In late November 2024, Macy’s, one of America’s most iconic department store chains, dropped a bombshell that reverberated through the retail and financial worlds: a single employee had intentionally concealed between $132 million and $154 million in delivery expenses over a period of nearly three years, from the fourth quarter of 2021 through early November 2024. This staggering sum, hidden within the company’s small package delivery accounting, forced Macy’s to delay its third-quarter earnings report, originally scheduled for November 26, 2024, to December 11, 2024, as it scrambled to complete an independent investigation. The employee responsible, now terminated, acted alone, according to Macy’s, leaving the company—and the public—reeling with questions: How could such a massive financial discrepancy go unnoticed for so long? What does this mean for Macy’s, already a retailer under pressure in a shifting industry? And what broader lessons can be drawn from this unprecedented breach of financial trust?
This article delves into the details of the Macy’s expense-hiding scandal, exploring the company’s history, the mechanics of the deception, its fallout, and the implications for corporate governance in the retail sector. At its core, this is a story of human error, oversight failures, and the vulnerabilities of even the most established institutions in an era of rapid change.
Macy’s: A Retail Giant Under Siege
To understand the gravity of this scandal, one must first grasp Macy’s place in the American retail landscape. Founded in 1858 by Rowland Hussey Macy, the company has grown from a single dry goods store in New York City to a nationwide chain synonymous with middle-class shopping and holiday traditions, most notably the Macy’s Thanksgiving Day Parade. With flagship stores like the Herald Square location in Manhattan, upscale Bloomingdale’s outlets, and the beauty-focused Bluemercury chain, Macy’s has long positioned itself as a versatile retailer catering to a broad demographic. By 2024, it operated hundreds of stores across the United States, complemented by a robust e-commerce platform that has become increasingly vital as brick-and-mortar retail faces existential challenges.
Yet, Macy’s has not been immune to the seismic shifts in retail over the past decade. The rise of Amazon and other online giants, coupled with changing consumer preferences and economic pressures, has eroded the dominance of traditional department stores. Comparable sales declines, store closures, and investor scrutiny have plagued Macy’s, forcing CEO Tony Spring—appointed in 2023—to spearhead a turnaround strategy. This plan included bolstering the “First 50” stores with enhanced staffing and merchandising, leaning into luxury offerings via Bloomingdale’s, and streamlining operations to cut costs. By mid-2024, there were signs of progress: preliminary third-quarter results showed a modest 1.9% sales increase in those First 50 locations and gains at Bloomingdale’s (1.4%) and Bluemercury (3.2%). Still, overall comparable sales dipped 1.3%, reflecting the uphill battle Macy’s faced.
It was against this backdrop of cautious optimism that the expense-hiding scandal emerged, threatening to undermine the company’s efforts and expose deeper vulnerabilities in its financial controls.
The Scandal Unfolds: A Rogue Employee’s Deception
The revelation came on November 25, 2024, when Macy’s issued a press release acknowledging “erroneous accounting accrual entries” made by a single employee responsible for small package delivery expense accounting. The hidden expenses, estimated at $132 million to $154 million, spanned from the fourth quarter of 2021 to the fiscal quarter ending November 2, 2024. Over this period, Macy’s recorded $4.36 billion in total delivery expenses, meaning the concealed amount represented roughly 3% to 3.5% of that figure—a significant sum, though not catastrophic in the context of the company’s broader $8 billion-plus annual operating expenses.
Details about the employee remain scarce. Macy’s has not disclosed their identity, citing the ongoing investigation, but confirmed that the individual is no longer with the company. Initial reports suggest the misconduct began with an accidental understatement of delivery expenses in late 2021, which the employee then deliberately covered up in subsequent quarters. Sources briefed on the probe, as reported by outlets like the Wall Street Journal and NBC News, indicate that the worker did not personally profit from the scheme—unlike typical embezzlement cases—raising questions about their motives. Was it an attempt to mask an initial mistake and preserve their job? A misguided effort to make Macy’s financials appear stronger amid investor pressure? The company has remained tight-lipped, promising more clarity once the investigation concludes.
The mechanics of the deception likely involved manipulating accrual accounts—financial records used to estimate expenses before invoices are finalized. Small package delivery, a critical and growing cost for retailers in the e-commerce age, provided fertile ground for such subterfuge. Industry-wide shipping disruptions, including those triggered by the COVID-19 pandemic and subsequent supply chain chaos, may have further obscured the discrepancies, as Macy’s could not rely on stable historical cost patterns. Over three years, the employee’s falsified entries accumulated into a nine-figure liability, undetected until the preparation of the third-quarter earnings report in early November 2024 triggered an internal review.
The Fallout: Immediate and Long-Term Impacts
The immediate consequence of the discovery was a delay in Macy’s third-quarter earnings release. Originally set for November 26, the company pushed the date to December 11 to allow its independent investigators—supported by external auditors—to fully assess the damage. Preliminary sales figures, released on November 25, showed a 2.4% drop to $4.74 billion, slightly below Wall Street’s expectations, while Macy’s stock fell 3.5% in trading that day, adding to a year-to-date decline of over 20%. Investors, already wary of Macy’s turnaround prospects, reacted with unease, though some analysts, like Morningstar’s David Swartz, downplayed the materiality of the hidden expenses, noting they amounted to less than 1% of annual operating costs.
For Macy’s leadership, the timing could not have been worse. The holiday season, a make-or-break period for retailers, was underway, and the company was still navigating a potential $5.8 billion buyout offer from Arkhouse Management and Sycamore Partners—a deal complicated by the scandal’s emergence. CEO Tony Spring sought to reassure stakeholders, emphasizing in a statement that Macy’s remained focused on “serving our customers and executing our strategy for a successful holiday season.” He also underscored the company’s commitment to ethical conduct, though the breach raised inevitable questions about oversight.
Financially, Macy’s insisted the hidden expenses did not affect cash management or vendor payments, a claim that mitigated some concerns. By December 11, when the full earnings report was released, the company slightly raised its full-year forecast, projecting a sales decline but highlighting resilience in key segments. The investigation concluded that no other employees were involved, isolating the incident to a single rogue actor. Still, the damage to Macy’s reputation—and its internal controls—was undeniable.
How Did This Happen? Unpacking the Oversight Failure
The question on everyone’s mind was simple yet confounding: How could Macy’s, a publicly traded company with rigorous auditing requirements, fail to detect a $154 million discrepancy over three years? Experts point to a combination of factors, from human error to systemic weaknesses exacerbated by industry upheaval.
First, the small package delivery sector has been a pressure point for retailers since the e-commerce boom accelerated during the pandemic. Rising shipping costs, fluctuating carrier rates, and a shift to smaller, more frequent deliveries created a volatile expense category. Ken Rackliffe, a former Macy’s executive quoted by ABC News, noted that this upheaval “may have helped disguise the hidden expenses,” as the company lacked reliable benchmarks to flag anomalies. The employee’s role in managing these accounts gave them unique leverage to manipulate records without immediate scrutiny.
Second, Macy’s internal controls appear to have faltered. Public companies like Macy’s are subject to the Sarbanes-Oxley Act (SOX), enacted in 2002 to prevent accounting scandals like Enron. SOX mandates robust financial reporting processes, including segregation of duties and regular audits. Yet, as Neil Saunders of GlobalData observed, “It is worrying that these are intentional accounting errors that go back to 2021.” The fact that one employee could single-handedly conceal such a sum suggests gaps in oversight—perhaps a lack of cross-verification or insufficient audit frequency in this specific area.
Third, Macy’s broader challenges may have diverted attention. With leadership focused on store closures, e-commerce expansion, and investor negotiations, operational details like delivery accruals might have slipped through the cracks. While Macy’s external auditor, KPMG, has not commented publicly, its silence has fueled speculation about whether warning signs were missed during annual reviews.
Broader Implications: Lessons for Retail and Beyond
The Macy’s scandal is not just a corporate embarrassment—it’s a cautionary tale with ramifications for the retail industry and corporate governance writ large. Here are some key takeaways:
- The Fragility of Financial Controls: Even large, established companies can fall victim to internal fraud if checks and balances are not airtight. The incident underscores the need for real-time monitoring and data analytics to detect anomalies, rather than relying solely on periodic audits.
- The Cost of E-Commerce Complexity: As retailers pivot to online sales, managing delivery expenses has become a critical yet vulnerable aspect of their operations. Macy’s experience highlights the importance of specialized oversight in this domain, especially as shipping costs continue to rise.
- Reputational Risk in a Competitive Market: For a brand like Macy’s, already fighting to retain relevance, public trust is paramount. The scandal, while not fatal, could erode confidence among consumers, investors, and partners at a pivotal moment.
- Human Factors in Corporate Misconduct: The absence of personal profit in this case sets it apart from typical fraud. It suggests that psychological pressures—fear of failure, job insecurity, or misplaced loyalty—can drive unethical behavior, necessitating stronger employee support and whistleblower protections.
For Macy’s, the path forward involves not only repairing its financial processes but also proving it can execute its turnaround strategy under heightened scrutiny. For the retail sector, it’s a reminder that adaptation to new market realities must be paired with vigilance over the old ones.
Conclusion: A Wake-Up Call for Macy’s and Beyond
As of March 25, 2025, the Macy’s expense-hiding scandal remains a fresh wound, its full ramifications still unfolding. The company has weathered the immediate storm, releasing its delayed earnings and reaffirming its commitment to transparency. The terminated employee, whose identity may never be public, leaves behind a legacy of disruption that belies their apparent lack of personal gain. For Macy’s, the incident is a costly detour in an already arduous journey—one that CEO Tony Spring and his team must navigate with precision to restore faith in the brand.
At its heart, this saga is about more than numbers on a balance sheet. It’s about the interplay of trust, accountability, and resilience in an industry fighting for survival. Macy’s, with its 166-year history, has faced crises before—economic downturns, wars, and the rise of digital retail—and emerged battered but intact. Whether it can do so again depends not just on its response to this scandal, but on its ability to learn from it. For now, the retail world watches, and the lessons of $154 million in hidden expenses echo far beyond Herald Square.
