Come on boys, are you committed to international expansion or not? For Walmart, with $122bn in earnings over the past decade, it looks, perhaps, a little halfhearted to pay just $24m in bribes for building permits in Mexico, as The New York Times alleges.
Markets were nonplussed, sending Walmart’s shares down 5 per cent and those of its majority-owned Mexican subsidiary by twice that much. Investors were not, of course, selling because the small sum reflects a lack of enthusiasm. And it would take the prospect of a truly massive fine under the Foreign Corrupt Practices Act to justify the roughly $12bn in market value lost in the sell-off. The worry is more that because the allegations involve a number of Walmart’s senior managers, significant leadership disruption could ensue.
Still, the panic looks a bit overdone. Yes, the Mexican operation is growing faster than the US one – its 10-year average sales growth is 18 per cent, more than twice the rate of the US supercenters. Profits are strong too: operating margins in Mexico are comparable to US levels and return on assets are a shade higher than the corporate average. But Walmart Mexico’s sales amount to just 6 per cent of Walmart’s overall, even before the minority owners’ portion is backed out. It is not as if the whole Mexican business is in danger of disappearing.