Macy's (M) Q3 2024 quarterly earnings

A Macy's store is decorated for the holidays in San Francisco, California, USA, on Wednesday, November 13, 2024.

David Paul Morris | Bloomberg | Getty Images

Macy's at Wednesday said it has completed an investigation into an employee who hid approximately $151 million in delivery charges on its accounting books for nearly three years and that those years of its historical financial statements review.

In a statement, CEO Tony Spring, who took over in February, said Macy's is “strengthening our current controls and implementing additional changes designed to prevent this from happening.” to happen again and demonstrate our strong commitment to corporate governance. “

“Our focus is on ensuring that ethical behavior and integrity are maintained throughout the entire organization,” he said in the company's press release.

Department store operator delayed full quarterly earnings at the end of November, after they discovered an accounting issue while preparing its financial statements for the fiscal quarter and began an independent investigation. They said on Wednesday that the investigation has ended and that they found that there was no significant impact on financial results in previous years or quarters.

An independent Macy's investigation found that “one employee responsible for small package delivery cost accounting intentionally made inaccurate accounting entries and concealed underlying documentation,” according to a financial filing with the SEC Wednesday morning. .The filing said the audit found “a material weakness in its internal control over financial reporting” that allowed the individual to bypass audit information with “manual journal entries.”

The employee told investigators that an error was first made in billing small parcel delivery charges, and then the person made deliberate mistakes to cover up the error, according to sources was familiar with the study.

Macy's said in late November that the person is no longer with the company, but did not say whether the person left the company or was fired.

Macy's look update

Shares of the company sank more than 10% in premarket trading, as Macy's lowered its full-year earnings forecast. The company cut its guidance, saying it expects adjusted earnings per share of $2.25 to $2.50, down from its previous outlook of $2.34 to $2.69.

However, Macy's raised its full-year sales forecast slightly, while still expecting a decline from the previous year. Macy's said it expects net sales to be between $22.3 billion and $22.5 billion compared to the range of $22.1 billion and $22.4 billion previously expected. That would be a year-over-year drop from the $23.09 billion it reported for fiscal 2023.

For full-year comparable sales, a metric that takes out the impact of store openings and closings, Macy's expects a decline of about 1% to about flat from a year ago. That is higher than the previous range of a decrease of about 2% to a decline of about 0.5%. That metric includes merchandise that Macy's owns, products from brands that pay for space within its stores and Macy's third-party online marketplace.

Macy's cut its full-year forecast in August, and its latest guidance remains below the upper end of its outlook earlier in the year.

Here's what the retailer reported for the fiscal third quarter compared to Wall Street expectations, according to a survey of analysts by LSEG:

Earnings per share: 4 cents adjusted. It was not comparable to estimates due to the accounting treatment of the delivery accrual audit.
Revenue: $4.74 billion vs $4.78 billion expected

In the three months ended Nov. 2, Macy's net income fell to $28 million, or 10 cents per share, from $41 million, or 15 cents per share, in the year-ago quarter.

Macy's, which is in the midst of a new turnaround effort, revealed some quarterly metrics earlier. The company reported third-quarter sales of $4.74 billion, a 2.4% year-over-year drop. It also reported a relative decline in sales of 1.3% across its owned and licensed businesses, as well as its online market.

The Macy's name brand remains the weakest part of the company. In the last quarter, comparable sales for the segment fell 2.2% on an owned and licensed basis and includes its third-party market.

However, Macy's said the stores where it has ramped up efforts are seeing stronger sales trends. The company is closing about 150 of its designated stores by early 2027, meaning it has about 350 Macy's locations nationwide. It has already increased staff and investment at 50 of those stores that will remain open. At these locations, labeled “the first 50,” comparable sales grew 1.9%.

At Bloomingdale's, comparable sales climbed 3.2% on a like-for-like basis, including the third-party market. And Bluemercury's comparable sales increased 3.3%, marking the 15th consecutive quarter of comparable sales growth for the beauty brand.

Along with an investigation into the accounting incident, Macy's has been feeling the heat from activist investors. On Monday, activist Barington Capital said he revealed that he has a stake in the company and said he wants the retailer to make moves, including a possible sale of its luxury brands. This is the fourth time in the last ten years that campaigners have targeted the heritage department store.