Channel Stuffing (redirected from Trade loading)

Channel Stuffing

An illegal practice in which a company willfully sells more of its product to distributors than the distributors can sell to customers. The company makes these sales on credit, which temporarily boosts its accounts receivable and by extension its current assets. This makes the company look healthier than it really is which can raise its stock price. Eventually, when the distributors are unable to sell the product they return it to the company instead of paying, which reduces the accounts receivable and brings the company's balance sheet in line with reality.

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channel stuffing

Artificially inflating current sales and earnings by shipping more goods than would normally be ordered. For example, an appliance manufacturer may inflate revenues and earnings in the current accounting period by shipping to retail stores more refrigerators, stoves, and dishwashers than the stores are likely to sell. The practice of channel stuffing borrows revenues and earnings from the future because overstocked customers will reduce orders in future periods.