Macy’s rocked by $154m accounting scandal, delays Q3 results

Macy’s Inc. has delayed its fiscal third-quarter earnings report after uncovering an alarming accounting discrepancy involving hidden delivery expenses totaling up to $154 million. The revelation came during routine preparations for the quarter ending November 2, 2024, when the American department store company identified irregular entries in its small-package delivery expense account. The issue has been linked to a single employee, whose actions spanned nearly three years, from late 2021 through 2024.

The independent investigation, now underway, has revealed that the employee intentionally manipulated accrual entries to obscure these expenses. Despite the financial irregularity, Macy’s confirmed that its cash management practices and vendor payments remain unaffected. The company acted swiftly, terminating the employee involved and emphasizing its zero-tolerance stance on unethical conduct.

Q3 results impacted but strategy remains on track

Macy’s preliminary financial results for the third quarter show net sales of $4.74 billion, a 2.4% decline compared to the same period last year. The company noted mixed performance across its segments. While its “First 50” locations—a key part of its strategic “Bold New Chapter” initiative—delivered a third consecutive quarter of comparable sales growth, weaker performance in non-First 50 locations and cold-weather categories weighed down overall sales.

Luxury segments performed well, with Bloomingdale’s and Bluemercury posting 1.0% and 3.3% comparable sales growth, respectively. These gains underscore Macy’s ongoing efforts to strengthen its premium and experiential offerings.

Chairman and CEO Tony Spring highlighted Macy’s focus on sustaining ethical practices while continuing to serve customers. He stated that the company is prioritizing the completion of its investigation but remains committed to delivering a strong holiday season.

Financial irregularities spark broader concerns

The uncovered irregularities have raised questions about Macy’s internal controls and oversight mechanisms. Experts believe the incident highlights the need for robust auditing processes to detect and prevent such issues. With delivery expenses accounting for over $4.36 billion during the affected period, the hidden amounts represent a significant fraction of this cost base.

The company’s decision to delay its third-quarter earnings release until December 11, 2024, reflects its commitment to transparency and accuracy. Analysts suggest that the incident, while troubling, could serve as a wake-up call for broader industry practices, where delivery logistics are a growing expense amid the rise of e-commerce.

Investor reaction and the road ahead

Following the announcement, Macy’s shares dropped by nearly 3% in early trading, reflecting investor concerns about the company’s governance and potential financial implications. However, preliminary results also show promising trends, such as a 13.9% increase in revenue from Macy’s Media Network, driven by higher advertiser engagement.

As Macy’s moves forward, its ability to reassure stakeholders and reinforce internal controls will be critical. Industry analysts expect the company to outline concrete measures in its upcoming earnings call to prevent future discrepancies.

Macy’s continues to emphasize its strategic priorities, including focusing on high-performing locations, enhancing digital and in-store experiences, and driving sustainable growth. While this accounting issue poses a significant reputational challenge, it also presents an opportunity for the company to reinforce its commitment to transparency and ethical leadership.