Hidden accounting fraud forced the giant to postpone publication of results

Macy's, the well-known US retail chain, has been at the centre of a scandal that has revealed major accounting irregularities. An employee, whose name has not been disclosed, caused accounting errors so serious that the company had to postpone publication of its quarterly results. The situation raises questions about internal controls and the future of the company. Alleged irregularities of up to $154 million are involved.

Macy's has announced that it has discovered accounting irregularities involving up to $154 million that were intentionally hidden for nearly three years. An employee who no longer works at the company manipulated accounting records to hide the cost of small package delivery. While those costs represent only a small fraction of the $4.36 billion in total delivery services during that period, Macy's $M called the errors significant enough that it had to delay the release of the results until Dec. 11.

However, according to company management, the discrepancies did not affect Macy's solvency or payments to suppliers. The current investigation so far points only to a single perpetrator and has found no evidence of other employee involvement.

Macy's CEO Tony Spring stressed that the company promotes a culture of ethical behavior and that the incident will not affect the crucial holiday season: "Our colleagues remain focused on customers and the successful execution of our strategy for the holiday season," Spring said.

Impact on investors and results

Investors, however, were not reassured by the situation. Macy's stock is down nearly 20% this year, raising questions about the competence of the company's auditors.

"Problems like this increase the nervousness of investors who are already concerned about the company's performance," said Neil Saunders, an analyst at GlobalData Retail.

In addition to the accounting scandal, Macy's reported a 2.4% drop in sales to $4.7 billion, which it attributed to weaker performance in digital channels and a warmer fall that reduced demand for winter apparel.

The future of Macy's

Macy's has been trying to transform itself for some time. The company plans to close hundreds of underperforming stores, while premium brands like Bloomingdale's (+1.4%) and Bluemercury (+3.2%) are performing better.

Still, analysts warn that Macy's faces an overall decline and competitive pressure is weakening it further. In July, the company rejected buyout offers from private investors and decided to pursue its own strategy to get the chain back on its feet.

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Source: CNN.