Macy’s Accounting Scandal: Employee Hides Millions in Expenses, Delaying Q3 Earnings
In a shocking turn of events, Macy’s has uncovered a significant accounting irregularity that has forced the retail giant to delay its third-quarter earnings report. The company revealed that a single employee intentionally concealed up to $154 million in expenses over nearly three years, prompting an independent forensic investigation.
The Accounting Discrepancy
The issue came to light when Macy’s identified a problem related to delivery expenses in one of its accrual accounts earlier this month. The investigation found that an employee responsible for small package delivery expense accounting had made erroneous entries to hide approximately $132 million to $154 million of expenses from the fourth quarter of 2021 through November 2, 2024.
Impact on Financial Reporting
As a result of this discovery, Macy’s has been forced to delay the release of its full quarterly results, which were initially scheduled for Tuesday, November 26. The company now anticipates reporting its complete third-quarter financial results by December 11.
Preliminary Q3 Results
Despite the accounting issue, Macy’s released some preliminary results for its third quarter:
- Net sales fell 2.4% to $4.74 billion, slightly above analyst estimates
- Comparable sales decreased by 2.4%, excluding licensed businesses
- Macy’s comparable sales were down 3%
- Bloomingdale’s comparable sales rose 1%
- Bluemercury’s comparable sales increased by 3.3%
Company Response
Tony Spring, Chairman and CEO of Macy’s, stated, “At Macy’s Inc., we promote a culture of ethical conduct. While we work diligently to complete the investigation as soon as practicable and ensure this matter is handled appropriately, our colleagues across the company are focused on serving our customers and executing our strategy for a successful holiday season.”
Investigation Findings
The company has emphasized that:
- The employee responsible for the misconduct is no longer with Macy’s
- No other employees appear to be involved in the creation of the fake accounting entries
- There is no indication that the erroneous entries affected cash management activities or vendor payments
Market Reaction and Analyst Perspectives
The news has unsettled investors, with Macy’s stock falling nearly 3% in afternoon trading on Monday. Retail analyst Neil Saunders from GlobalData Retail commented that the accounting problem “raises the question as to the competence of the company’s auditors” and creates more nervousness for investors who are already concerned about the company’s performance.
Broader Context and Future Outlook
This accounting scandal comes at a challenging time for Macy’s, as the company is already facing:
- A 20% decline in stock value this year
- Ongoing store closures as part of a turnaround plan
- Weaknesses in digital channels and cold weather categories
- Rejection of takeover talks with private investors in July
As Macy’s works to resolve this issue and release its full financial results, the retail industry will be watching closely to see how this impacts the company’s performance during the crucial holiday shopping season.