Macy's Lowers Annual Profit Forecast Amid Accounting Misstep, Stock Tumbles
Wednesday, Dec 11, 2024 8:41 am ET
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Macy's Inc., a leading American department store chain, has recently faced a significant setback following the discovery of an accounting error that has led to a revision of its annual profit forecast. The company's stock price has taken a tumble as a result, raising concerns about its financial health and turnaround efforts. This article explores the impact of the accounting misstep on Macy's financial projections and stock performance, as well as the strategic changes the company is implementing to mitigate the effects and improve future profitability.
The accounting error, involving a single employee hiding up to $154 million in delivery expenses, has significantly impacted Macy's financial projections. The company initially forecasted earnings per share (EPS) of $2.55 to $2.90 but later revised it to $2.25 to $2.50, representing a decrease of approximately 12% to 16%. Additionally, Macy's revenue growth projections have been negatively affected, with the company now expecting a decrease of 4.31% in revenue this year compared to the previous year, down from a projected increase of 0.20%.
The accounting misstep has also had a notable impact on Macy's stock performance. Following the announcement of the error and the revision of the annual profit forecast, Macy's stock price fell by 8%, reflecting investor concerns about the company's financial health and the potential impact of the accounting misstep on its turnaround efforts.
To mitigate the effects of the accounting misstep and improve future profitability, Macy's is implementing strategic changes. The company is increasing its target for Macy's store closures this year to 65 stores from 55 in August, focusing on shuttering underperforming locations. Additionally, Macy's is prioritizing investment in about 350 "go-forward" locations and expanding its small-format store chains, including Bloomie's, Bloomingdale's outlets, and Backstage off-price units. The company is also opening about 15 Bloomie's stores and at least 30 Bluemercury stores in new and existing markets over the next three years, along with roughly 30 Bluemercury remodels.

The strategic moves aim to cut costs, improve sales, and enhance the overall customer experience. However, the long-term impact of the accounting misstep on Macy's brand reputation and customer trust remains a concern. While the company has stated that the employee acted alone and is no longer with the company, the magnitude of the error and the delay in its discovery may erode customer confidence in Macy's financial management and integrity. To mitigate this, Macy's must swiftly complete its investigation, transparently communicate the findings, and implement robust internal controls to prevent similar incidents in the future. Additionally, the company should focus on rebuilding trust through strong financial performance and enhanced customer engagement.
In conclusion, the accounting error at Macy's has significantly impacted the company's financial projections and stock performance. To address these challenges, Macy's is implementing strategic changes aimed at improving future profitability. However, the long-term impact on the company's brand reputation and customer trust remains a concern, and Macy's must take proactive measures to rebuild confidence in its financial management and integrity.