Highlights
- A former Macy’s employee intentionally hid $154 million in expenses over nearly three years.
- The irregularities delayed the retailer’s quarterly earnings report, now scheduled for December 11.
- Macy’s preliminary results show a 2.4% sales decline to $4.7 billion, reflecting challenges in digital and seasonal categories.
- Bloomingdale’s and Bluemercury outperformed with modest sales growth.
The $154 Million Scandal at Macy’s
On Monday, Macy’s announced that it had uncovered a significant accounting irregularity involving a single employee. The individual, who is no longer with the company, deliberately hid as much as $154 million in expenses related to small package deliveries.
This deception occurred over nearly three years, forcing Macy’s to delay its earnings report, originally slated for Tuesday. The company is conducting an independent forensic accounting investigation, which so far points to the actions of just one employee, with no evidence implicating others.
The hidden expenses accounted for only a fraction of Macy’s $4.36 billion delivery expenses recognized since late 2021. However, the errors were deemed significant enough to require a deeper examination of the company’s accounting practices.
Macy’s CEO Tony Spring emphasized the company’s commitment to ethical conduct, stating:
“While we work diligently to complete the investigation, our colleagues remain focused on serving customers and executing a successful holiday season.”
Impact on Macy’s and Its Investors
This scandal adds to Macy’s struggles, as its stock has already fallen nearly 20% this year. Retail analyst Neil Saunders highlighted the incident’s potential to erode investor confidence:
“The issue 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.”
Despite these challenges, Macy’s stated that the irregularities did not impact its cash management activities or vendor payments.
Preliminary Earnings Results
Macy’s released a preliminary report showing:
- A 2.4% decline in quarterly sales to $4.7 billion.
- Weakened performance in digital channels and cold weather categories, likely due to unusually warm fall weather.
Sales at Bloomingdale’s and Bluemercury, Macy’s higher-end brands, fared better:
- Bloomingdale’s: Sales rose 1.4%.
- Bluemercury: Sales increased 3.2%.
However, Macy’s core middle-market stores continue to underperform, underlining the retailer’s broader struggles to compete.
Macy’s Turnaround Challenges
Macy’s is pursuing a turnaround strategy, including plans to close hundreds of underperforming stores. While some stores slated to remain open performed better, their sales also declined.
Earlier this year, Macy’s rejected a buyout offer from private investors, opting instead to focus on remaking its brand.
Takeaway for Investors
The accounting irregularities and delayed earnings report add to Macy’s challenges during a pivotal holiday season. While the company works to regain investor trust, stronger performances at Bloomingdale’s and Bluemercury provide some hope for growth in the premium segment.
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