Macy’s fraud finding distracts from ‘otherwise positive update,’ says Evercore

Evercore ISI notes that Macy’s (M) postponed its Q3 earnings release that was expected tomorrow due to a “long-running (though immaterial)” accounting fraud that was discovered. The firm thinks Macy’s found out recently and doesn’t have the full details yet prepared to give a completed gross margin and EPS update, though the disclosed delivery expense accounting fraud has only about a 20 basis point impact to cumulative gross margin over the three-year fraud period, the firm says. Based on the firm’s conversations, Macy’s is unable to comment on whether the $132M-$154M of cumulative delivery expense from Q4 of 2021 to Q3 of 2024 skews earlier or later in the affected period, or how much this impacts the 2024 P&L versus prior years, the analyst tells investors. The analyst, who calls the delay an “unhelpful distraction amid an otherwise positive update,” notes that owned plus licensed plus marketplace same-store sales were “only” down 1.3%, which was better than the firm’s 1.7% decline forecast. Evercore has an In Line rating and $16 price target on Macy’s shares, which are down 51c, or 3%, to $15.78 in morning trading.