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Ahold's Woes Grow

Written by George Anderson

By George Anderson

Ahold's troubles continue to grow over its U.S. Foodservice division's overstatement of earnings. Here's a top line from around the net.

  1. The Securities and Exchange Commission (SEC) is investigating the company's accounting practices.
  2. Lawsuits, seeking class-action status, have been filed against the retailer in courts in Virginia and New York.
  3. The Dutch Ministry of Justice may investigate the company for alleged insider trading violations.
  4. Ahold's shares continue to tank with company market value down nearly 80 percent this week.
  5. Investor sentiment following previous corporate accounting scandals is working against Ahold. CBS MarketWatch published comments from investors on Ahold community boards. Zara 135 wrote, "Let's see, shall I buy 3 shares of AHO stock this PM or a McDonald's Happy Meal? Guess it makes no difference since both will eventually turn to crap."
  6. Separate reports indicate that competitors such as Tesco and Sysco are likely to gain at Ahold's expense because of the negative publicity surrounding the retailer.

Moderator's Comment: Is the reaction to Ahold's admission it overstated earnings out of line with the reality of the situation? Are the accounting problems that have affected retailers such as Ahold, A&P, Fleming, Nash Finch, etc. widespread or are do these remain isolated examples?

Much of what is happening to Ahold seems an overreaction by investors following previous accounting scandals in other companies.

There still remains many who believe in Ahold. CBS MarketWatch cited the following message board response from ItsASharkTank. "The restatement comes only from its relatively small 'American' foodservice division. Additionally, the restatement amount does not amount to a pot of beans when overall revenues are considered." [George Anderson - Moderator]

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