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An accounting irregularity by a Macy's employee has delayed the release of the company's quarterly earnings report, the American department store chain said on Monday. The unnamed accountant deliberately hid up to $154 million in expenses over nearly three years, compelling the retailer to launch an independent forensic investigation, CNN reported.
The company explained the employee, no longer with Macy's, “intentionally made erroneous accounting accrual entries” to conceal small package delivery costs. Macy's has not disclosed why the employee chose to hide the expenses.
While the concealed expenses represented only a small portion of Macy's $4.36 billion in delivery costs between the fourth quarter of 2021 and the most recent period, the company found the errors serious enough to delay publishing its earnings report until December 11. However, Macy's reassured investors there was “no indication that the erroneous accounting accrual entries had any impact on the company's cash management activities or vendor payments.”
So far, the investigation has pointed solely to the former employee, with no other individuals identified as involved in creating false accounting entries.
“At Macy's, Inc., we promote a culture of ethical conduct,” Macy's CEO Tony Spring said in a statement. She added that while the investigation is ongoing and will be handled appropriately, the focus across the organisation remains on serving customers and executing the strategy for a successful holiday season.
Shares of Macy's fell nearly 3 per cent at the market open following the news.
Apart from the accounting issues, Macy's reported a 2.4 per cent decline in quarterly sales, which fell to $4.7 billion. The dip was attributed to weaker performance in its digital channels and cold weather categories, as the country experienced an unusually warm fall.
Retail analyst Neil Saunders from GlobalData Retail remarked, “The decline in sales is to be expected given that the middle-market isn't great, and that Macy's is far from being on the front foot across all of its stores. But it still underlines the fact the company is in overall decline.”
As part of its restructuring plans, Macy's is preparing to close hundreds of underperforming stores. Some of the company's better-performing locations saw a less severe sales decline. Bloomingdale's reported a 1.4 per cent increase in sales, while Bluemercury saw a 3.2 per cent rise.
In July, Macy's declined offers from private investors seeking to take over the company and chose to pursue its strategy for revitalisation.