Macy’s Tightens Financial Controls After $151 Million Accounting Error by Employee

Macy’s announced that it has strengthened its internal financial controls following the discovery of a significant accounting error involving a rogue employee who concealed $151 million in delivery expenses over nearly three years.

The error, which was uncovered after an internal investigation, led the retailer to delay the release of its third-quarter earnings report last month.

The investigation revealed that the employee, who is no longer with the company, initially made an error in accounting for small parcel delivery expenses. Subsequently, the employee intentionally manipulated the figures to cover up the mistake. Macy’s clarified that the employee did not act with personal gain in mind, with Chairman and CEO Tony Spring emphasizing that the incident was not an attempt to steal money, but rather a cover-up of an accounting error.

While the company stated that the discrepancy would not have a material impact on its overall financial position, it did require the revision of several past financial statements. Despite this, the error accounted for a small fraction of the $4.36 billion in delivery expenses that Macy’s reported between the fourth quarter of 2021 and the third quarter of 2024.

Macy’s is now taking steps to reinforce its financial oversight and prevent similar issues in the future. Spring commented that the company is “strengthening our existing controls and implementing additional changes designed to prevent this from happening again.” The company’s commitment to ethical conduct and corporate governance remains a priority, he added.

The news of the accounting issue comes at a challenging time for Macy’s, which is grappling with lower profit and sales amid heightened competition and shifting consumer spending patterns. The department store chain has faced ongoing difficulties in adjusting to changing market conditions, including cautious consumer behavior and a rise in competition from big-box retailers like Walmart, as well as e-commerce platforms.

Macy’s reported a 2.4% drop in net sales for the quarter, totaling $4.7 billion, and adjusted its profit outlook for the year, lowering its earnings per share guidance to between $2.25 and $2.50, down from a previous estimate of $2.34 to $2.69. The company also acknowledged a $79 million impact related to the delivery expense error.

The company’s stock experienced a decline of more than 11% in pre-market trading, reflecting investor concerns about Macy’s financial performance and the impact of the accounting mishap. Although the shares later recovered slightly, they remained down by about 2%.

As part of its broader efforts to turn around its performance, Macy’s is implementing various strategies, including store upgrades and expansions of its Bloomingdale’s and Bluemercury brands. However, the retailer faces increasing pressure from activist investors, who are urging the company to explore options such as unlocking the value of its real estate assets, including its iconic flagship store in Manhattan.

While the investigation into the accounting error is now concluded, it has raised questions about Macy’s internal controls and its ability to manage such errors in the future. As part of its response, the company has seen two members of its audit committee resign since October, though it emphasized that their departures were not related to any disagreements with the company.

The Associated Press, CNN, and the Financial Times contributed to this report.