Macy’s has finalized its inquiry into a former employee who concealed over $150 million in delivery costs. The misrepresentation, which occurred over a span of nearly three years beginning in late 2021 and ending in 2024, caused the retailer to delay releasing its quarterly earnings. The employee entered false accounting figures to hide the expenses, but Macy’s determined that the concealed costs had a negligible impact on its financial statements overall.
The $151 million in hidden costs amounted to a small percentage of the $4.36 billion Macy’s allocated to delivery expenses during that period. While the retailer has not disclosed the reason for the employee’s actions, it confirmed that the individual is no longer part of the organization, though it remains unclear whether the person left voluntarily or was terminated.
To avoid the recurrence of such issues in the future, Macy’s has enhanced its internal protocols and implemented additional safeguards. These measures aim to uphold ethical practices and ensure integrity across all levels of the company. The retailer is also working to bolster corporate governance, aiming to rebuild trust with investors and stakeholders.
Financial Struggles and Declining Sales
Despite concluding its investigation, Macy’s continues to face significant financial challenges. The retailer lowered its profit forecast to between $2.25 and $2.50 per share, down from its previous projection of $2.55 to $2.90 per share. The reduced outlook led to an 11% drop in Macy’s stock during premarket trading, highlighting growing investor frustration with the company’s performance.
Quarterly sales fell by 2.4% to $4.7 billion, with weak digital sales and warm weather being key contributors to the decline. The unseasonal temperatures reduced demand for cold-weather items such as winter coats, further straining the retailer’s revenue.
Investor Demands for Change
Macy’s has faced mounting pressure from activist investors, including Barington Capital and Thor Equities, who have called for drastic measures to unlock shareholder value. The investors suggested that Macy’s should consider selling its valuable real estate assets and shutting down its operations to maximize returns.
This year, Macy’s rejected overtures from private investors seeking to take over the company. Instead, it opted to pursue its own turnaround strategy to revive its fortunes. However, the continued decline in sales and stock value has raised questions about the effectiveness of the company’s approach.
Store Closures and Strategic Shifts
As part of its efforts to regain stability, Macy’s is moving forward with plans to close hundreds of underperforming stores. The locations selected to remain open, referred to as “go-forward” stores, showed some resilience during the last quarter but still reported a decline in sales.
Amid its struggles, Macy’s high-end Bloomingdale’s brand performed relatively better, with sales increasing by 1%. However, this growth fell short of the company’s preliminary estimates. Bluemercury, another Macy’s-owned brand, reported a 3.3% increase in sales, providing a small glimmer of hope for the retailer.
Challenges Ahead
The 165-year-old retailer is under immense pressure to deliver results and retain investor trust. Macy’s continued struggles with declining sales and investor dissatisfaction underscore the challenges it faces in a competitive retail landscape. While efforts to strengthen internal controls and focus on strategic store closures may provide some relief, the path to recovery remains uncertain.
For now, Macy’s must balance investor expectations, operational adjustments, and its commitment to corporate integrity to navigate through these turbulent times.
