Macy’s has been operating under a cloud due to a multimillion-dollar accounting error that was recently revealed. The company said an employee intentionally made erroneous accounting entries and falsified documentation over the past few years, affecting delivery expenses from late 2021 to this year. Although the impact on revenues and cash flow was minimal, the error required the company to revise its previous accounts and lower its forecast for profits.
Analysts see bigger challenges for Macy’s beyond lax accounting. The retailer is struggling with weak sales and fending off activist investors pushing for major changes. Despite slightly raising its full-year revenue forecast, Macy’s still expects a slight decline in comparable sales. Its stock fell 6% after announcing the error.
The company’s turnaround plan, announced in February, aims to attract more discerning consumers by improving store experiences and closing underperforming locations. However, analysts are skeptical about the plan’s success, citing past failures. Department stores are facing a shift towards online shopping, with brands opening their own stores and building direct relationships with customers.
Macy’s forecast for the rest of the year assumes pressures on consumers will persist, with a focus on attracting cost-conscious consumers while maintaining profitable growth. Analysts see a glimmer of hope in the company’s future locations, which showed a 1.9% increase in comparable sales. Nevertheless, Macy’s stock price remains stagnant due to concerns about the retailer’s ability to overcome its challenges.
The activist campaign by Barington Capital and Thor Equities may provide some relief for Macy’s, as they plan to pressure the company to reduce capital expenditures and buy back shares. However, analysts remain cautious about the company’s prospects.
Source: https://www.nytimes.com/2024/12/11/business/macys-earnings-accounting-error.html