What You Need To Know
Macy's (NYSE: M) has disclosed that a former employee intentionally misrepresented and concealed $154 million in delivery expenses over a period from late 2021 until the most recent quarter. This revelation has compelled the company to delay the release of its third-quarter financial results. The employee, who handled accounting for small package delivery costs, is no longer with Macy's, and there were no other employees involved in the incident. While the misstated amount is relatively modest compared to the company's total delivery expenses of $4.36 billion, it is significant when benchmarked against Macy's 2023 net income of $105 million.
In abridged results, third-quarter sales experienced a 2.4% decline, falling short of analyst expectations, although notable growth occurred in select locations focused on luxury brands. Macy's shares encountered volatility following the news, dropping over 8% in premarket trading before recovering as investors assessed the implications. As the company faces challenges including a sluggish retail environment and weak online performance, it has postponed full-year guidance, increasing uncertainty around the upcoming holiday shopping season. Final financial results are expected by December 11, 2024.
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Why This Is Important for Retail Investors
Investor Confidence: Accounting errors and delayed financial reports raise concerns about management oversight and governance, impacting trust in the company.
Financial Health Uncertainty: The hidden expenses, comparable to Macy’s net income, create doubts about the company's profitability and stability.
Market Volatility: The sharp drop in Macy’s share price highlights potential risks for investors amid broader operational challenges.
Holiday Season Risks: The delay in full-year guidance increases uncertainty about Macy’s performance during the crucial holiday shopping period.