Macy's on Monday delayed its third-quarter results after finding that an employee hid as much as $154 million in expenses over years, instead issuing preliminary sales figures that fell short of Wall Street expectations.
The surprise announcement deprives the market of a key department-store bellwether's outlook ahead of a potentially uncertain holiday season that favors retail giants such as Walmart and Amazon.
A single employee "intentionally" made wrong accounting entries to hide about $132 million to $154 million of delivery expenses between the fourth quarter of 2021 through third quarter of 2024, Macy's said. It had recorded about $4.36 billion as delivery expenses in this period.
That employee is no longer with the company, Macy's said, though the revelation, along with the preliminary sales figures, sent shares down 3.5%. The department store chain was set to report results on Nov. 26 and will now publish it by Dec. 11.
"It looks bad... It indicates that they were caught off guard by this," Morningstar analyst David Swartz said, adding that the error should not worry investors as the amount over three years does not seem significant for Macy's.
Macy's preliminary results showed net sales fell 2.4% to $4.74 billion compared to $4.77 billion based on estimates compiled by LSEG, a sign that steep promotions failed to draw customers who have turned selective on purchases for the holidays.
The company said an independent investigation showed no involvement by any other employee, and there was no sign of the error affecting cash management activities or vendor payments.
Along with its full third-quarter results, Macy's said it will provide fourth quarter and annual outlooks, as well as hold its earnings call.
CEO Tony Spring said November comparable sales were trending ahead of third-quarter levels in the run-up to the crucial shopping season when retailers offer big discounts.
Target and several other department store chains may see muted sales as they are skewed toward more slightly pricey non-essential items.
"While we work diligently to complete the investigation as soon as practicable and ensure this matter is handled appropriately, our colleagues are focused on...executing our strategy for a successful holiday season," Spring said.
