Macy's (M) stock is lower to start the week after the department store chain announced preliminary results for its fiscal third quarter and said it is delaying its quarterly filing due to "erroneous accounting accrual entries" by a single employee.
For its fiscal third quarter ended November 2, Macy's net sales declined 2.4% year over year to $4.7 billion as its comparable-store sales decreased 2.4% on an owned basis and 1.3% on an owned-plus-licensed-plus-marketplace basis.
"We delivered third-quarter sales in line with expectations as we continued to make traction on our Bold New Chapter strategy initiatives," said Macy's CEO Tony Spring in a statement.
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"Our Macy's First 50 locations achieved their third consecutive quarter of comparable sales growth. At the same time, our luxury brands, Bloomingdale's and Bluemercury, reported positive comparable sales," the executive added. "Importantly, November comparable sales are trending ahead of third-quarter levels across nameplates."
Macy's delays its quarterly filing
Macy's was initially slated on the earnings calendar to disclose its full financial results ahead of Tuesday's open. However, the retailer said that when it was preparing its quarterly filing, it "identified an issue related to delivery expenses in one of its accrual accounts."
After conducting an investigation, it found that a single employee "intentionally made erroneous accounting accrual entries to hide approximately $132 to $154 million of cumulative delivery expenses."
The employee's actions took place between the fourth quarter of 2021 through its most recently completed quarter, though there's no indication that the actions impacted its cash management or vendor payments, the company said. The individual is no longer employed by Macy's.
"At Macy's, Inc., we promote a culture of ethical conduct," Spring said. "While we work diligently to complete the investigation as soon as practicable and ensure this matter is handled appropriately, our colleagues across the company are focused on serving our customers and executing our strategy for a successful holiday season."
Macy's expects to report its third-quarter results by December 11.
Is Macy’s stock a buy, sell or hold?
Macy's has had a rough year on the price charts, down nearly 22% on a price basis. And Wall Street is sitting on the sidelines when it comes to the consumer discretionary stock.
According to S&P Global Market Intelligence, the average analyst target price for M stock is $17.45, representing implied upside of about 10% to current levels. Meanwhile, the consensus recommendation is a Hold.
Financial services firm UBS Global Research has a Sell rating on the mid-cap stock and a $10 price target.
"Macy's is a share loss stock, in our view," wrote UBS Global Research analyst Jay Sole in a November 18 note. "It has major disadvantages vs peers around price, product, and service. We believe these dynamics should lead to continuous net losses. M's current stock price does not reflect long-term earnings-per-share challenges, in our view."
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