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Dive Brief:
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Macy’s is clawing back over $600,000 in executive bonus compensation after determining its previously reported $151 million accounting error led to overinflated pay, according to a securities filing.
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The New York-based department store chain tied executives’ cash bonuses to adjusted 2023 EBITDA, among other metrics; given the $151 million error correction, EBITDA for that year was overstated by just over $81 million, which shifted overall payout under the company’s 2023 annual incentive plan, or STI plan, from “60.47% to 51.59% of target,” according to the filing Tuesday with the Securities and Exchange Commission. As a consequence, the company issued “erroneously awarded compensation of $609,613” under its 2023 STI plan, according to the filing.
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In a separate filing Tuesday, Macy’s also announced sweeping leadership changes, appointing Thomas Edwards, presently the CFO and chief operating officer for luxury group Capri Holdings, as its next CFO and COO, CFO Dive previously reported. Edwards will step in for Macy’s CFO and COO Adrian Mitchell effective June 22, according to the release.
Dive Insight:
Both the clawbacks and the leadership shifts come just over four months after Macy’s reported an individual employee had intentionally made “erroneous accounting accrual entries” which hid over $100 million in delivery expenses from a period starting in the fourth quarter of 2021 to the quarter ended Nov. 2, 2024, according to a company release.
In December Macy’s said an independent investigation had shown the $151 million error had “no material impact on financial results for any historical annual or interim period” and that it would be making changes to ensure such an error would not happen again. At the same time, the company also concluded “that revisions should be made to its historical consolidated financial statements that were impacted by these misstatements to properly reflect delivery expense, the related accrual and tax effects,” according to the Tuesday filing.
The clawbacks are based on profit numbers that were overstated due to the accounting error; meaning this “isn’t exactly a penalty — it’s collection of overpayments,” said David Swartz, senior equity analyst with Morningstar.
“It’s still unclear to me that this issue is related to Macy’s CFO change,” Swartz told CFO Dive via email. “The misstatements are clearly embarrassing, but I think the CFO would have been fired months ago if he was mainly to blame.”