By Daily Mail (U.S.) | Created at 2024-12-11 22:11:55 | Updated at 2024-12-22 18:55:04
1 week ago
A Macy's accountant hid $150 million in expenses after making a genuine mistake and trying to cover it up for years afterwards, an investigation has heard.
The since-fired employee accidentally understated the value of small parcel delivery expenses in late 2021, an official briefed on the probe told the Wall Street Journal.
In a desperate bid to mask the error, the accountant intentionally made incorrect accounting entries and falsified accompanying documents for years until the colossal blunder was uncovered this fall.
According to the official, the employee, who has not been named, was not motivated by personal or financial game. They are said to have made false records only to cover their mistake.
The discovery of the accounting errors prompted Macy's execs to postpone the reporting of their quarterly financial results for two weeks in November, causing a landslide in shares as investors pulled out amid the chaos.
Sales at the iconic department store chain, which also owns Bloomingdale's, fell by 2.4 percent in the quarter ending in November. Shares plummeted more than 12 percent in early trading on the news. They had already fallen 22 percent this year.
Meanwhile, Macy's stock dropped another 10 percent on Wednesday after the retailer slashed its profit targets for the year, per the Wall Street Journal.
Executives blamed shopping habits and the cost of living for the pullback, saying it expected consumers to continue cutting down on non-essential spending.
A Macy's accountant hid $150 million in expenses after making a genuine mistake and trying to cover it up for years afterwards, an investigation has heard
Macy's has been hit by falling sales ahead of the traditional holiday shopping period
Chairman and CEO Tony Spring said the company are working diligently to complete the investigation
Macy's declined to comment on whether it had referred the case to any law-enforcement or regulatory authorities.
They said the employee who caused the financial nightmare hid around $151 million in cumulative delivery expenses from the fourth quarter of 2021 all the way up until the third quarter of 2024.
'We've concluded our investigation and are strengthening our existing controls and implementing additional changes designed to prevent this from happening again,' Macy's Chief Executive Officer Tony Spring said in a press statement.
The executive did not disclose how the erroneous entries were unearthed, or how they managed to slip the notice of the company's auditor, KPMG.
According to the Wall Street Journal, Macy's paid KPMG around $12.8 million in audit fees from 2021 until 2023.
DailyMail.com has contacted KPMG for comment.
The Big Four accounting firms, PwC, Deloitte, EY, and KPMG, have admitted to hundreds of violations of audit independence regulations in the US.
A retail expert told DailyMail.com that while there may be more store closures, Macy's still makes a profit and so was not a bankruptcy risk.
The troubled department store chain announced in February that it would shut 150 over the next three years - including 55 by the end of 2024.
It will be left with just 350 stores - a far cry from the peak of around 1,100 in 2008. Since then it has been in steady decline.
The company's stock is down 22 percent so far this year
The retailer recently revealed a lone employee hid more than $150 million in delivery expenses
Macy's has yet to announce exactly which stores will be affected, but employees are speculating whether their location could be on the chopping block.
The latest to emerge is at the Kingston Collection mall in Massachusetts, but will stay open for locals to shop there through the holidays and close in early 2025.
On this morning's quarterly earnings, retail expert Neil Saunders from GlobalData said: 'Macy’s outlook is very mixed. There is still a big dose of decline in the numbers, but the chain isn’t at the bottom of the department store league table – which is positive.
'The numbers are not expected to strengthen significantly over the year ahead as the consumer economy remains pressured and Macy’s is in the middle of a turnaround program.
'There will certainly be store closures in the year ahead, but most of these have already been planned in.
'Macy’s might be struggling to generate growth, but the group is still generating profit and is in the black. As such, bankruptcy is not on the cards.'
