Macy’s, the iconic U.S. department store chain that also owns Bloomingdale's and Bluemercury, recently uncovered a major accounting issue involving over $130 million in hidden costs. The discovery has delayed the release of the company’s financial results and raised questions about internal controls.

What Caused the $130 Million Accounting Problem?

The issue stems from small package delivery expenses. According to Macy’s, a single employee responsible for tracking these costs intentionally falsified accounting records starting in late 2021. The company emphasized that the individual acted alone.

Macy’s flagged the discrepancies earlier this month while preparing its financial update. Upon investigation, they identified hidden costs totaling $130 million. While this represents a fraction of the $4.3 billion Macy’s spent on delivery services during the three-year period, the impact is significant enough to delay financial reporting.

What Does This Mean for Macy’s Financial Health?

Macy’s reassured stakeholders that the accounting problem does not affect its financial stability or its obligations to other companies. The company is finalizing its financial report and has committed to updating investors by December 11.

The employee responsible is no longer with the company, though Macy’s declined to confirm if they were terminated.

Tony Spring, Macy’s CEO, addressed the situation, saying:
"At Macy’s, Inc., we promote a culture of ethical conduct. While we work diligently to complete the investigation, our team remains focused on serving customers and preparing for a successful holiday season."

Macy’s Ongoing Challenges

The accounting issue emerges as Macy’s grapples with declining sales. In the quarter ending November 2, sales dropped by 2.4% compared to the same period in 2023. While Bloomingdale’s and Bluemercury posted growth, it wasn’t enough to counteract falling revenues at Macy’s stores.

As the holiday shopping season approaches, Macy’s faces dual challenges: rebuilding investor confidence after the accounting mishap and navigating a tough retail environment.

What’s Next for Macy’s?

Macy’s is working to restore trust by ensuring transparency in its financial practices. The company’s ability to overcome this setback will be closely tied to its performance during the crucial holiday season.

Macy’s financial update is due on December 11, where the company is expected to address the full implications of this issue and its plans for the future.

Source: bbc.co.uk