Accounting
Macy’s touted a metric that ended up being juiced for years by former employee
For years, Macy’s Inc. touted its ability to boost profits by cutting delivery costs and trimming other expenses on calls with Wall Street analysts. Then on Monday, the department store chain surprised investors by revealing that those very costs had become the source of an internal investigation into what the company has described as a multimillion-dollar employee plot to manipulate the metrics.
The retailer said the incident involved only one former employee, who had hidden as much as $154 million of delivery expenses since 2021. Cash was not taken from the company and the amount of hidden expenses is a small portion of the $4.36 billion of overall delivery costs incurred during that time.
Macy’s said it discovered the hidden expenses while the retailer was preparing its most recent quarterly earnings release, which was set to come out on Tuesday but was delayed due to the accounting issue.
The company said it launched a probe following the discovery but declined to answer why the apparently intentional accounting errors went undetected for nearly three years. Its auditor, KPMG, declined to comment. Macy’s also didn’t provide information on what the employee’s motive was, when the employee left, whether their departure was related to the events, or if the issue was being investigated by law enforcement. Macy’s hasn’t identified the employee.
Cutting the cost of delivering online orders has been a focus for the retailer in recent years as it aims to shore up profitability in the face of flagging sales.
To that effect, the retailer has been diversifying shipping carriers, reducing the distance its packages are sent and spearheading what CFO Adrian Mitchell recently called “process reengineering initiatives” on the company’s August earnings call.
A month later, Mitchell called the efforts one of the “key drivers in terms of expanding gross margin” at the annual Goldman Sachs retailing conference, where investors gathered to hear about the company’s turnaround plan under a new chief executive who took the helm earlier this year.
Macy’s is getting “our delivery expense under control for a lot of customers that are going to be receiving deliveries to their home,” said Mitchell, who joined Macy’s in 2020 from the Boston Consulting Group. He has mentioned delivery expenses in all but one of the 16 quarterly earnings calls that he’s participated in since joining the retailer.
It was a major boon for the retailer and its finance chief, who told Wall Street in May 2021 that the “largest headwind” for profits was its delivery expense. At the time, Mitchell said that the delivery expense accounted for nearly twice the drag on profits compared to the same period in 2019. The more that people shopped online, the bigger the delivery expense line item ratcheted up.
Checks and balances
To be sure, the amount of hidden expenses by the former employee is a small portion of overall delivery costs. Macy’s has been focused on cost cutting across the company, not just delivery expenses. And there’s no indication that Mitchell and other members of the company’s leadership team were aware of the single employee’s actions.
But the discovery raises questions about the checks and balances Macy’s has in place to ensure accurate accounting of its business activities, particularly around a metric its chief financial officer was keenly focused on. Macy’s declined to make its CFO available for an interview.
One possible scenario is that an accountant at Macy’s could have changed the internal coding of delivery transactions to charge those payments to the wrong account, according to Adriana Carpenter, a former accountant at auditor PwC who now serves as chief financial officer of expense management software company Emburse.
As a result, the payments may have been recorded as cash outflows, but the expense wouldn’t have been reported, said Carpenter, who does not have first-hand knowledge of Macy’s business practices.
A large company like Macy’s typically has controls in place to ensure such a scenario couldn’t occur but it’s unclear if that’s the case in this instance, she added. Macy’s declined to comment on its controls.
The size and duration of the incident also makes it likely that the Securities and Exchange Commission is investigating or will investigate, said Jim Barratt, a former SEC enforcement accountant and founder of Barratt Consulting Group.
The SEC, which regularly reviews company filings for unusual disclosures, said it doesn’t comment on the “existence or nonexistence of a possible investigation.” Macy’s declined to comment on any possible external investigations.
The disclosure also draws attention to the company as a whole, not just the unnamed employee singled out in the press release, Barratt said. “Accounting entries aren’t made by one person,” he said. “It takes more than one person.”
President Donald Trump’s drive to enact trillions of dollars in tax cuts and raise the federal debt is on track after he and congressional leaders successfully corralled House Republican lawmakers to approve a
The 216-214 vote Thursday on the budget — which outlines the parameters for the tax cut and
The president worked the holdouts by phone and in a White House meeting. House Speaker Mike Johnson held a press conference to declare himself “committed” to coming up with at least $1.5 trillion in spending cuts. And Senate Republican leader John Thune joined the speaker to announce “a lot of” Republican senators shared the goal, though he stopped short of a commitment.
It was enough.
With the budget approved, the way is open for a follow-on package to cut taxes by up to $5.3 trillion over a decade and raise the debt ceiling by $5 trillion, in exchange for $4 billion in spending cuts. Republicans can now pass Trump’s tax-cut agenda solely on GOP votes, bypassing the need for negotiations with Democrats.
Trump offered congressional Republicans “Congratulations” in a social media post minutes after the vote.
The vote came a day after Trump announced a 90-day pause on some of his sweeping tariff plans that have roiled markets and sparked predictions of a looming recession. Financial markets — often a barometer of success for the president — initially soared on the news, though U.S. stocks
Republicans are planning to renew Trump’s first-term tax cuts for households and the owners of privately held businesses, and enact a fresh round of reductions, including expanding the state and local tax deduction and eliminating levies on tipped wages.
Conservative hardliners in the House say they want a final package to trim $2 trillion in spending over the next decade, a significant increase over the $4 billion the Senate is directed to cut in the budget passed Saturday. To make those reductions they’ll likely need to curb Medicaid, food stamps and other social programs with tens of millions of beneficiaries.
A group of moderate Republicans sought — and gained — assurances from Johnson during the vote that the final bill would not cut benefits for qualified Medicaid individuals and institutions, said New Jersey Republican Jeff Van Drew.
“We voted late to make the point,” Van Drew said.
The group, however, is open to eligibility reviews and work requirements for Medicaid recipients, he said.
The budget outline punts many of the hard decisions for lawmakers to hammer out later in the tax-cut negotiations. That could lead to a standoff with the Senate at the end of the process, where several members are resistant to large cuts in safety-net programs.
Democrats assailed the plan as cutting benefits for the poor in order to pay for a tax cut skewed toward the wealthy.
“Republicans do nothing to lower the high cost of living,” Democratic Leader Hakeem Jeffries said on the House floor. “In fact, you’re making the affordability crisis in America worse, not better, when you target earned benefits and things that are important to the American people, like Medicaid.”
Senator John Barrasso, the No. 2 Senate Republican, said GOP lawmakers in both chambers are committed to “very serious savings for the American taxpayer.”
Trump hosted Republican holdouts at the White House on Tuesday to urge their backing. He echoed his pleas while speaking later that day at a donor event in Washington, imploring members who were hesitant to vote for the budget to “just get the damn thing done and stop showboating.”
“It is IMPERATIVE that Republicans in the House pass the Tax Cut Bill, NOW! Our Country Will Boom!!!” Trump posted on Truth Social Wednesday.
Johnson has set a target of the end of May to enact the tax bill, while Senate Republicans have talked of being able to complete the process by August. The 2017 tax cuts don’t expire until the end of the year.
Those self-imposed deadlines could be overrun by a fiscal deadline: the debt ceiling.
The nonpartisan Congressional Budget Office estimates that the Treasury will be unable to pay all of its bills in August or September, but that date could come as soon as late May if tax receipts are low.
Baker Tilly, a Top 25 Firm based in Chicago, reportedly is close to a megamerger with Moss Adams, another Top 25 Firm based in Seattle, creating a firm with $3 billion in annual revenue.
The deal, reported Wednesday by
Baker TIlly declined to confirm the deal, but acknowledged it’s always searching for merger candidates.
“We can’t comment on speculation or confidential discussions,” said Baker Tilly spokesperson Nicole Berkeland in an email to Accounting Today. “What we can say is that we’ve been transparent about our strategy to grow through strategic mergers. We are continually exploring opportunities with respected firms that align with our vision and will strengthen our ability to serve the middle market.”
Moss Adams also declined to comment. “It’s our policy not to comment on market speculation,” said Moss Adams spokesperson Greg Kunkel.
Koltin Consulting Group CEO Allan D. Koltin, who has previously advised Baker Tilly and Moss Adams on strategy and M&A, sees major ramifications from the deal. “Just when we thought nothing could get any bigger in CPA firm M&A than Forvis (formerly BKD and Dixon Hughes), and CBIZ (formerly CBIZ and Marcum), here comes Baker Tilly and Moss Adams (potentially) combining to create the sixth largest CPA firm in the country (only behind the Big Four and RSM),” Koltin said in an email. “After the combination, Baker Tilly will become the largest (non-Big Four) CPA firm in the Western region and Moss Adams will become part of a Top 10 Global Network. Additionally, both firms will bring over their unique areas of industry specialization and service line expertise which should provide robust organic growth opportunities to the combined firm. As a 44-year veteran and advisor to the accounting profession, I daresay there has been more change and transformation in the accounting profession in the past 4 years than the 40 prior years combined!”
Another merger expert also sees benefits in the combination. “The primary reason for this reported merger is to expand both firms’ scale and market position,” said Brad Haller, a senior partner in West Monroe’s mergers and acquisitions practice. This move would significantly boost Moss Adams’ scale and provide Baker Tilly with access to Moss Adams’ extensive client base. Together, they would become the sixth largest firm, leapfrogging over Grant Thornton and others. Additionally, this merger would allow Moss Adams to tap into Baker Tilly’s global networks, enabling them to expand their wallet share with clients. While there will be modest synergies in the long term as they combine redundant support services, the immediate benefits of this merger would be substantial.”
Baker Tilly is part of the Baker Tilly International network, based in London, which reported $5.6 billion in worldwide revenue in 2024. Baker Tilly has done several acquisitions since receiving
Last May, it merged in
Moss Adams does not do M&A deals as often, but last December, it entered the Salesforce.com consulting market by acquiring
States are looking beyond the 150-hour requirement for CPA licensure and adding alternative pathways amid the profession’s pervasive ongoing talent shortage.
See below for where things stand in those states that are moving forward on the issue, and read
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