Macy’s said a rogue employee intentionally hid more than $154 million in expenses over the past few years, forcing the department store giant to delay releasing its quarterly earnings.
The employee made “intentionally false accounting” entries in an effort to hide years of expenses — from the fourth quarter of 2021 to the most recent quarter ended Nov. 2, the company said.
Macy’s estimates the missing expenses to be between $132 million and $154 million. During the three-year period in question, Macy’s said it spent a total of $4.36 billion in delivery expenses.
The company said it discovered the discrepancies as it was preparing its latest unaudited financial results, which showed a quarterly revenue decline of 2.4%, reflecting weaker-than-expected sales at Macy’s stores and online.
Shares of Macy’s, which is gearing up for the crucial holiday shopping season, fell 2.2% to $15.94.
The employee — who no longer works for Macy’s — was responsible for “small package delivery expense accounting,” the company said.
There is no indication that anyone else was involved in the scheme, Macy’s said, or that the accounting problem affected the company’s cash management or vendor payments.
It is unclear how this individual might have benefited from the scheme, but accounting experts speculated that there were three possible motivations, including securing a large bonus.
“The vast majority of accounting fraud is overreporting of revenues or underreporting of expenses, both of which overstate profitability,” said Stacey Ritter, assistant professor of accounting at Santa Clara University’s Leavey School of Business.
An employee may be motivated to meet earnings targets because they have a bonus for meeting certain targets or they may be under pressure from other people in the company or may own stock in the company and they are motivated to meet earnings targets. Don’t want to reduce value by missing the target, added Ritter.
Restructuring expert Adam Stein-Sapir told The Post it was unlikely the former employee withdrew money from the company. “When someone underreports expenses, it is more likely they are doing so to meet financial goals, which can have a positive impact on their bonus.”
The company did not provide details about the former employee’s motivation.
“At Macy’s, we foster a culture of ethical conduct,” Chairman and Chief Executive Tony Spring said in a statement. “While we work diligently to complete the investigation as quickly as possible and ensure this matter is handled appropriately, our associates across the company look forward to serving our customers and ensuring a successful holiday season.” “We are focused on executing our strategy.”
The company said it was completing an independent investigation into the matter and declined to comment further.
The nation’s largest department store was set to announce its financial results Tuesday morning, but it released preliminary results on Monday that showed third-quarter sales fell 2.4% to $4.7 billion and comparable store sales were up 1.3%. % declined.
By contrast, comparable sales at its luxury department store Bloomingdale’s rose 3.2% and comparable sales at its beauty brand Bloomercury rose 3.3%.
The company is expected to release its full quarter results on December 11.
“We delivered third quarter sales in line with expectations as we continued to focus on our Bold New Chapter strategy initiative,” Spring said in a statement. “Importantly, November comparable sales are running ahead of third quarter levels across all nameplates.”
The company had said this in February Will close about one-third of its stores or about 150 locations by 2027 Consumers curb their discretionary spending Due to inflation.
