Dive Brief:

• 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.
• The retailer 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 from “60.47% to 51.59% of target,” according to the filing. 
• The news came as Macy’s announced sweeping leadership changes, which included Chief Operating and Financial Officer Adrian Mitchell announcing his departure later this year.

Dive Insight:

Both the clawbacks and the leadership shifts come about 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,” David Swartz, senior equity analyst with Morningstar, said. The erroneously awarded compensation was paid to some executives in April 2024, with the aggregate amount outstanding as of the end of its fiscal 2024 standing at $609,613. As of April 1, the aggregate amount outstanding stood at $352,093. The company will seek to recover the remaining amount during fiscal 2025, according to the Tuesday filing.

In a statement Tuesday, Macy's said there was no connection between the accounting missteps and leadership change.

“While we don’t discuss business rationale regarding any leadership transition or change, this decision is not related to the accounting issue. We have been transparent and our disclosures are complete,” the company said in statement emailed to sister publication CFO Dive.

According to the company’s proxy statement for its full-year 2023, Mitchell received $742,036 in non-equity incentive compensation for the year as part of total compensation of about $7.9 million. For 2024, he received non-equity incentive compensation of approximately $1.2 million, with total compensation reaching $5.5 million, according to Macy’s latest proxy filed Tuesday.

Macy's declined to provide further details on the executive bonuses beyond what was provided in public filings.