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Dow Jones reports that both CVS Corp. and BJ's Wholesale Club have received inquiry letters from the US Securities and Exchange Commission (SEC) into how they deal with supplier rebates.

The informal inquiries appear to be indirectly connected to the accounting scandal that has unfolded Royal Ahold's US Foodservice division, where profits were overstated by $880 million over several years. This morning there are reports that Ahold's Tops division in upstate New York may have had "intentional" accounting irregularities amounting to another $29 million.

Spurred on by the Ahold issues, the SEC has been examining how major New England retailers account for promotional incentives and rebates from manufacturers. Other companies that have said they have received inquiries include Staples, the office supplies company.
KC's View:
There is no good news for retailers in the SEC's ongoing curiosity about how vendor rebates and allowances are accounted for. Not only will there be the accounting irregularities to deal with, but the public will begin to see, painted in sharp relief, the picture of a retail community that is less in touch with what consumers want than was previously believed, and more in touch with making money on the buy, not the sell…

This is a congressional investigation just waiting to happen. Maybe not today, maybe not tomorrow…