Macy’s announced on Monday that a single employee was responsible for significant accounting irregularities, leading the company to postpone its quarterly earnings report, which had been scheduled for release on Tuesday.
The company recently uncovered that the employee, whose identity has not been disclosed, intentionally concealed up to $154 million in expenses over nearly three years. This discovery prompted Macy’s to initiate an independent forensic accounting investigation. According to the company, the former employee—who is no longer with Macy’s—deliberately made erroneous accounting accrual entries to hide small package delivery expenses.
Macy’s did not provide an explanation for the employee’s actions.
Macy’s revealed that while the questionable expenses represented only a small fraction of the $4.36 billion in delivery expenses it reported from the fourth quarter of 2021 through its most recent period, the errors were significant enough to delay its full quarterly earnings report until December 11. Despite this, the company assured stakeholders that the erroneous accounting entries had “no indication” of impacting cash management activities or vendor payments.
The investigation thus far has pointed solely to the actions of the former employee, with no evidence suggesting involvement from other staff members.
“At Macy’s, Inc., we promote a culture of ethical conduct,” said CEO Tony Spring in a statement. “While we are working diligently to complete the investigation as soon as practicable and address the matter appropriately, our colleagues remain focused on serving our customers and executing our strategy for a successful holiday season.”
The revelation of accounting issues compounds challenges for Macy’s, whose stock has already declined nearly 20% this year. Retail analyst Neil Saunders of GlobalData Retail noted that the situation “raises the question as to the competence of the company’s auditors,” adding that such problems heighten investor unease amid concerns about Macy’s overall performance.
On Monday, Macy’s released a preliminary earnings report indicating that quarterly sales had dropped 2.4% to $4.7 billion, citing weaknesses in digital channels and cold-weather categories during an unusually warm fall season. Saunders observed that the decline reflects broader difficulties in the middle-market retail segment and Macy’s ongoing struggles to invigorate its brand and store performance.
The company has identified hundreds of underperforming stores slated for closure as part of a broader turnaround plan. Although stores designated to remain open performed somewhat better, they still experienced sales declines. In contrast, Macy’s upscale Bloomingdale’s stores saw a 1.4% sales increase, and its Bluemercury beauty chain reported a 3.2% rise in sales.
Despite these efforts, Macy’s continues to face significant challenges. In July, the 165-year-old retailer rejected a takeover bid by private investors, opting instead to implement its own strategy to revitalize the brand.
Shares of Macy’s (M) fell nearly 3% at market open following the announcement.
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