channel stuffing

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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.

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.
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References in periodicals archive ?
The discovery of trade loading -mostly involving LIG, the condoms and rubber gloves part of the business -triggered the exit of several senior SSL executives, including Mr Cater who stepped down in February 2001.
Consider the traditional practice of quarter trade loading.
Trade loading occurs when a company sells more to its retail channels than consumers are currently purchasing--supply exceeds demand.
US domestic profits more than doubled due mainly to the elimination of trade loading.
External Web-Services Interface: The Kiodex Application Program Interface (API) enables Kiodex customers to integrate Kiodex Risk Workbench(SM) trade loading, trading downloading and trade amending into their existing risk-management systems.
Cheshire-based SSL cut pounds 56 million from sales figures after eliminating the practice of trade loading, where more goods than usual had been offered to wholesale customers to boost sales before the end of financial periods.
SSL said the trade loading issues were now over and that it was focused on core brands like Scholl footwear, Durex condoms, Biogel surgical gloves and the Hibi range of antiseptics.
It said yesterday the task of eliminating trade loading was now complete.
This settlement also includes a separate resolution with Pernod Ricard of certain alleged trade loading claims.
He said: 'The reality is that we are getting on top of this trade loading issue.
Duracell alkaline batteries remain number one worldwide, but shares have declined despite category growth, due to issues of organizational disruption, trade loading and flawed decision-making on pricing and market segmentation.
The reported improvement in profits reflects increases in margarine and detergents and the benefit from the elimination of year-end trade loading in foods.