One Employee’s Actions Cost Macy’s $154 Million

Macy’s, the retail giant, just got a rather pricey surprise package: a $132 million hole in its delivery expenses. One of their employees had been hiding these costs, wrapping them up tighter than a Black Friday bargain bin. And investors will have to wait a bit longer for the full picture—Macy’s is delaying its Q3 earnings report until December 11. Interestingly, exactly 100 years ago, on November 27, 1924, Macy’s held its very first Thanksgiving Day Parade in New York City. Back then, for its first three years, it was called the Macy’s Christmas Parade. Fast forward a century to November 27, 2024, and Macy’s is now facing a very different kind of challenge. As Macy’s works to account for every penny, it’s clear they’re not just unpacking boxes but also unpacking some serious questions about internal controls. So, as Macy’s tries to put on a brave face and keep the parade moving, investors might still be holding their breath to see what comes next.

When “Gift Wrap” Turns Into Gift Fraud

Let’s start with the mystery package that Macy’s unwrapped just last week: a massive discrepancy in delivery expenses. According to the company, a former employee went rogue, hiding between $132mn-$154mn in delivery costs through some creative accounting. One could think of it as the ultimate hide-and-seek.

The accounting sleight-of-hand started in late 2021 and continued through this quarter, inflating the company’s profits by concealing costs that should have been front and center. Macy’s leadership has called this the result of “intentional” misstatements by one former employee. Talk about delivering the wrong kind of surprise!

Santa’s Not Paying the Bill—But Macy’s Has To

$154 million is no small chunk of change, even for a giant like Macy’s. For context, that’s more than their entire 2023 net income of $105 million. The good news? Macy’s assured investors that these hidden costs didn’t hit cash flow or vendor payments. Still, the market didn’t wait—shares dropped over 8% in premarket trading. Retail analyst Neil Saunders from GlobalData Retail summed it up: while Macy’s can’t control every employee move, this kind of slip-up doesn’t help investor confidence. “It adds to the jitters investors already have,” he said.

Parade Floats While Sales Fall

Macy’s third-quarter sales took a 2.4% dip, missing analyst predictions. Blame the unseasonably warm weather—shoppers weren’t exactly rushing for winter coats when it felt more like fall stroll weather. Total sales hit $4.74 billion, a number that’s giving investors some serious chills. Despite the financial frost, Macy’s is leaning on its holiday tradition to keep spirits high.

In a recent LinkedIn post, the company highlighted a Freakonomics article asking if the Thanksgiving Day Parade is Macy’s most valuable asset. With 30 million TV viewers tuning in every year, it’s clear the parade is still a big deal. Macy’s called it their “gift to the nation,” and they’re likely hoping a little parade magic can help distract from the current struggles. The post strikes a hopeful tone, balancing the tough financial reality with a reminder of the joy Macy’s brings every holiday season. It’s their way of saying, “Yeah, things are rough, but the show will go on.

Rebuilding Trust

Macy’s CEO Tony Spring isn’t letting the holiday spirit fade. In a statement, he emphasized the company’s commitment to ethical conduct and promised steps to prevent this kind of issue in the future. “At Macy’s, we promote a culture of ethical conduct,” Spring said, adding that the matter is being taken very seriously. With the holiday season right around the corner, Macy’s knows it needs to rebuild trust quickly.

Despite the shake-up, Macy’s is reassuring stakeholders that it’s tightening internal controls, essentially saying, “We’re making our list and checking it twice.” This hiccup comes as the company continues its transformation plan to close 150 stores, cutting costs, and focusing on its top-performing locations.

Will Macy’s Sleigh the Holiday Season?

With its December earnings report looming and the holiday season in full swing, the big question is: can Macy’s deliver for both shareholders and shoppers? Beyond sales, Macy’s is banking on the goodwill of its iconic Thanksgiving Day Parade to reinforce what the brand represents. As those giant balloons float down New York streets, they’re carrying more than characters—they’re carrying the weight of a company working to keep its reputation intact. Stay tuned for more updates, and be sure to subscribe to our weekly newsletter!