Macy’s Says Employee Hid Up to $154 Million in Delivery Expenses

The retail giant allegedly discovered accounting fraud by a single employee and delayed its Q3 earnings report to complete an investigation.

A Macy’s store in the Fashion Centre at Pentagon City shopping mall in Arlington, Va., on Jan 3, 2024. Madalina Vasiliu/The Epoch Times

Macy’s Inc. announced on Nov. 25 that it is delaying the release of its third-quarter earnings after uncovering that an employee intentionally hid between $132 million and $154 million in delivery expenses over several quarters.

The discovery was made during the preparation of the company’s unaudited financial statements for the fiscal quarter ended Nov. 2.

An independent investigation revealed that a single employee made erroneous accounting accrual entries to conceal the expenses from the fourth quarter of 2021 through the most recent fiscal quarter, the company said in an investor statement.

The employee responsible for the misconduct is no longer with the company, it said, and the investigation did not identify involvement by any other employee.

Macy’s did not respond to a request for comment on whether the employee’s conduct had been referred to law enforcement.

“There is no indication that the erroneous accounting accrual entries had any impact on the company’s cash management activities or vendor payments,” the statement said.

The company emphasized that the hidden expenses represented a small portion of the approximately $4.36 billion in delivery expenses recognized during the same period.

Macy’s also reported weaker-than-expected preliminary sales for the fiscal third quarter and said it’s delaying the release of its quarterly earnings to complete an investigation into the matter. The retailer was originally scheduled to report its quarterly results on Nov. 26.

Despite the accounting issue, Macy’s provided preliminary third-quarter results. Net sales decreased by 2.4 percent to $4.74 billion, with comparable sales down by 2.4 percent, the company said.

Macy’s “First 50” locations delivered their third consecutive quarter of comparable sales growth, up by 1.9 percent. Bloomingdale’s reported comparable sales growth of 1 percent, and Bluemercury saw a 3.3 percent increase in comparable sales.

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

Macy’s now expects to report its full third-quarter financial results and hold its earnings conference call by Dec. 11. The company will provide an update on its fiscal year 2024 outlook when it reports the full results.

The company assured investors that the issue did not affect its cash management activities or payments to vendors. Macy’s stock remained relatively unchanged in premarket trading after initially falling by more than 3 percent early on Monday, according to The Associated Press.