What: Macy's delays its third-quarter earnings report following the discovery of USD 132-154 million in hidden delivery expenses, caused by intentional accounting errors made by a now-terminated employee.

Why it is important: This accounting issue emerges at a critical time during Macy's transformation strategy, potentially impacting investor confidence and complicating the company's ongoing efforts to modernize its operations.

Macy's has launched an investigation into accounting irregularities after discovering intentional errors in delivery expense accounting spanning from Q4 2021 through Q3 2024. The cumulative impact ranges from USD 132 million to USD 154 million, representing a fraction of the USD 4.36 billion in total delivery expenses during this period. While preliminary Q3 figures show net sales decreased 2.4% to $4.74 billion, the full earnings report is delayed until December 11. The company emphasizes that these accounting entries did not affect cash management or vendor payments, and the investigation has not identified any other employee involvement. Despite these challenges, Macy's reports positive momentum in November sales across all divisions, with particular strength in its First 50 locations, Bloomingdale's, and Bluemercury divisions.

IADS Notes: This accounting issue surfaces during a pivotal period in Macy's transformation. While the company's "Bold New Chapter" strategy has shown early success with its "First 50" stores initiative, this development adds complexity to CEO Tony Spring's modernization efforts. The timing is particularly challenging as it coincides with the company's recently announced three-part strategy for sustainable growth and broader restructuring plans involving store closures and format optimization, potentially affecting stakeholder confidence in the company's transformation journey.

Macy's delays its third-quarter earnings report following the discovery of hidden delivery expenses