CNN
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Macy’s said Wednesday that it has concluded its investigation into an employee who intentionally hid more than $150 million in expenses, and it has tightened its controls to avoid a repeat of the embarrassing problem.
The troubled retailer said its investigation revealed a single, unnamed accounting employee—who was responsible for keeping tabs on small package delivery expenses— intentionally entered erroneous accounting accrual figures to hide roughly $151 million of delivery expenses over the course of nearly three years.
The bad data, which the company discovered last month, forced Macy’s to delay its quarterly earnings report by a couple of weeks as it worked to conclude its forensic accounting investigation.
“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 CEO Tony Spring in a statement. “Our focus is on ensuring that ethical conduct and integrity are upheld across the entire organization.”
The company found that the erroneous accounting, which took place between the fourth quarter of 2021 and the third quarter of 2024, wasn’t ultimately material to Macy’s previously filed financial statements. The questionable expenses were a small fraction of the $4.36 billion in delivery expenses Macy’s recognized between the fourth quarter of 2021 through its most recent period.
Macy’s still hasn’t said why the employee hid the expenses. The retailer noted last month that the employee was no longer with the company, but Macy’s didn’t say whether the person was fired or left on their own.
The conclusion of the investigation did little to soothe investors who are increasingly fed up with the company’s poor performance.
Macy’s (M) stock fell more than 11% in premarket trading after the company reduced its profit forecast. The company significantly lowered its earnings forecast to between $2.25 to $2.50 a share, down from its August forecast of $2.55 to $2.90 per share.
The company also reported Wednesday that its quarterly sales fell 2.4% to $4.7 billion. Macy’s blamed weakness in its digital sales, as well as warm weather that devastated demand for cold-weather items like winter coats.
Macy’s is struggling and is working to fend off multiple activist investors – two of which said this week that Macy’s would be more valuable if it unlocked its real estate value, which is worth more than the company itself. On Monday, Barington Capital and private equity firm Thor Equities called on the company to make drastic changes to boost its stock price, which has fallen more than 15% this year.
The 165-year-old retailer in July rejected talks with private investors attempting to take over the company and opted to pursue its own strategy to remake the chain.
Part of Macy’s turnaround effort includes plans to close hundreds of stores. The locations that the company plans to keep open performed somewhat better last quarter, but sales at those “go-forward” stores still fell.
Bloomingdale’s fared better in the quarter: Sales at those higher-end stores rose 1%. Bluemercury sales rose 3.3%.
This story has been updated with additional context and developments.
