Dive Brief:

• A Macy’s accountant intentionally hid as much as $154 million in expenses from the fourth quarter of 2021 through the fiscal quarter ended Nov. 2, 2024, the company said Monday, flagging the flawed bookkeeping just days before the marquis retailing day known as Black Friday.
• The employee, responsible for small delivery expense accounting, no longer works for Macy’s and an internal investigation has not identified involvement by any other employee, Macy’s said. The company postponed from Tuesday the release of its third quarter 2024 financial results and earnings call, and said it plans to provide those results, as well details of its investigation, by Dec. 11.
• “While Macy’s cannot control the actions of every employee, it is worrying that these are intentional accounting errors that go back to 2021,” Neil Saunders, managing director at GlobalData Retail, said in a LinkedIn post.

Dive Insight:

Macy’s recognized approximately $4.36 billion of delivery expenses during the period of misleading accounting, the company said, adding that it has found no evidence that the errors disrupted cash management or vendor payments.

“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 CEO Tony Spring said in a statement.

Disclosure of the botched accounting coincides with concerns among some investors about the company’s recent results, Saunders said. “Such things create more nervousness for investors who are already concerned about the company’s performance.”

The intentional error “also raises the question as to the competence of the company’s auditors,” Saunders said. A spokesperson for KPMG, Macy’s auditor, declined comment.

The retailer on Monday released preliminary Q3 results. Net sales fell 2.4% year over year to $4.7 billion, with comps — including licensed and marketplace sales — declining 1.3%.

The share price of Macy’s fell 2.2% in New York Stock Exchange trading on Monday.

Although consumer sentiment has defied predictions of a slump this year, shoppers have become pickier and now spend with care, top retail executives have said in recent earnings calls.

“Consumers tell us their budgets remain stretched and they're shopping carefully as they work to overcome the cumulative impact of multiple years of price inflation,” Target CEO Brian Cornell told analysts on Wednesday.

“They're becoming increasingly resourceful in their shopping behaviors, waiting to buy until last moment of need, focusing on deals, and then stocking up when they find them,” Cornell said.

Still, a record 183.4 million people plan to shop at stores and online from Thanksgiving Day on Nov. 26 through so-called Cyber Monday on Dec. 2, according to an annual survey released Nov. 14 by the National Retail Federation and Prosper Insights & Analytics.

Retail sales during November and December will probably increase between 2.5% and 3.5% compared with 2023, the NRF forecast on Oct. 15.

Consumers are increasingly taking out home equity lines of credit to finance spending, Torsten Sløk, chief economist at Apollo Global Management, said Monday.

“Homeowners are liquifying their home price gains and using the proceeds for consumption,” he said in an email.

“Combined with low jobless claims, strong wage growth, high stock prices, and solid cash flows from fixed income, including private credit, the US consumer continues to do well,” Sløk said.

Retail sales rose 0.4% last month compared with September and 2.8% in the year since October 2023, the Commerce Department recently said, signaling the possibility of solid consumer spending during the holiday season.

Among the 13 retail categories, eight registered stronger sales, including autos, food service and drinking places, and electronics and appliance stores, the Commerce Department reported on Nov. 15. Sales declined the most at furniture stores, miscellaneous retailers and health and personal care stores.

“This holiday season looks very good,” NRF Chief Economist Jack Kleinhenz said in a Nov. 7 statement.

“Households are starting the season in decent financial shape and are managing the constraints of their paychecks, with growth in wages and salaries still supportive of a steady pace of spending,” he said. “The economy remains on solid footing and is growing faster than many expected.”