[Update as of Dec. 12, 2024] Macy’s has completed its investigation into the financial irregularities that caused the retailer to delay its Q3 2024 earnings announcement, and said that the $151 million in delivery expenses that were hidden by a since-terminated employee “had no material impact” on the company’s results. The employee, who hid the delivery expenses over the course of three years beginning in Q4 2021, was apparently attempting to mask an accounting error, according to CNBC.
“We’ve concluded our investigation and are strengthening our existing controls and implementing additional changes designed to prevent this from happening again and demonstrate our strong commitment to corporate governance,” said Tony Spring, Chairman and CEO of Macy’s, Inc. in a statement. “Our focus is on ensuring that ethical conduct and integrity are upheld across the entire organization.”
Macy’s final Q3 2024 earnings were in line with the preliminary numbers reported on Nov. 25, 2024.
Original story from Nov. 25, 2024 begins-
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Macy’s reported preliminary earnings for its Q3 2024, which ended Nov. 2, 2024, but has delayed the full release of results while it investigates an incident in which it appears an employee hid millions of dollars of expenses for nearly three years.
The irregularity was uncovered as the retailer was preparing its financial statements for the current quarter. Following an independent investigation and forensic analysis, Macy’s said it identified “a single employee with responsibility for small package delivery expense accounting” who had intentionally made erroneous accounting entries to hide approximately $132 to $154 million in delivery expenses from Q4 2021 to this current quarter. While certainly a significant sum, Macy’s said that during the time period in question it incurred approximately $4.36 billion in total delivery expenses, adding that “there is no indication that the erroneous accounting accrual entries had any impact on the company’s cash management activities or vendor payments.”
The employee in question has been fired and, so far, Macy’s said there is no indication of involvement by other employees. Still, the company is delaying its full earnings release until Dec. 11, 2024, so the internal investigation can be completed.
“At Macy’s we promote a culture of ethical conduct,” said Tony Spring, Chairman and CEO of Macy’s, Inc. 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.”
For Q3 2024, net sales decreased 2.4% to $4.74 billion, with comparable sales down 1.3%, less than analysts expected. At Macy’s First 50 stores — that is, the locations where the company has already made investments in staffing, assortment and merchandising as part of its Bold New Chapter turnaround strategy — comparable sales grew 1.9%. However, that growth was offset by weakness at the non-First 50 stores as well as in digital, leading to the overall decline.
“We delivered third quarter sales in line with expectations as we continued to make traction on our Bold New Chapter strategy initiatives,” said Spring. “Our Macy’s First 50 locations achieved their third consecutive quarter of comparable sales growth. At the same time, our luxury brands, Bloomingdale’s and Bluemercury, reported positive comparable sales. Importantly, November comparable sales are trending ahead of third quarter levels across nameplates.”
