Macy's says an employee hid as much as 154 million dollars in expenses

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On Monday, Nov. 25, Macy’s announced that there were significant accounting irregularities.

On Monday, Nov. 25, Macy’s announced that significant accounting irregularities, traced to a single employee, have forced the company to delay its quarterly earnings report. Initially scheduled for release on Tuesday, Nov. 19, the report will now be published on Dec. 11 to allow further investigation.

Macy’s revealed that the former employee intentionally concealed up to 154 million dollars in delivery-related expenses over nearly three years. These discrepancies were created through erroneous accounting entries designed to hide small package delivery costs. While the employee has since left the company, Macy’s launched an independent forensic accounting investigation to assess the extent of the issue.

Although the concealed expenses represent a relatively small fraction of the 4.36 billion dollars Macy’s incurred for delivery services since late 2021, the errors were significant enough to disrupt the company’s reporting schedule. Macy’s assured stakeholders that the irregularities did not affect cash management or vendor payments, and no evidence suggests that other employees were involved.

“At Macy’s, Inc., we promote a culture of ethical conduct,” CEO Tony Spring said in a statement. “While we work diligently to complete the investigation and ensure this matter is handled appropriately, our colleagues remain focused on serving our customers and executing a successful holiday season.”

Despite the accounting challenges, Macy’s shared preliminary third-quarter results. Net sales fell 2.4 percent to 4.74 billion dollars, slightly exceeding analysts’ expectations of 4.72 billion in sales. Comparable sales, which measure performance across established physical and digital channels, also fell 2.4 percent, excluding licensed businesses. By division, Macy’s stores reported a 3 percent drop in comparable sales, while Bloomingdale’s saw a 1 percent increase, and Bluemercury achieved a 3.3 percent gain.

The revelations have prompted scrutiny of Macy’s auditing practices. Managing director at GlobalData Retail, Neil Saunders, criticized the oversight, stating, “This raises questions about the competence of the company’s auditors. For investors already concerned about Macy’s performance, such issues deepen their nervousness.”

Macy’s preliminary earnings report cited additional challenges, including declining sales in digital channels and weak demand for cold-weather apparel, exacerbated by an unseasonably warm fall. These factors contributed to the 2.4 percent dip in sales, aligning with broader trends in the struggling middle-market retail sector. “The decline is expected, given that the middle market isn’t thriving, and Macy’s is far from being at the forefront in all its stores. Nevertheless, it underscores the company’s ongoing challenges,” Saunders added.

In response to these difficulties, Macy’s has identified hundreds of underperforming stores slated for closure as part of its broader turnaround strategy. While stores earmarked for continuation performed slightly better, they also experienced sales declines. Earlier this year, Macy rejected acquisition offers from private investors and pursued its strategic vision instead. The 165-year-old retailer remains committed to revitalizing its brand and operations, even as it grapples with internal challenges and broader market pressures.

As the holiday season approaches, Macy’s efforts to rebuild investor confidence will be critical. The company aims to demonstrate resilience in the face of setbacks and reassert its position in the competitive retail landscape.