Macy’s has discovered a massive expense fraud, pushing back its Q3 earnings. An investigation found that a single employee intentionally made erroneous accounting entries to hide $132 million to $154 million of expenses from 2021 to November 2. The employee is no longer working for Macy’s, and the company’s cash management and vendor payments were not affected.
Investigation and Forensic Analysis
According to Macy’s, the accounting issue was identified on one of its accrual accounts while preparing its quarterly financial statements. An independent investigation and forensic analysis found that a single employee with responsibility for small package delivery expense accounting intentionally made erroneous accounting accrual entries to hide roughly $132 million to $154 million of expenses from the fourth quarter of 2021 through the fiscal quarter ended November 2.
Impact on Earnings and Sales
Macy’s reported preliminary third-quarter results, with net sales decreasing 2.4% to $4.7 billion. The company’s comparable sales were down 2.4% in company-owned stores, excluding cosmetics. Bloomingdale’s comparable sales rose 1%, while Bluemercury’s comparable sales rose 3.3%.
Key Points
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The accounting issue was identified on one of its accrual accounts while preparing quarterly financial statements
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An independent investigation and forensic analysis found that a single employee intentionally made erroneous accounting accrual entries
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The employee no longer works for Macy’s, and the investigation did not identify any other individuals who participated in the scheme
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The accounting errors did not affect cash management or payments to vendors
Preliminary Results
Some preliminary results for Macy’s third quarter were provided, including:
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Net sales fell 2.4% to $4.74 billion, slightly above the average analyst estimate of $4.72 billion.
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Macy’s comparable sales — sales from established physical and online channels — were down 2.4%, excluding licensed businesses like cosmetics.
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By division, Macy’s comparable sales were down 3%, while Bloomingdale’s comparable sales rose 1%. Bluemercury’s comparable sales rose 3.3%.
Employee No Longer Works for Macy’s
The employee responsible for hiding the expenses is no longer working for Macy’s. The company’s investigation did not identify any other individuals who participated in the scheme.
Cash Management and Vendor Payments
Macy’s said that the accounting errors did not affect its cash management or payments to vendors.
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