Macy's Inc. (M) shares plummeted over 12% in pre-market trading on Wednesday after the department store chain cut its annual profit forecast and revealed an accounting scandal involving hidden delivery expenses. The company also announced plans to accelerate store closures amid weak demand.

In its fiscal third-quarter earnings report, Macy's slashed its adjusted earnings per share guidance for fiscal 2024 to a range of $2.25 to $2.50, down from its previous outlook of $2.34 to $2.69, which had already been reduced due to an accounting error. The company also lowered its gross margin expectations for the year, citing increased promotional activity during the holiday season.

Macy's disclosed that a single employee had intentionally made erroneous accounting entries to hide approximately $151 million in delivery expenses from the fourth quarter of 2021 through the third quarter of 2024. The company has revised its financial statements for fiscal years 2021, 2022, and 2023, as well as the third quarter of 2024, to correct the misstatements.

Adding to the challenges, Macy's reported a 2.4% year-over-year decline in net sales for the third quarter, with comparable sales down 2.4% on an owned basis and 1.3% on an owned-plus-licensed-plus-marketplace basis. The company attributed the weakness to its non-First 50 locations, digital channels, and cold weather categories.

In response to the weak demand environment, Macy's announced plans to close an additional 10 stores in 2024, bringing the total store closures for the year to 65 locations. The company is accelerating its broader plan to shut down 150 underperforming stores by the beginning of 2027 as it focuses on its top-performing locations and seeks to unlock value from its real estate portfolio.