Macy’s Investigation Reveals $151 Million Accounting Misstatement

NEW YORK, December 11, 2024 – Macy’s, Inc. provided more ​details ​on an employee’s intentional accounting errors, resulting in the concealment of approximately $151 million in shipping costs for ​almost three years. This information, revealed during the preparation of Macy’s unaudited financial statements for the quarter ending November 2, 2024, triggered a review of ​historical financial data ​and identified weaknesses in internal controls.

Research reveals intentional errors

The independent investigation, conducted with the support of forensic accounting, revealed ​that only one employee responsible for accounting for the delivery costs of small parcels had deliberately made ​incorrect access entries from the fourth quarter of 2021 to the third quarter of 2024. ​Macy indicated that ​inaccuracies did ​not affect net cash flows, inventories or payments ​from suppliers.

After the analysis, the company found that there was ​no significant impact on its historical ​financial results. However, Macy reviews its consolidated financial statements in order to accurately reflect the costs of carrying out and related tax ​effects. The revisions are detailed ​in an ​updated Form 8-K submitted to the Securities and Change Commission (SEC). The company ​plans to submit its 10-Q form for the fiscal quarter ended November ​2, 2024, no later than December 12.

“We have completed our ​research and strengthened our existing controls and are implementing further changes to prevent this from happening again and to demonstrate our strong commitment to corporate governance. »

jeff Gennette, CEO of Macy. The company has emphasized the maintenance of ethics and integrity in its operations as a cornerstone of its governance strategy.

Financial and investor reactions

The issue ​of accounting comes at a difficult time for Macy, as the company struggles ​with the reduction of performance and dissatisfaction of shareholders. In its latest profit report, Macy revealed ​that quarterly sales decreased by 2.4 per cent to $4.7 ​billion, citing low digital sales and an exceptionally hot climate, which dampened demand for winter clothing. The retailer ​also significantly reduced its profit forecast for the year, projecting revenues from $2.25 to $2.50 per ​share, from ​$2.55 to $2.90 per share ​in August.

Investors reacted with ​dismay, ​sending Macy plumbing shares of more than 11% in pre-market trade. The announcement comes as the company faces pressure from several activist investors demanding drastic changes to ​stimulate the company’s evaluation. Two activist ​groups, Barington Capital and Thor Equities, suggested that Macy unlock ​the value of their real estate, ​which seems ​to be worth more than the company itself.

Activist pressure and strategic challenges

Activist investors criticized Macy for not capitalizing on his real estate assets ​and called for a more aggressive strategy to revitalize the ​165-year-old retailer. In ​July, Macy rejected discussions with private investors, ​instead opting for an internal change plan. This strategy includes the closure of hundreds of low-performance stores while focusing on “future” locations that showed better, though still declining, performance in the last quarter.

Bloomingdale’s, Macy’s premium ​department store chain, has offered a rare bright spot in the company’s portfolio. Sales to Bloomingdale increased by 1% during the quarter, while ​sales to ​Macy’s ​beauty retailer Bluemercury ​increased by 3.3%. These achievements, however, were not sufficient to ​compensate for the broader weaknesses of Macy’s core operations.

Rebuilding confidence through governance

Macy now focuses on restoring confidence with investors and stakeholders ​who address the root causes of the accounting issue. ​The company is committed to improving its financial controls and ​putting in place stricter supervisory ​mechanisms to avoid ​future discrepancies. Analysts noted that while early identification ​by Macy of inaccuracies and ​transparent ​research ​management are positive steps, the incident highlights deeper governance challenges that need to be ​addressed.

As part of its rehabilitation efforts, Macy plans to invest ​in advanced accounting technologies and conduct training programs to strengthen ethical standards among its employees. By ​aligning its governance practices with investor expectations, Macy aims to restore ​confidence in its financial reporting and administration.

I’m watching

Accounting inaccuracy and its fall are Macy’s commodities with a rapidly changing retail landscape and increasing competition. The company’s commitment to strong controls and improved ​governance will be essential as it seeks to overcome ​these challenges and provide long-term value to its shareholders. Although Macy has demonstrated resilience over his 165 years of existence, his ability to adapt to current pressures and regain investor confidence remains uncertain.

With active investors who continue to drive strategic change and the retail sector in full transformation, Macy will have ​to find a delicate balance between innovation and ​tradition. ​The ​next steps of ​the ​company will be carefully followed by the actors, who are trying to rebuild their reputation and ​reposition ​themselves ​for sustainable growth.