Macy’s said Wednesday that a rogue employee was in charge of concealing $151 million in delivery costs over almost three years.
The department store chain claimed in a statement that accompanied its quarterly earnings results that one employee in charge of small-package delivery expense accounting purposefully made false cost entries from the fourth quarter of 2021 to the third quarter of 2024. According to a regulatory filing made by Macy’s on Wednesday morning, the employee also fabricated supporting documentation.
When the matter was initially made public last month, Macy’s estimated that the number of incorrect entries was between $132 million and $154 million. Macy’s shares fell after the disclosure, which resulted in a two-week delay in the company’s quarterly results.
In a statement, Macy’s Chairman and CEO Tony Spring said, “We have come to the conclusion of our investigation and are strengthening our existing controls and implementing additional changes designed to prevent this from happening again and demonstrate our strong commitment to corporate governance.” Our goal is to make sure that integrity and moral behavior are maintained throughout the entire company.
Macy’s reaffirmed that the employee is “no longer with the company” and provided no further details regarding how the individual’s actions were revealed.
According to Macy’s, the examination revealed that its internal accounting processes were susceptible to being circumvented by staff members. According to the corporation, those procedures are being revised.
Additionally, following consultation with its longstanding independent accounting firm, KPMG, Macy’s stated that a report on its internal controls that was published in February “should no longer be relied upon”—as should KPMG’s prior support of Macy’s internal controls.
In addition to reporting results that fell short of analysts’ projections, Macy’s shares saw an 11% decline in pre-market trade on Wednesday.
While $151 million is less than the $4.36 billion Macy’s reported total delivery costs for the relevant period, it is still more than the company’s $105 million net profit for the most recent fiscal year.
The discovery coincides with Macy’s efforts to turn things around in the face of widespread changes in consumer behavior; in February, the chain revealed plans to eliminate 150 stores over a number of years. An outside investor group announced earlier this week that it had acquired a sizeable interest in Macy’s in an effort to disrupt the retailer’s business practices, notably by making money off of its real estate holdings.
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