Jamie Spencer
Macy’s has postponed its quarterly earnings report after discovering a single employee had intentionally concealed $154 million in expenses over nearly three years. The accounting irregularities have raised concerns about oversight at the 165-year-old retailer, compounding investor worries about the company’s declining performance.
The Hidden Expenses
The accounting issues stem from an unnamed employee who deliberately made erroneous accrual entries to hide small package delivery expenses. These hidden costs amounted to a fraction of the $4.36 billion Macy’s spent on delivery expenses since late 2021. However, the discrepancies were significant enough for the company to initiate an independent forensic accounting investigation.
While the investigation has not found evidence implicating other employees, the company said the errors did not affect cash management or vendor payments. Macy’s CEO Tony Spring reassured stakeholders that the company is addressing the issue thoroughly.
“At Macy’s, Inc., we promote a culture of ethical conduct,” Spring said in a statement. “While we work diligently to complete the investigation, our colleagues remain focused on serving our customers and executing our holiday strategy.”
Delayed Earnings Report
Macy’s had planned to release its quarterly earnings on Tuesday but postponed the report until December 11 to allow time for the ongoing investigation. The retailer did release preliminary figures, revealing a 2.4% drop in quarterly sales to $4.7 billion. Weakness in digital sales and reduced demand for cold-weather items amid an unusually warm fall contributed to the decline.
Analyst Reactions
The scandal has intensified scrutiny of Macy’s management and auditing practices. Neil Saunders, retail analyst and managing director at GlobalData Retail, criticized the oversight, stating, “This raises questions about the competence of the company’s auditors. Such things create more nervousness for investors who are already concerned about the company’s performance.”
Investors have already expressed their concerns, with Macy’s stock down nearly 20% this year. Shares fell an additional 3% following Monday’s news.
Performance Trends
Macy’s has struggled to maintain sales growth, particularly in its middle-market stores. While the company plans to close hundreds of underperforming locations as part of a broader turnaround strategy, even the stores slated to remain open experienced sales declines.
However, its higher-end chains, including Bloomingdale’s and Bluemercury, fared better. Bloomingdale’s sales rose 1.4%, while Bluemercury’s sales increased by 3.2%, providing a glimmer of hope amid otherwise disappointing performance.
Looking Ahead
The accounting scandal comes as Macy’s works to redefine its strategy and fend off private investor takeover attempts, which the company rejected earlier this year. With the holiday season in full swing, Macy’s faces mounting pressure to reassure customers and investors alike that it can stabilize operations and restore confidence.
The discovery of $154 million in hidden expenses is a blow to Macy’s as it grapples with declining sales and investor skepticism. While the company works to resolve the issue and implement its turnaround strategy, the incident underscores the importance of robust oversight and accountability in rebuilding trust.
