10:22 AM EST, 12/11/2024 (MT Newswires) -- Macy's (M) lowered its full-year earnings outlook on Wednesday as the department store operator completed its investigation into an accounting issue that delayed the release of its complete fiscal third-quarter results.

The company found a single employee hid about $151 million of cumulative delivery expenses from the fourth quarter of 2021 through the third quarter of 2024. Following the completion of its probe, the company determined that there was no material impact on any of its past or current reporting periods, but it revised its financial statements to reflect the impact of the delivery expense misstatement.

The total misstatement to delivery expense for the first half of the ongoing fiscal year amounted to roughly $9 million, which was adjusted in total during the third quarter, it said Wednesday. In a separate regulatory filing with the Securities and Exchange Commission, the company said it identified material weakness in its internal controls over financial reporting related to journal entries of delivery costs and certain other expenses. Macy's has begun to implement changes designed to improve its processes, including re-evaluating the risk of employees circumventing its controls, it said.

"We've concluded our investigation and are strengthening our existing controls and implementing additional changes designed to prevent this from happening again and demonstrate our strong commitment to corporate governance," Chief Executive Tony Spring said in a statement. "Our focus is on ensuring that ethical conduct and integrity are upheld across the entire organization."

The company now anticipates adjusted earnings to be in between $2.25 and $2.50 per share for fiscal 2024, down from its previous expectations of $2.34 to $2.69, which were adjusted for the delivery expense. In August, Macy's said it expected adjusted EPS between $2.55 to $2.90 for the full year. The current consensus on FactSet is for non-GAAP EPS of $2.73.

The guidance includes a $13 million adjustment to delivery expense in the third quarter of 2024 as well as an updated estimated delivery expense impact of $66 million for the fourth quarter of 2024.

The stock dropped 10% in Wednesday trading.

Sales are now pegged at $22.3 billion to $22.5 billion for the fiscal year versus the previous forecast of $22.1 billion to $22.4 billion. Four analysts polled by FactSet expect $22.19 billion. The company estimates comparable owned-plus-licensed-plus-marketplace sales to be flat to down 1%, compared with prior projections for a decline of 0.5% to 2%.

Macy's disclosed on Nov. 25 that it will delay its full third-quarter earnings release due to its investigation into the accounting issue. On Wednesday, it reported adjusted EPS of $0.04 for the three-month period ended Nov. 2, as expected by six FactSet-polled analysts, down from $0.21 the year before. Sales decreased 2.4% to $4.74 billion, meeting the estimate on FactSet by two analysts.

Comparable sales moved down 2.4% on an owned basis. By brand, Macy's comparable sales dropped 3% on an owned basis while Bloomingdale's ticked up 1%. Bluemercury comparable sales gained 3.3%.

"We are encouraged by the consistent sales growth in our Macy's first 50 locations and the strong performance of Bloomingdale's and Bluemercury," Spring said. "Quarter-to-date, comparable sales continue to trend ahead of third-quarter levels across the portfolio."

Earlier this week, Macy's shareholders Barington Capital and Thor Equities urged the department store chain to cut capital expenditures and consider strategic alternatives for its Bloomingdale's and Bluemercury chains.

Price: 15.22, Change: -1.51, Percent Change: -9.00