Macy’s, Inc. is delaying its third quarter earnings release and conference call relating to the third quarter of 2024 to allow for completion of an independent investigation into erroneous accounting accrual entries.

The company reported that during the preparation of its unaudited condensed consolidated financial statements for the fiscal quarter ended November 2, it identified an issue related to delivery expenses in one of its accrual accounts. The company consequently initiated an independent investigation.

As a result of the independent investigation and forensic analysis, the company identified that a single employee with responsibility for small package delivery expense accounting intentionally made erroneous accounting accrual entries to hide approximately $132 million to $154 million of cumulative delivery expenses from the fourth quarter of 2021 through fiscal quarter ended November 2, 2024. During this same time period, the company recognized approximately $4.36 billion of delivery expenses.

There is no indication that the erroneous accounting accrual entries had any impact on the company’s cash management activities or vendor payments. The individual who engaged in this conduct is no longer employed by the company. The investigation has not identified involvement by any other employee.

“At Macy’s, Inc., we promote a culture of ethical conduct,” said Tony Spring, chairman and CEO, Macy’s, Inc. 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.”

Macy’s, Inc. net sales decreased 2.4 percent to $4.74 billion, with comparable sales down 2.4 percent on an owned basis and down 1.3 percent on an owned-plus-licensed-plus-marketplace basis. Sales growth at Macy’s First 50 locations, Bloomingdale’s, and Bluemercury was offset primarily by weakness in Macy’s other non-First 50 locations as well as its digital channel and cold weather categories.

“We delivered third quarter sales in line with expectations as we continued to make traction on our Bold New Chapter strategy initiatives,” added Spring. “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.”

Macy’s, Inc. go-forward business comparable sales were down 2.0 percent on an owned basis and down 0.9 percent on an owned-plus-licensed-plus-marketplace basis. By nameplate:

Macy’s net sales were down 3.1 percent in the third quarter, with comparable sales down 3.0 percent on an owned basis and down 2.2 percent on an owned-plus-licensed-plus-marketplace basis. Fragrances, dresses and men’s and women’s active apparel were said to be strong. Macy’s go-forward business comparable sales were down 2.6 percent on an owned basis and down 1.8 percent on an owned-plus-licensed-plus-marketplace basis.

First 50 locations comparable sales were up 1.9 percent on both an owned basis and on an owned-plus-licensed basis as investments in staffing, merchandising, visual presentation and eventing continued to resonate with the customer.

Bloomingdale’s net sales were up 1.4 percent, with comparable sales up 1.0 percent on an owned basis and up 3.2 percent on an owned-plus-licensed-plus-marketplace basis. Key drivers included strength in contemporary apparel, beauty and digital.

Bluemercury net sales were up 3.2 percent and comparable sales were up 3.3 percent on an owned basis, representing the fifteenth consecutive quarter of comparable sales growth. Customers continued to respond well to the breadth of skincare offerings.

Other revenue of $161 million decreased $17 million, or 9.6 percent. Within Other revenue:

  • Credit card revenues, net decreased $22 million, or 15.5 percent, to $120 million. Net credit losses contributed to the year-over-year decline and were in-line with the company’s expectations.
  • Macy’s Media Network revenue, net rose $5 million, or 13.9 percent, to $41 million, reflecting higher advertiser and campaign counts.

Asset sale gains of $66 million were $61 million higher than last year due to the monetization of non-go-forward assets, as part of the company’s Bold New Chapter strategy. Higher asset sale gains reflect the pull-forward of the monetization of certain non-go-forward assets into the third quarter from the fourth quarter, at better-than-expected valuations.

Preliminary Balance Sheet and Liquidity
Merchandise inventories increased 3.9 percent year-over-year, reflecting improved inventory composition and supply chain efficiencies. The conversion to cost accounting was estimated to account for approximately half of the increase from the prior year. Entering the fourth quarter, the company believes it has the appropriate level of newness heading into the holiday season.

The company ended the third quarter of 2024 with cash and cash equivalents of $315 million and $2.77 billion of available borrowing capacity under its asset-based credit facility reflecting current borrowings and letters of credit.

Total debt of $2.87 billion included $86 million of short-term borrowings under the company’s asset-based credit facility and no material long-term debt maturities until 2027. The company voluntarily retired $220 million of debt during the quarter through a previously disclosed tender offer.

2024 Guidance
The company will provide an update on its fiscal 2024 outlook when it reports full third quarter 2024 financial results.

Third Quarter Results Reporting
The company expects to report its full third quarter 2024 financial results and hold its earnings conference call, where it will provide its fourth quarter and full year outlooks, by December 11, 2024.

Image courtesy Macy’s Inc.