11/27/2024
How Did a Macy's Employee Hide $154 Million?
Macy's has just announced that an employee manipulated their financial records for years, hiding up to $154 million in expenses. They've postponed their third-quarter earnings release to December 11 to sort this out.
What exactly did this employee do? They were in charge of small package delivery expenses and intentionally made false accounting entries to conceal between $132 million and $154 million in delivery costs from late 2021 through November 2023. That's about 3% to 3.5% of their delivery expenses during that period.
How did they manage this? According to Emburse CFO Adriana Carpenter, it's significant that only the profit and loss statements were affected, not the cash flow. She suggests the employee may have altered how these expenses were recorded, moving them from the P&L to the balance sheet to keep them off the radar. This could have been done at the time of the transactions or through later adjustments.
This kind of issue isn't unheard of. Jo-Ellen Pozner, a professor at Santa Clara University, says people manipulate numbers all the time. She speculates the employee might have been trying to meet targets tied to cost-cutting or profitability boosts—especially if their pay or bonuses depended on it. Sometimes, incentives can push individuals to make unethical choices.
Despite the situation, analysts like David Swartz from Morningstar think the issue is manageable. The hidden costs are relatively small compared to Macy's annual expenses of over $8 billion. He believes people will focus more on Macy's new strategies and improving sales rather than this setback.
