Macy’s Discovers $154 Million in Hidden Expenses by Single Employee, Delays Earnings Report

Macy’s revealed on Monday that a single employee was responsible for accounting irregularities that forced the retailer to delay its quarterly earnings report, originally scheduled for Tuesday.

The company uncovered that the employee, whose name has not been disclosed, intentionally concealed up to $154 million in expenses over nearly three years by creating erroneous accounting accrual entries. These irregularities were tied to small package delivery costs, leading Macy’s to initiate an independent forensic accounting investigation.

The retailer did not provide details on the employee’s motive but confirmed that the individual is no longer with the company. Despite the magnitude of the hidden expenses, Macy’s emphasized that the errors accounted for a small fraction of the $4.36 billion the company spent on delivery expenses from the fourth quarter of 2021 through the most recent reporting period.

The company assured investors that the inaccuracies did not impact its cash management activities or vendor payments. However, the discrepancies were significant enough to delay the release of the full quarterly earnings report until December 11.

The investigation has so far found no evidence of other employees being involved in the falsification of accounting records.

“At Macy’s, Inc., we promote a culture of ethical conduct,” said Macy’s CEO Tony Spring 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 announcement comes at a challenging time for Macy’s, as the company’s stock has already dropped nearly 20% this year.

The accounting scandal has further shaken investor confidence, with Neil Saunders, retail analyst and managing director at GlobalData Retail, questioning the company’s auditing processes. “Such things create more nervousness for investors who are already concerned about the company’s performance,” Saunders told CNN.

On Monday, Macy’s released a preliminary earnings report, revealing that quarterly sales had declined 2.4% to $4.7 billion.

The retailer cited weaknesses in digital channels and cold-weather categories as contributing factors, with the U.S. experiencing one of its warmest falls on record.

The decline in sales reflects broader struggles within Macy’s, which has been facing challenges in the middle-market retail sector.

As part of a turnaround strategy, Macy’s has identified hundreds of stores for closure, though stores that remain open have shown marginally better performance. Sales at Bloomingdale’s, Macy’s higher-end brand, rose by 1.4%, while Bluemercury, its luxury beauty chain, saw a 3.2% increase in sales.

Macy’s, a 165-year-old retailer, has been under pressure to adapt to shifting consumer trends and competition. In July, the company rejected takeover talks from private investors, opting instead to pursue its own transformation strategy.

Despite these efforts, Macy’s stock fell nearly 3% after the market opened on Monday.

The accounting irregularities and ongoing sales challenges underline the difficulties the retailer faces in restoring investor confidence and revitalizing its brand in an increasingly competitive retail landscape.