Macy’s has taken steps to tighten its financial controls after discovering a rogue employee had hidden $151 million in delivery expenses over nearly three years. The mistake was initially made in accounting for small parcel delivery expenses and then the person intentionally made errors to cover it up.
According to Chairman and CEO Tony Spring, the employee did not pursue these acts for personal gain but rather to avoid making an error that would have reflected poorly on the company’s financial statements. Macy’s has revised years of financial statements due to this incident, but the company claims it will have no material impact on its finances.
The probe into the cover-up forced Macy’s to postpone its full third-quarter earnings report late last month. The retailer reported falling profit and sales, with cautious spending by customers, rising competition, and sluggish demand for cold-weather goods. Despite this, Macy’s raised sales expectations for the year, but lowered profit projections.
Shares recovered in late-day trading after the announcement, closing at 2% down from $16.33. Spring stated that integrity is paramount at Macy’s Inc. and the company promotes a culture of ethical conduct. The incident occurred during a challenging operating environment for Macy’s, which has seen its shares fall more than 20% over the past year.
Macy’s plans to close 150 stores while upgrading another 350. The retailer is attempting to find a formula to reinvigorate sales, having tested various tactics in dozens of stores. It also expanded its Bluemercury and Bloomingdale’s stores.
The company reported adjusted earnings of 4 cents per share, beating analyst projections by a penny. Comparable store sales fell 1.3%, but sales at Bluemercury rose 3.3%. Macy’s now expects earnings per share to be $2.25 to $2.50 and projected sales of $22.3 billion to $22.5 billion for the year.
Source: https://apnews.com/article/macys-third-quarter-earnings-profit-holiday-60800dd9f1c194510ee9cacbfbba4725