Macy's sales dropped in the third quarter as the retail titan unveiled a surprising accounting issue involving up to $154 million in hidden delivery expenses. The revelation has cast a shadow over the company’s financial standing just as it prepares for the busy holiday season.
Macy’s has postponed its full earnings report to complete an investigation, but its preliminary data reveals declining sales and mounting concerns about its operations.
Macy's Sales Dropped: A Closer Look at the Accounting Scandal
The unexpected announcement of Macy’s sales drop wasn’t the only surprise. The retailer disclosed an internal accounting issue where one employee hid $132 million to $154 million in delivery expenses. These hidden costs, spanning from late 2021 through the fiscal third quarter of 2023, went undetected until recently.
GTN / According to Macy’s, the employee responsible for these errors is no longer with the company.
While the issue has not impacted cash flow or vendor payments, the revelation raises questions about internal oversight. CEO Tony Spring reassured customers and stakeholders, emphasizing the company’s commitment to ethical practices and transparency.
Still, this accounting mishap has created an air of uncertainty around Macy’s operations.
Third-Quarter Sales Figures Reflect Challenges
Even without the accounting irregularities, Macy's sales dropped during the third quarter, reflecting broader retail challenges. Sales fell by 2.4%, landing at $4.74 billion, with comparable sales (including owned and licensed businesses) down 1.3%. At Macy’s brick-and-mortar stores, sales decreased 0.9% on an owned-plus-licensed basis.
These figures highlight the hurdles Macy’s faces, including shifting consumer habits, rising competition, and economic uncertainty. The company’s online marketplace, which has been a key growth area, also reported declines.
Why Macy’s Postponed Its Earnings Report
The delayed earnings report stems from the time required to investigate the accounting issue. While the company hasn’t disclosed details about how the errors were discovered, Macy’s has confirmed it conducted an independent investigation. The findings pointed to an individual who mishandled delivery expense entries for nearly two years.
Macy’s noted that the discrepancy affected one accrual account, which tracks delivery expenses. These costs are significant for a retailer of Macy’s scale, with the company reporting $4.36 billion in delivery expenses over the impacted period. This revelation not only underscores the seriousness of the issue but also raises questions about oversight processes within the organization.
Telly / Despite the accounting setback, Macy’s leadership remains optimistic, focusing on its core strengths, including holiday décor and gift selections.
Macy’s Faces Growing Pressure Amid Falling Sales
The announcement of Macy’s sales drop comes at a critical time for the company. With the holiday season approaching, the retailer faces increased pressure to regain consumer trust and deliver strong results.
CEO Tony Spring highlighted the importance of the holiday season, calling it an opportunity to solidify customer loyalty. However, the recent sales figures and the fallout from the accounting error may weigh heavily on the retailer’s ability to meet its year-end goals.
What Does It Mean for Macy’s?
The Macy’s sales drop and accounting scandal reflect broader challenges in the retail industry. As customers increasingly shift to online shopping and competitors like Amazon continue to dominate, legacy retailers like Macy’s must innovate to stay relevant. The hidden expenses issue, while troubling, also underscores the importance of robust internal controls in maintaining trust and financial integrity.
Macy’s must navigate these hurdles while addressing consumer concerns about transparency and reliability. The company has pledged to release its full earnings report by December 11, which will provide further clarity on its financial position and future strategy.
