Macy’s Worker Hid Millions in Expenses, Prompting Earnings Delay

The Macy's flagship store in the Herald Square neighborhood of New York.

(Bloomberg) -- Macy’s Inc. is delaying its third-quarter earnings release after an investigation revealed an employee hid more than $100 million of expenses over several years.

The worker “intentionally” hid $132 million to $154 million of delivery expenses through false accounting entries from the end of 2021 through Nov. 2 of this year, the company said Monday. The employee is no longer with the retailer.

Macy’s declined to provide information on the employee’s motive or how the accounting entries slipped by its auditor, KPMG, for years.

The retailer said it discovered the issue while preparing its recent quarterly financial statements, prompting an independent investigation into the person.

KPMG, one of the largest US auditors, declined to comment. The firm has had a series of struggles in recent years, including issuing clean audit opinions for three regional banks just weeks before they failed in 2023 as interest rates rose.

Macy’s was slated to release its earnings report and hold a call with analysts on Tuesday. It said it will issue the release, as well as its fourth quarter and full-year outlooks, by Dec. 11.

The fact that the accounting errors go back to 2021 “raises the question as to the competence of the company’s auditors,” wrote Neil Saunders, managing director at GlobalData. It also creates “more nervousness for investors who are already concerned about the company’s performance.”

Macy’s shares declined 3% at 2:04 p.m. in New York. The stock had lost 19% this year through Friday’s close as Wall Street remains skeptical of Chief Executive Officer Tony Spring’s plan to close poorly performing stores and boost sales at its top locations.

Spring, who took over from Jeff Gennette in February, said there’s “no indication” the issue had any impact on the company’s vendor payments.

“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,” Spring said.

As the largest department-store chain in the US by revenue, Macy’s often serves as a barometer of consumer spending during the all-important holiday season. Delaying earnings until after the annual Black Friday shopping extravaganza may provide investors with a deeper look into holiday spending trends.

Comparable sales at the retailer’s owned and licensed stores during the third quarter dropped 1.3%, according to preliminary results, slightly better than analyst expectations. The picture was rosier at Bloomingdale’s, where third-quarter comparable sales rose 3.2%, and at Bluemercury, which showed a 3.3% increase on an owned basis. Spring said November comparable sales are “trending ahead” of third-quarter levels across its various brands.

Third-quarter sales fell 2.4% to $4.74 billion, below Wall Street estimates.

--With assistance from Amanda Iacone.

(Recasts story.)

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