Macy’s Uncovers $154 Million Accounting Scandal Linked to a Single Employee
Macy’s announced Monday that it has delayed its quarterly earnings report after discovering a massive accounting issue caused by a single employee. The revelation has sent shockwaves through the retail giant, highlighting serious oversight concerns and raising questions about its internal controls.
 |
| image: cnn.com |
The Discovery: Hidden Expenses Over Three Years
According to Macy’s, the now-former employee intentionally concealed up to $154 million in delivery expenses over nearly three years. This was done through "erroneous accounting accrual entries," which were designed to mask the company’s small package delivery costs. While the expenses represent a small fraction of the $4.36 billion Macy’s has recorded in delivery costs since late 2021, the errors were significant enough to necessitate an independent forensic investigation.
Although Macy’s has not disclosed the employee’s motives, the company confirmed that no other staff members were involved, and vendor payments or cash management activities were unaffected.
Impact on Earnings Report and Stock Performance
The accounting irregularities have forced Macy’s to delay its full earnings report, originally scheduled for Tuesday, to December 11. On Monday, the retailer released a preliminary earnings report, revealing a 2.4% decline in quarterly sales to $4.7 billion. Weakness in digital channels and unseasonably warm fall weather were cited as contributing factors.
The news has done little to reassure investors, with Macy’s stock down nearly 20% year-to-date and falling an additional 3% at market open Monday.
Expert Reactions: Oversight Under Scrutiny
Retail analysts, like Neil Saunders of GlobalData Retail, have expressed concern over the incident’s implications.
“This raises questions about the competence of Macy’s auditors,” Saunders said. “Such events make investors more nervous, especially when the company is already underperforming.”
The episode underscores broader challenges for Macy’s, which has struggled with declining sales and market share in an increasingly competitive retail environment.
Challenges Beyond Accounting Issues
While the accounting scandal has dominated headlines, Macy’s financial challenges run deeper. Sales have been slipping, particularly at middle-market locations. The company has been closing underperforming stores as part of a turnaround strategy, though even its better-performing locations saw declining sales.
On the brighter side, higher-end divisions like Bloomingdale’s and Bluemercury saw growth, with sales rising 1.4% and 3.2%, respectively. However, these gains aren’t enough to offset struggles across the core Macy’s brand.
Leadership’s Response
Macy’s CEO, Tony Spring, emphasized the company’s commitment to ethical practices and transparency.
“At Macy’s, Inc., we promote a culture of ethical conduct,” Spring stated. “While we work diligently to complete the investigation and handle this appropriately, our team remains focused on serving our customers and ensuring a successful holiday season.”
What’s Next for Macy’s?
The company’s decision to reject private investor takeover attempts earlier this year signaled confidence in its internal turnaround plan. However, the accounting scandal and continued sales declines add significant pressure to demonstrate that the strategy is working.
For Macy’s, the incident is a reminder of the importance of strong oversight and internal controls. Investors and customers alike will be watching closely as the company navigates this crisis and works to rebuild trust.