|
Getting your Trinity Audio player ready...
|
By: Meyer Wolfsheim
Macy’s revealed that a former employee deliberately concealed up to $154 million in expenses over several years, causing the iconic department store chain to postpone its latest earnings announcement. The company disclosed Monday that the individual, no longer with Macy’s, had engaged in “erroneous accounting” practices tied to delivery expenses from late 2021 through the most recent quarter ending on November 2.
The concealed expenses, estimated between $132 million and $154 million, were part of the $4.36 billion in delivery costs Macy’s incurred during the three-year period. According to Macy’s, these discrepancies came to light as the company prepared unaudited financial results, which revealed a 2.4% decline in revenue last quarter, reflecting sluggish sales both in stores and online.
Shares of Macy’s dropped 2.2% to $15.94 following the announcement.
The former employee, responsible for accounting related to small-package delivery expenses, acted alone, Macy’s said. There is no evidence that the scheme impacted the company’s cash flow or vendor payments. However, the exact motivation remains unclear.
Accounting experts, including Stacey Ritter of Santa Clara University’s Leavey School of Business, told the New York Post that such manipulations often aim to inflate profitability. “The majority of accounting fraud involves either overstating revenue or underreporting expenses,” Ritter explained. “This can help meet earnings targets tied to bonuses or stock value.”
Restructuring expert Adam Stein-Sapir added that underreporting expenses typically serves to meet financial benchmarks rather than directly embezzling funds. “Hitting financial targets could positively influence an employee’s bonus,” he noted.
Macy’s has not shared details on the former employee’s motivations but emphasized its commitment to ethical practices.
“At Macy’s, we promote a culture of ethical conduct,” said CEO Tony Spring in a statement. “While we work diligently to complete the investigation, our team remains focused on serving our customers and executing a successful holiday strategy.”
The scandal delayed the company’s planned earnings release but didn’t stop Macy’s from sharing preliminary results. Third-quarter sales fell 2.4% to $4.7 billion, with comparable store sales dropping 1.3%. In contrast, Macy’s luxury division, Bloomingdale’s, reported a 3.2% rise in comparable sales, while Bluemercury, its beauty brand, saw a 3.3% increase.
Despite the setback, Macy’s expressed optimism about the holiday shopping season. “We delivered third-quarter sales in line with expectations and are seeing November comparable sales trend ahead of third-quarter levels,” Spring said. The company plans to release its full results on December 11.
Challenges Amid Cost-Cutting
The New York Post also highlighted Macy’s ongoing efforts to streamline operations. In February, the retailer announced plans to close about one-third of its locations—roughly 150 stores—by 2027 as inflation pressures consumers to limit discretionary spending.
As the nation’s largest department store, Macy’s is grappling with an evolving retail landscape while ensuring it addresses the fallout from the accounting scandal. The company is conducting an independent investigation and declined further comment on the matter.
This incident underscores the challenges of maintaining financial transparency
