Wal-Mart Stores Inc shares were down 3.1 percent in early premarket trading on Monday following an article in the New York Times this weekend alleging that the world's largest retailer stymied an internal probe into bribery at its Mexican affiliate, Wal-Mart de Mexico.
BMO Capital Markets analyst Wayne Hood said in a research note that the allegations could hamper the discount chain's future growth both domestically and abroad.
"Articles like this will be used against the company by activists and competitors when it attempts to open stores in the US and abroad," Hood wrote in a note on Monday.
According to the New York Times article, in September 2005, a senior Wal-Mart lawyer was alerted by a former executive at Wal-Mart de Mexico of the use of bribery to speed up store openings in Mexico.
Wal-Mart then sent investigators to Mexico City and found a paper trail of hundreds of suspect payments totaling more than $24 million, but the company's leaders shut down the investigation and neglected to notify U.S. or Mexican law enforcement officials, the Times reported.
Citigroup said in a note that, after discussions with Wal-Mart, it believed that the retailer would conduct a "thorough and transparent" review and said any pressure on the stock was "an enhanced buying opportunity."
Legal and retail experts said that the allegations, if proven true, could badly hamper the company and its management for years. They could lead to a time-consuming global probe, substantial financial penalties paid to U.S. authorities, and the departure of some executives.
Wal-Mart shares were trading at $60.50 on Monday before the market open, down from their close on Friday at $62.45 on the New York Stock Exchange.
Reporting By Martinne Geller and Phil Wahba in New York