Macy's Inc. (NYSE:M) revealed the findings of its investigation into a significant accounting mishap that impacted its financial reporting over several years.
The inquiry determined that a single employee's repeated errors and subsequent coverup led to $151 million in falsely recorded expenses, The Wall Street Journal reports.
What Happened: The discrepancies, which stemmed from understated small package delivery expenses starting in late 2021, were perpetuated by intentional erroneous entries and falsified documentation. This manipulation concealed the true costs until its discovery in the fall of 2024.
While Macy's terminated the employee responsible, the company stated the individual did not gain financially from the misconduct, WSJ reports.
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Why It Matters: The timing of the investigation and its fallout couldn't be more critical, given the holiday shopping season's importance to retail. With net sales declining by 2.4% to $4.7 billion for the recent quarter, the company is striving to rebuild investor trust and refocus on operational improvements.
On Wednesday, the company announced adjusted earnings per share for the third quarter that still managed to beat expectations despite the scandal, coming in at $0.04 versus a consensus of $0.03. Macy's highlighted sales strength at its first 50 locations, Bloomingdale's and Bluemercury, partially offsetting broader declines.
According to The Journal, CEO Tony Spring emphasized the need to "strengthen existing controls" to prevent future errors of this magnitude.
Macy's also announced plans to close 65 stores this year, surpassing its initial estimate of 55, and raised $66 million through asset sales during the quarter. Despite these measures, activist investors continue to pressure the retailer to unlock more value, including considering a real estate spinoff.
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