Macy’s earnings plunged into chaos by mistakes of single accountant who hid $150 MILLION of expenses

A Macy’s employee hid up up to $154milion in expenses, forcing the company to delay their third-quarter earning results.

The company reported weaker-than-expected sales after it discovered the worker had intentionally hid the hundreds of millions of dollars over several years.   

The department store chain, which also operates Bloomingdale’s and Bluemercury cosmetics chain in addition to its namesakes stores, was expected to report quarterly results on Tuesday.

The retailer said Monday that it identified an issue related to delivery expenses in one of its accrual accounts earlier this month. 

An independent investigation and forensic analysis found that a single employee with responsibility for small package delivery expense accounting intentionally made erroneous accounting accrual entries.

These were made to hide roughly $132 million to $154 million of expenses from the fourth quarter of 2021 through the fiscal quarter ended November 2.

The company recognized about $4.36 billion of delivery expenses during the same time period.

Macy’s said that there’s no indication that the erroneous accounting accrual entries had any impact on its cash management activities or vendor payments.

Chairman and CEO Tony Spring said the company are working diligently to complete the investigation

The company added that the person behind the conduct is no longer an employee and that the investigation didn’t identify involvement by any other worker.

Macy’s said is it delaying reporting its third-quarter earnings results to complete an independent investigation. 

It anticipates reporting its full third-quarter financial results by December 11.

‘At Macy’s Inc., we promote a culture of ethical conduct,’ Chairman and CEO Tony Spring said in a statement. 

‘While we work diligently to complete the investigation as soon as practicable and ensure this matter is handled appropriately, our colleagues across the company are focused on serving our customers and executing our strategy for a successful holiday season.’

The company did provide some preliminary results for its third quarter, including that net sales fell 2.4% to $4.74 billion, slightly above the average analyst estimate of $4.72 billion.

Macy’s Inc.’s comparable sales – sales from established physical and online channels – were down 2.4 per cent, excluding licensed businesses like cosmetics. 

By division, Macy’s comparable sales were down 3 per cent, while Bloomingdale’s comparable sales rose 1 per cent. Bluemercury’s comparable sales rose 3.3 per cent.

Macy’s so-called First 50 stores – which are the ones Macy’s has renovated and put more effort into with extra customer service – produced a comparable sales gain of 1.9 per cent in the latest quarter.

Macy’s has upped the number of stores that it is closing this year, as it attempts to revamp its dwindling business (Pictured: Flagship store in Manhattan)

Shares fell close to 3 percent, or 44 cents, to $15.85 in early morning trading Monday.

The troubled department store chain announced in February that it would shut 150 over the next three years – including 55 by the end of 2024.

It will be left with just 350 stores – a far cry from the peak of around 1,100 in 2008. Since then it has been in steady decline.

Macy’s has yet to announce exactly which stores will be affected, but employees are speculating whether their location could be on the chopping block.

The latest to emerge is at the Kingston Collection mall in Massachusetts, but will stay open for locals to shop there through the holidays and close in early 2025.

Like many department stores, Macy’s has been suffering from dwindling sales amid the stratospheric rise of online rivals and the demise of America’s suburban malls.

Earlier this year, Spring was named the new CEO – and he announced a major turnaround effort.

This includes closing more than a third of stores – leaving just 350 nationwide by 2026 – and focusing more on its luxury offerings Bloomingdale’s and Bluemercury.

It also closed five further locations in January, and laid off over 2,000 workers.