Macy’s Offers Mixed Outlook After Reporting Declines in Third-Quarter Profits and Sales

NEW YORK– Macy’s announced Wednesday that it has strengthened its internal financial accounting measures after investigating a dishonest employee who hidden $151 million in delivery costs over a period of almost three years.

An investigation into the cover-up forced Macy’s to delay the release of its full third-quarter earnings report until late last month.

The employee’s intention was to cover up the error, not to steal the money, Chairman and CEO Tony Spring said in a phone call after the earnings report was released.

An unintentional error was made when accounting for small package delivery costs at the end of 2021. This error was hidden by the employee and was only discovered by the company this year, according to a source close to the investigation who wished to remain anonymous due to its private nature. information.

While the company said Wednesday that the former employee’s cover-ups would have no material impact on the company’s finances, it was required to revise annual financial statements. Additional details of the investigation were released as the company’s third-quarter results and mixed outlook sent shares down as much as 11% on Wednesday.

Macy’s reported falling profits and sales as the department store chain struggles with cautious spending by customers, growing competition and sluggish demand for winter products. The New York retailer raised its sales forecast for the year on Wednesday, but lowered its profit forecast.

Shares rallied in late trading and were down 2% at $16.33.

Spring said on a call that its internal investigation found that the employee, who acted alone and is no longer with the company, “did not pursue these actions for personal gain.” »

“Integrity is paramount at Macy’s Inc., and we promote a culture of ethical conduct,” Spring told industry analysts. “Once discovered, we acted quickly to investigate and resolve the issue. »

The incident occurred during a difficult operating environment for Macy’s, whose shares have fallen more than 20% over the past year. Activist investor Barington Capital Group asked Macy’s this week to develop a real estate subsidiary, cut expenses and explore strategic options for the Bloomingdale’s and Bluemercury chains, among others.

Barington follows a number of attempts by other major investors who have attempted to revive the popular retailer.

In July, the retailer discontinued buyout of several months discussions with two investment companies, saying the supply was insufficient and financing was not certain. Macy’s said Arkhouse Management and Brigade Capital Management did not provide additional information by the June deadline, including the highest price they would be willing to pay. Macy’s named two Arkhouse-backed directors to its board in April, ending the takeover attempt and pressure from investment firms to replace most of its board.

Spring, after taking over in February, announced plans to close 150 storeswhile upgrading 350 others.

In the top 50 stores upgraded by Macy’s, same-store sales increased 1.9%. Macy’s is trying to find a formula to revive its sales. Over the past year, the company has tested different tactics in dozens of stores, including increasing the number of salespeople in fitting rooms and shoe departments. The so-called “First 50” strategy also consists of putting in place more visual displays in the first renovated stores.

It is also expanding its Bluemercury and Bloomingdale’s stores.

Macy’s earned $28 million, or 10 cents per share, for the three months ended Nov. 2. That compares to $41 million, or 15 cents per share, for the year-ago period.

Adjusted earnings came to 4 cents per share, beating analysts’ forecasts by a penny, according to FactSet.

The company had already published a turnover of $4.74 billion at the end of last month, slightly higher than the $4.72 billion expected by Wall Street.

Same-store sales fell 1.3%, better than the 3.3% decline in the previous quarter.

Macy’s stores saw a 2.2% decline in comparable sales, while Bloomingdale’s stores saw a 2% increase. Bluemercury’s same-store sales increased 3.3%.

Sales of cold weather items have been difficult due to the unseasonably warm weather, the company said. It will be difficult to make up for those losses because the period between Thanksgiving and Christmas is five days shorter than last year, Macy’s said.

The company now expects earnings per share of between $2.25 and $2.50 per share for the year, down from its previous estimate of $2.34 to $2.69. But it forecast sales of $22.3 billion to $22.5 billion for the year, up from its previous forecast of $22.1 billion to $22.4 billion.

“We are encouraged by the continued sales growth at our top 50 Macy’s locations and the strong performance of Bloomingdale’s and Bluemercury,” Spring said. “Quarter-to-date, comparable sales continue to exceed third quarter levels across the portfolio. »