In late 2024, retail giant Macy’s revealed a shocking accounting scandal involving its parcel delivery expenses. It said a single employee had managed to hide approximately $151 million in delivery costs over nearly three years, causing significant disruption to the company’s financial reporting and raising questions about its internal controls.
Macy’s uncovered the issue during the preparation of its financial statements for the third quarter of 2024. The company immediately launched an independent investigation, which it says revealed that a lone employee responsible for small package delivery expense accounting had intentionally made erroneous entries to conceal delivery expenses from the fourth quarter of 2021 through Nov. 2, 2024.
The hidden expenses totaled between $132 million and $154 million, ultimately settling at $151 million. While this amount may seem substantial, it’s important to note that Macy’s recognized approximately $4.36 billion in delivery expenses during the same period. The concealed costs represented about 3.5% of the company’s overall delivery expenses.
Contrary to initial speculation, the employee’s actions were not motivated by personal financial gain. Macy’s CEO Tony Spring stated that the investigation found the employee “acted alone and did not pursue these acts for personal gain.” Instead, it appears the alleged fraud began as an attempt to cover up an initial accounting mistake.
According to sources familiar with the investigation, the employee told investigators that they had mistakenly understated small parcel delivery expenses in late 2021. To hide this error, the employee allegedly continued to make intentional accounting errors and falsify documentation until the misstatement was discovered in the fall of 2024.
Despite the significant sum involved, Macy’s has stated that the accounting errors did not materially impact its operations or financial position. The company reported that there was no indication that the erroneous entries affected cash management activities, vendor payments or net sales figures.
However, the discovery of the alleged fraud did force Macy’s to delay its third-quarter earnings report by two weeks. The company also adjusted its annual profit forecast, reducing the expected adjusted profit per share from $2.34-$2.69 to $2.25-$2.50.
The incident has raised serious questions about Macy’s internal financial controls. How could such a significant discrepancy go unnoticed for nearly three years? Experts point to several factors that may have contributed to the oversight:
