Macy’s Delays Earnings Amid $154M Accounting Scandal and Strategic Transformation
Macy’s, one of America’s most iconic department store chains, has delayed the release of its third-quarter earnings report after uncovering a significant accounting discrepancy. An employee allegedly concealed between $132 million and $154 million in delivery expenses over a period spanning from late 2021 through the current fiscal year. This revelation, confirmed by an independent investigation, has raised questions about internal controls while shining a spotlight on Macy’s ongoing efforts to modernize and streamline its operations.
Uncovering the hidden costs
Macy’s accounting investigation revealed discrepancies in its small package delivery expenses. These costs, which totaled approximately $4.36 billion during the period in question, were understated by erroneous entries made by an employee who has since left the company. While Macy’s refrained from disclosing details about how the errors were detected or whether legal action is being considered, the retailer assured stakeholders that the issues had no impact on its cash management or payments to vendors.
CEO Tony Spring stressed the company’s commitment to ethics and customer satisfaction, stating, “While we work diligently to complete the investigation 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.”
Preliminary Financial Results
Despite posting its complete earnings release until December 11, Macy’s offered a glimpse into its third-quarter financial performance. The company reported a 2.4% decline in sales, which fell to $4.74 billion. Comparable sales—including those from its online marketplace—declined by 1.3%. However, Macy’s highlighted areas of growth driven by strategic investments and its focus on high-performing brands.
- Store Optimization Success: Macy’s has been prioritizing 50 locations for enhanced staffing and merchandising. These yield investments achieved a 1.9% increase in comparable sales for the third consecutive quarter.
- Bloomingdale’s and Bluemercury Momentum: Bloomingdale’s saw comparable sales climb 3.2%, while Bluemercury—a fast-growing beauty retailer—reported a 3.3% increase. Bluemercury has now achieved 15 consecutive quarters of growth, a testament to its strong customer appeal and product offerings.
These results reflect the early success of Macy’s strategy to focus on more profitable stores while closing underperforming locations.
Macy’s Transformation in Progress
The accounting issue comes amid broader changes at Macy’s. The company announced earlier this year that it would close 150 stores—or nearly a third of its footprint—by 2027. These closures are part of a larger effort to shift resources toward the roughly 350 stores expected to remain open. Macy’s has also been selling some of its mall anchor properties, although it has not disclosed which locations are on the chopping block.
Notably, Macy’s is doubling down on its high-performing Bloomingdale’s and Bluemercury brands, which continue to deliver strong results. At the same time, the company is investing in its Macy’s Media Network, an advertising platform that grew 13.9% year-over-year to $41 million in revenue for the third quarter.
Challenges Amid Industry Turmoil
Macy’s accounting scandal is not the only challenge the retailer faces. Its parent company, Banco de Sabadell, is currently fighting off a hostile takeover bid by BBVA, one of Spain’s largest banks. Analysts speculate that if BBVA succeeds, it may consider selling Macy’s, given its limited presence in the UK market.
On the financial front, Macy’s credit card revenue fell 15.5% year-over-year to $120 million, reflecting tightening consumer spending. However, CEO Tony Spring offered some optimism, stating that November sales across Macy’s, Bloomingdale’s, and Bluemercury have been trending ahead of third-quarter levels.
Related: Kering Announces Major Leadership Changes at Saint Laurent and Balenciaga: A New Era for Luxury Fashion
Bright Spots in the Holiday Season
As Macy’s heads into the critical holiday season, the company is optimistic about the momentum in its targeted investments. For instance, asset sale gains for the quarter totaled $66 million, exceeding expectations and providing a financial cushion during a tumultuous period.
Macy’s has positioned itself as a leader in offering omnichannel shopping experiences, blending online and in-store retail to attract a broader range of consumers. This approach, combined with a focus on profitability, will be crucial as the company looks to navigate industry challenges and restore investor confidence.
Strengthening Corporate Governance and Accountability
The discovery of Macy’s accounting scandal underscores the importance of robust internal controls and corporate governance in safeguarding integrity business. Companies, particularly those of Macy’s stature, must ensure transparency at all levels of their operations. While Macy’s has taken swift action, this incident highlights the need for tighter oversight to prevent future issues. Moving forward, Macy’s should use this opportunity to not only rebuild trust but also set a higher standard for ethical conduct in the retail industry.
The Macy’s accounting scandal is a stark reminder of the critical role corporate governance plays in today’s business landscape. With so much at stake, companies must establish and maintain strong internal controls to detect and deter financial irregularities. Macy’s response to this crisis will be instrumental in rebuilding investor trust, but this should also serve as a wake-up call for the retail industry as a whole. A stronger commitment to transparency, accountability, and ethical business practices will not only prevent similar incidents but also strengthen long-term stability and growth in an increasingly competitive market.
