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

Macy’s delayed its quarterly results after the company discovered that an employee had hidden up to $154 million in corporate delivery expenses over several years, prompting an investigation.

The retailer said Monday that a single employee, responsible for small-package delivery expense accounting, had intentionally made erroneous bookkeeping entries since late 2021.

The individual didn’t pocket the amounts in question and the company declined to say how it uncovered the erroneous entries or how it went undetected by the company’s auditor, KPMG. Macy’s said it would provide details on its investigation when it reports quarterly results on Dec. 11.

“While Macy’s cannot control the actions of every employee, it is worrying that these are intentional accounting errors that go back to 2021,” said Neil Saunders, managing director of research firm GlobalData. “It also raises the question as to the competence of the company’s auditors.”

A KPMG spokesman declined to comment. The accounting firm has served as Macy’s auditor since 1988.

The disclosure came the day before Macy’s had been scheduled to report its third-quarter results, though the company released preliminary figures on Monday that were in line with forecasts. Shares of Macy’s fell about 3.5% in Monday afternoon trading.

The department-store chain said its internal investigation found that the employee had hidden $132 million to $154 million cumulatively from the fourth quarter of 2021 through the most recent period. The company said it had recognized about $4.36 billion in delivery expenses over the same period.

“Clearly there was a breakdown in the company’s internal controls in this area,” said Jeffrey Johanns, an associate accounting professor at University of Texas at Austin.

Macy’s said there was no evidence the accounting errors had affected its cash management or payments to vendors. The company hasn’t identified involvement by any other employees, and the person who was responsible for the errors is no longer employed by the company.

Retailers have been under pressure to lower delivery expenses in the face of rising costs and an increase in online shopping that have eaten into profits, said Ron Friedman, a managing director at CBIZ, formerly Marcum, an accounting and advisory firm. One possibility is the employee was trying to boost the profitability of their department to increase compensation, Friedman said.

Macy’s declined to comment beyond its statement.

Macy’s is the latest company to report issues in financial statements amid a deepening shortage of qualified accountants in the last several years. Fewer students have pursued accounting degrees, leading to more openings that remain unfilled for longer.

The delayed results come as Macy’s looks to turn around slumping sales. Chief Executive Tony Spring has taken aim at revamping the company’s business by closing underperforming locations and improving customer experience. Those efforts have clashed with continued wariness from shoppers.

The company said that based on preliminary results, sales fell 2.4% to $4.74 billion in the quarter ended Nov. 2. Sales exceeded the $4.72 billion expected by analysts polled by FactSet.

Comparable sales were down 2.4% in company-owned stores. Macy’s said that its comparable sales in November were on pace to exceed results in the third quarter.

Mark Maurer contributed to this article.

Write to Ben Glickman at [email protected] and Suzanne Kapner at [email protected]