Macy's Faces Financial Setback After $151 Million Accounting Error
New York City, Wednesday, 11 December 2024.
Macy’s disclosed a $151 million accounting error, impacting its earnings forecasts. The error led to revised profit outlooks and a significant drop in stock prices.
Investigation Reveals Employee’s Cover-up
Macy’s (NYSE: M) investigation revealed that a single employee concealed over $151 million in delivery expenses spanning from late 2021 through the third quarter of 2024 [1][2]. According to company officials, the employee initially made an accounting mistake and subsequently attempted to hide it through erroneous entries and falsified documentation [4]. CEO Tony Spring emphasized that the employee, who has since been terminated, acted alone and did not pursue these actions for personal gain [2][4].
Financial Impact and Market Response
The revelation has forced Macy’s to revise its financial outlook significantly. The company lowered its full-year earnings guidance to $2.25-$2.50 per share, down from the previous forecast of $2.34-$2.69 [2]. The accounting error’s impact on gross margin and adjusted earnings per share is estimated at $79 million [3]. The market responded severely to this news, with Macy’s stock falling 6% following the announcement [1], and showing a more substantial decline of 17% year-to-date as of December 10, 2024 [5].
Broader Business Challenges
Beyond the accounting issues, Macy’s faces additional business challenges. The company’s net income for the third quarter fell to $28 million from $41 million in the previous year [4]. Sales declined 2.4% to $4.7 billion compared to the same period last year [4]. In response to these challenges, Macy’s has announced plans to close approximately 150 stores by early 2027, with about 65 locations already shuttered this year [2].
Looking Forward
Macy’s is taking steps to address these issues, implementing measures to improve its financial controls [1]. The company has slightly raised its sales forecast to between $22.3 billion and $22.5 billion, though this still represents a decline from the $23.09 billion reported for fiscal 2023 [2]. A scheduled conference call on December 15, 2024, will provide more details about the accounting issues and revised forecasts [1]. Meanwhile, activist investor Barington Capital, which disclosed its stake on December 9, 2024, is urging the retailer to consider potential sale of its luxury brands [2].