By Suzanne Kapner

Macy's has completed its investigation into accounting problems and found that a single employee's mistake -- and subsequent coverup -- created $151 million in false bookkeeping entries, according to a person briefed on the probe.

The discovery prompted the retailer in November to postpone reporting its quarterly financial results for two weeks and triggered a selloff of Macy's shares.

The employee told investigators about having mistakenly understated the amount of small parcel delivery expenses in late 2021, the person briefed on the probe said. Macy's has said that the employee had responsibility for small package delivery expense accounting, but declined to provide further information about the employee.

To hide the error, the employee continued to intentionally make erroneous accounting entries and falsify underlying documentation until the misstatement was discovered this fall, the person briefed on the probe said. The employee, who has since been terminated, didn't act out of personal or financial gain, the person added.

Macy's said on Wednesday that the employee hid roughly $151 million of cumulative delivery expenses from the fourth quarter of 2021 through the third quarter of 2024. The company said there was no impact to Macy's revenue, cash, inventory or vendor payments. Macy's had previously estimated that the erroneous entries obscured between $132 million and $154 million in delivery expenses.

"We've concluded our investigation and are strengthening our existing controls and implementing additional changes designed to prevent this from happening again," Macy's Chief Executive Tony Spring said in a press statement.

Macy's didn't say how it uncovered the erroneous entries or how they went undetected by the company's auditor, KPMG.

The accounting irregularities delayed the release of Macy's financial results during a period when investors eagerly look for clues to how retailers are performing as they head into the important year-end holiday season.

On Wednesday, Macy's said net sales fell 2.4% to $4.7 billion for the three months that ended Nov. 2, compared with the same period last year. Sales at stores open at least a year declined 2.4%. When licensed departments and goods sold on its marketplace were factored in, same-store sales fell 1.3%

The company's Bloomingdale's and Bluemercury chains performed better, with net sales up 1.4% and 3.2%, respectively.

Net income fell to $28 million from $41 million a year earlier. The company raised its sales guidance slightly for the full fiscal year.

Macy's said it raised $66 million from asset sales in the period, more than double its prior guidance. The company has been closing and selling weaker stores to focus on its top locations. Spring has outlined a plan to close 150 Macy's locations by the beginning of 2027. There are currently about 475 Macy's stores.

The company has come under pressure from activist investors, who want it to do more to unlock value from its real estate.

Barington Capital has built a position in Macy's and is pushing the department-store operator to make changes to boost its slumping stock, including the creation of a separate real-estate unit within the company and the possible sale or spinoff of Bloomingdale's and Bluemercury, which cater to more upscale shoppers.

In July, Macy's ended talks with two investors -- Arkhouse Management and Brigade Capital Management -- that had offered to buy the company for about $6.9 billion.

Write to Suzanne Kapner at suzanne.kapner@wsj.com

(END) Dow Jones Newswires

December 11, 2024 07:34 ET (12:34 GMT)

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