Macy's (M, Financial) investors just got a gut punch. Shares dropped 6% this morning after the retailer finally released its delayed Q3 earnings report, unveiling a $151 million accounting scandal that had been brewing since 2021. The culprit? A lone employee who fudged delivery expense numbers for years. While Macy's hit $28 million in net income—beating analysts' meager expectations of $6.4 million—sales of $4.74 billion fell short of the $4.88 billion Wall Street was banking on. Adding to the chaos, the company trimmed its full-year earnings outlook to $2.25–$2.50 per share but slightly bumped up its sales guidance to $22.3–$22.5 billion. Investors, understandably, aren't thrilled.
CEO Tony Spring is in damage-control mode, promising tighter oversight and safeguards to prevent similar scandals. But it's not all doom and gloom. Macy's pointed to bright spots in its “Bold New Chapter” strategy, like the strong performance of Bloomingdale's and Bluemercury and improved sales at its spruced-up flagship locations. Still, the core Macy's brand took a 3.1% hit in sales, with weaknesses in digital channels and cold-weather categories dragging results further south.
The road ahead? Rocky. Activist investors are circling, demanding capital allocation changes and even floating the idea of spinning off Bloomingdale's. For now, Macy's is trying to sell a narrative of resilience, emphasizing incremental wins and its raised sales guidance. But with the stock down over 25% this year and the competition in retail heating up, it's clear the retailer has its work cut out to rebuild trust—and its bottom line.
