Macy's announced that a fraudulent employee intentionally hid up to $154 million in expenses over the past several years, forcing the department store giant to postpone its quarterly earnings report.
The company said the employee engaged in “intentional misaccounting” over a period of years, from the fourth quarter of 2021 through the most recent quarter ended Nov. 2, in an attempt to hide expenses. It is said that
Macy's estimates the cost shortfall to be between $132 million and $154 million. Macy's said it incurred a total of $4.36 billion in shipping costs over the three years in question.
The company said it discovered the discrepancy while preparing its latest unaudited financial results, which showed quarterly sales down 2.4%, reflecting lower-than-expected sales at Macy's stores and online.
Macy's shares fell 2.2% to $15.94 as the company prepares for the important holiday shopping season.
The employee, who no longer works for Macy's, was responsible for “accounting for small package delivery expenses,” the company said.
Macy's said there was no indication that anyone else was involved in the scheme, and there was no indication that the accounting issues affected the company's cash management or payments to vendors.
It's not clear how the individual benefited from the scheme, but accounting experts speculate there could be three motivations, including securing a larger bonus.
Stacey Ritter, assistant professor of accounting at Santa Clara University's Leavey School of Business, said, “The majority of accounting fraud involves over-reporting revenue or under-reporting expense recognition, because both Because it's an exaggeration.”
Employees don't want to lose value by not meeting their revenue goals because they get a bonus for meeting certain goals, or because they are under pressure from other people in the company, or because they own stock in the company. Because of this, you may be motivated to meet your revenue goals. added Ritter.
It is unlikely that former employees siphoned money from the company, restructuring expert Adam Stein Sapir told the Post. “People who underreport expenses are likely doing so as a means to meet financial goals, which can positively impact their bonuses.”
The company did not provide details about the former employee's motives.
“At Macy's, we promote a culture of ethical behavior,” Tony Spring, chairman and chief executive officer, said in a statement. “While we are working diligently to complete the investigation and ensure this matter is properly handled as quickly as possible, our colleagues across the company remain committed to serving our customers and implementing strategies to ensure a successful holiday season.” I’m focused on doing that.”
The company added that it had completed an independent investigation into the matter and declined further comment.
The nation's largest department store had been scheduled to report earnings Tuesday morning, but instead released preliminary results on Monday, reporting third-quarter sales of $4.7 billion, down 2.4%, and same-store sales of 1.3%. It was shown that it decreased.
By comparison, comparable sales at the company's luxury department store Bloomingdale's rose 3.2%, and comparable sales at its beauty brand Bluemercury rose 3.3%.
The company is scheduled to announce its full quarterly financial results on December 11th.
“Third quarter sales were in line with expectations as we continue to advance our bold new chapter strategic initiatives,” Spring said in a statement. “Importantly, November comparable sales are trending above third-quarter levels across nameplates.”
The company announced in February that it would close about a third of its stores, or about 150 locations, by 2027 as inflation causes consumers to curb discretionary spending.
