Macy’s found that a single employee hid up to $154 million worth of expenses

New York
CNN
—

Macy’s announced Monday that a single employee was responsible for so many accounting irregularities that the company was forced to delay its quarterly report, which the retailer had planned to release on Tuesday.

The company recently discovered that the unnamed employee intentionally hid as much as $154 million in expenses over nearly three years, prompting the retailer to conduct an independent forensic accounting investigation. The employee, who Macy’s said is no longer with the company, “intentionally made false accounting entries” to hide small package delivery costs.

Macy’s did not say why the employee hid the expenses.

Although the questionable expenses were a small fraction of the $4.36 billion in delivery costs that Macy’s recognized between the fourth quarter of 2021 through its most recent period, Macy’s found that the errors were significant enough to delay reporting its full quarterly earnings until December 11. the company said there was “no indication that the erroneous accounting accrual entries had any impact on the company’s cash management activities or supplier payments.”

So far, the company’s investigation only points to the one former employee. The investigators have not found any other employees who may have participated in the creation of the false accounting records.

“At Macy’s, Inc., we foster a culture of ethical behavior,” Macy’s CEO Tony Spring said in a statement. “While we are working diligently to complete the investigation as quickly as possible and ensure this matter is handled appropriately, our colleagues across the company are focused on serving our customers and executing our strategy for a successful holiday season.”

Accounting woes will do little to reassure investors, who have sent Macy’s stock down nearly 20% this year.

The accounting problem “raises the question of the competence of the company’s accountants,” Neil Saunders, retail analyst and managing director at GlobalData Retail, told CNN. “Such things create more nervousness for investors who are already worried about the company’s performance.”

Macy’s released a preliminary earnings report Monday, revealing that quarterly sales fell 2.4% to $4.7 billion due to weakness in its digital channels and cold weather categories as the country experienced its warmest drop on average.

The retailer’s drop in sales is “expected since the mid-market is not great and Macy’s is far from being on the front foot in all of its stores. But it still underscores the fact that the company overall is in decline,” Saunders said.

The company has identified hundreds of stores it plans to close as part of a turnaround plan. The stores that the company plans to keep open fared somewhat better, but their sales still fell.

Bloomingdale’s fared better, with sales at its high-end stores up 1.4%. Sales of Bluemercury increased by 3.2 per cent.

The 165-year-old retailer in July rejected talks with private investors trying to take over the company, opting to pursue its own strategy to rebuild the chain.

Shares of Macy’s ( M ) fell nearly 3% at the open.