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Macy’s rogue employee hid $151M in expenses to cover up mistake, wasn’t motivated by personal gain: report

Macy's investigation into accounting issues found that fraudulent employees hid more than $151 million in expenses to hide bookkeeping errors and were not motivated by personal or financial gain, according to the report. announced that it had been found.

News of the accounting cover-up in late November delayed the company's quarterly earnings report, and its stock price plummeted.

Shares of the department store giant fell more than 11% on Wednesday after Macy's cut its profit outlook for this year.

Macy's CEO Tony Spring said in response to the accounting fraud investigation that “integrity is paramount at Macy.” Getty Images for Fragrance Foundation

Acting alone, the former employee hid shipping costs for three years and intentionally made “errors in the bookkeeping.” [falsifying] “We did not produce the underlying documentation to underestimate shipping costs,” the company said in a securities filing.

The employee told investigators in late 2021 that he had mistakenly underreported the cost of a package delivery service, according to a person briefed on the investigation, according to The Wall Street Journal. The newspaper reported, citing sources, that the employees “did not act for personal or financial gain.”

The employee, whose identity was not disclosed by Macy's, “continued to intentionally make false accounting entries and falsify underlying documents until the misstatements were discovered this fall” to conceal the mistakes. a source told the Journal.

Macy's previously estimated that between $132 million and $154 million was hidden due to errors, but said employees hid expenses from the fourth quarter of 2021 to the third quarter of 2024. Announced.

The company said its revenue, cash, inventory and vendor payments were unaffected.

Macy's CEO Tony Spring said in an earnings call Wednesday that the person responsible has now left the company after his actions were discovered. “We have also identified and begun implementing additional controls to become a stronger and more disciplined organization to ensure this type of behavior never occurs again.”

Macy's has lowered its profit forecast for this year after third-quarter results showed weak sales. AP

Macy's delayed its third-quarter earnings report by two weeks after an accounting error was discovered in late November.

The Wall Street Journal reported that a fired former employee told Macy's that he made an accounting error and then tried to cover it up, but that he did not do it for personal gain. It is said that

Macy's, meanwhile, lowered its profit forecast to $2.25-$2.50 per share from its previous estimate of $2.34-$2.69.

Macy's net income fell to $28 million, or 10 cents per share, from $41 million, or 15 cents per share, in the year-ago period.

Macy's also expects full-year sales to be lower than last year's $23.09 billion. The company estimates that its sales this year will not exceed $22.5 billion.

Spring added on the conference call that the company is “certainly seeing sales trends starting in the third quarter.”

The department store expects to close 65 stores next year, and more than 150 total by 2017. Getty Images

In the third quarter ended Nov. 2, Macy's sales for the three months ended Nov. 2 were $4.7 billion, down 2.4% from a year earlier. Sales at stores open for at least a year fell 2.4%.

The company previously announced it would close about 150 underperforming stores and reduce its number of locations to 350 by 2027. The company announced Wednesday that it expects to close 65 stores next year.

The company says a large number of store closures are occurring in markets with other stores.

One of those stores is in downtown Brooklyn, where Macy's will close its Fulton Street store and sell it at a deep discount, the Post reported.

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