January 17, 2025

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Macy’s Shares Fall After Profit Hit by Accounting Error

Macy’s Shares Fall After Profit Hit by Accounting Error

(Bloomberg) — Macy’s Inc. trimmed its profit outlook after concluding its investigation into an employee that hid millions of dollars in expenses.

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The misstatement of delivery expenses will have a full-year impact of $79 million on gross margin and adjusted earnings per share, according to a statement on Wednesday. Most of the impact will be recorded in the fourth quarter.

As a result, Macy’s reduced its earnings outlook to $2.25 to $2.50 per share from a previous range from August that topped out at $2.90. It also lowered its projected gross margin rate.

Macy’s shares fell 2.3% at 2:30 p.m. in New York trading, paring an earlier decline of as much as 13%. Through Tuesday, the stock had fallen 17% this year.

Macy’s said the investigation concluded that there was “no material impact or restatements” to its previously filed financial statements. The company reiterated that the probe didn’t uncover evidence of missing cash or unpaid vendors and instead points to accounting errors by a former employee who hid approximately $151 million in delivery expenses from the fourth quarter of 2021 through the third quarter of this year.

The company published revised financial information for those fiscal years on Wednesday.

“We’ve concluded our investigation and are strengthening our existing controls and implementing additional changes designed to prevent this from happening again,” Chief Executive Officer Tony Spring said in the statement. He later told analysts on an earnings call that the ex-employee acted alone and didn’t hide the expenses for personal gain.

‘This Was Not Theft’

During the past several years, Macy’s has focused on reducing its delivery expenses and other costs to increase profitability.

Investigators were told by the employee that, initially, a mistake was made in accounting for delivery expenses, according to a person familiar with the investigation who asked not to be named disclosing information that hasn’t been made public. After that initial mistake, the employee intentionally made erroneous accounting entries to hide the mistake, the person added. The employee no longer works at Macy’s, the retailer has said.

“This was not theft,” Chief Financial Officer Adrian Mitchell told analysts on Wednesday. “There was no impact to revenues and there was no impact to cash or inventories as all vendors were fully paid.”

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