15.7%, so the allegations have not hurt results there. The Mexican government has not pressed whatever investigation it has started via public attacks on the world’s largest retailer. However a probe has begun there and has proceeded quietly.

The United States has continued an investigation, supported by members of Congress, but that could last for years. The Foreign Corrupt Practices Act almost certainly will be at the core of the conclusions about Walmart’s actions in Mexico, and perhaps elsewhere. Investors apparently do not fret much about that. Revenue growth and success may have come partially at the price of shady practices, but the improvements have come nonetheless.

The rise in Walmart’s stock is deserved because it has bucked most of the effect of the U.S. economic slowdown and has continued to do well in its other key markets of China and Mexico. Walmart is so successful that it has even renewed its push into Japan, which has not worked at all in the past. Walmart has started to act as it did for years — as the most successful retailer in the world, pressing to leverage that position into greater success.

As Walmart puts its rapidly improving prospects under its belt, the revelations from April that threatened to badly damage the retailer and its most senior management have almost entirely gone away.

Douglas A. McIntyre