Macy’s is providing preliminary third-quarter results while delaying the release of its full financial results for the period as it investigates a former employee’s purported concealing of as much as $154 million in operational expenses starting in the company’s 2021 fourth quarter.
As it prepared financial statements for the fiscal third quarter that ended November 2, Macy’s identified a delivery expense issue in one of its accrual accounts, the company reported. Through an independent investigation and forensic analysis, Macy’s discovered a single employee responsible for small package delivery expense accounting intentionally made incorrect accounting accrual entries to hide $132 million to $154 million of cumulative delivery expenses from the 2021 quarter through the third quarter of this year, according to Macy’s.
During the period involved, Macy’s recognized approximately $4.36 billion of delivery expenses, the company noted. The erroneous accounting accrual entries didn’t impact the company’s cash management activities or vendor payments.
Macy stated that the employee involved is no longer with the company.
The company plans to announce its third-quarter full earnings release and conference call by December 11.
In the preliminary results, Macy’s maintained its upgraded First 50 namesake store locations delivered a third consecutive quarter of comparable sales growth, up 1.9% year over year. Macy’s Bloomingdale’s division reported comps at owned and owned-plus-licensed-plus-marketplace stores gained 1% and 3.2% year over year, respectively. Bluemercury enjoyed comp growth of 3.3% versus the year-earlier quarter, Macy’s indicated.
However, for the business as a whole, comps slipped 2.4% on an owned basis and 1.3% on an owned-plus-licensed-plus-marketplace basis versus the year-past quarter as Macy’s store comps decreased 3% on an owned and 2.2% on an owned-plus-licensed-plus-marketplace. Sluggish sales in the Macy’s unrenovated locations, weakness in the digital channel and softer demand in cold-weather product categories offset sales growth at Macy’s First 50 locations, Bloomingdale’s, and Bluemercury. Asset sale gains of $66 million were ahead of expectations, Macy’s asserted.
Macy’s net sales declined 2.4% in the quarter to $4.74 billion from the prior-year period.
According to the company, preliminary sales results by banner versus the previous quarter were:
- Macy’s stores’ net sales slipped 3.1% in the quarter year over year, as, by segment, fragrances, dresses and men’s and women’s active apparel turned in relatively strong performances.
- Bloomingdale’s net sales gained 1.4% versus the year-before quarter, with contemporary apparel, beauty and digital providing the greatest lift.
- Bluemercury net sales increased 3.2% year over year as customers continued to respond well to the breadth of skincare offerings.
Other revenue, including credit card and Macy’s Media Network contributions, decreased 9.6% to $161 million year over year, with credit card revenues down 15.5% and media network revenues up 13.9%.
Asset sale gains of $66 million were $61 million higher than in the year past because of the monetization of non-go-forward assets as part of the company’s Bold New Chapter strategy.
Macy’s, Inc.’s go-forward business, including stores not scheduled for closing and digital operations, suffered a 2% comparable sales decrease on an owned basis and a 0.9% decrease on an owned-plus-licensed-plus-marketplace basis. Macy’s banner go-forward comps slid 2.6% on an owned and 1.8% on an owned-plus-licensed-plus-marketplace basis.
“We delivered third-quarter sales in line with expectations as we continued to make traction on our Bold New Chapter strategy initiatives,” said Tony Spring, Macy’s chairman and CEO. “Our Macy’s First 50 locations achieved their third consecutive quarter of comparable sales growth. At the same time, our luxury brands, Bloomingdale’s and Bluemercury, reported positive comparable sales. Importantly, November comparable sales are trending ahead of third-quarter levels across nameplates.”
In addressing the investigation into the cash discrepancy, Spring said, “At Macy’s, Inc., we promote a culture of ethical conduct. While we work diligently to complete the investigation as soon as practicable and ensure this matter is handled appropriately, our colleagues across the company are focused on serving our customers and executing our strategy for a successful holiday season.”
