Wal-Mart vs. Bloomberg News

Wal-Mart is cutting inventory according to a story by Bloomberg, sending the company’s stock price down. But are they? Wal-Mart denied the story, making it hard to decipher the truth.

Here’s the beginning of the Bloomberg piece that started all the uproar:

Wal-Mart Stores Inc. (WMT) is cutting orders it places with suppliers this quarter and next to address rising inventory the company flagged in last month’s earnings report.

Last week, an ordering manager at the company’s Bentonville, Arkansas, headquarters described the pullback in an e-mail to a supplier, who said others got similar messages. “We are looking at reducing inventory for Q3 and Q4,” said the Sept. 17 e-mail, which was reviewed by Bloomberg News.

U.S. inventory growth at Wal-Mart outstripped sales gains in the second quarter at a faster rate than at the retailer’s biggest rivals. Merchandise has been piling up because consumers have been spending less freely than Wal-Mart projected, and the company has forfeited some sales because it doesn’t have enough workers in stores to keep shelves adequately stocked.

“We are managing our inventory appropriately,” David Tovar, a Wal-Mart spokesman, said today in a telephone interview. “We feel good about our inventory position.”

The order pullback isn’t “across the board” and is happening “category by category,” he said in a previous interview.

“In some cases, we’re going to be taking less, in some we’re going to be taking more,” Tovar said.

MarketWatch countered with this story quoting the Wal-Mart spokesman calling the Bloomberg story false:

Wal-Mart Stores Inc., scrambling to right the damage that was done after a Bloomberg News report said it’s cutting orders to reduce inventory, denied the report and shot back to say the article “is completely false.”

“The report lacks the fundamental understanding of how the retail world works and the fundamental ebbs and flows of inventory,” Wal-Mart spokesman David Tovar said in an interview. “It’s typically how retail works. We have thousands of buyers across thousands of categories. We are increasing orders in some categories and decreasing in others. Categories that are doing well. We are calling those suppliers right now. We are cutting back where it makes sense. It’s not out of the blue.”

“The (Bloomberg) article is blatantly false and inaccurate,” Tovar said, adding Wal-Mart doesn’t plan to issue a press release just to say its business goes on as normal.

Investors remained skeptical. Wal-Mart’s shares originally dropped close to 3% on the report, deepening the loss of the Dow. They closed down 1.5% to $74.65 with 15 million shares trading hands. The swift stock pullback reflects a more general concern that retailers may face their worst holiday season in four years after a disappointing back-to-school selling period. Wal-Mart cut its full-year outlook after its second-quarter U.S. sales disappointed.

Cutting outlook for the full year indicates that Wal-Mart and other retailers will continue to struggle, lending some credence to the Bloomberg story that they’re reducing inventories. The news sent the overall stock market tanking, USA Today reported:

The Dow was dragged lower by Wal-Mart after a report by Bloomberg News said the retailer was cutting orders to suppliers because of a buildup in inventories.

Wal-Mart spokesman Dave Tovar said the report was misleading and that in some categories, the discounter was ordering more, and in other areas it was ordering less.

“This is business as usual,” Tovar said, noting that it was part of an ongoing process of managing the seasonality of the business based on consumer demand.

Wal-Mart shares fell $1.10, or 1.5%, to close at $74.65, after dipping as low as $73.56.

It’s hard to tell what is accurate in this case. Bloomberg, which has incredibly high sourcing and editorial standards, wouldn’t simply make up the news. A company where running a correction to a story is the worst possible outcome is in the business of getting things wrong.

But for a spokesman to call the story inaccurate is also an extreme step. Usually there is a bit more nuance to a denial. Not so in the MarketWatch story, since Bloomberg is accused of lacking basic understanding of the retail industry — not a light accusation.

If the markets are any judge, then Bloomberg is to be believed since investors sold off Wal-Mart shares and those of other retailers. So it may be a case of too little, too late for Wal-Mart on this one. It seems defensive at best, untruthful at worst. While it’s hard to tell what’s true, it’s always interesting when reporters and press people have public fights.