NEW YORK, NEW YORK – NOVEMBER 25: People walk by Macy’s flagship Manhattan store, decorated for the holiday season. The iconic department store announced it is delaying the release of its full quarterly results after discovering significant accounting irregularities allegedly orchestrated by one employee.
On Monday, Macy’s revealed the shocking news: through erroneous accounting entries, the employee reportedly concealed expenses totaling between $132 million and $154 million over more than three years. The company made the announcement days before its annual Thanksgiving Day parade, complicate matters as it gears up for its busiest shopping season.
According to Macy’s, the issue stems from the accounting practices of one employee responsible for small package delivery expenses. An independent investigation found this individual intentionally manipulated financial records from the fourth quarter of 2021 through the fiscal quarter ending November 2, 2024. The corporation's internal forensic analysis determined the discrepancies occurred amid reported delivery costs amounting to approximately $4.36 billion during the same timeframe.
“The employee who’s responsible for these discrepancies no longer works for the company,” said Macy's representatives, adding they have not found any other employees involved. This mishandling resulted in delaying the company's earnings release and earnings call, originally slated for the week of Thanksgiving, but has now been pushed back to December 11.
Despite the grave nature of the findings, Macy’s clarified: “There is no evidence the erroneous entries affected vendor payments or the company’s cash position.” Still, financial analysts express concern. Neil Saunders, managing director at GlobalData Retail, commented on the seriousness of such issues, especially those stretching back to 2021. He stated, "While Macy’s cannot control the actions of every employee, it is worrying these are intentional accounting errors. This raises questions about the competence of the company’s auditors.”
Currently, Macy’s shares fell 2.2% following the announcement, trading at around $15.94. The company’s struggles are particularly notable as its preliminary reports indicated net sales for the third quarter had dropped 2.4% to $4.74 billion, below market expectations.
This series of events marks another chapter of challenges for Macy’s, already grappling with shifting consumer behaviors and e-commerce trends adversely affecting its sales. The lengthy investigations combined with reduced consumer confidence can shake investor sentiment severely during one of the year’s most significant retail periods.
Interestingly, the timing of the disclosures coincides with broader concerns for the retail sector. Macy’s is not alone; many retail names have experienced revenue declines, with pressure mounting from price inflation as consumers become more selective with spending. For example, various analysts report shifts indicating shoppers are increasingly cautious, balancing their budgets far more tightly than previous years.
The department store chain also has plans to restructure significantly. Earlier this year, the company announced intentions to close approximately 150 stores over the next three years, affecting nearly half of its locations since the pandemic. This bold move indicates the economic pressures and the urgent need to adapt to changes within the retail marketplace.
While Macy’s has also been refreshing its brand strategy, such initiatives can resemble “turning around an oil tanker,” as described by Saunders—a process demanding time rather than instant results.
Despite the hurdles, Macy’s continues to maintain some growth avenues. Certain brand segments such as Bloomingdale’s and Bluemercury have shown promising sales increases. The company aims to concentrate on executing its “Bold New Chapter” strategy, reinforcing emphasis on both customer service and its overall shopping experience.
“At Macy's, we promote a culture of ethical conduct,” remarked Tony Spring, the company's CEO. “While we diligently work to complete the investigation and handle this matter appropriately, our team remains focused on serving customers during the holiday season.”
With Macy’s poised to reveal more about the investigation’s outcomes and its restructuring efforts soon, consumers and investors alike are watching closely. This current phase underlines the importance of internal controls, especially within financial management, for corporations aiming to navigate these turbulent retail waters and retain consumer trust.
Macy’s has positioned itself strategically during this holiday season, demonstrating resilience amid difficulties. The upcoming weeks will be pivotal as the company outlines its course of action to navigate through both existing challenges and its long-term vision for sustainable growth.
