Macy’s Discovers $154 Million in Hidden Expenses by a Single Employee

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Macy’s has uncovered accounting irregularities involving a single employee who intentionally hid up to $154 million in expenses over nearly three years. This revelation has prompted the retailer to postpone its quarterly earnings report, originally scheduled for Tuesday, to December 11.

The former employee, whose identity has not been disclosed, concealed small package delivery expenses through “erroneous accounting accrual entries,” according to the company. While Macy’s has not clarified the motive behind these actions, it emphasized that the issue did not impact cash management or vendor payments.

Details of the Discovery

The irregularities were identified during an internal audit and have led to an independent forensic accounting investigation. Despite the large sum involved, the hidden expenses account for a fraction of Macy’s $4.36 billion in delivery expenses recognized since the fourth quarter of 2021.

In a statement, Macy’s CEO Tony Spring reassured stakeholders about the company’s commitment to ethical conduct:

“While we work diligently to complete the investigation as soon as practicable and ensure this matter is handled appropriately, our colleagues across the company are focused on serving our customers and executing our strategy for a successful holiday season.”

Investigators have not found evidence implicating any other employees in the scheme.

Investor Concerns and Preliminary Earnings

The revelation has raised questions about the effectiveness of Macy’s internal controls and auditing processes. Neil Saunders, a retail analyst at GlobalData Retail, criticized the oversight, stating:

“Such things create more nervousness for investors who are already concerned about the company’s performance.”

Adding to investor unease, Macy’s released a preliminary earnings report showing a 2.4% decline in quarterly sales to $4.7 billion. Weakness in digital sales and cold-weather merchandise contributed to the drop, exacerbated by unseasonably warm fall weather.

Macy’s shares fell nearly 3% at Monday’s open and are down 20% year-to-date.

Operational Challenges and Strategic Plans

The 165-year-old retailer continues to face challenges in its middle-market segment, which has been underperforming. Macy’s is executing a turnaround strategy that includes closing hundreds of underperforming stores. Despite this, sales at remaining stores also declined.

Conversely, the company’s premium segments, including Bloomingdale’s and Bluemercury, performed better, with sales rising 1.4% and 3.2%, respectively.

Earlier this year, Macy’s rejected offers from private investors to take over the company, opting instead to pursue its own recovery strategy.

As the investigation proceeds and the company navigates its turnaround, the incident underscores the importance of robust internal controls in maintaining investor confidence.

 

Deutsche Bank Predicts S&P 500 to Reach 7,000 by 2025 Amid Rising Investor Risk Appetite

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Deutsche Bank has projected a significant rally for the S&P 500, expecting the index to reach 7,000 by the end of 2025, marking a 17% increase from its current levels. The forecast hinges on robust investor demand for equities, buoyed by strong corporate activity and favorable market conditions.

Binky Chadha, Deutsche Bank’s chief global strategist, attributes this optimistic outlook to sustained inflows into equities and bonds, driven by heightened risk appetite. In a note to clients, Chadha stated: “We see S&P 500 buybacks rising from an annual run rate of $1.1 trillion currently to about $1.3 trillion next year, rising in line with earnings.” He added that the solid demand-supply dynamics for U.S. equities will support the index’s rise to 7,000.

Key Drivers of Growth

The S&P 500 is already closing 2024 on a high note, boosted by investor optimism surrounding President-elect Donald Trump’s pro-business policies. The index recently set an intraday record, with November gains of about 5% contributing to an impressive 25.5% return for the year, excluding reinvested dividends.

Looking ahead, Deutsche Bank foresees continued economic growth in 2025, spurred by potential tax cuts and deregulation under the new administration. Corporate earnings growth is expected to fuel increased buybacks and spending, further supporting equity markets.

Risks to the Bullish Thesis

Despite the positive outlook, Deutsche Bank highlighted potential risks tied to Trump’s protectionist trade and immigration policies. The bank warned that aggressive measures in these areas could negatively impact economic growth and drive inflation higher. This scenario might prompt the Federal Reserve to halt its interest rate cuts or even consider rate hikes, which could exert upward pressure on bond yields and dampen equity performance.

“The main downside risks are more likely to emerge if greater weight is put on aggressive trade and immigration policies,” Deutsche Bank cautioned.

Market Consensus

Deutsche Bank’s forecast aligns with other optimistic projections from Wall Street. UBS recently described the market environment as a continuation of a “Roaring 20s” period, predicting the S&P 500 could also hit 7,000 under its most bullish scenario. Meanwhile, Goldman Sachs anticipates an 11% gain for stocks by 2025.

As 2024 wraps up with strong gains and 2025 shaping up to continue the momentum, the market appears set for an extended bull run—barring significant geopolitical or economic disruptions.

 

Warren Buffett’s Estate Planning Advice: Parents Should Share Their Will With Kids Before Signing

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Warren Buffett has shared a crucial piece of advice for all parents, whether they have modest or vast wealth: let your children read your will before you sign it. The billionaire investor, who has built a fortune of $150 billion, emphasized the importance of transparency in estate planning to prevent confusion and potential conflict among heirs.

In a letter on Monday, Buffett, who has three children, advised parents to ensure their children understand the rationale behind their inheritance decisions. He stressed that addressing any questions or concerns before finalizing the will can help avoid misunderstandings later. “You don’t want your children asking ‘Why?’ about your testamentary choices when you can no longer respond,” he wrote.

The Importance of Transparency

Buffett’s counsel reflects the complexity of family dynamics when wealth is involved. According to Douglas Boneparth, a certified financial planner, the conversations about inheritance can be tough but are essential for strengthening relationships. “These are tough conversations to have, but they’re meaningful and when approached correctly, can strengthen relationships,” Boneparth explained. He added that parents should aim for clear, thorough communication about who will inherit what and why, helping children form realistic expectations about their share.

Boneparth also cautioned against the tendency to avoid tough topics out of fear of upsetting children. “You want to address the situation before you’re no longer around, so the message isn’t left to be misinterpreted,” he said.

Avoiding Family Conflict

Buffett recalled observing how family conflicts often arise when children feel left out or confused about the distribution of an inheritance. He noted that unresolved issues, such as perceived favoritism or jealousy over past slights, can magnify after a parent’s death if the will is not communicated properly. If inheritance is not equally divided, parents should provide clear reasons for their decisions, such as prior financial support for one child or differences in their financial situations.

Certified financial planner Carolyn McClanahan also emphasized that parents with multiple children may want to consider discussing their estate plans with the wealthier child to ensure that they understand why they may receive less than their sibling, who may need more financial assistance. She suggests asking questions like, “Do you really care how I leave our assets? Because your brother is an artist and could use a little more help.”

Knowing When to Withhold Information

While transparency is generally important, there are cases where parents may choose to withhold certain details from their children. McClanahan warned that if a child has exploited the parents financially, it may be better to refrain from discussing inheritance plans. Additionally, if a child is irresponsible with money, knowing they stand to inherit a significant amount could negatively impact their work ethic or motivation. In these cases, McClanahan suggests writing a letter to children explaining the estate decisions, which can be read only after the parent’s passing.

As McClanahan pointed out, every family dynamic is unique. What works for one family may not be appropriate for another, so parents should carefully consider how and when to share information about their estate plans.

Buffett’s Legacy and Practical Wisdom

Buffett’s own estate planning reflects his pragmatic approach to wealth management. He has stated that he plans to give most of his fortune to charity rather than leaving it to his children. However, he encourages other parents to use their will as an opportunity for open dialogue, ensuring that all parties understand the reasons behind the financial decisions made.