Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

~~Large Accelerated Filer~~ ☒ ~~Accelerated Filer~~ ☐ ~~Non-Accelerated Filer~~ ☐ ~~Smaller Reporting Company~~ ☐ ~~Emerging Growth Company~~ ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at ~~November 28, 2020~~May 29, 2021
Common Stock, $.01 par value per share	~~310,477,909~~ 311,868,429 shares

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MACY’S, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(millions, except per share figures)

	13 Weeks Ended
	May 1, 2021			May 2, 2020
Net sales	$	4,706		$	3,017
Credit card revenues, net		159			131

Cost of sales		(2,889	)		(2,501	)
Selling, general and administrative expenses		(1,748	)		(1,598	)
Gains on sale of real estate		6			16
Impairment, restructuring and other costs		(19	)		(3,184	)
Operating income (loss)		215			(4,119	)
Benefit plan income, net		15			9
Interest expense		(79	)		(49	)
Losses on early retirement of debt		(11	)		0
Interest income		0			2
Income (loss) before income taxes		140			(4,157	)
Federal, state and local income tax benefit (expense)		(37	)		576
Net income (loss)	$	103		$	(3,581	)
Basic earnings (loss) per share	$	0.33		$	(11.53	)
Diluted earnings (loss) per share	$	0.32		$	(11.53	)

13 Weeks Ended 39 Weeks Ended
October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019
Net sales $ 3,990 $ 5,173 $ 10,566 $ 16,223
Credit card revenues, net 195 183 494 531
Cost of sales (2,569) (3,106) (7,788) (9,905)
Selling, general and administrative expenses (1,726) (2,202) (4,723) (6,489)
Gains on sale of real estate 3 17 20 67
Impairment, restructuring and other costs (20) (13) (3,445) (16)
Operating income (loss) (127) 52 (4,876) 411
Benefit plan income, net 16 8 37 23
Settlement charges (26) (12) (65) (12)
Interest expense (80) (52) (199) (159)
Financing costs 0 0 (4) 0
Interest income 0 4 3 16
Income (loss) before income taxes (217) 0 (5,104) 279
Federal, state and local income tax benefit (expense) 126 2 1,000 (55)
Net income (loss) $ (91) $ 2 (4,104) 224
Basic earnings (loss) per share $ (0.29) $ 0.01 $ (13.20) $ 0.72
Diluted earnings (loss) per share $ (0.29) $ 0.01 $ (13.20) $ 0.72

The accompanying notes are an integral part of these Consolidated Financial Statements.

MACY’S, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(millions)

	13 Weeks Ended
	May 1, 2021			May 2, 2020
Net income (loss)	$	103		$	(3,581	)
Reclassifications to net income (loss):
Amortization of net actuarial loss and prior service credit on post employment and postretirement benefit plans included in net income, before tax		10			12
Tax effect related to items of other comprehensive income		(2	)		(3	)
Total other comprehensive income, net of tax effect		8			9
Comprehensive income (loss)	$	111		$	(3,572	)

~~(Unaudited)~~

~~(millions)~~

13 Weeks Ended 39 Weeks Ended
October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019
Net income (loss) $ (91) $ 2 $ (4,104) $ 224
Other comprehensive income (loss):
Actuarial loss on post employment and postretirement benefit plans, before tax (36) (70) (17) (70)
Reclassifications to net income (loss):
Amortization of net actuarial loss and prior service credit on post employment and postretirement benefit plans included in net income, before tax 13 8 36 23
Settlement charges, before tax 26 12 65 12
Tax effect related to items of other comprehensive income (loss) (1) 13 (21) 9
Total other comprehensive income (loss), net of tax effect 2 (37) 63 (26)
Comprehensive income (loss) $ (89) $ (35) $ (4,041) $ 198

The accompanying notes are an integral part of these Consolidated Financial Statements.

MACY’S, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(millions)

	May 1, 2021		January 30, 2021		May 2, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	1,798	$	1,679	$	1,523
Receivables		205		276		170
Merchandise inventories		4,230		3,774		4,923
Prepaid expenses and other current assets		1,007		455		519
Total Current Assets		7,240		6,184		7,135
Property and Equipment - net of accumulated depreciation and amortization of $4,550, $4,400 and $4,560		5,798		5,940		6,425
Right of Use Assets		2,853		2,878		2,672
Goodwill		828		828		838
Other Intangible Assets – net		436		437		439
Other Assets		927		1,439		1,072
Total Assets	$	18,082	$	17,706	$	18,581
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	294	$	452	$	739
Merchandise accounts payable		2,545		1,978		2,196
Accounts payable and accrued liabilities		2,616		2,927		2,757
Income taxes		63		0		80
Total Current Liabilities		5,518		5,357		5,772
Long-Term Debt		4,558		4,407		4,918
Long-Term Lease Liabilities		3,166		3,185		2,923
Deferred Income Taxes		868		908		944
Other Liabilities		1,297		1,296		1,327
Shareholders' Equity		2,675		2,553		2,697
Total Liabilities and Shareholders’ Equity	$	18,082	$	17,706	$	18,581

~~(Unaudited)~~

~~(millions)~~

October 31, 2020 February 1, 2020 November 2, 2019
ASSETS
Current Assets:
Cash and cash equivalents $ 1,551 $ 685 $ 301
Receivables 185 409 175
Merchandise inventories 5,144 5,188 7,256
Prepaid expenses and other current assets 477 528 569
Total Current Assets 7,357 6,810 8,301
Property and Equipment - net of accumulated depreciation and
amortization of $4,816, $4,392 and $4,926 6,122 6,633 6,558
Right of Use Assets 3,028 2,668 2,596
Goodwill 828 3,908 3,908
Other Intangible Assets – net 437 439 440
Other Assets 1,442 714 744
Total Assets $ 19,214 $ 21,172 $ 22,547
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt $ 536 $ 539 $ 6
Merchandise accounts payable 3,267 1,682 3,427
Accounts payable and accrued liabilities 2,848 3,448 3,046
Income taxes 0 81 0
Total Current Liabilities 6,651 5,750 6,479
Long-Term Debt 4,852 3,621 4,677
Long-Term Lease Liabilities 3,266 2,918 2,819
Deferred Income Taxes 917 1,169 1,200
Other Liabilities 1,285 1,337 1,315
Shareholders' Equity 2,243 6,377 6,057
Total Liabilities and Shareholders’ Equity $ 19,214 $ 21,172 $ 22,547

The accompanying notes are an integral part of these Consolidated Financial Statements.

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

(millions)

	Common Stock		Additional Paid-In Capital			Accumulated Equity		Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
Balance at January 30, 2021	$	3	$	571		$	3,928	$	(1,161	)	$	(788	)	$	2,553
Net income							103								103
Other comprehensive income												8			8
Stock-based compensation expense				11											11
Stock issued under stock plans				(24	)				24						0
Balance at May 1, 2021	$	3	$	558		$	4,031	$	(1,137	)	$	(780	)	$	2,675

~~(Unaudited)~~

~~(millions~~)

Common
Stock Additional
Paid-In
Capital Accumulated
Equity Treasury
Stock Accumulated
Other
Comprehensive
Income (Loss) Total Shareholders' Equity
Balance at February 1, 2020 $ 3 $ 621 $ 7,989 $ (1,241) $ (995) $ 6,377
Net loss (3,581) (3,581)
Other comprehensive income 9 9
Common stock dividends
($0.3775 per share)
(117) (117)
Stock-based compensation expense 6 6
Stock issued under stock plans (62) 61 (1)
Other 4 4
Balance at May 2, 2020 3 565 4,291 (1,180) (982) 2,697
Net loss (431) (431)
Other comprehensive income 51 51
Stock-based compensation expense 7 7
Stock issued under stock plans (4) 4 0
Balance at August 1, 2020 3 568 3,860 (1,176) (931) 2,324
Net loss (91) (91)
Other comprehensive income 2 2
Stock-based compensation expense 8 8
Stock issued under stock plans (1) 1 0
Balance at October 31, 2020 $ 3 $ 575 $ 3,769 $ (1,175) $ (929) $ 2,243

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - (Continued)

(Unaudited)

(millions)

	Common Stock		Additional Paid-In Capital			Accumulated Equity			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
Balance at February 1, 2020	$	3	$	621		$	7,989		$	(1,241	)	$	(995	)	$	6,377
Net loss							(3,581	)								(3,581	)
Other comprehensive income													9			9
Common stock dividends ($0.3775 per share)							(117	)								(117	)
Stock-based compensation expense				6												6
Stock issued under stock plans				(62	)					61						(1	)
Other												4				4
Balance at May 2, 2020	$	3	$	565		$	4,291		$	(1,180	)	$	(982	)	$	2,697

~~(Unaudited)~~

~~(millions~~)

Common
Stock Additional
Paid-In
Capital Accumulated
Equity Treasury
Stock Accumulated
Other
Comprehensive
Income (Loss) Total Shareholders' Equity
Balance at February 2, 2019 $ 3 $ 652 $ 8,050 $ (1,318) $ (951) $ 6,436
Cumulative-effect adjustment (a) (158) (158)
Net income 136 136
Other comprehensive income 6 6
Common stock dividends
   ($0.3775 per share)
(117) (117)
Stock-based compensation expense 14 14
Stock issued under stock plans (60) 66 6
Balance at May 4, 2019 3 606 7,911 (1,252) (945) 6,323
Net income 86 86
Other comprehensive income 5 5
Common stock dividends
   ($0.3775 per share)
(117) (117)
Stock-based compensation expense 14 14
Stock issued under stock plans (3) 4 1
Other 3 3
Balance at August 3, 2019 3 617 7,883 (1,248) (940) 6,315
Net income 2 2
Other comprehensive loss (37) (37)
Common stock dividends
   ($0.7550 per share)
(236) (236)
Stock-based compensation expense 12 12
Stock issued under stock plans (3) 4 1
Balance at November 2, 2019 $ 3 $ 626 $ 7,649 $ (1,244) $ (977) $ 6,057

~~(a) Represents the cumulative-effect adjustment to retained earnings for the adoption of Accounting Standards Update 2016-02 (ASU-2016-02), Leases (Topic 842), on February 3, 2019.~~

The accompanying notes are an integral part of these Consolidated Financial Statements.

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(millions)

	13 Weeks Ended
	May 1, 2021			May 2, 2020
Cash flows from operating activities:
Net income (loss)	$	103		$	(3,581	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Impairment, restructuring and other costs		19			3,184
Depreciation and amortization		224			237
Stock-based compensation expense		11			6
Gains on sale of real estate		(6	)		(16	)
Benefit plans		10			12
Amortization of financing costs and premium on acquired debt		8			0
Deferred income taxes		(43	)		(225	)
Changes in assets and liabilities:
Decrease in receivables		71			236
(Increase) decrease in merchandise inventories		(457	)		265
(Increase) decrease in prepaid expenses and other current assets		(56	)		12
Increase in merchandise accounts payable		674			629
Decrease in accounts payable and accrued liabilities		(114	)		(531	)
(Increase) decrease in current income taxes		75			(353	)
Change in other assets, liabilities, and other items not separately identified		(25	)		(39	)
Net cash provided (used) by operating activities		494			(164	)
Cash flows from investing activities:
Purchase of property and equipment		(61	)		(122	)
Capitalized software		(38	)		(38	)
Disposition of property and equipment		8			21
Other, net		17			26
Net cash used by investing activities		(74	)		(113	)
Cash flows from financing activities:
Debt issued		500			1,500
Debt issuance costs		(9	)		0
Debt repurchase premium and expenses		(12	)		0
Debt repaid		(503	)		(4	)
Dividends paid		0			(117	)
Decrease in outstanding checks		(276	)		(231	)
Net cash provided (used) by financing activities		(300	)		1,148
Net increase in cash, cash equivalents and restricted cash		120			871
Cash, cash equivalents and restricted cash beginning of period		1,754			731
Cash, cash equivalents and restricted cash end of period	$	1,874		$	1,602
Supplemental cash flow information:
Interest paid	$	52		$	38
Interest received		0			3
Income taxes paid (net of refunds received)		5			2

~~(Unaudited)~~

~~(millions)~~

39 Weeks Ended
October 31, 2020 November 2, 2019
Cash flows from operating activities:
Net income (loss) $ (4,104) $ 224
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Impairment, restructuring and other costs 3,445 16
Settlement charges 65 12
Depreciation and amortization 722 725
Stock-based compensation expense 21 40
Gains on sale of real estate (20) (67)
Benefit plans 36 23
Amortization of financing costs and premium on acquired debt 11 1
Deferred income taxes (270) 25
Changes in assets and liabilities:
Decrease in receivables 223 224
(Increase) decrease in merchandise inventories 34 (1,993)
Decrease in prepaid expenses and other current assets 29 13
Increase in merchandise accounts payable 1,612 1,648
Decrease in accounts payable and accrued liabilities
(598) (470)
Decrease in current income taxes (818) (168)
Change in other assets and liabilities (144) (81)
Net cash provided by operating activities 244 172
Cash flows from investing activities:
Purchase of property and equipment (290) (623)
Capitalized software (96) (189)
Disposition of property and equipment 39 73
Other, net 33 10
Net cash used by investing activities (314) (729)
Cash flows from financing activities:
Debt issued 2,780 0
Debt issuance costs (102) (3)
Debt repaid (1,508) (42)
Dividends paid (117) (349)
Increase (decrease) in outstanding checks (90) 49
Acquisition of treasury stock 0 (1)
Issuance of common stock 0 6
Net cash provided (used) by financing activities 963 (340)
Net increase (decrease) in cash, cash equivalents and restricted cash 893 (897)
Cash, cash equivalents and restricted cash beginning of period 731 1,248
Cash, cash equivalents and restricted cash end of period $ 1,624 $ 351
Supplemental cash flow information:
Interest paid $ 140 $ 152
Interest received 4 16
Income taxes paid (net of refunds received) 88 199

Note: Restricted cash of ~~$73~~$76 million and ~~$50~~$79 million have been included with cash and cash equivalents for the 3913 weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ respectively.

The accompanying notes are an integral part of these Consolidated Financial Statements.

~~MACY’S,~~

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.
Organization and Summary of Significant Accounting Policies

~~1. Organization and Summary of Significant Accounting Policies~~

Nature of Operations

Macy's, Inc. ~~and~~, together with its subsidiaries (the "Company"), is an omnichannel retail organization operating stores, websites and mobile applications under three brands (Macy's, Bloomingdale's and bluemercury) that sell a wide range of merchandise, including apparel and accessories (men's, women's and kids'), cosmetics, home furnishings and other consumer goods. The Company has stores in 43 states, the District of Columbia, ~~Guam~~Puerto Rico and ~~Puerto Rico.~~Guam. As of ~~October 31, 2020,~~May 1, 2021, the Company's operations were conducted through Macy's, Market by Macy’s, Macy’s Backstage, Bloomingdale's, Bloomingdale's The Outlet, ~~Macy's Backstage~~ and bluemercury.

Bloomingdale's in Dubai, United Arab Emirates and Al Zahra, Kuwait are operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC.

A description of the Company's significant accounting policies is included in the Company's Annual Report on Form 10-K for the fiscal year ended ~~February 1, 2020~~January 30, 2021 (the ~~"2019~~"2020 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the ~~2019~~2020 10-K.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States ~~generally accepted accounting principles~~of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company considered the novel coronavirus ("COVID-19") related impacts to its estimates, as appropriate, within its Consolidated Financial Statements and there may be changes to those estimates in future periods. The Company believes that the accounting estimates are appropriate after giving consideration to the increased uncertainties surrounding the severity and duration of the COVID-19 pandemic. Such estimates and assumptions are subject to inherent uncertainties, including the ultimate financial impact of the COVID-19 pandemic, which may result in actual amounts differing from reported amounts.

The Consolidated Financial Statements for the 13 ~~and 39~~ weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly, in all material respects, the consolidated financial position and results of operations of the Company.

Seasonality

Because of the seasonal nature of the retail business, the results of operations for the 13 ~~and 39~~ weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~(which do not include the Christmas season) are not necessarily indicative of such results for the full fiscal year.

~~Reclassifications~~

~~Certain reclassifications were made to the prior period's amounts to conform to the classifications of such amounts in the most recent period.~~

Comprehensive Income (Loss)

Total comprehensive income (loss) represents the change in equity during a period from sources other than transactions with shareholders and, as such, includes net income (loss). For the Company, the only other components of total comprehensive income (loss) for the 13 ~~and 39~~ weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~ relate to post employment and postretirement plan items. Settlement charges incurred are included as a separate component of income (loss) before income taxes in the Consolidated Statements of Operations. Amortization reclassifications out of accumulated other comprehensive loss are included in the computation of net periodic benefit cost (income) and are included in benefit plan income, net on the Consolidated Statements of Operations. See Note 8,6, "Benefit Plans," for further information.

COVID-19 Pandemic

As the COVID-19 pandemic continues into fiscal 2021, the Company remains focused on prudent cash management, maintaining strong liquidity, and executing its strategic initiatives. In addition, the Company continues to prioritize health and safety measures in its stores and facilities to protect the well-being of its customers and colleagues. Although the Company has experienced recovery in operating results during the first quarter of 2021 as compared to fiscal 2020, certain stores continued to operate under local governmental orders or restrictions. The full impact of COVID-19 will continue to depend on future developments, including the continued spread and duration of the pandemic, variant strains of COVID-19, the availability and distribution of effective medical treatments or vaccines as well as any related federal, state or local governmental orders or restrictions. In addition, numerous uncertainties continue to surround the pandemic and its ultimate impact on the Company, including the timing and extent of any recovery in consumer traffic and spending, and potential delays, interruptions and disruptions in the Company’s supply chain, all of which are highly uncertain and cannot be predicted.

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

~~2. Impact of COVID-19~~

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which continues to spread throughout the United States. The COVID-19 pandemic has had a negative impact on the Company's fiscal 2020 operations and financial results to date, and the full financial impact of the pandemic cannot be reasonably estimated at this time due to uncertainty as to the severity and duration of the pandemic. The following summarizes the actions taken and impacts from the COVID-19 pandemic during the 13 and 39 weeks ended October 31, 2020.

•~~In an effort to increase liquidity, the Company fully drew on its $1,500 million credit facility, announced the suspension of quarterly cash dividends beginning~~

As further disclosed in the ~~second quarter of~~Company’s 2020 and took additional steps to reduce discretionary spending. The Company's Board of Directors also rescinded its authorization of any unused amounts under the Company's share repurchase program. In June 2020, the Company completed financing activities totaling nearly $4.5 billion and used a portion of the proceeds from these activities, as well as cashForm 10-K, on hand, to repay its credit facility. To create greater flexibility for future liquidity needs, the Company executed an exchange offer and consent solicitation in July 2020 for $465 million of previously issued unsecured notes. See Note 7, "Financing Activities," for further discussion on these activities.

•To improve the Company's cash position and reduce its cash expenditures, the Company's Board of Directors and Chief Executive Officer did not receive compensation from April 1, 2020 through June 30, 2020. In addition, the Company deferred cash expenditures where possible and temporarily implemented a furlough for the majority of its colleague population which ended for most colleagues at the beginning of July 2020. Certain executives not impacted by the furlough took a temporary reduction of their pay through June 30, 2020.

•In June 2020, the Company announced a restructuring that aligns its cost base with anticipated near-term sales as the business recovers from the impact of the COVID-19 pandemic. The Company reduced corporate and management headcount by approximately 3,900. Additionally, the Company reduced staffing across its stores portfolio, supply chain and customer support network, which it will adjust as sales recover. During the second quarter of 2020, the Company recognized $154 million of expense for severance related to this reduction in force, of which substantially all has been paid as of October 31, 2020.

•Through October 31, 2020, the Company has deferred approximately $75 million of occupancy payments for a significant number of its stores. COVID-19 pandemic-related rent deferrals are included in accounts payable and accrued liabilities. The Company continues to recognize expense during the deferral periods based on the contractual terms of the lease agreements.

•During the 39 weeks ended October 31, 2020, the Company incurred non-cash impairment charges primarily related to long-lived tangible and right of use assets to adjust the carrying value of certain store locations to their estimated fair value. The Company also incurred non-cash impairment charges during the 39 weeks ended October 31, 2020 on goodwill as a result of the sustained decline in the Company's market capitalization and decline in projected cash flows primarily as a result of the COVID-19 pandemic. See Note 3, "Impairment, Restructuring and Other Costs" and Note 4, "Goodwill and Indefinite Lived Intangible Assets," respectively, for further discussion of these charges.

•On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ~~("the~~ (“CARES ~~Act"~~Act”) was signed into law, which ~~included payroll tax credits for employee retention, deferral of payroll taxes, and several income tax provisions, including modifications to~~permitted, among other benefits, the ~~net interest deduction limitation, changes to certain property depreciation and~~ carryback of certain net operating losses.

~~The impacts of~~ Based on the ~~CARES Act have been included in the estimation of the Company's annual effective tax rate and the~~Company’s 2020 fiscal results, a $520 million income tax ~~benefit~~receivable has been recognized ~~during the 13 and 39 weeks ended October 31, 2020. Specifically, the Company has estimated an annual~~as of May 1, 2021, associated with this net operating loss ~~that will be available for~~ carryback ~~at a 35% federal~~benefit. This income tax ~~rate rather than the current 21% federal income tax rate. During the 39 weeks ended October 31, 2020, the resultant benefit of this rate~~

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~differential was offset by the impact of the non-tax deductible component of the goodwill impairment charge and additional income tax expense associated with deferred tax remeasurement during~~receivable is estimated to be received in the first quarter of 2020. The net impact of these items is the primary driver of the effective tax rate decrease when compared to the same period in 2019. As of October 31, 2020, the Company recognized a $705 million income tax receivable, which2022 and is included within ~~Other Assets~~prepaid expenses and other current assets on the Company’s Consolidated Balance ~~Sheets.~~Sheet.

2.	Impairment, Restructuring and Other Costs

	13 Weeks Ended
	May 1, 2021			May 2, 2020
	(millions)
Impairments	$	18		$	3,150
Restructuring		(1	)		25
Other		2			9
Total	$	19		$	3,184

~~In addition, during~~

During the 3913 weeks ended ~~October 31, 2020,~~May 1, 2021, the Company ~~recognized $60~~incurred non-cash impairment charges totaling $18 million ~~in employee retention payroll tax credits and elected~~primarily related to ~~defer payment of approximately $100 million of the employer portion of social security taxes. The Company expects to repay the deferred payroll taxes in the third quarter of fiscal 2021.~~

~~3. Impairment, Restructuring and Other Costs~~

13 Weeks Ended 39 Weeks Ended
October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019
(millions)
Impairments $ 6 $ 0 $ 3,170 $ 1
Restructuring 2 5 196 5
Other 12 8 79 10
Total $ 20 $ 13 $ 3,445 $ 16

capitalized software assets.

During the 3913 weeks ended ~~October 31,~~May 2, 2020, primarily as a result of the COVID-19 pandemic, the Company incurred non-cash impairment charges totaling $~~3,170~~3,150 million ~~the majority of which was recognized during the first quarter of 2020 and consisted~~ consisting of:

•$3,080 million of goodwill impairments, with $2,982 million attributable to the Macy's reporting unit and $98 million attributable to the bluemercury reporting unit. See discussion at Note 4, "Goodwill and Indefinite Lived Intangible Assets."

•~~$90 million of impairments primarily related to long-lived tangible and right of use assets to adjust the carrying value of certain store locations to their estimated fair value.~~

~~The Company also recognized $154 million~~ ~~of expense for severance during the second quarter of 2020~~ ~~associated with the reduction in force in response to the COVID-19 pandemic. Substantially all of this severance was paid as of October 31, 2020.~~

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

•

$3,070 million of goodwill impairments, with $2,972 million attributable to the Macy's reporting unit and $98 million attributable to the bluemercury reporting unit.

	•
$80 million of impairments primarily related to long-lived tangible and right of use assets to adjust the carrying value of certain store locations to their estimated fair value.

A summary of the restructuring and other cash activity for the 13 ~~and 39~~ weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020 related to the Polaris strategy, which was announced in February 2020 and ~~are~~ included within accounts payable and accrued liabilities, is as follows:

	Severance and other benefits			Professional fees and other related charges			Total
	(millions)
Balance at February 1, 2020	$	115		$	9		$	124
Additions charged to expense		25			7			32
Cash payments		(82	)		(6	)		(88	)
Balance at May 2, 2020	$	58		$	10		$	68

								Severance and other benefits			Professional fees and other related charges			Total
		Severance and other benefits		Professional fees and other related charges		Total		(millions)
		(millions)
Balance at February 1, 2020		$	115	$	9	$	124
Balance at January 30, 2021								$	14		$	2		$	16
Additions charged to expense	Additions charged to expense	25		7		32			5			0			5
Cash payments	Cash payments	(82)		(6)		(88)			(16	)		(2	)		(18	)
Balance at May 2, 2020		58		10		68
Additions charged to expense		15		6		21
Cash payments		(67)		(6)		(73)
Balance at August 1, 2020		6		10		16
Additions charged to expense		1		4		5
Cash payments		(6)		(10)		(16)
Balance at October 31, 2020		$	1	$	4	$	5
Balance at May 1, 2021								$	3		$	0		$	3

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

3.
Earnings (Loss) Per Share

~~4. Goodwill and Indefinite Lived Intangible Assets~~

October 31,
2020 February 1,
2020 November 2,
2019
(millions)
Non-amortizing intangible assets
Goodwill $ 9,290 $ 9,290 $ 9,290
Accumulated impairment losses (8,462) (5,382) (5,382)
828 3,908 3,908
Tradenames 403 403 403
$ 1,231 $ 4,311 $ 4,311

As a result of the sustained decline in the Company's market capitalization and changes in the Company's long-term projections driven largely by the impacts of the COVID-19 pandemic, the Company determined a triggering event had occurred that required an interim impairment assessment for all of its reporting units and indefinite lived intangible assets during the first quarter of 2020. The Company determined the fair value of each of its reporting units using a market approach or a combination of a market approach and income approach, as appropriate. Relative to the prior assessment, as part of this current assessment, it was determined that an increase in the discount rate applied in the valuation was required to align with market-based assumptions and company-specific risk. This higher discount rate, in conjunction with revised long-term projections, resulted in lower fair values of the reporting units. As a result, the Company recognized $2,982 million and $98 million of good~~will impairment for the Macy's and bluemercury reporting units, respectively, primarily during the first quarter of 2020.~~

As of May 2, 2020, the Company elected to perform a qualitative impairment test on its intangible assets with indefinite lives and concluded that it is more likely than not that the fair values exceeded the carrying values and the intangible assets with indefinite lives were not impaired.

For the Company's annual impairment assessment as of the end of fiscal May, the Company elected to perform a qualitative impairment test on its goodwill and intangible assets with indefinite lives and concluded that it is more likely than not that the fair values exceeded the carrying values and goodwill and intangible assets with indefinite lives were not impaired.

~~5. Earnings (Loss) Per Share~~

The following tables set forth the computation of basic and diluted earnings (loss) per share:

	13 Weeks Ended
	May 1, 2021						May 2, 2020
	Net Income				Shares		Net Loss						Shares
	(millions, except per share data)
Net income (loss)	$	103				310.7	$	(3,581	)					309.7
Shares to be issued under deferred compensation and other plans						0.9								0.9
	$	103				311.6	$	(3,581	)					310.6
Basic earnings (loss) per share			$	0.33						$	(11.53	)
Effect of dilutive securities:
Stock options and restricted stock units						7.0								0
	$	103				318.6	$	(3,581	)					310.6
Diluted earnings (loss) per share			$	0.32						$	(11.53	)

13 Weeks Ended
October 31, 2020 November 2, 2019
Net
Loss Shares Net
Income Shares
(millions, except per share data)
Net income (loss) $ (91) 310.2 $ 2 308.9
Shares to be issued under deferred compensation and other plans 1.0 1.0
$ (91) 311.2 $ 2 309.9
Basic earnings (loss) per share $ (0.29) $ 0.01
Effect of dilutive securities:
Stock options and restricted stock units 0 1.1
$ (91) 311.2 $ 2 311.0
Diluted earnings (loss) per share $ (0.29) $ 0.01

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

39 Weeks Ended
October 31, 2020 November 2, 2019
Net
Loss Shares Net
Income Shares
(millions, except per share data)
Net income (loss) $ (4,104) 310.1 $ 224 308.7
Shares to be issued under deferred compensation and other plans 0.9 0.9
$ (4,104) 311.0 $ 224 309.6
Basic earnings (loss) per share $ (13.20) $ 0.72
Effect of dilutive securities:
Stock options and restricted stock units 0 1.7
$ (4,104) 311.0 $ 224 311.3
Diluted earnings (loss) per share $ (13.20) $ 0.72

In addition to the stock options and restricted stock units reflected in the foregoing tables, stock options to purchase 14.7 million shares of common stock and restricted stock units relating to 11.7 million shares of common stock were outstanding at May 1, 2021, but were not included in the computation of diluted earnings per share because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.

For the 13 ~~and 39~~ weeks ended ~~October 31,~~May 2, 2020, as a result of the net loss for the quarter, ~~and year to date period,~~ all options and restricted stock units have been excluded from the calculation of diluted earnings per share and, therefore, there was no difference in the weighted average number of common shares for basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive. Stock options to purchase ~~16.4~~17.3 million shares of common stock and restricted stock units relating to ~~10.0~~3.4 million shares of common stock outstanding at ~~October 31,~~May 2, 2020 were excluded from the computation of diluted earnings per share.

Revenue

In addition to the stock options and restricted stock units reflected in the foregoing tables, stock options to purchase 19.4 million shares of common stock and restricted stock units relating to 1.9 million shares of common stock were outstanding at November 2, 2019, but were not included in the computation of diluted earnings per share because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.

~~6. Revenue~~

Net sales

Revenue is recognized when customers obtain control of goods and services promised by the Company. The amount of revenue recognized is based on the amount that reflects the consideration that is expected to be received in exchange for those respective goods and services. The Company's revenue generating activities include the following:

Retail Sales

Retail sales include merchandise sales, inclusive of delivery income, licensed department income, sales of private brand goods directly to third party retailers and sales of excess inventory to third parties. Sales of merchandise are recorded at the time of shipment to the customer and are reported net of estimated merchandise returns and certain customer incentives. Commissions earned on sales generated by licensed departments are included as a component of total net sales and are recognized as revenue at the time merchandise is sold to customers. Service revenues (e.g., alteration and cosmetic services) are recorded at the time the customer receives the benefit of the service. The Company has elected to present sales taxes on a net basis and, as such, sales taxes are included in accounts payable and accrued liabilities until remitted to the taxing authorities.

~~For~~

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Macy’s accounted for 87% of the Company’s net sales for each of the 13 ~~and 39~~ weeks ended ~~October 31, 2020, Macy's~~May 1, 2021 and May 2, 2020. In addition, digital sales accounted for ~~88%~~approximately 37% and 43% of the ~~Company's~~Company’s net ~~sales. For~~sales for the 13 ~~and 39~~ weeks ended ~~November~~May 1, 2021 and May 2, ~~2019, Macy's accounted for 87% and 88%, respectively, of the Company's net sales.~~ 2020, respectively.

Disaggregation of the Company's net sales by family of business for the 13 ~~and 39~~ weeks ended ~~October 31,~~May 1, 2021 and May 2, 2020 ~~and November 2, 2019~~ were as follows:

	13 Weeks Ended
Net sales by family of business	May 1, 2021		May 2, 2020
	(millions)
Women's Accessories, Intimate Apparel, Shoes, Cosmetics and Fragrances	$	2,023	$	1,215
Women's Apparel		913		579
Men's and Kids'		932		573
Home/Other (a)		838		650
Total	$	4,706	$	3,017

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

(a)
Other primarily includes restaurant sales, allowance for merchandise returns adjustments and breakage income from unredeemed gift cards.

13 Weeks Ended 39 Weeks Ended
Net sales by family of business October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019
(millions)
Women's Accessories, Intimate Apparel, Shoes, Cosmetics and Fragrances $ 1,677 $ 1,960 $ 4,273 $ 6,152
Women's Apparel 690 1,197 1,895 3,779
Men's and Kids' 790 1,195 2,089 3,663
Home/Other (a)
833 821 2,309 2,629
Total $ 3,990 $ 5,173 $ 10,566 $ 16,223

~~(a) Other primarily includes restaurant sales, allowance for merchandise returns adjustments and breakage income from unredeemed gift cards.~~

Merchandise Returns

The Company estimates merchandise returns using historical data and recognizes an allowance that reduces net sales and cost of sales. The liability for merchandise returns is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was ~~$182~~$225 million, ~~$213~~$159 million and ~~$245~~$184 million as of ~~October 31,~~May 1, 2021, January 30, 2021 and May 2, 2020, ~~February 1, 2020 and November 2, 2019,~~ respectively. Included in prepaid expenses and other current assets is an asset totaling ~~$116~~$136 million, ~~$147~~$103 million and ~~$164~~$130 million as of ~~October 31,~~May 1, 2021, January 30, 2021 and May 2, 2020, ~~February 1, 2020 and November 2, 2019,~~ respectively, for the recoverable cost of merchandise estimated to be returned by customers.

Gift Cards and Customer Loyalty Programs

The Company only offers no-fee, non-expiring gift cards to its customers. At the time gift cards are sold or issued, no revenue is recognized; rather, the Company records an accrued liability to customers. The liability is relieved and revenue is recognized equal to the amount redeemed at the time gift cards are redeemed for merchandise. The Company records revenue from unredeemed gift cards (breakage) in net sales on a pro-rata basis over the time period gift cards are actually redeemed. At least three years of historical data, updated annually, is used to determine actual redemption patterns.

The Company maintains customer loyalty programs in which customers earn points based on their purchases. Under ~~both~~ the Macy’s ~~and Bloomingdale's brands,~~Star Rewards loyalty program, points are earned based on customers’ spending ~~regardless of~~on Macy’s private label and co-branded credit cards as well as non-proprietary cards. The Company’s Bloomingdale’s Loyallist and bluemercury BlueRewards programs provide tender ~~type.~~neutral points-based programs to their customers. The Company recognizes the estimated net amount of the rewards that will be earned and redeemed as a reduction to net sales at the time of the initial transaction and as tender when the points are subsequently redeemed by a customer.

The liability for unredeemed gift cards and customer loyalty programs is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was ~~$639~~$580 million, ~~$839~~$616 million and ~~$705~~$732 million as of ~~October 31,~~May 1, 2021, January 30, 2021 and May 2, 2020, ~~February 1, 2020 and November 2, 2019,~~ respectively.

Credit Card Revenues, net

In 2005, the Company entered into an arrangement with Citibank, N.A. ("Citibank") to sell the Company's private label and co-branded credit cards ("Credit Card Program"). Subsequent to this initial arrangement and associated amendments, in 2014, the Company entered into an amended and restated Credit Card Program Agreement (the "Program Agreement") with Citibank. As part of the Program Agreement, the Company receives payments for providing a combination of interrelated services and intellectual property to Citibank in support of the underlying Credit Card Program. Revenue based on the spending activity of the underlying accounts is recognized as the respective card purchases occur and the Company’s profit share is recognized based on the performance of the underlying portfolio. Revenue associated with the establishment of new credit accounts and assisting in the receipt of payments for

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

existing accounts is recognized as such activities occur. Credit card revenues include finance charges, late fees and other revenue generated by the Company’s Credit Card Program, net of fraud losses and expenses associated with establishing new accounts.

~~7. Financing Activities~~

~~Prior~~Under the terms of the Program Agreement, if sales decrease by more than 34% over a twelve-month period as compared to the Benchmark Year, defined as the twelve-month period from July 2006 to June ~~2020,~~2007 in the Program Agreement, Citibank has the ability to provide written notice to terminate the agreement prior to the end of its current term. Based on the results for the Company’s February 2021 fiscal period, sales for the twelve-month period ended February 27, 2021 decreased by more than 34% as compared to the Benchmark Year. On June 4, 2021, the Company ~~was~~received a written notice of termination of the Program Agreement from Citibank. The Company plans to continue negotiations with Citibank as well as evaluate a potential transfer of its Credit Card Program to another financial service entity. Upon receipt of the written notice of termination, the Company has six months to exercise, or not exercise, an option to purchase the assets of the Program Agreement, or nominate a third party to purchase such assets, and a ~~credit agreement with certain financial institutions. The credit agreement provided for revolving credit borrowings and letters of credit in an aggregate amount not~~subsequent six month period to ~~exceed $1,500 million. The credit agreement was scheduled to expire on May 9, 2024,~~complete such transfer, subject to ~~up to two one-year~~potential extensions ~~that could be requested by~~as more fully described in the Program Agreement. The Company and ~~agreed~~Citibank are required to ~~by the lenders. On March 19, 2020, due~~continue to ~~the impacts of the COVID-19 pandemic, the Company~~

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~elected to draw on the full $1,500 million available under the agreement. As discussed further below, during the second quarter of 2020, this amount was repaid~~meet their respective obligations and ~~the credit agreement amended.~~

~~2020 Financing Activities~~

~~Secured Debt Issuance~~

5.	Financing Activities

The ~~Notes are, jointly and severally, unconditionally guaranteed on a secured basis by Propco and its subsidiaries and unconditionally guaranteed on an unsecured basis by~~following table shows the detail of debt repayments:

	13 Weeks Ended
	May 1, 2021		May 2, 2020
	(millions)
9.5% Amortizing debentures due 2021	$	2	$	2
9.75% Amortizing debentures due 2021		1		1
3.875% Senior notes due 2022		156		0
2.875% Senior notes due 2023		136		0
4.375% Senior notes due 2023		49		0
3.625% Senior notes due 2024		150		0
6.65% Senior debentures due 2024		5		0
7.6% Senior debentures due 2025		4		0
	$	503	$	3

On March 17, 2021, Macy’s Retail Holdings, LLC ~~(f/k/a Macy’s Retail Holdings, Inc.)~~ (“MRH”), a direct, wholly owned subsidiary of Macy’s, Inc., completed an offering of $500 million in aggregate principal amount of 5.875% senior notes due 2029 (the “2029 Notes”) in a private offering (the “Notes Offering”). The ~~Company~~2029 Notes mature on April 1, 2029. The 2029 Notes are senior unsecured obligations of MRH and are unconditionally guaranteed on a senior unsecured basis by Macy’s, Inc. MRH used the net proceeds offrom the Notes ~~offering, along~~Offering, together with cash on hand, to ~~repay~~fund the ~~outstanding borrowings under the existing $1,500 million unsecured credit agreement.~~

~~Entry into Asset-Based Credit Facility~~

tender offer discussed below.

On ~~June 8, 2020, Macy’s Inventory Funding LLC (the “ABL Borrower”), an indirect wholly owned subsidiary of~~March 17, 2021, the Company ~~and its parent, Mac~~y’s Inventory Holdings LLC (the “ABL Parent”), entered into an asset-based credit agreement (the “ABL Credit Facility”) with Bank of America, N.A., as administrative agent and collateral agent, and the lenders party thereto. As of October 31, 2020, the ABL Credit Facility provides the ABL Borrower with (i)completed a ~~$2,941 million r~~evolving credit facility (the “Revolving ABL Facility”), including a swingline sub-facility and a letter of credit sub-facility, and (ii) a bridge revolving credit facility of up to $300 million (the “Bridge Facility”). The ABL Borrower may request increasestender offer in ~~the size of the Revolving ABL Facility up to an additional aggregate principal amount of $750 million. As of October 31, 2020, the Company had $124~~which $500 million of ~~standby letters of credit outstanding under~~senior notes and debentures were tendered for early settlement and purchased by MRH. The total cash cost for the ~~ABL Credit Facility, which reduces~~tender offer was $17 million with the ~~available borrowing capacity.~~remainder funded through the net proceeds from the private offering discussed above. The Company ~~had 0 borrowings outstanding under the ABL Credit Facility as~~recognized $11 million of ~~October 31, 2020.~~

Additionally on June 8, 2020 and concurrently with closing the ABL Credit Facility, the ABL Borrower purchased all presently existing inventory, and assumed the liabilities in respect of all presently existing and outstanding trade payables owed to vendors in respect of such inventory, from MRH and certain wholly owned subsidiaries of MRH. The ABL Credit Facility is secured on a first priority basis (subject to customary exceptions) by (i) all assets of the ABL Borrower including all such inventory and the proceeds thereof and (ii) the equity of the ABL Borrower. The ABL Parent guaranteed the ABL Borrower’s obligations under the ABL Credit Facility. The Revolving ABL Facility matures on May 9, 2024, and the Bridge Facility matures on December 30, 2020.

~~The ABL Credit Facility contains customary borrowing conditions including a borrowing base equal~~loss related to the ~~sum~~early retirement of ~~(a) 80% (which shall automatically increase to 90% upon~~debt on the ~~satisfaction~~Consolidated Statements of ~~certain conditions, including~~Operation during the ~~delivery~~first quarter of an initial appraisal of the inventory) of the net orderly liquidation percentage of eligible inventory, minus (b) customary reserves. Amounts borrowed under the ABL Credit Facility are subject to interest at a rate per annum equal to (i) prior to the Step Down Date (as defined in the ABL Credit Facility), at the ABL Borrower’s option, either (a) adjusted LIBOR plus a margin of 2.75% to 3.00% or (b) a base rate plus a margin of 1.75% to 2.00%, in each case depending on revolving line utilization and (ii) after the Step Down Date, at the ABL Borrower’s option, either (a) adjusted LIBOR plus a margin of 2.25% to 2.50% or (b) a base rate plus a margin of 1.25% to 1.50%, in each case depending on revolving line utilization. The ABL Credit Facility also contains customary covenants that provide for, among other things, limitations on indebtedness, liens, fundamental changes, restricted payments, cash hoarding, and prepayment of certain indebtedness as well as customary representations and warranties and events of default typical for credit facilities of this type.

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

2021.

6.
Benefit Plans

greater of (x) 10% of the Loan Cap (as defined in the ABL Credit Facility) and (y) $250 million, in each case, as of the end of such fiscal quarter and (2) prior to April 30, 2021, that the ABL Borrower not permit Availability plus Suppressed Availability to be lower than the greater of (x) 10% of the Loan Cap and (y) $250 million.

~~Amendment to Existing Credit Agreement~~

On June 8, 2020, the Company substantially reduced the credit commitments of its existing $1,500 million unsecured credit agreement, which as of October 31, 2020 provided the Company with unsecured revolving credit of up to $1 million. The unsecured revolving credit facility contains covenants that provide for, among other things, limitations on fundamental changes, use of proceeds, and maintenance of property, as well as customary representations and warranties and events of default.

~~Exchange Offers and Consent Solicitations for Certain Outstanding Debt Securities of MRH~~

During the second quarter of 2020, MRH completed exchange offers (each, an “Exchange Offer” and, collectively, the “Exchange Offers”) with eligible holders and received related consents in consent solicitations for each series of notes as follows:

(i) $81 million aggregate principal amount of 6.65% Senior Secured Debentures due 2024 (“New 2024 Notes”) issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.65% Senior Debentures due 2024 issued by MRH (“Old 2024 Notes”);

(ii) $74 million aggregate principal amount of 6.7% Senior Secured Debentures due 2028 (“New 2028 Notes”) issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.7% Senior Debentures due 2028 issued by MRH (“Old 2028 Notes”);

(iii) $13 million aggregate principal amount of 8.75% Senior Secured Debentures due 2029 (“New 2029 Notes”) issued by MRH for validly tendered (and not validly withdrawn) outstanding 8.75% Senior Debentures due 2029 issued by MRH (“Old 2029 Notes”);

(iv) $5 million aggregate principal amount of 7.875% Senior Secured Debentures due 2030 (“New 2030 Notes”) issued by MRH for validly tendered (and not validly withdrawn) outstanding 7.875% Senior Debentures due 2030 issued by MRH (“Old 2030 Notes”);

(v) $5 million aggregate principal amount of 6.9% Senior Secured Debentures due 2032 (“New 2032 Notes”) issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.9% Senior Debentures due 2032 issued by MRH (“Old 2032 Notes”); and

(vi) $183 million aggregate principal amount of 6.7% Senior Secured Debentures due 2034 (“New 2034 Notes” and, together with the New 2024 Notes, New 2028 Notes, New 2029 Notes, New 2030 Notes and New 2032 Notes, the “New Notes” and each series, a “series of New Notes”) issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.7% Senior Debentures due 2034 issued by MRH (“Old 2034 Notes” and, together with the Old 2024 Notes, Old 2028 Notes, Old 2029 Notes, Old 2030 Notes and Old 2032 Notes, the “Old Notes” and each series, a “series of Old Notes”).

Each New Note issued in the Exchange Offers for a validly tendered Old Note has an interest rate and maturity date that is identical to the interest rate and maturity date of the tendered Old Note, as well as identical interest payment dates and optional redemption prices. The New Notes are MRH’s and Macy’s general, senior obligations and are secured by a second-priority lien on the same collateral securing the Notes. Following the settlement, the aggregate principal amounts of each series of Old Notes outstanding are: (i) $41 million Old 2024 Notes, (ii) $29 million Old 2028 Notes, (iii) $5 million Old 2030 Notes, (iv) $12 million Old 2032 Notes and (v) $18 million Old 2034 Notes.

In addition, MRH solicited and received consents from holders of each series of Old Notes (each, a “Consent Solicitation” and, collectively, the “Consent Solicitations”) pursuant to a separate Consent Solicitation Statement to adopt certain proposed amendments to the indenture governing the Old Notes (the “Existing Indenture”) to conform certain provisions in the negative pledge covenant in the Existing Indenture to the provisions of the negative pledge covenant in MRH’s most recent indenture (the “Proposed Amendments”). MRH received consents from holders of (i) $85 million aggregate principal amount of outstanding Old 2024 Notes, (ii) $77 million aggregate principal amount of outstanding Old 2028 Notes, (iii) $13 million aggregate principal amount of outstanding Old 2029 Notes, (iv) $5 million aggregate principal amount of outstanding Old 2030 Notes, (v) $6 million aggregate principal amount of outstanding Old 2032 Notes and (vi) $185 million aggregate principal amount of outstanding Old 2034 Notes.

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~Debt Repayments~~

~~The following table shows the detail of debt repayments:~~

39 Weeks Ended
October 31, 2020 November 2, 2019
(millions)
Revolving credit agreement $ 1,500 $ 0
8.5% Senior debentures due 2019 0 36
9.5% amortizing debentures due 2021 4 4
9.75% amortizing debentures due 2021 2 2
$ 1,506 $ 42

~~8. Benefit Plans~~

The Company has defined contribution plans which cover substantially all colleagues who work 1,000 hours or more in a year. In addition, the Company has a funded defined benefit plan ("Pension Plan") and an unfunded defined benefit supplementary retirement plan ("SERP"), which provides benefits, for certain colleagues, in excess of qualified plan limitations. Effective January 1, 2012, the Pension Plan was closed to new participants, with limited exceptions, and effective January 2, 2012, the SERP was closed to new participants.

In February 2013, the Company announced changes to the Pension Plan and SERP whereby eligible colleagues no longer earn future pension service credits after December 31, 2013, with limited exceptions. All retirement benefits attributable to service in subsequent periods are provided through defined contribution plans.

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In addition, certain retired colleagues currently are provided with specified health care and life insurance benefits ("Postretirement Obligations"). Eligibility requirements for such benefits vary, but generally state that benefits are available to eligible colleagues who were hired prior to a certain date and retire after a certain age with specified years of service. Certain colleagues are subject to having such benefits modified or terminated.

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

The defined contribution plan expense and actuarially determined components of the net periodic benefit cost (income) associated with the defined benefit plans are as follows:

	13 Weeks Ended
	May 1, 2021			May 2, 2020
	(millions)
401(k) Qualified Defined Contribution Plan	$	22		$	13
Pension Plan
Service cost	$	0		$	1
Interest cost		12			19
Expected return on assets		(40	)		(45	)
Recognition of net actuarial loss		8			10
	$	(20	)	$	(15	)
Supplementary Retirement Plan
Interest cost		3			4
Recognition of net actuarial loss		3			3
	$	6		$	7

Total Retirement Expense	$	8		$	5

Postretirement Obligations
Interest cost		0			1
Recognition of net actuarial gain		(1	)		(1	)
	$	(1	)	$	0

13 Weeks Ended 39 Weeks Ended
October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019
(millions) (millions)
401(k) Qualified Defined Contribution Plan $ 17 $ 25 $ 49 $ 74
Non-Qualified Defined Contribution Plan $ 0 $ 0 $ 0 $ 2
Pension Plan
Service cost $ 1 $ 2 $ 4 $ 4
Interest cost 13 26 51 78
Expected return on assets (46) (48) (138) (144)
Recognition of net actuarial loss 11 7 31 21
Amortization of prior service credit 0 0 0 0
$ (21) $ (13) $ (52) $ (41)
Supplementary Retirement Plan
Service cost $ 0 $ 0 $ 0 $ 0
Interest cost 3 5 11 17
Recognition of net actuarial loss 3 2 9 6
Amortization of prior service cost 0 0 0 0
$ 6 $ 7 $ 20 $ 23
Total Retirement Expense $ 2 $ 19 $ 17 $ 58
Postretirement Obligations
Service cost $ 0 $ 0 $ 0 $ 0
Interest cost 1 1 3 3
Recognition of net actuarial gain (1) (1) (4) (4)
Amortization of prior service credit 0 0 0 0
$ 0 $ 0 $ (1) $ (1)

In connection with the Company's defined benefit plans, for the 13 and 39 weeks ended October 31, 2020, the Company incurred non-cash settlement charges of $26 million and $65 million, respectively. For the 13 and 39 weeks ended November 2, 2019, the Company incurred a non-cash settlement charge of $12 million. These charges relate to the pro-rata recognition of net actuarial losses associated with the Company's defined benefit plans and are the result of an increase in lump sum distributions associated with retiree distribution elections and restructuring activity.

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

7.
Fair Value Measurements

~~9. Fair Value Measurements~~

The following table shows the Company's financial assets that are required to be measured at fair value on a recurring basis, by level within the hierarchy as defined by applicable accounting standards:

Level 1: Quoted prices in active markets for identical assets

Level 2: Significant observable inputs for the assets

Level 3: Significant unobservable inputs for the assets

	May 1, 2021								May 2, 2020
			Fair Value Measurements								Fair Value Measurements
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(millions)
Marketable equity and debt securities	$	82	$	38	$	44	$	0	$	102	$	28	$	74	$	0

October 31, 2020 November 2, 2019
Fair Value Measurements Fair Value Measurements
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
(millions)
Marketable equity and debt securities $ 95 $ 32 $ 63 $ 0 $ 92 $ 33 $ 59 $ 0

Other financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, receivables, certain short-term investments and other assets, short-term debt, merchandise accounts payable, accounts payable and accrued liabilities and long-term debt. With the exception of long-term debt, the carrying amount of these financial instruments approximates fair value because of the short maturity of these instruments. The fair values of long-term debt, excluding capitalized leases, are generally estimated based on quoted market prices for identical or similar instruments, and are classified as Level 2 measurements within the hierarchy as defined by applicable accounting standards.

Goodwill and other indefinite-lived intangible assets are evaluated for impairment annually or more frequently if events or conditions indicate the carrying value of a reporting unit or an indefinite-lived intangible asset may not be recoverable. Impairment testing compares the carrying amount of the reporting unit or other intangible assets with its fair value. During the first quarter of 2020, the Company performed an interim quantitative impairment test for goodwill. The fair value was calculated using a market approach or a combination of a market approach and income approach, as appropriate, for the reporting units. The fair value of goodwill is a Level 3 valuation based on certain unobservable inputs including projected cash flows and estimated risk-adjusted rates of return that would be utilized by market participants in valuing these assets or prices of similar assets.

~~During the first quarter of 2020, long-liv~~ed and right of use assets were tested for impairment. The fair values of these assets is a Level 3 valuation based on certain unobservable inputs including projected cash flows and an estimated risk-adjusted rate of return that would be utilized by market participants in valuing these assets or prices of similar assets.

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table shows the estimated fair value of the Company's long-term debt:

	May 1, 2021						May 2, 2020
	Notional Amount		Carrying Amount		Fair Value		Notional Amount		Carrying Amount		Fair Value
	(millions)
Long-term debt	$	4,610	$	4,558	$	4,643	$	4,903	$	4,918	$	3,698

October 31, 2020 November 2, 2019
Notional
Amount Carrying
Amount Fair
Value Notional
Amount Carrying
Amount Fair
Value
(millions)
Long-term debt $ 4,903 $ 4,852 $ 3,967 $ 4,664 $ 4,677 $ 4,716

MACY'S, INC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~10. Condensed Consolidating Financial Information~~

Certain debt obligations of the Company, which constitute debt obligations of Macy's Retail Holdings, Inc. ("Subsidiary Issuer"), a 100%-owned subsidiary of Macy's, Inc. ("Parent"), are fully and unconditionally guaranteed by Parent. In the following condensed consolidating financial statements, "Other Subsidiaries" includes all other direct subsidiaries of Parent, including bluemercury, Inc., FDS Bank, West 34th Street Insurance Company New York, Macy's Merchandising Corporation, Macy's Merchandising Group, Inc. and its subsidiaries Macy's Merchandising Group (Hong Kong) Limited, Macy's Merchandising Group Procurement, LLC, Macy's Merchandising Group International, LLC, Macy's Merchandising Group International (Hong Kong) Limited, and Macy's China Limited. "Subsidiary Issuer" includes operating divisions and non-guarantor subsidiaries of the Subsidiary Issuer on an equity basis. The assets and liabilities and results of operations of the non-guarantor subsidiaries of the Subsidiary Issuer are also reflected in "Other Subsidiaries." "Consolidating Adjustments" represent adjustments to eliminate investments in subsidiaries and intercompany balances and transactions between the parent guarantor, subsidiary issuer, and the non-guarantor subsidiaries.

In June 2020, in conjunction with the financing discussed in Note 7, "Financing Activities," Macy's Retail Holdings, Inc. was converted into a limited liability company and in May 2020 direct, wholly-owned subsidiaries of the Parent, ABL Parent and Propco were created. In conjunction with the June 2020 financings transactions, ABL Parent was transferred certain inventory and related trade payables of MRH and its subsidiaries, while Propco was transferred certain real property of MRH and its subsidiaries, both of which serve as collateral for the new debt agreements.

In March 2020, the SEC amended Rule 3-10 of Regulation S-X regarding financial disclosure requirements for certain debt securities. The new rules affect those disclosures related to registered securities that are guaranteed and those that are collateralized by the securities of an affiliate. The changes include expanding the population of subsidiary issuers and guarantors that can use the SEC's guarantee-related disclosure framework, simplifying the disclosure models and allowing for disclosures to be made outside of the financial statements. This rule is effective January 4, 2021 with early adoption permitted. The Company is currently evaluating the impact this new rule will have on the financial statements and related disclosures when it is adopted for the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021.

Condensed Consolidating Statements of Comprehensive Income for the 13 and 39 weeks ended October 31, 2020 and November 2, 2019, Condensed Consolidating Balance Sheets as of October 31, 2020, November 2, 2019 and February 1, 2020, and the related Condensed Consolidating Statements of Cash Flows for the 39 weeks ended October 31, 2020 and November 2, 2019 are presented on the following pages.

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~Condensed Consolidating Statement of Comprehensive Income (Loss)~~

~~For the 13 Weeks Ended October 31, 2020~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
Net sales $ 0 $ 97 $ 3,893 $ 0 $ 3,990
Consignment commission income 0 353 0 (353) 0
Credit card revenues, net 0 2 193 0 195
Cost of sales 0 (32) (2,537) 0 (2,569)
Selling, general and administrative expenses 0 (624) (1,455) 353 (1,726)
Gains on sale of real estate 0 0 3 0 3
Restructuring, impairment and other costs 0 (5) (15) 0 (20)
Operating income (loss) 0 (209) 82 0 (127)
Benefit plan income, net 0 6 10 0 16
Settlement charges 0 (12) (14) 0 (26)
Interest (expense) income, net:
External (29) (44) (7) 0 (80)
Intercompany (33) 26 7 0 0
Equity in loss of subsidiaries (53) (92) 0 145 0
Income (loss) before income taxes (115) (325) 78 145 (217)
Federal, state and local income
tax benefit 24 95 7 0 126
Net income (loss) $ (91) $ (230) $ 85 $ 145 $ (91)
Comprehensive income (loss) $ (89) $ (227) $ 85 $ 142 $ (89)

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~Condensed Consolidating Statement of Comprehensive Income~~

~~For the 13 Weeks Ended November 2, 2019~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
Net sales $ 0 $ 2,044 $ 5,245 $ (2,116) $ 5,173
Credit card revenues (expense), net 0 (2) 185 0 183
Cost of sales 0 (1,230) (3,992) 2,116 (3,106)
Selling, general and administrative expenses 0 (870) (1,332) 0 (2,202)
Gains on sale of real estate 0 8 9 0 17
Impairment and other costs 0 (1) (12) 0 (13)
Operating income (loss) 0 (51) 103 0 52
Benefit plan income, net 0 3 5 0 8
Settlement charges 0 0 (12) 0 (12)
Interest (expense) income, net:
External 3 (52) 1 0 (48)
Intercompany 0 (18) 18 0 0
Equity in loss of subsidiaries (3) (125) 0 128 0
Income (loss) before income taxes 0 (243) 115 128 0
Federal, state and local income
tax benefit (expense) 2 30 (30) 0 2
Net income (loss) $ 2 $ (213) $ 85 $ 128 $ 2
Comprehensive income (loss) $ (35) $ (249) $ 65 $ 184 $ (35)

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~Condensed Consolidating Statement of Comprehensive Income (Loss)~~

~~For the 39 Weeks Ended October 31, 2020~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
Net sales $ 0 $ 1,131 $ 10,274 $ (839) $ 10,566
Consignment commission income 0 572 0 (572) 0
Credit card revenues (expense), net 0 (4) 498 0 494
Cost of sales 0 (814) (7,813) 839 (7,788)
Selling, general and administrative expenses 0 (1,651) (3,644) 572 (4,723)
Gains on sale of real estate 0 1 19 0 20
Impairment, restructuring and other costs 0 (2,811) (634) 0 (3,445)
Operating loss 0 (3,576) (1,300) 0 (4,876)
Benefit plan income, net 0 14 23 0 37
Settlement charges 0 (26) (39) 0 (65)
Interest (expense) income, net:
External (44) (141) (11) 0 (196)
Intercompany (55) 18 37 0 0
Financing costs 0 (4) 0 0 (4)
Equity in loss of subsidiaries (4,041) (1,360) 0 5,401 0
Loss before income taxes (4,140) (5,075) (1,290) 5,401 (5,104)
Federal, state and local income
tax benefit 36 597 367 0 1,000
Net loss $ (4,104) $ (4,478) $ (923) $ 5,401 $ (4,104)
Comprehensive loss $ (4,041) $ (4,420) $ (884) $ 5,304 $ (4,041)

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~Condensed Consolidating Statement of Comprehensive Income~~

~~For the 39 Weeks Ended November 2, 2019~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
Net sales $ 0 $ 6,418 $ 14,428 $ (4,623) $ 16,223
Credit card revenues (expense), net 0 (8) 539 0 531
Cost of sales 0 (3,913) (10,615) 4,623 (9,905)
Selling, general and administrative expenses 1 (2,544) (3,946) 0 (6,489)
Gains on sale of real estate 0 32 35 0 67
Impairment, restructuring and other costs 0 (1) (15) 0 (16)
Operating income (loss) 1 (16) 426 0 411
Benefit plan income, net 0 9 14 0 23
Settlement charges 0 0 (12) 0 (12)
Interest (expense) income, net:
External 11 (157) 3 0 (143)
Intercompany 0 (55) 55 0 0
Equity in earnings (loss) of subsidiaries 212 (264) 0 52 0
Income (loss) before income taxes 224 (483) 486 52 279
Federal, state and local income
tax benefit (expense) 0 61 (116) 0 (55)
Net income (loss) $ 224 $ (422) $ 370 $ 52 $ 224
Comprehensive income (loss) $ 198 $ (448) $ 358 $ 90 $ 198

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~Condensed Consolidating Balance Sheet~~

~~As of October 31, 2020~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
ASSETS:
Current Assets:
Cash and cash equivalents $ 566 $ 52 $ 933 $ 0 $ 1,551
Receivables 0 41 144 0 185
Merchandise inventories 0 244 4,900 0 5,144
Prepaid expenses and other current assets 84 109 308 (24) 477
Total Current Assets 650 446 6,285 (24) 7,357
Property and Equipment – net 0 2,391 3,731 0 6,122
Right of Use Assets 0 979 2,399 (350) 3,028
Goodwill 0 661 167 0 828
Other Intangible Assets – net 0 4 433 0 437
Other Assets 760 74 608 0 1,442
Deferred Income Taxes 11 0 0 (11) 0
Intercompany Receivable 436 0 2,341 (2,777) 0
Investment in Subsidiaries 1,750 3,815 0 (5,565) 0
Total Assets $ 3,607 $ 8,370 $ 15,964 $ (8,727) $ 19,214
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt $ 0 $ 536 $ 0 $ 0 $ 536
Merchandise accounts payable 0 220 3,047 0 3,267
Accounts payable and accrued liabilities 97 893 1,939 (81) 2,848
Total Current Liabilities 97 1,649 4,986 (81) 6,651
Long-Term Debt 1,242 3,610 0 0 4,852
Long-Term Lease Liabilities 0 872 2,687 (293) 3,266
Intercompany Payable 0 2,777 0 (2,777) 0
Deferred Income Taxes 0 403 525 (11) 917
Other Liabilities 25 327 933 0 1,285
Shareholders' Equity (Deficit) 2,243 (1,268) 6,833 (5,565) 2,243
Total Liabilities and Shareholders' Equity $ 3,607 $ 8,370 $ 15,964 $ (8,727) $ 19,214

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~Condensed Consolidating Balance Sheet~~

~~As of November 2, 2019~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
ASSETS:
Current Assets:
Cash and cash equivalents $ 42 $ 73 $ 186 $ 0 $ 301
Receivables 0 30 145 0 175
Merchandise inventories 0 3,145 4,111 0 7,256
Prepaid expenses and other current assets 96 126 442 (95) 569
Total Current Assets 138 3,374 4,884 (95) 8,301
Property and Equipment – net 0 3,174 3,384 0 6,558
Right of Use Assets 0 653 1,943 0 2,596
Goodwill 0 3,326 582 0 3,908
Other Intangible Assets – net 0 5 435 0 440
Other Assets 0 49 695 0 744
Deferred Income Taxes 9 0 0 (9) 0
Intercompany Receivable 2,923 0 454 (3,377) 0
Investment in Subsidiaries 3,231 2,812 0 (6,043) 0
Total Assets $ 6,301 $ 13,393 $ 12,377 $ (9,524) $ 22,547
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt $ 0 $ 6 $ 0 $ 0 $ 6
Merchandise accounts payable 0 1,521 1,906 0 3,427
Accounts payable and accrued liabilities 216 835 1,995 0 3,046
Income taxes 0 51 44 (95) 0
Total Current Liabilities 216 2,413 3,945 (95) 6,479
Long-Term Debt 0 4,677 0 0 4,677
Long-Term Lease Liabilities 0 589 2,230 0 2,819
Intercompany Payable 0 3,377 0 (3,377) 0
Deferred Income Taxes 0 654 555 (9) 1,200
Other Liabilities 28 377 910 0 1,315
Shareholders' Equity 6,057 1,306 4,737 (6,043) 6,057
Total Liabilities and Shareholders' Equity $ 6,301 $ 13,393 $ 12,377 $ (9,524) $ 22,547

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~Condensed Consolidating Balance Sheet~~

~~As of February 1, 2020~~

~~(millions)~~

Parent Subsidiary Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
ASSETS:
Current Assets:
Cash and cash equivalents $ 413 59 $ 213 $ 0 $ 685
Receivables 0 83 326 0 409
Merchandise inventories 0 2,239 2,949 0 5,188
Prepaid expenses and other current assets 0 118 410 0 528
Total Current Assets 413 2,499 3,898 0 6,810
Property and Equipment – net 0 3,103 3,530 0 6,633
Right of Use Assets 0 611 2,057 0 2,668
Goodwill 0 3,326 582 0 3,908
Other Intangible Assets – net 0 4 435 0 439
Other Assets 0 37 677 0 714
Deferred Income Taxes 12 0 0 (12) 0
Intercompany Receivable 2,675 0 1,128 (3,803) 0
Investment in Subsidiaries 3,433 2,796 0 (6,229) 0
Total Assets $ 6,533 $ 12,376 $ 12,307 $ (10,044) $ 21,172
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt $ 0 $ 539 $ 0 $ 0 $ 539
Merchandise accounts payable 0 702 980 0 1,682
Accounts payable and accrued liabilities 126 909 2,413 0 3,448
Income taxes 5 11 65 0 81
Total Current Liabilities 131 2,161 3,458 0 5,750
Long-Term Debt 0 3,621 0 0 3,621
Long-Term Lease Liabilities 0 543 2,375 0 2,918
Intercompany Payable 0 3,803 0 (3,803) 0
Deferred Income Taxes 0 595 586 (12) 1,169
Other Liabilities 25 414 898 0 1,337
Shareholders' Equity 6,377 1,239 4,990 (6,229) 6,377
Total Liabilities and Shareholders' Equity $ 6,533 $ 12,376 $ 12,307 $ (10,044) $ 21,172

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~Condensed Consolidating Statement of Cash Flows~~

~~For the 39 Weeks Ended October 31, 2020~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
Cash flows from operating activities:
Net loss $ (4,104) $ (4,478) $ (923) $ 5,401 $ (4,104)
Impairment, restructuring and other costs 0 2,811 634 0 3,445
Settlement charges 0 26 39 0 65
Equity in loss of subsidiaries 4,041 1,360 0 (5,401) 0
Dividends received from subsidiaries 608 300 0 (908) 0
Depreciation and amortization 0 225 497 0 722
Gains on sale of real estate 0 (1) (19) 0 (20)
Changes in assets, liabilities and other items not separately identified (750) 1,058 (172) 0 136
Net cash provided (used) by operating activities (205) 1,301 56 (908) 244
Cash flows from investing activities:
Purchase of property and equipment and capitalized software, net of dispositions 0 (63) (284) 0 (347)
Other, net 0 (1) 34 0 33
Net cash used by investing activities 0 (64) (250) 0 (314)
Cash flows from financing activities:
Debt issued, net of debt issuance costs 1,238 1,492 (52) 0 2,678
Debt repaid 0 (1,506) (2) 0 (1,508)
Dividends paid (117) 0 (908) 908 (117)
Intercompany activity, net (641) (1,210) 1,851 0 0
Other, net (63) (15) (12) 0 (90)
Net cash provided (used) by financing activities 417 (1,239) 877 908 963
Net increase (decrease) in cash, cash equivalents and restricted cash 212 (2) 683 0 893
Cash, cash equivalents and restricted cash at beginning of period 413 64 254 0 731
Cash, cash equivalents and restricted cash at end of period $ 625 $ 62 $ 937 $ 0 $ 1,624

~~MACY'S, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~Condensed Consolidating Statement of Cash Flows~~

~~For the 39 Weeks Ended November 2, 2019~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
Cash flows from operating activities:
Net income (loss) $ 224 $ (422) $ 370 $ 52 $ 224
Impairment, restructuring and other costs 0 1 15 0 16
Settlement charges 0 0 12 0 12
Equity in loss (earnings) of subsidiaries (212) 264 0 (52) 0
Dividends received from subsidiaries 819 0 0 (819) 0
Depreciation and amortization 0 251 474 0 725
Gains on sale of real estate 0 (32) (35) 0 (67)
Changes in assets, liabilities and other items not separately identified (99) (139) (500) 0 (738)
Net cash provided (used) by operating activities 732 (77) 336 (819) 172
Cash flows from investing activities:
Purchase of property and equipment and capitalized software, net of dispositions 0 (179) (560) 0 (739)
Other, net 0 (2) 12 0 10
Net cash used by investing activities 0 (181) (548) 0 (729)
Cash flows from financing activities:
Debt repaid 0 (45) 0 0 (45)
Dividends paid (349) 0 (819) 819 (349)
Issuance of common stock 5 0 0 0 5
Intercompany activity, net (1,161) 239 922 0 0
Other, net (74) 73 50 0 49
Net cash provided (used) by financing activities (1,579) 267 153 819 (340)
Net increase (decrease) in cash, cash equivalents and restricted cash (847) 9 (59) 0 (897)
Cash, cash equivalents and restricted cash at beginning of period 889 64 295 0 1,248
Cash, cash equivalents and restricted cash at end of period $ 42 $ 73 $ 236 $ 0 $ 351

~~MACY'S, INC.~~

~~Item 2.~~

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

For purposes of the following discussion, all references to ~~"third~~"first quarter of ~~2020"~~2021" and ~~"third~~"first quarter of ~~2019"~~2020" are to the Company's 13-week fiscal periods ended ~~October 31,~~May 1, 2021 and May 2, 2020, ~~and November 2, 2019,~~ respectively. ~~References to "2020" and "2019" are to the Company's 39-week periods ended October 31, 2020 and November 2, 2019, respectively.~~

The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes included elsewhere in this report, as well as the financial and other information included in the ~~2019~~2020 10-K. The following discussion contains forward-looking statements that reflect the Company's plans, estimates and beliefs. The Company's actual results could materially differ from those discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this report (particularly in "Risk Factors" and in "Forward-Looking Statements") and in the ~~2019~~2020 10-K (particularly in "Risk Factors" and in "Forward-Looking Statements"). This discussion includes Non-GAAP financial measures. For information about these measures, see the disclosure under the caption "Important Information Regarding Non-GAAP Financial Measures" ~~on pages 40 and 41.~~.

COVID-19 Update

~~Impact of COVID-19~~

~~The~~As the COVID-19 pandemic continues ~~to cause significant disruption to organizations and communities across~~into fiscal 2021, the ~~globe. The~~ Company ~~is navigating through the pandemic with a focus~~remains focused on prudent cash management, ~~strengthening~~maintaining strong liquidity, and executing ~~Holiday 2020 and re-prioritizing~~its strategic initiatives. In addition, ~~as its stores began to reopen in the second quarter of 2020,~~ the Company ~~prioritized the implementation of significant~~continues to prioritize health and safety measures ~~to allow its customers and colleagues to feel safe~~ in the Company's stores and facilities. In response to the operational and financial challenges caused by the COVID-19 pandemic, the specific steps taken by the Company to manage its business through this uncertain period, include, but are not limited to, the following:

•The Company temporarily closed all stores on March 18, 2020, which included all Macy’s, Bloomingdale’s, bluemercury, Macy’s Backstage, Bloomingdales the Outlet and Market by Macy’s stores. Stores began reopening on May 4, 2020 and substantially all of the Company's stores were open by the end of the second quarter of 2020. In conjunction with the reopening of its stores and facilities to protect the ~~Company implemented a number of health and safety measures, including:~~

◦~~implementation of wellness checks, enhanced sanitization and cleaning processes,~~

◦~~reducing store hours,~~

◦~~requiring all colleagues and customers to wear masks and providing such personal protective equipment when needed,~~

◦~~establishing maximum store density requirements and installing markers to promote and facilitate social distancing,~~

◦~~installing sneeze guards at all registers, and~~

◦~~adding curb side pick-up to enable contactless transactions at all of the Company's stores.~~

~~The Company continues to prioritize the health and safety~~well-being of its customers and ~~colleagues~~colleagues. The Company continuously monitors the ongoing impacts of COVID-19, including the evolving federal, state and local ordinances and health guidelines related to the mitigation of transmission risk associated with the pandemic. The Company has ~~implemented further enhancements during the Holiday 2020 season in response~~taken, and continues to ~~an expected increase in the level of activity~~take, numerous steps to promote health and safety at its stores and ~~facilities. Specifically,~~facilities, including establishment of vaccine distribution sites at different corporate facilities, increasing safety equipment in stores, offering contactless shopping opportunities, providing company-supplied personal protection equipment and wellness checks for colleagues, performing enhanced cleaning and continuing to offer remote work plans for certain colleagues.

Under the terms of the Program Agreement between the Company and Citibank, if sales decrease by more than 34% over a twelve-month period as compared to the Benchmark Year, defined as the twelve-month period from July 2006 to June 2007 in the Program Agreement, Citibank has the ability to provide written notice to terminate the agreement prior to the end of its current term. Based on the results for the Company’s February 2021 fiscal period, sales for the most recent twelve-month period ended February 27, 2021, have decreased by more than 34% as compared to the Benchmark Year. On June 4, 2021, the Company received a written notice of termination of the Program Agreement from Citibank. The Company plans to continue negotiations with Citibank as well as evaluate a potential transfer of its Credit Card Program to another financial service entity. Upon receipt of the written notice of termination, the Company has ~~implemented protocols~~six months to ~~systemically monitor~~exercise, or not exercise, an option to purchase the ~~health~~assets of the Program Agreement, or nominate a third party to purchase such assets, and ~~wellness~~a subsequent six month period to complete such transfer, subject to potential extensions as more fully described in the Program Agreement. The Company and Citibank are required to continue to meet their respective obligations and provide support pursuant to the terms of ~~its stores’ colleague population as well as~~ the ~~health risk at a store location level based on public health data.Such measures allow~~Program Agreement through this period. Given this timeline, the Company is confirming its guidance provided on May 18, 2021, for fiscal 2021 Credit Card Revenues, Net, equal to ~~anticipate potential COVID-19 resurgences and alter stores’ operations as appropriate or necessary as well as monitor store occupancy levels~~approximately 3% of Net Sales. The Company has not provided guidance for periods beyond fiscal 2021. The Company is currently unable to ensure they are within jurisdictional guidelines. The implementation of these measures has resulted in the Company incurring additional costs and such expenses will continue as the Company continues to ensure the health and safety of its customers and colleagues.

•In an effort to increase liquidity, the Company fully drew on its $1,500 million credit facility, announced the suspension of quarterly cash dividends beginning in the second quarter of 2020 and took additional steps to reduce discretionary spending. The Company's Board of Directors also rescinded its authorization of any unused amounts under the Company's share repurchase program. In June 2020, the Company completed financing activities totaling nearly $4.5 billion and used a portion of the proceeds from these activities, as well as cash on hand, to repay its credit facility. To create greater flexibility for future liquidity needs, the Company executed an exchange offer and consent solicitation in July 2020 for $465 million of previously issued unsecured notes.

~~MACY'S, INC.~~

Company deferred cash expenditures where possible and temporarily implemented a furlough for the majority of its colleague population which ended for most colleagues at the beginning of July 2020. Certain executives not impacted by the furlough took a temporary reduction of their pay through June 30, 2020.

•~~In June 2020, the Company announced a restructuring that aligns its cost base with anticipated near-term sales as the business recovers from~~estimate the impact ofbeyond fiscal 2021 this termination event or transfer might have on the COVID-19 pandemic. The Company reduced corporate and management headcount by approximately 3,900 and reduced staffing across its stores portfolio, supply chain and customer support network, which it will adjust as sales recover. DuringProgram Agreement or on the ~~second quarter of 2020, the Company recognized $154 million of expense for severance related to this reduction in force, of which substantially all has been paid as of October 31, 2020.~~Company’s future financial results.

•~~Through October 31, 2020,~~Although the Company has ~~deferred approximately $75 million~~experienced recovery in operating results through the first quarter of ~~occupancy payments for a significant number of its stores. Such COVID-19 pandemic-related rent deferrals are included in accounts payable and accrued liabilities. The Company continues~~2021 as compared to ~~recognize expense during the deferral periods based on the contractual terms of the lease agreements.~~fiscal 2020

•Where possible, the Company utilized the benefits provided in the CARES Act signed into law on March 27, 2020, which included payroll tax credits for employee retention, deferral of payroll taxes, and several income tax provisions, including modifications, certain stores continued to ~~the net interest deduction limitation, changes to certain property depreciation and carryback of certain operating losses.~~

operate under local governmental orders or restrictions. T

The Company has incurred, and expects to continue to incur, additional supply chain costs due to various surcharges that have been announced by third party carriers. These surcharges are expected to significantly impact delivery expense in the fourth quarter as a result of peak activity during the holiday season. Given the continued uncertainty associated with the COVID-19 pandemic, the Company is unable to predict and quantify the future financial and operationalhe full impact of ~~such additional costs, or other supply chain disruptions.~~

~~The~~ COVID-19 ~~pandemic has had, and continues~~will continue to ~~have a material adverse impact on the Company's operational performance, financial results and cash flows. The full impact will~~ depend on future developments, including the continued spread and duration of the outbreak, ~~(including a resurgence~~variant strains of COVID-19, ~~cases),~~ the availability and distribution of effective medical treatments or vaccines as well as any related federal, state or local governmental orders or restrictions. In addition, numerous uncertainties continue to surround the pandemic and its ultimate impact ~~of any protective measures implemented by governmental authorities,~~on the Company, including the timing and extent of any recovery in consumer traffic and spending, and potential delays, interruptions and disruptions in the Company’s supply chain, all of which are highly uncertain and cannot be predicted. ~~See “Part II – Other Information. Item 1A. Risk Factors” for additional information.The Company will continue to monitor~~Further discussion of the ~~impact of~~risks and uncertainties posed by the COVID-19 pandemic ~~and remains focused~~are disclosed in “Risk Factors” under Part I Item 1A of the Company’s 2020 Form 10-K.

Quarterly Overview

During the first quarter of 2021, the Company continued to build on ~~addressing~~ the ~~challenges presented by~~momentum of the ~~pandemic.~~

~~Management Overview~~

~~The Company's performance during the third~~fourth quarter of 2020 ~~continued to be impacted by the COVID-19 pandemic.~~and exceeded its expectations from both a sales and profit standpoint. The ~~third~~profitable first quarter results were driven by disciplined cost and inventory management ~~strong~~through the ongoing execution ~~by colleagues and an early start to~~of the ~~holiday shopping season. The Company's gross~~ ~~margin rate~~Company’s Polaris strategy, including investments in its digital platforms. Additionally, the Company’s performance during the ~~third~~first quarter of 2021 reflects the benefits from rapidly improving macroeconomic conditions, driven by the government’s stimulus program and heightened consumer confidence resulting from the roll-out of the COVID-19 vaccinations.

MACY'S, INC.

In evaluating the performance of the first quarter of 2021, the Company considered its results against the first quarter of 2020 ~~increased sequentially~~ as well as the first quarter of 2019 given the impact of the pandemic and the closure of the Company’s stores during the first and second quarters of 2020. Certain financial highlights are as follows:

•

Comparable sales were up 62.5% on an owned basis; and up 63.9% on an owned plus licensed basis compared to the first quarter of 2020. Compared to 2019, this reflects a comparable sales decline of 10.5% on an owned basis and 10.0% on an owned plus licensed basis.

•

Digital sales grew 34% over the first quarter of 2020 and 32% over the first quarter of 2019. Digital penetration was at 37% of net sales for the first quarter of 2021.

•

Gross margin was 38.6%, compared to 17.1% in the first quarter of 2020, representing an improvement of approximately 21.5 percentage points. Compared to the first quarter of 2019, gross margin was up 40 basis points.

•

Net credit card revenues were $159 million, up $28 million from the first quarter of 2020, and representing 3.4% of sales. Net credit card revenues were down $13 million from the first quarter of 2019 but saw a 30 basis point improvement as a percent of net sales.

•

Selling, general and administrative ("SG&A") expense was $1.7 billion, up $150 million from first quarter of 2020.Compared to the first quarter of 2019, SG&A expenses were down approximately 17%. SG&A expense as a percent of sales was 37.1%, down from 52.9% in the first quarter of 2020 and 130 basis points lower than the first quarter of 2019.

•

Net income was $103 million in the first quarter of 2021, compared to a net loss of $3,581 million in the first quarter of 2020 and net income of $136 million in the first quarter of 2019. On an adjusted basis, net income improved from a loss of $630 million in the first quarter of 2020 to net income of $126 million for the first quarter of 2021. This compares to adjusted net income of $137 in the first quarter of 2019.

•

The first quarter of 2021 had positive earnings before interest, taxes, depreciation and amortization ("EBITDA") of $454 million compared to negative EBITDA of $3,873 million during the first quarter of 2020. EBITDA was $446 million for the first quarter of 2019. On an adjusted basis, EBITDA was $473 million and 10.1% of net sales, a loss of $689 million and (22.8%) of net sales, and $447 million and 8.1% of net sales for the first quarters of 2021, 2020, and 2019, respectively.

•

Diluted earnings per share and adjusted diluted earnings per share were $0.32 and $0.39, respectively, during the first quarter of 2021. These include an earnings impact of $0.01 related to gains on the sale of real estate. This compares to a diluted loss per share and adjusted diluted loss per share of $11.53 and $2.03, respectively, for the first quarter of 2020. These include an earnings impact of $0.04 related to gains on sale of real estate. This compares to diluted earnings per share and adjusted diluted earnings per share of $0.44 for the first quarter of 2019. Earnings during the first quarter of 2019 included $0.10 related to gains on sale of real estate.

•

Inventory was down 14.1% from the first quarter of 2020.

•

The Company ended the first quarter of 2021 in a strong liquidity position with approximately $1.8 billion in cash and full borrowing capacity in its asset-based credit facility.

During the first quarter of 2021, the Company continued to execute its Polaris strategy and these actions impacted its operating results for the period, notably:

•

Win With Fashion and Style: The Company experienced sales improvement from off-price to luxury. In merchandise, strengths continued in pandemic-driven products and categories but the Company also saw dormant categories improve their performance trend compared to the fourth quarter of 2020, notably dresses and men’s tailored clothing. The Company has added hundreds of new brands and categories over the past year and its flexibility in inventories has enabled the Company to respond to new customer demands in emerging categories such as toys, health and wellness, pet and home décor.

•

Deliver Clear Value: The Company is improving and expanding location-level pricing and strategically shifting its markdown cadence. With these actions, higher full price sell-throughs and related higher merchandise margins are being achieved. Along with advancing data-led capabilities in merchandising pricing, allocation and personalization, these collective activities are expected to improve average unit retail and gross margin performance.

MACY'S, INC.

•

Excel in Digital Shopping: The Company improved fundamental digital offerings during the first quarter of 2021 and took specific actions to attract customers with an under-40 demographic, including the launch of a contemporary site within macys.com. The Company continued to experience growth in its digital channels as previously disclosed and the Macys brand specifically saw double-digit increases in site visits and higher conversation rates as compared to the first quarters of 2020 and 2019.

•

Enhance Store Experience: Store sales continued to improve throughout the quarter and as compared to the fourth quarter of 2020, with a sequential improvement in comparable store sales from the fourth quarter of nearly 890 basis points. By maintaining leaner inventory levels, the Company’s stores have improved their layouts for easier navigation and to provide customers a more streamlined shopping experience.

•

Modernize Supply Chain: The Company has continued to update its supply chain infrastructure and network, while leveraging improved data and analytics capabilities in fulfillment strategies to meet customers' desire for speed and convenience. The Company is navigating supply chain disruptions by adjusting freight strategies and working closely with brand partners to prioritize product.

•

Enable Transformation: The Company has continued to modernize its technology foundations to ensure agility to react to customers and the market regardless of the channel in which customers interact. These activities are coupled with others to build out data science and analytics capabilities with a focus on areas to provide competitive differentiation.

The Company began to see its Platinum, Gold and Silver Star Rewards customers re-engage with the Macy’s brand during the first quarter of 2021, with the average customer spend up 10% compared to the ~~second~~first quarter of ~~2020, driven by improved sell-through of merchandise during the quarter that also enabled the Company to exit the quarter with healthy inventory levels heading into~~2019 and an 11 percentage point improvement from the fourth quarter of 2020. The Company’s Bronze Star Rewards tier continued to grow and had 3.2 million active customers during the quarter. During the first quarter of 2021, the Company ~~is approaching~~acquired 4.6 million new Macy’s customers, of which approximately 47% occurred through Macy’s digital channel.

MACY'S, INC.

Results of Operations

The Company’s operations during the ~~fourth~~first quarter of 2020 ~~conservatively given anticipated continued turbulence associated with~~were significantly impacted by the closure of its stores due to the COVID-19 ~~pandemic and a moderation of its stores' recovery.~~

~~Third Quarter of 2020 Financial Highlights~~

•~~Comparable sales were down 21.0% on an owned basis; and down 20.2% on an owned plus licensed basis, reflecting continued stores recovery and continued growth of digital business.~~

•~~Digital sales grew 27% over third quarter 2019. Digital sales penetrated at 38% of total owned comparable sales.~~

•~~Gross margin of 35.6%, compared to 23.6% in~~pandemic. The Company’s performance during the ~~second~~first quarter of ~~2020, an~~2021 showed significant improvement ~~of approximately 12 percentage points.~~

•Selling, general and administrative ("SG&A") expense of $1.7 billion, down $476 million from third quarter of 2019, illustrating efficient expense management and improved colleague productivity in stores.

~~MACY'S, INC.~~

•~~Positive earnings before interest, taxes, depreciation and amortization ("EBITDA") one quarter sooner than expected.~~

•~~Diluted loss per share of $0.29 and adjusted diluted loss per share of $0.19.~~

•~~Strong liquidity position with approximately $1.6 billion in cash and approximately $3 billion of untapped capacity in~~over the ~~company’s asset-based credit facility.~~

•~~Inventory down 29% from third quarter 2019. The Company exited the quarter in a clean inventory position.~~

~~Polaris Strategy~~

~~On February 4, 2020, Macy’s, Inc. announced its Polaris strategy, a three-year plan designed to stabilize profitability and position the Company for sustainable, profitable growth. Over the course~~results of the ~~COVID-19 pandemic,~~prior year period as it continued to recover from the Company has refined the components of the Polaris strategy to focus where the Company can drive competitive advantage and differentiation to first recover the business and then drive both top- and bottom-line growth. The five major components of the Polaris strategy are unchanged to those presented in February 2020: however, the components were re-focused during the second quarter of 2020 topandemic.

~~align with customer demand in the COVID-19 pandemic environment.~~

•Strengthen Customer Relationships: The Company is focusing on maximizing customer lifetime value, which included expanding the Macy's Star Rewards loyalty program with the launch of Loyalty 3.0 in early February 2020 that allows every Star Rewards member to earn loyalty rewards on their purchases regardless of tender. Going forward the Company will continue to increase customer lifetime value through improving personalization. The Company will also pursue the growth of on-site and off-site monetization income as an enterprise priority.

•Curate Quality Fashion: The Company is repositioning its merchandise category focus to drive sales and improve gross margin. In conjunction, the Company is focused on four merchandise categories that resonate best with customers in this environment: big ticket, beauty, fine jewelry and off-price at Macy's and luxury, advanced contemporary, textiles and off-price at Bloomingdale's.

•Accelerate Digital Growth: The Company is focused on delivering profitable omnichannel growth and will continue to invest in its websites and mobile apps to deliver a superior fashion experience and improve its customers' end-to-end digital experience, including enhancements to product discovery and the checkout process.

•Optimize the Omni Experience: The Company will modernize customer choices and enhance its omni-channel capabilities to deliver efficient, cost effective transactions while providing expanded order and fulfillment options to allow customers the flexibility to receive products how, where and when they want. Additionally, the Company plans to evolve the role of a store and develop a revised retail ecosystem model with a mix of store formats within a geographic market, including smaller format, off-mall locations.

•Reset Cost Base: After resetting the Company's cost base in the first half of 2020, the Company will continue to execute its operations with a disciplined cost focus to identify additional savings and drive profitable growth.

At the center of the above strategies is an enhanced focus on the cultivation of a Company workplace and culture rooted in social equity where all colleagues have the opportunity to connect, grow and thrive. All of the above components of the Polaris strategy will continue to evolve as the Company navigates the COVID-19 pandemic in order to focus on achievable short-term results and also position itself for long-term sustainability and growth.

~~MACY'S, INC.~~

~~Results of Operations~~

Comparison of the ~~Third~~First Quarter of ~~2020~~2021 and the ~~Third~~First Quarter of ~~2019~~2020

	First Quarter of 2021						First Quarter of 2020
	Amount			% to Net Sales			Amount			% to Net Sales
	(dollars in millions, except per share figures)
Net sales	$	4,706					$	3,017
Credit card revenues, net		159			3.4	%		131			4.3	%

Cost of sales		(2,889	)		(61.4	)%		(2,501	)		(82.9	)%
Selling, general and administrative expenses		(1,748	)		(37.1	)%		(1,598	)		(52.9	)%
Gains on sale of real estate		6			0.1	%		16			0.5	%
Impairment, restructuring and other costs		(19	)		(0.4	)%		(3,184	)		(105.5	)%
Operating income (loss)		215			4.6	%		(4,119	)		(136.5	)%
Benefit plan income, net		15						9
Losses on early retirement of debt		(11	)					0
Interest expense, net		(79	)					(47	)
Income (loss) before income taxes		140						(4,157	)
Federal, state and local income tax benefit (expense)		(37	)					576
Net income (loss)	$	103					$	(3,581	)

Diluted earnings (loss) per share	$	0.32					$	(11.53	)

Supplemental Financial Measure
Gross margin (a)	$	1,817			38.6	%	$	516			17.1	%

Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items	$	0.39					$	(2.03	)

Third Quarter of 2020 Third Quarter of 2019
Amount % to Net Sales Amount % to Net Sales
(dollars in millions, except per share figures)
Net sales $ 3,990 $ 5,173
Credit card revenues, net 195 4.9 % 183 3.5 %
Cost of sales (2,569) (64.4) % (3,106) (60.0) %
Selling, general and administrative expenses (1,726) (43.3) % (2,202) (42.6) %
Gains on sale of real estate 3 0.1 % 17 0.3 %
Restructuring, impairment and other costs (20) (0.5) % (13) (0.2) %
Operating income (loss) (127) (3.2) % 52 1.0 %
Benefit plan income, net 16 8
Settlement charges (26) (12)
Interest expense, net (80) (48)
Income (loss) before income taxes (217) —
Federal, state and local income tax benefit 126 2
Net income (loss) $ (91) $ 2
Diluted earnings (loss) per share $ (0.29) $ 0.01
Supplemental Financial Measure
Gross margin (a)
$ 1,421 35.6 % $ 2,067 40.0 %
Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items $ (0.19) $ 0.07

(a)	Gross margin is defined as net sales less cost of sales.

~~(a) Gross margin is defined as net sales less cost of sales.~~

Net Sales

Net sales for the ~~third~~first quarter of ~~2020 decreased $1,183 million,~~2021 increased $1.7 billion, or ~~22.9%~~56.0%, compared to the ~~third~~first quarter of ~~2019.~~2020. The ~~Company's third~~Company’s first quarter of ~~2020~~2021 sales ~~are showing~~showed steady recovery across all three brands - Macy's, Bloomingdale's and bluemercury. Digital sales during the ~~third~~first quarter of ~~2020~~2021 improved ~~27%~~34% compared to the ~~third~~first quarter of ~~2019~~2020 and accounted for approximately ~~38%~~37% of ~~comparable sales on an owned basis.~~net sales. The ~~strongest performing~~Company experienced strength across all of its major merchandise categories during the third quarter of 2020 were home furnishings, as customers continue to work, cook, dine and learn from home, and both luxury items, including fine jewelry and fragrances, and off-price items. Sales performance continued to be weaker in apparel driven by the ~~work-from-home environment.~~

continued recovery of its stores as well as continued growth in its digital channel.

Credit Card Revenues, Net

Net credit card revenues were ~~$195~~$159 million in the ~~third~~first quarter of ~~2020,~~2021, an increase of ~~$12~~$28 million, or ~~6.6%~~21.0%, compared to ~~$183~~$131 million recognized in the ~~third~~first quarter of ~~2019.~~2020. This increase was driven by improvement in the credit card portfolio's delinquency rates and bad debt, partially offset ~~slightly~~ by a decrease in proprietary credit card sales penetration, down ~~330~~approximately 400 basis points, at ~~45.0%,~~42.0% in the ~~third~~first quarter of ~~2020~~2021 compared to ~~48.3%~~46.0% in the ~~third~~first quarter of ~~2019.~~

~~MACY'S, INC.~~

2020.

Gross Margin

Gross margin was ~~35.6%~~38.6% in the ~~third~~first quarter of ~~2020~~2021 compared to ~~40.0%~~17.1% in the ~~third quarter of 2019, but up from 23.6% for the second~~first quarter of 2020. The ~~decline~~increase in the gross margin rate in the ~~third~~first quarter of ~~2020~~2021 compared to the ~~third~~first quarter of ~~2019~~2020 was driven primarily by ~~higher delivery expense resulting from~~inventory productivity and the ~~improvement in digital sales. The Company experienced an improved trend as compared~~execution

MACY'S, INC.

of the Polaris strategy. Due to the ~~second~~impact of COVID-19 and store closures, the first quarter of 2020 included an approximate $300 million inventory write-down from ~~disciplined inventory management, better sell through of both full-price and clearance merchandise and lower clearance markdowns.~~

markdowns on fashion merchandise.

Selling, General and Administrative Expenses

SG&A expenses for the ~~third~~first quarter of 2021 increased $150 million from the first quarter of 2020 but decreased ~~$476 million from the third quarter~~as a percentage of ~~2019.~~net sales by 15.8 percentage points. The ~~decrease~~increase in SG&A expense dollars corresponds with ~~lower~~higher net sales but ~~also~~the improvement in the SG&A expense rate reflects the expense management strategies implemented by the Company in response to the COVID-19 pandemic as well as execution against the Polaris strategy.

Impairment, Restructuring ~~Impairment~~ and Other Costs

During the ~~13 weeks ended October 31, 2020,~~first quarter of 2021, the Company ~~recognized expense of $20~~incurred impairment, restructuring and other costs totaling $19 million, primarily related to ~~restructuring and other costs. See the discussion at Note 3, "Impairment, Restructuring and Other Costs" to the accompanying Consolidated Financial Statements for further information.~~

~~Settlement Charges~~

capitalized software assets. During the 13 weeks ended October 31, 2020, the Company recognized expense of $26 million related to the pro-rata recognition of net actuarial losses associated with the Company's defined benefit plans and are the result of an increase in lump sum distributions associated with retiree distribution elections and restructuring activity.

~~Interest Expense, Net~~

~~During the third~~first quarter of 2020, the Company recognized expense of $80 million compared to $48 million in the third quarter of 2019. The increase is primarily driven by the issuance of the new $1,300 million secured notes in June 2020.

~~Effective Tax Rate~~

~~The Company's effective tax rate of 58.1% on the pretax loss for the third quarter of 2020 reflects the impact of the carryback of net operating losses as permitted under the CARES Act.~~

~~Diluted Earnings (Loss) Per Share~~

~~Diluted loss per share for the third quarter of 2020 decreased $0.30 compared to the third quarter of 2019, reflecting lower net income resulting from the impact of the COVID-19 pandemic.~~

~~MACY'S, INC.~~

~~Comparison of the 39 Weeks Ended October 31, 2020 and November 2, 2019~~

2020 2019
Amount % to Net Sales Amount % to Net Sales
(dollars in millions, except per share figures)
Net sales $ 10,566 $ 16,223
Credit card revenues, net 494 4.7 % 531 3.3 %
Cost of sales (7,788) (73.7) % (9,905) (61.1) %
Selling, general and administrative expenses (4,723) (44.7) % (6,489) (40.0) %
Gains on sale of real estate 20 0.2 % 67 0.4 %
Restructuring, impairment and other costs (3,445) (32.6) % (16) (0.1) %
Operating income (loss) (4,876) (46.1) % 411 2.5 %
Benefit plan income, net 37 23
Settlement charges (65) (12)
Interest expense, net (196) (143)
Financing costs (4) —
Income (loss) before income taxes (5,104) 279
Federal, state and local income tax benefit (expense) 1,000 (55)
Net income (loss) $ (4,104) $ 224
Diluted earnings (loss) per share $ (13.20) $ 0.72
Supplemental Financial Measure
Gross margin (a)
$ 2,778 26.3 % $ 6,318 38.9 %
Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items $ (3.03) $ 0.79

~~(a) Gross margin is defined as net sales less cost of sales.~~

~~Net Sales~~

Net sales for 2020 decreased $5,657 million, or 34.9%, compared to 2019. The Company's 2020 sales were negatively impacted by the closure of all stores on March 18, 2020, resulting in stores sales being significantly down compared to 2019. Stores began to reopen in early May 2020 and substantially all stores were fully reopened by August 1, 2020. As discussed within the quarterly analysis, digital sales experienced significant growth due to changes in consumer shopping behaviors and increased during 2020 by nearly 25% compared to 2019 and accounted for nearly 45% of comparable sales on an owned basis. The strongest performing categories during 2020 were home, particularly housewares, textiles and soft home, fine jewelry, fragrances, activewear, and sleepwear. Sales performance continued to be weaker in women’s and men's apparel, including dresses and suits.

~~Credit Card Revenues, Net~~

Net credit card revenues were $494 million in 2020, a decrease of $37 million, or 7%, compared to $531 million recognized in 2019. Proprietary credit penetration was down 320 basis points at 43.9% in 2020 compared to 47.1% in 2019. The decrease in net credit card revenue is associated with lower credit sales as compared to the prior year, driven by the aforementioned store closures resulting from the COVID-19 pandemic.

~~Gross Margin~~

~~Gross margin was 26.3% in 2020 compared to 38.9% in 2019. The reason for the decline was due to increased net markdowns as compared to 2019 as well as higher delivery expense.~~

~~MACY'S, INC.~~

~~Selling, General and Administrative Expenses~~

~~SG&A expenses for 2020 decreased~~ ~~$1,766 million~~ from 2019. The decrease in SG&A expense dollars is a reflection of lower sales as well as the implementation of various expense management strategies undertaken in response to the COVID-19 pandemic, including the July 2020 restructuring to align the cost base with anticipated near-term sales, a significant reduction in discretionary spending, the employee furlough, and the Company's Polaris strategy.

~~Impairment, Restructuring and Other Costs~~

~~During the 39 weeks ended October 31, 2020, the Company recognized expense of $3,445 million~~ primarily as a result of the COVID-19 pandemic, ~~including~~the Company incurred non-cash impairment charges totaling ~~$3,170~~$3,150 million ~~the majority~~ driven by recognition of ~~which consisted of:~~

•~~$3,080~~$3,070 million of goodwill ~~impairments, with~~ ~~$2,982 million~~ ~~attributable to the Macy's reporting unit~~impairment and $98 million attributable to the bluemercury reporting unit. See discussion at Note 4, "Goodwill and Indefinite Lived Intangible Assets" to the accompanying Consolidated Financial Statements for more information.

•~~$90~~$80 million of impairments ~~primarily~~ on long-lived tangible and right of use ~~assets to adjust the carrying value~~assets. The first quarter of ~~certain store locations to their estimated fair value.~~

~~Additionally, the Company recognized $196~~2020 also included $34 million of restructuring and other costs related to severance activity and other costs associated with organizational restructuring, ~~including $154 million of severance recognized during the 13 weeks ended August 1, 2020~~primarily associated with the reduction in force in response to the COVID-19 pandemic. See discussion at Note 3, "Impairment, Restructuring and Other Costs" to the accompanying Consolidated Financial Statements for more information.

~~Settlement Charges~~

During the 39 weeks ended October 31, 2020, the Company recognized expense of $65 million related to the pro-rata recognition of net actuarial losses associated with the Company's defined benefit plans and are the result of an increase in lump sum distributions associated with retiree distribution elections and restructuring activity.

Polaris strategy.

Interest Expense, Net

~~During 2020,~~

Net interest expense, excluding losses on early retirement of debt, was $79 million during the ~~Company recognized expense~~first quarter of ~~$196 million~~2021, compared to ~~$143~~$47 million ~~in 2019. As noted previously,~~during the first quarter of 2020. The increase is primarily driven by interest paid with respect to the ~~issuance of the new~~ $1,300 million of secured notes issued in June 2020.

Effective Tax Rate

The ~~Company's~~Company’s effective tax rate was 26.3% for the first quarter of ~~19.6% on~~2021 compared to the ~~pretax loss for 2020 reflects the impact~~federal income statutory tax rate of ~~the carryback of net operating losses as permitted under the CARES Act offset by the impact of the non-tax deductible component of the goodwill impairment charge. Additionally, the~~21%. The effective tax rate ~~for 2020 and the effective tax rate for 2019 of 19.7% were favorably~~was impacted by the ~~settlement or expiration~~tax shortfalls associated with the vesting and cancellation of certain ~~tax matters.~~

stock-based compensation awards.

Diluted Earnings (Loss) Per Share

Diluted earnings per share were $0.32 for the first quarter of 2021 compared to a diluted loss per share of $11.53 for the first quarter of 2020, ~~decreased $13.92 compared to 2019,~~ reflecting ~~lower~~higher net income ~~resulting~~as a result of the continued recovery from the impact of the COVID-19 ~~pandemic and goodwill impairment.~~

pandemic.

Cash Flow, Liquidity and Capital Resources

The Company's principal sources of liquidity are cash from operations, cash on hand and the asset-based credit facility described ~~below.~~

~~Because of the~~below

The COVID-19 outbreak ~~there is significant uncertainty surrounding~~and related store closure in 2020 negatively impacted the ~~potential impact on the Company's results of operations and cash flows. The~~ Company’s liquidity ~~was negatively impacted by store closures.~~in 2020. The Company proactively took steps to increase available cash on hand including, but not limited to, targeted reductions in discretionary operating expenses and capital expenditures, suspension of the Company's quarterly dividend and executing additional financing transactions during the second quarter of ~~2020 as discussed in more detail below.~~2020. While the Company has obtained additional financing and, as of May 1, 2021, estimates that it has sufficient cash on hand and other capital resources to cover the Company's reasonably foreseeable working capital, capital expenditure and debt service and other cash requirements in both the near term and over the longer term, the continued uncertainty associated with the COVID-19 pandemic could have a significant impact on the Company’s cash flow and liquidity and further actions may be required to improve the Company’s cash ~~position, including but not limited to, monetizing Company assets, reinstituting colleague furloughs, and foregoing capital expenditures and other discretionary expenses.~~

~~MACY'S, INC.~~

position.

Operating Activities

Net cash provided by operating activities ~~in 2020~~for the first quarter of 2021 was ~~$244~~$494 million, compared to ~~$172~~net cash used by operating activities of $164 million ~~in 2019.~~for the first quarter of 2020. The increase in operating cash flows period over period is due to the lower level of merchandise inventories, including a reduction in inventory receipts as the Company executed its inventory management strategies in response to the COVID-19 pandemic, partially offset by operating losses in 2020 driven by the impact of the COVID-19 pandemic, primarily resulting from the temporary closure of the Company's physical store locationssignificant improvement in the ~~first and second quarters of 2020.~~

Company’s EBITDA, offset partly by lower working capital benefits.

Investing Activities

Net cash used by investing activities was ~~$314~~$74 million ~~in 2020,~~for the first quarter of 2021, compared to ~~$729~~$113 million ~~in 2019.~~for the first quarter of 2020. The decrease ~~in 2020~~period over period is primarily due to a ~~$426 million~~ reduction in capital spending compared to ~~2019~~2020 as a result of the Company's ~~proactive steps~~updated plan for capital expenditures in response to ~~reduce discretionary spending to address~~ the COVID-19 ~~pandemic.~~

pandemic and alignment with its Polaris strategy.

MACY'S, INC.

Financing Activities

Net cash used by financing activities was $300 million for the first quarter of 2021, driven by a decrease in outstanding checks. Net cash provided by ~~the Company for~~ financing activities was ~~$963~~$1,148 million for the first quarter of 2020, ~~including~~driven by the issuance of $1,500 million of debt ~~issued of $2,780 million~~ related to a ~~$1,500 million~~ draw on ~~its~~the Company’s revolving credit agreement, ~~and issuance of $1,300 million 8.375% senior secured notes, partially~~partly offset by ~~repayment~~cash dividend payments of ~~the $1,500 million revolving credit agreement draw. 2020 also included~~ $117 million ~~of cash dividends paid.~~and a decrease in outstanding checks. See below for further discussion ~~on 2020 financing activities. Net cash used by~~of the ~~Company for~~Company’s financing activities ~~was $340 million for 2019, driven by payment~~during the first quarter of ~~$349 million of cash dividends.~~

~~Secured Debt Issuance~~

2021.

On June 8, 2020, the Company issued $1,300 million aggregate principal amount of 8.375% senior secured notes due 2025 (the "Notes"). The Notes bear interest at a rate of 8.375% per annum, which accrues from June 8, 2020 and is payable in arrears on June 15 and December 15 of each year, commencing on December 15, 2020. The Notes mature on June 15, 2025, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the related indenture. The Notes were issued byMarch 17, 2021, Macy’s ~~Inc. and are secured on~~Retail Holdings, LLC (“MRH”), a ~~first-priority basis by (i) a first mortgage/deed of trust in certain real property of subsidiaries of Macy’s, Inc. that was transferred to subsidiaries of Propco, a newly created~~ direct, wholly owned subsidiary of Macy’s, Inc., ~~and (ii)~~completed an offering of $500 million in aggregate principal amount of 5.875% senior notes due 2029 (the “2029 Notes”) in a ~~pledge by Propco of the equity interests in its subsidiaries that own such transferred real property.~~private offering (the “Notes Offering”). The 2029 Notes mature on April 1, 2029. The 2029 Notes are ~~jointly~~senior unsecured obligations of MRH and ~~severally,~~are unconditionally guaranteed on a ~~secured basis by Propco and its subsidiaries and unconditionally guaranteed on an~~senior unsecured basis by ~~MRH, a direct, wholly owned subsidiary of~~ Macy’s, Inc. ~~The Company~~MRH used the net proceeds offrom the Notes ~~offering, along~~Offering, together with cash on hand, to ~~repay~~fund the ~~outstanding borrowings under the existing $1,500 million unsecured credit agreement.~~

~~Entry into Asset-Based Credit Facility~~

tender offer discussed below.

On ~~June 8, 2020, the ABL Borrower, an indirect wholly owned subsidiary of~~March 17, 2021, the Company completed a tender offer in which $500 million of senior notes and ~~its parent,~~ debentures were tendered for early settlement and purchased by MRH on March 17, 2021. The purchased senior notes and debentures included $156 million of 3.875% senior notes due 2022, $136 million of 2.875% senior notes due 2023, $49 million of 4.375% senior notes due 2023, $150 million of 3.625% senior notes due 2024, $5 million of 6.65% senior debentures due 2024, and $4 million of 7.6% senior debentures due 2025. The total cash cost for the ~~ABL Parent, entered into~~ tender offer was $17 million with the remainder funded through the net proceeds from the Notes Offering discussed above. The Company recognized $11 million of losses associated with this early retirement of debt on the Consolidated Statements of Operation during the first quarter of 2021.

The Company is party to an asset-based credit facility (“the ABL Credit ~~Facility~~Facility”) with ~~Bank of America, N.A., as administrative agent and collateral agent, and the lenders party thereto. As of October 31, 2020, the ABL Credit Facility provides the ABL Borrower with (i)~~certain financial institutions providing for a ~~$2,941~~$2,941 million revolving credit facility (the “Revolving ABL Facility”), including a swingline sub-facility and a letter of credit ~~sub-facility, and (ii) a bridge revolving credit facility of up to $300 million (the “Bridge Facility”).~~sub- facility. The ~~ABL Borrower~~Company may request increases in the size of the Revolving ABL Facility up to an additional aggregate principal amount of $750 million. As of October 31, 2020, the Company had $124 million of standby letters of credit outstanding under the ABL Credit Facility, which reduces the available borrowing capacity. The Company had no borrowings outstanding under the ABL Credit Facility as of October 31, 2020.

The ABL Credit Facility contains customary borrowing conditions including a borrowing base equal to the sum of (a) ~~80% (which shall automatically increase to~~ 90% ~~upon the satisfaction of certain conditions, including the delivery of an initial appraisal of the inventory)~~ of the net orderly liquidation percentage of eligible inventory, minus (b) customary reserves. Amounts borrowed under the ABL Credit Facility are subject to interest at a rate per annum equal to (i) prior to the Step Down Date (as defined in the ABL Credit Facility), at the ~~ABL Borrower’s~~Company’s option, either (a) adjusted LIBOR plus a margin of 2.75%

~~MACY'S, INC.~~

to 3.00% or (b) a base rate plus a margin of 1.75% to 2.00%, in each case depending on revolving line utilization and (ii) after the Step Down Date, at the ~~ABL Borrower’s~~Company’s option, either (a) adjusted LIBOR plus a margin of 2.25% to 2.50% or (b) a base rate plus a margin of 1.25% to 1.50%, in each case depending on revolving line utilization. The ABL Credit Facility also contains customary covenants that provide for, among other things, limitations on indebtedness, liens, fundamental changes, restricted payments, cash hoarding, and prepayment of certain indebtedness as well as customary representations and warranties and events of default typical for credit facilities of this type.

The ABL Credit Facility also requires (1) the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any fiscal quarter on or after April 30, 2021 if (a) certain events of default have occurred and are continuing or (b) Availability plus Suppressed Availability (each as defined in the ABL Credit Facility) is less than the greater of (x) 10% of the Loan Cap (as defined in the ABL Credit Facility) and (y) $250 million, in each case, as of the end of such fiscal quarter and (2) prior to April 30, 2021, that the ~~ABL Borrower~~Company not permit Availability plus Suppressed Availability to be lower than the greater of (x) 10% of the Loan Cap and (y) $250 million.

As of May 1, 2021, no such events had occurred triggering such requirement.

~~Amendment to Existing Credit Agreement~~

~~On June 8, 2020,~~

As of May 1, 2021, the Company ~~substantially reduced~~had $158 million of standby letters of credit outstanding under the ~~credit commitments~~ABL Credit Facility, which reduces the available borrowing capacity. The borrowing capacity of ~~its existing $1,500~~the ABL Credit Facility was $2,444 million unsecured credit agreement, which as of October 31, 2020 provides the Company with unsecured revolving credit of up to $1 million. The unsecured revolving credit facility contains covenants that provide for, among other things, limitations on fundamental changes, use of proceeds, and maintenance of property, as well as customary representations and warranties and events of default. In conjunction with this amendment, the interest coverage ratio and leverage ratio were eliminated as covenant requirements. As of October 31, 2020, the Company had no borrowings outstanding under the ~~credit agreement.~~

~~Exchange Offers and Consent Solicitations for Certain Outstanding Debt Securities~~ABL Credit Facility as of ~~MRH~~

~~MACY'S, INC.~~

May 1, 2021.

Contractual Obligations

As of ~~October 31, 2020,~~May 1, 2021, other than the financing transactions discussed ~~previously~~above and in Note 75 to the accompanying Consolidated Financial Statements, there were no material changes to our contractual obligations and commitments outside the ordinary course of business since ~~February 1, 2020,~~January 30, 2021, as reported in the ~~2019~~Company’s 2020 Form 10-K.

Capital Resources

Management believes that, with respect to the Company's current operations, its cash on hand and funds from operations, together with the ABL Credit Facility and other capital resources, will be sufficient to cover the Company's reasonably foreseeable working capital, capital expenditure and debt service requirements and other cash requirements in both the near term and over the longer term.

MACY'S, INC.

The Company's ability to generate funds from operations may be affected by numerous factors, including the COVID-19 pandemic, general economic conditions and levels of consumer confidence and demand; however, the Company expects to be able to manage its working capital levels and capital expenditure amounts so as to maintain sufficient levels of liquidity. To the extent that the Company's cash balances from time to time exceed amounts that are needed to fund its immediate liquidity requirements, the Company will consider alternative uses of some or all of such excess cash. Such alternative uses may include, among others, the redemption or repurchase of debt, equity or other securities through open market purchases, privately negotiated transactions or otherwise, and payment of dividends. Depending upon its actual and anticipated sources and uses of liquidity, conditions in the capital markets and other factors, the Company will from time to time consider the issuance of debt or other securities, or other possible capital markets transactions, for the purpose of raising capital which could be used to refinance current indebtedness or for other corporate purposes.

Guarantor Summarized Financial Information

The Company had $3,243 million and $3,246 million aggregate principal amount of senior unsecured notes and senior unsecured debentures (collectively the “Unsecured Notes”) outstanding as of May 1, 2021 and January 30, 2021, respectively, with maturities ranging from 2022 to 2043. The Unsecured Notes constitute debt obligations of MRH ("Subsidiary Issuer"), a 100%-owned subsidiary of Macy's, Inc. ("Parent" and together with the "Subsidiary Issuer," the "Obligor Group"), and are fully and unconditionally guaranteed on a senior unsecured basis by Parent. The Unsecured Notes rank equally in right of payment with all of the Company’s existing and future senior unsecured obligations, senior to any of the Company’s future subordinated indebtedness, and are structurally subordinated to all existing and future obligations of each of the Company’s subsidiaries that do not guarantee the Unsecured Notes. Holders of the Company’s secured indebtedness, including the Notes and any borrowings under the ABL Credit Facility, will have a priority claim on the assets that secure such secured indebtedness; therefore, the Unsecured Notes and the related guarantee are effectively subordinated to all of the Subsidiary Issuer’s and Parent and their subsidiaries’ existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness.

The following tables include combined financial information of the Obligor Group. Investments in non-Guarantor subsidiaries of $6,342 million and $6,126 million as of May 1, 2021 and January 30, 2021, respectively, have been excluded from the Summarized Balance Sheets. Equity in earnings of non-Guarantor subsidiaries of $428 million for the first quarter of 2021 has been excluded from the Summarized Statement of Operations. The combined financial information of the Obligor Group is presented on a combined basis with intercompany balances and transactions within the Obligor Group eliminated.

Summarized Balance Sheets

	May 1, 2021		January 30, 2021
	(in millions)
ASSETS
Current Assets	$	1,422	$	1,297
Noncurrent Assets		6,807		7,491

LIABILITIES
Current Liabilities	$	1,990	$	2,216
Noncurrent Liabilities (a)		9,906		10,145

(a)	Includes net amounts due to non-Guarantor subsidiaries of $2,819 million and $2,702 million as of May 1, 2021 and January 30, 2021, respectively.

MACY'S, INC.

Summarized Statement of Operations

	First Quarter of 2021
	(in millions)
Net Sales	$	157
Consignment commission income (a)		713
Cost of sales		(109	)
Operating income		(251	)
Loss before income taxes (b)		(132	)
Net loss		(110	)

~~Expectations~~

(a)	Income pertains to transactions with ABL Borrower, a non-Guarantor subsidiary

(b)	Includes $215 million of dividend income from non-Guarantor subsidiaries

Outlook and Recent Developments

The Company expects the COVID-19 pandemic to have a material impact on its financial condition, results of operations and cash flows from operations in future periods. The extent of the impact of the COVID-19 pandemic on the Company's operational and financial performance depends on future developments outside of the Company's control, including the duration and spread of the pandemic and related actions taken by federal, state and local government officials, and international governments to prevent disease spread. On ~~November 19, 2020,~~May 18, 2021, the Company disclosed, in connection with its preliminary first quarter of 2021 earnings release, its ~~best estimate~~updated estimates of performance expectations for fiscal 2021, which have been revised from the ~~second half and full year fiscal 2020, but acknowledged~~performance expectations disclosed on February 23, 2021. The revisions are due to the ~~significant uncertainty surrounding consumer behavior and~~Company’s performance for the first quarter of 2021, combined with the faster than anticipated economic ~~conditions in the current environment. For a more complete discussion of~~recovery from the COVID-19 ~~pandemic related risks facing the Company's business, refer to the “Risk Factors” section included in Part II, Item 1A.~~pandemic.

•

Net sales are expected to be between $21,725 million and $22,225 million, an increase between 25% to 28% compared to fiscal 2020. Annual digital sales are estimated at approximately $8 billion.

•

Gross margin is expected to increase by up to 8 percentage points from 2020.

•Comparable owned plus licensed sales are expected to be down in the low to mid-20% range for the second half of fiscal 2020. Annual digital sales penetration is estimated in the mid-40% range, with a high-teens digital increase in the second half of fiscal 2020 and a low-to mid-teens digital increase for all of fiscal 2020.•

SG&A expense as a percentage of net sales is expected to improve approximately 135 basis points compared to 2019 levels.

•

Earnings before interest, taxes, depreciation and amortization, excluding the impact of certain items, are expected to be approximately 9% to 9.5% of net sales.

•~~Net credit card revenues are expected to be down year-over-year in the fourth quarter and as a percentage of net sales are expected to be modestly higher than the fourth quarter of 2019.~~•

Net interest expense is expected to be approximately $320 million.

•

The effective tax rate, excluding the impact of certain items, is expected to be approximately 25%.

•

Adjusted diluted earnings per share are expected to be between $1.71 and $2.12.

•Gross margin for the second half of fiscal 2020 is expected to be mid-single-digit percentage points lower than the same period last year as a percentage of net sales. Quarterly gross margins were expected to peak in the third quarter of 2020.

•~~SG&A rate as a percentage of net sales in the second half of fiscal 2020 is expected to be low to mid-single digit percentage points higher than the same period last year.~~

•~~Gains on sale of real estate are estimated to be approximately $50 million for fiscal 2020.~~

•~~Earnings before interest, taxes, depreciation and amortization, excluding the impact of certain items, are expected to improve sequentially in the fourth quarter from the third quarter.~~

•~~Net interest expense is expected to be approximately $300 million for fiscal 2020.~~

•~~The effective tax rate, excluding the impact of certain items, is expected to be between 35% and 38% for fiscal 2020.~~

•~~Capital expenditures are expected to be approximately $450 million for fiscal 2020.~~

~~MACY'S, INC.~~

Important Information Regarding Non-GAAP Financial Measures

The Company reports its financial results in accordance with U.S. ~~GAAP.~~generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures provide users of the Company's financial information with additional useful information in evaluating operating performance. Management believes that providing supplemental changes in comparable sales on an owned plus licensed basis, ~~and changes in comparable sales on an owned plus licensed basis,~~ which includes adjusting for ~~growth in~~the impact of comparable sales of departments licensed to third parties, assists in evaluating the Company's ability to generate sales growth, whether through owned businesses or departments licensed to third parties, and in evaluating the impact of changes in the manner in which certain departments are operated. ~~The reconciliation of the forward-looking~~Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure which the company believes provides meaningful information about its operational efficiency by excluding the impact of changes in ~~comparable sales on an owned plus licensed basis to GAAP comparable sales (i.e., on an owned basis) is in the same manner as illustrated below.~~tax law and structure, debt levels and capital investment. In addition, management believes that excluding certain items from EBITDA, net income (loss) and diluted earnings (loss) per share that are not associated with the Company’s core operations and that may vary substantially in frequency and magnitude from period-to-period provides useful supplemental measures that assist in evaluating the Company's ability to generate earnings and to more readily compare these metrics between past and future periods.

The Company does not provide reconciliations of the forward-looking non-GAAP measures of adjusted EBITDA and adjusted diluted earnings per share to the most directly comparable forward-looking GAAP measures because the timing and amount of excluded items are unreasonably difficult to fully and accurately estimate. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.

MACY'S, INC.

Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the Company's financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company's financial position, results of operations or cash flows and should therefore be considered in assessing the Company's actual and future financial condition and performance. Additionally, the amounts received by the Company on account of sales of departments licensed to third parties are limited to commissions received on such sales. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.

Changes in Comparable Sales

	Comparable Sales vs. 13 Weeks Ended
	May 2, 2020
Increase in comparable sales on an owned basis (Note 1)		62.5	%
Comparable sales growth impact of departments licensed to third parties (Note 2)		1.4	%
Increase in comparable sales on an owned plus licensed basis		63.9	%

	Comparable Sales vs. 13 Weeks Ended
	May 4, 2019
Decrease in comparable sales on an owned basis (Note 1)		(10.5	)%
Comparable sales growth impact of departments licensed to third parties (Note 2)		0.5	%
Decrease in comparable sales on an owned plus licensed basis		(10.0	)%

Notes:

13 Weeks Ended 39 Weeks Ended
October 31, 2020 October 31, 2020
Decrease in comparable sales on an owned basis (Note 1) (21.0) % (33.9) %
Comparable sales growth impact of departments licensed to third parties (Note 2) 0.8 % 0.1 %
Decrease in comparable sales on an owned plus licensed basis (20.2) % (33.8) %
13 Weeks Ended 39 Weeks Ended
November 2, 2019 November 2, 2019
Decrease in comparable sales on an owned basis (Note 1) (3.9) % (1.0) %
Comparable sales growth impact of departments licensed to third parties (Note 2) 0.4 % 0.2 %
Decrease in comparable sales on an owned plus licensed basis (3.5) % (0.8) %

~~Notes:~~

~~(1)~~

(1)

Represents the period-to-period percentage change in net sales from stores in operation during the 13 weeks ended May 1, 2021 and the 13 weeks ended May 2, 2020 and May 4, 2019, respectively. Such calculation includes all digital sales and excludes commissions from departments licensed to third parties. Stores impacted by a natural disaster or undergoing significant expansion or shrinkage remain in the comparable sales calculation unless the store, or material portion of the store, is closed for a significant period of time. No stores have been excluded as a result of the COVID-19 pandemic. Definitions and calculations of comparable sales may differ among companies in the retail industry.

(2)

Represents the impact of including the sales of departments licensed to third parties occurring in stores in operation throughout the year presented and the immediately preceding year and all online sales in the calculation of comparable sales. The Company licenses third parties to operate certain departments in its stores and online and receives commissions from these third parties based on a percentage of their net sales. In its financial statements prepared in conformity with GAAP, the Company includes these commissions (rather than sales of the departments licensed to third parties) in its net sales. The Company does not, however, include any amounts in respect of licensed department sales (or any commissions earned on such sales) in its comparable sales in accordance with GAAP (i.e., on an owned basis). The amounts of commissions earned on sales of departments licensed to third parties are not material to its net sales for the periods presented.

MACY'S, INC.

Adjusted EBIT and EBITDA as a Percent to Net Sales

The following is a tabular reconciliation of the non-GAAP financial measures EBIT and EBITDA, as adjusted to exclude certain items (“Adjusted EBIT” and “Adjusted EBITDA”), as a percent to net sales ~~from stores in operation throughout the year presented and the immediately preceding year and all online sales, excluding commissions from departments licensed~~ to third parties. Stores impacted by a natural disaster or undergoing significant expansion or shrinkage remain in the comparable sales calculation unless the store, or material portion of the store, is closed for a significant period of time. No stores have been excludedGAAP net income as a ~~result of the COVID-19 pandemic. Definitions and calculations of comparable sales may differ among companies in the retail industry.~~

~~(2) Represents the impact of including the sales of departments licensed~~percent to third parties occurring in stores in operation throughout the year presented and the immediately preceding year and all online sales in the calculation of comparable sales. The company licenses third parties to operate certain departments in its stores and online and receives commissions from these third parties based on a percentage of their net sales. In its financial statements prepared in conformity with GAAP, the company includes these commissions (rather than sales of the departments

~~MACY'S, INC.~~

licensed to third parties) in its net sales. The company does not, however, include any amounts in respect of licensed department sales (or any commissions earned on such sales) in its comparable sales in accordance with GAAP (i.e., on an owned basis). The amounts of commissions earned on sales of departments licensed to third parties are not material to its net sales, ~~for~~which the ~~periods presented.~~Company believes to be the most directly comparable GAAP financial measure.

	13 Weeks Ended May 1, 2021			13 Weeks Ended May 2, 2020			13 Weeks Ended May 4, 2019
	(millions, except percentages)
Net sales	$	4,706		$	3,017		$	5,504

Net income (loss)	$	103		$	(3,581	)	$	136

Net income (loss) as a percent to net sales		2.2	%		(118.7	)%		2.5	%

Net income (loss)	$	103		$	(3,581	)	$	136
Impairment, restructuring and other costs	$	19		$	3,184		$	1
Interest expense - net		79			47			47
Losses on early retirement of debt		11			—			—
Federal, state and local income tax expense (benefit)		37			(576	)		27
Adjusted EBIT	$	249		$	(926	)	$	211
Adjusted EBIT as a percent to net sales		5.3	%		(30.7	)%		3.8	%

Add back depreciation and amortization		224			237			236
Adjusted EBITDA	$	473		$	(689	)	$	447
Adjusted EBITDA as a percent to net sales		10.1	%		(22.8	)%		8.1	%

Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) Per Share

The following is a tabular reconciliation of the non-GAAP financial measures of net income (loss) and diluted earnings (loss) per share, excluding certain items identified below, to GAAP net income (loss) and diluted earnings (loss) per share, which the Company believes to be the most directly comparable GAAP measures.

	First Quarter of 2021						First Quarter of 2020						First Quarter of 2019
	Net Income			Diluted Earnings Per Share			Net Income (Loss)			Diluted Earnings (Loss) Per Share			Net Income		Diluted Earnings Per Share
	(millions, except per share figures)
As reported	$	103		$	0.32		$	(3,581	)	$	(11.53	)	$	136	$	0.44
Impairment, restructuring and other costs		19			0.06			3,184			10.25			1		-
Losses on early retirement of debt		11			0.03			-			-			-		-
Income tax impact of certain items noted above		(7	)		(0.02	)		(233	)		(0.75	)		-		-
As adjusted to exclude certain items above	$	126		$	0.39		$	(630	)	$	(2.03	)	$	137	$	0.44

Third Quarter of 2020 Third Quarter of 2019
Net Income (Loss) Diluted Earnings (Loss) Per Share Net Income Diluted Earnings Per Share
As reported $ (91) $ (0.29) $ 2 $ 0.01
Restructuring, impairment and other costs 20 0.06 13 0.04
Settlement charges 26 0.09 12 0.04
Income tax impact of certain items noted above (15) (0.05) (6) (0.02)
As adjusted $ (60) $ (0.19) $ 21 $ 0.07

2020 2019
Net Income (Loss) Diluted Earnings (Loss) Per Share Net Income Diluted Earnings Per Share
As reported $ (4,104) $ (13.20) $ 224 $ 0.72
Impairment, restructuring and other costs 3,445 11.08 16 0.05
Settlement charges 65 0.21 12 0.04
Financing costs 4 0.01 — —
Income tax impact of certain items identified above (351) (1.13) (6) (0.02)
As adjusted $ (941) $ (3.03) $ 246 $ 0.79

~~MACY'S, INC.~~

~~Critical Accounting Policies~~

~~Goodwill and Intangible Assets~~

New Pronouncements

The Company reviews the carrying value of its goodwill and other intangible assets with indefinite lives at least annually, as of the end of fiscal May, or more frequently if an event occurs or circumstances change, for possible impairment in accordance with ASC Topic 350, ~~Intangibles - Goodwill and Other~~. For impairment testing, goodwill has been assigned to reporting units which consist of the Company's retail operating divisions. Macy's and bluemercury are the only reporting units with goodwill as of October 31, 2020, and 98% of the Company's goodwill is allocated to the Macy's reporting unit.

~~U.S. GAAP Accounting Methodologies~~

~~The Company may elect to evaluate qualitative factors to determine if it is more likely than~~does not expect that ~~the fair value of~~any recently issued accounting pronouncements will have a reporting unit or fair value of indefinite lived intangible assets is less than its carrying value. If the qualitative evaluation indicates that it is more likely than not that the fair value of a reporting unit or indefinite lived intangible asset is less than its carrying amount, a quantitative impairment test is required. Alternatively, the Company may bypass the qualitative assessment for a reporting unit or indefinite lived intangible asset and directly perform the quantitative assessment. This determination can be made on an individual reporting unit or asset basis, and performance of the qualitative assessment may resume in a subsequent period.

The quantitative impairment test involves estimating the fair value of each reporting unit and indefinite lived intangible asset and comparing these estimated fair values with the respective reporting unit or indefinite lived intangible asset carrying value. If the carrying value of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to such excess, limited to the total amount of goodwill allocated to the reporting unit. If the carrying value of an individual indefinite lived intangible asset exceeds its fair value, such individual indefinite lived intangible asset is written down by an amount equal to such excess.

Estimating the fair values of reporting units and indefinite lived intangible assets involves the use of significant assumptions, estimates and judgments with respect to a variety of factors, including sales, gross margin and SG&A rates, capital expenditures, cash flows and the selection and use of an appropriate discount rate and market values and multiples of earnings and revenues of similar public companies. Projected sales, gross margin and SG&A expense rate assumptions and capital expenditures are based on the Company's annual business plan or other forecasted results. Discount rates reflect market-based estimates of the risks associated with the projected cash flows of the reporting unit or indefinite lived intangible asset.

The use of different assumptions, estimates or judgments in the goodwill impairment testing process, including with respect to the estimated future cash flows of the Company's reporting units, the discount rate used to discount such estimated cash flows to their net present value, and the reasonableness of the resultant implied control premium relative to the Company's market capitalization, could materially increase or decrease the fair value of the reporting unit and/or its net assets and, accordingly, could materially increase or decrease any related impairment charge.

~~2020 Impairment Analysis~~

During the first quarter of 2020, as a result of the sustained decline in the Company's market capitalization and changes in the Company's long-term projections driven largely by the impacts of the COVID-19 pandemic, the Company determined a triggering event had occurred that required an interim impairment assessment for all of its reporting units and indefinite lived intangible assets. The Company determined the fair value of each of its reporting units using a market approach or a combination of a market approach and income approach, as appropriate. Relative to the prior assessment, as part of this current assessment, it was determined that an increase in the discount rate applied in the valuation was required to align with market-based assumptions and company-specific risk. This higher discount rate, in conjunction with revised long-term projections resulted in lower fair values of the reporting units. As a result, the Company recognized $2,982 million and $98 million of goodwill impairment for the Macy's and bluemercury reporting units, respectively, during the 26 weeks ended August 1, 2020.

~~As of May 2, 2020, the Company elected to perform a qualitative impairment test~~material effect on its intangible assets with indefinite lives and concluded that it is more likely than not that the fair values exceeded the carrying values and the intangible assets with indefinite lives were not impaired.

The Company continues to monitor the key inputs to the fair values of its reporting units. A decline in market capitalization or future declines in macroeconomic factors or business conditions may result in additional impairment charges in future periods.

consolidated financial statements.

MACY'S, INC.

~~New Pronouncements~~

~~Accounting Pronouncements Recently Adopted~~

~~See Note 1, "Organization and Summary of Significant Accounting Policies" to the accompanying Consolidated Financial Statements.~~

~~Item 3.~~

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes to the Company’s market risk as described in the Company's ~~2019~~2020 10-K. For a discussion of the Company’s exposure to market risk, refer to the Company’s market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of the ~~2019~~2020 10-K.

~~Item 4.~~

Item 4.

Controls and Procedures.

The Company's Chief Executive Officer and Chief Financial Officer have carried out, as of ~~October 31, 2020,~~May 1, 2021, with the participation of the Company's management, an evaluation of the effectiveness of the Company's disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities ~~and~~ Exchange Act of 1934 (the "Exchange Act"). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of ~~October 31, 2020,~~May 1, 2021, the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports the Company files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission (the "SEC") rules and forms, and that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

From time to time adoption of new accounting pronouncements, major organizational restructuring and realignment occurs for which the Company reviews its internal control over financial reporting. As a result of this review, there were no changes in the Company's internal control over financial reporting that occurred during the Company's most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

MACY'S, INC.

PART II - OTHER INFORMATION

~~Item 1.~~

Item 1.

Legal Proceedings.

The Company and its subsidiaries are involved in various proceedings that are incidental to the normal course of their businesses. As of the date of this report, the Company does not expect that any of such proceedings will have a material adverse effect on the Company’s financial position or results of operations.

~~Retail Hazardous Waste Matter.~~ As previously reported, the District Attorneys for ten counties in California and the City of Los Angeles are investigating alleged non-compliance with laws and regulations enacted or adopted regulating the storage, transportation and disposal of hazardous waste in California at Macy’s stores and distribution centers. The Company is cooperating with the offices and agencies involved, which are focused on disposal and return of cosmetic products, and is committed to adopting policies and procedures as may be appropriate depending on the outcome of its investigation into this matter. No administrative or judicial proceedings have been initiated. In October 2020 the District Attorneys made an initial settlement demand to the Company that included a monetary penalty, reimbursement of investigation costs and injunctive relief. Settlement discussions are on-going. It is possible that we will pay penalties in excess of $1,000,000 in connection with this matter and have adjusted our reserve against potential loss to reflect the settlement demand. Although we are currently unable to predict the outcome of this matter or the amount or range of any possible loss, we do not believe the resolution of this matter will have a material adverse impact on our consolidated results of operations, financial condition or cash flows.

~~Item 1A.~~

Item 1A.

Risk Factors.

Except as set forth below, there have been no material changes to the Risk Factors described in Part I, Item 1A."Risk Factors" in the Company's ~~2019~~2020 Form 10-K.

The risk factor “~~The recent outbreak of COVID-19~~If cash flows from our private label credit card decrease, our financial and operational results may ~~have a significant negative impact on the Company's business and financial results”~~be negatively impacted” is deleted and replaced as follows:

~~The recent outbreak~~

If cash flows from our private label credit card decrease, our financial and operational results may be negatively impacted.

We previously sold most of ~~COVID-19~~our credit accounts and related receivables to Citibank (in its role as the issuer of our credit card). Following the sale, we share in the economic performance of the credit card program with Citibank. Deterioration in economic or political conditions could adversely affect the volume of new credit accounts, the amount of credit card program balances and the ability of credit card holders to pay their balances. These conditions could result in the Company receiving lower payments under the credit card program.

Under the terms of the credit card program, Citibank has ~~had and will continue~~the right to ~~have~~terminate the agreement prior to the end of the current term if sales decrease by more than 34% over a ~~significant negative impact~~twelve-month period as compared to the fiscal twelve-month period from July 2006 to June 2007 (the “Benchmark Year”). Based on the ~~Company’s business and financial results.~~

~~In December 2019, there was an outbreak~~results of ~~COVID-19 in China that has since spread~~our February 2021 fiscal period, sales for the most recent twelve-month period then ended have decreased by more than 34% as compared to the ~~other regions~~Benchmark Year. On June 4, 2021, we received a written notice of termination of the ~~world. The outbreak was subsequently labeled as a global pandemic by the World Health Organization in March 2020. As the pandemic continues~~Program Agreement from Citibank. We plan to ~~spread throughout the United States, businesses~~continue negotiations with Citibank as well as ~~federal, state and local governments have implemented significant actions~~evaluate a potential transfer of its credit card program to ~~attempt to mitigate this public health crisis. Although the ultimate severity~~another financial service entity. Upon receipt of the ~~COVID-19 outbreak is uncertain at this time,~~written notice of termination, we have six months to exercise, or not exercise, an option to purchase the ~~pandemic has had and will continue to have adverse impacts on the Company’s financial condition and results of operations, including, but not limited to:~~

•On March 18, 2020, the Company temporarily closed all of its stores and subsequently furloughed the majority of its workforce. As different states and localities began to ease the regulations imposed to slow the spread of COVID-19, the Company began to reopen its stores and substantially allassets of the ~~Company’s stores have reopened to date. As~~credit card program, or nominate a result of the COVID-19 pandemic, and particularly with the reopening of stores, the Company implemented safety measures and health and wellness precautions across its stores and facilities to mitigate risk to its customers and colleagues. These efforts to protect the health and well-being of customers and Company colleagues have resulted in, and will continue to result in, additional SG&A expenses. Recently, there has been a resurgence of COVID-19 in parts of the U.S., which may negatively impact store performance, particularly in urban areas, as consumer shopping behaviors are impacted or government officials reinstate restrictions that may include occupancy limits, curfews and closures of non-essential businesses. Future outbreaks may continue to occur which could require the Company to close recently reopened stores. As a result, there can be no assurance as to whether stores can remain open or whether further store closures may be required.

•~~During the 39 weeks ended October 31, 2020, the Company experienced significant reductions and volatility in demand for its retail products as customers were either unable to or hesitant~~third party to purchase ~~merchandise in stores due~~such assets, and a subsequent six month period to ~~quarantine or government or self-imposed restrictions placed on the Company’s stores’ operations. Despite continued store recovery~~complete such transfer, subject to potential extensions as more fully described in the third quarter of 2020, store sales declined significantly compared to the same period last year. Additionally, social distancing measures or changes in consumer spending behaviors due to COVID-19 have impacted and may continue to impact traffic in stores and could result in a loss of sales and profit.

•In addition, the Company expects to be impacted by the deterioration in the economic conditions in North America, which could have an impact on discretionary consumer spending. In response to the disruption caused by the

~~MACY'S, INC.~~

COVID-19 pandemic, the Company reconfigured its cost base through colleague reductions and reduced discretionary spending. While it is premature to accurately predict the ultimate impact of these developments, the Company expects its results of operations will be adversely impacted in a significant manner and such impacts could continue for an undetermined amount of time.

•The Company has experienced and may continue to experience temporary or long-term disruptions in its supply chain, as the outbreak has resulted in travel disruptions and has impacted manufacturing and distribution throughout the world. The receipt of products or raw material sourced from impacted areas has been and may continue to be slowed or disrupted in the coming months, which could impact the fulfillment of merchandise orders from the Company’s brand partners. Furthermore, transportation delays and cost increases, more extensive travel restrictions, closures or disruptions of businesses and facilities and social, economic, political or labor instability in the affected areas have impacted and may continue to impact the Company, its suppliers’ operations and its customers.

•~~The Company has been and may continue to be~~credit card program agreement. Both parties are required to change its plan for inventory receipts, which could place financial pressure on its brand partners. Such actions may negatively impact relationships with brand partners or adversely impact their financial performance and position. If this occurs, current brand partners’ abilitycontinue to meet their respective obligations and provide support pursuant to the ~~Company~~terms of the credit card program agreement this period. We cannot assure that future negotiations with Citibank will be successful. In addition, an amended or new credit card program may be ~~impacted or~~on terms less favorable to us than the ~~Company~~current credit card program.

Credit card operations are subject to many federal and state laws that may ~~also be required to identify new brand partner relationships.~~

•~~COVID-19 has impacted the recoverability of~~impose certain ~~of the Company’s assets resulting in the recognition of significant goodwill~~requirements and ~~long-lived asset impairment charges during the 39 weeks ended October 31, 2020. The continued impact of the pandemic, including the reinstatement of closures or restrictions~~limitations on ~~retail capacity as well as changes in the Company’s work environment during~~credit card providers. Citibank and ~~post-pandemic, may impact the recoverability of the Company’s assets and lead to increased impairment risk and related charges in the future.~~

•~~The Company’s liquidity was negatively impacted by the store closures. While the Company has obtained additional financing, further actions~~our subsidiary bank, FDS Bank, may be required to improve the Company’s cash position, including but not limited to, monetizing Company assets, reinstituting colleague furloughs, and foregoing capital expenditures and other discretionary expenses. Failure to obtain any necessary additional financing or enhance the Company’s liquidity could lead to default on its current financing arrangements andcomply with regulations that may negatively impact the ~~Company’s ability to meet its obligations as they come due.~~

~~The Company cannot foresee whether~~operation of our private label credit card. This negative impact may affect our revenue streams derived from the ~~outbreak~~sale of ~~COVID-19 will be effectively contained, nor can it predict the severity~~such credit card accounts and duration of its impact or the timing and availability of effective medical treatments and vaccines. As such, impacts of COVID-19 to the Company are highly uncertain and the Company will continue to assess theour financial impacts. The disruption to the global economy and to the Company’s business may lead to triggering events that may indicate that the carrying value of certain assets, including inventories, long-lived assets, intangibles, and goodwill, may not be recoverable.

The impact of COVID-19 may also exacerbate other risks included in Part I, Item 1A. "Risk Factors" in the Company's 2019 10-K, any of which could be material. The situation is changing rapidly and future impacts may materialize that are not yet known. Even after the COVID-19 pandemic has subsided, the Company may continue to experience materially adverse impacts to the Company's business as a result of the virus' long-term economic impact, including adverse impacts on the business operations, liquidity and impacts of any recession that may occur in the future.

results.

MACY'S, INC.

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.~~

~~The following table provides information regarding the Company's purchases of Common Stock during the third quarter of 2020.~~

Total
Number
of Shares
Purchased

Average
Price Paid
per Share ($)

~~Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)~~

~~Maximum Dollar Value of Shares that may yet be Purchased Under the Plans or Programs (1)($)~~

~~(thousands)~~

~~(millions)~~

~~August 2, 2020 – August 29, 2020~~

—

~~August 30, 2020 – September 3, 2020~~

—

~~October 4, 2020 – October 31, 2020~~

—

~~___________________~~

~~(1)~~Commencing in January 2000, the Company's Board of Directors has from time to time approved authorizations to purchase, in the aggregate, up to $18 billion of Common Stock. As of February 2, 2020, $1,716 million of authorization remained unused. On March 26, 2020, the Company's Board of Directors rescinded its authorization of the remaining unused amount.

~~Item 5.~~

Item 5.

Other Information.

On June 4, 2021, the Company received notice from Citibank that it was exercising its right to terminate the Program Agreement, among the Company, FDS Bank, Macy’s Credit and Customer Services, Inc., Macy’s West Stores, Inc., Bloomingdales, Inc., Department Stores National Bank and Citibank.

The Program Agreement provides for, among other things, (i) the ownership by Citibank of the Company’s credit card accounts and related receivable balances purchased by Citibank, (ii) the ownership by Citibank of new accounts opened by the Company’s customers, (iii) the provision of credit by Citibank to the holders of the credit cards associated with those accounts, (iv) the servicing of those accounts and (v) the allocation between Citibank and the Company of the economic benefits and burdens associated with the credit card program. As part of the Program Agreement, the Company receives payments for providing a combination of interrelated services and intellectual property to Citibank in support of the program. Pursuant to the Program Agreement, the Company continues to provide certain servicing functions related to the accounts and related receivables owned by Citibank and receives compensation from Citibank for these services.

Under the terms of the Program Agreement, Citibank has the right to terminate the agreement prior to the end of the current term if sales decrease by more than 34% over a twelve-month period as compared to the fiscal twelve-month period from July 2006 to June 2007 (the “Benchmark Year”). Based on the results of the Company’s February 2021 fiscal period, sales for the most recent twelve-month period then ended decreased by more than 34% as compared to the Benchmark Year (an “Adverse Sales Development” under the Program Agreement). Although written notice of termination has been received, the Company is in on-going discussions with Citibank concerning the credit card program.

Upon receipt of the written notice of termination, the Company has six months to exercise, or not exercise, an option to purchase the assets of the Program Agreement, or nominate a third party to purchase such assets, and a subsequent six month period to complete such transfer, subject to potential extensions as more fully described in the Program Agreement. The Company and Citibank are required to continue to meet their respective obligations and provide support pursuant to the terms of the Program Agreement through this period.Given this timeline, the Company is confirming its guidance provided on May 18, 2021, for fiscal 2021 Credit Card Revenues, Net, equal to approximately 3% of Net Sales. The Company has not provided guidance for periods beyond fiscal 2021.

Forward-Looking Statements

This report and other reports, statements and information previously or subsequently filed by the Company with the SEC contain or may contain forward-looking statements. Such statements are based upon the beliefs and assumptions of, and on information available to, the management of the Company at the time such statements are made. The following are or may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: (i) statements preceded by, followed by or that include the words "may," "will," "could," "should," "believe," "expect," "future," "potential," "anticipate," "intend," "plan," "think," "estimate" or "continue" or the negative or other variations thereof, and (ii) statements regarding matters that are not historical facts. Such forward-looking statements are subject to various risks and uncertainties, including risks and uncertainties relating to:

•

the effects of the weather, natural disasters, and health pandemics, including the COVID-19 pandemic, on the Company’s business, including the ability to open stores, customer demand and its supply chain, as well as its consolidated results of operations, financial position and cash flows;

•the effects of the weather, natural disasters, and health pandemics, including the COVID-19 pandemic, on the Company’s business, including the ability to open stores, customer demand and its supply chain, as well as its consolidated results of operations, financial position and cash flows;•

the possible invalidity of the underlying beliefs and assumptions;

•~~the possible invalidity of the underlying beliefs and assumptions;~~•

the Company's ability to successfully execute against its Polaris strategy, including the ability to realize the anticipated benefits associated with the strategy;

•~~the Company’s ability to successfully implement its Polaris strategy, including the ability to realize the anticipated benefits within the expected time frame or at all;~~•

the success of the Company’s operational decisions, such as product sourcing, merchandise mix and pricing, and marketing and strategic initiatives, such as growing its digital channels, expanding off-mall and modernizing its technology and supply chain infrastructures;

•the success of the Company’s operational decisions, such as product sourcing, merchandise mix and pricing, and marketing, and strategic initiatives, such as Growth stores, Backstage on-mall off-price business, and vendor direct expansion;•

general consumer shipping behaviors and spending levels, including the shift of consumer spending to digital channels, the impact of changes in general economic conditions, consumer disposable income levels, consumer confidence levels, the availability, cost and level of consumer debt, and the costs of basic necessities and other goods;

•general consumer-spending levels, including the impact of changes in general economic conditions, consumer disposable income levels, consumer confidence levels, the availability, cost and level of consumer debt, and the costs of basic necessities and other goods;•

competitive pressures from department stores, specialty stores, general merchandise stores, manufacturers’ outlets, off-price and discount stores, and all other retail channels, including digitally-native retailers, social media and catalogs;

•competitive pressures from department stores, specialty stores, general merchandise stores, manufacturers’ outlets, off-price and discount stores, and all other retail channels, including the Internet and catalogs;

•~~the Company’s ability to remain competitive and relevant as consumers’ shopping behaviors migrate to other shopping channels and to maintain its brand and reputation;~~

•possible systems failures and/or security breaches, including any security breach that results in the theft, transfer or unauthorized disclosure of customer, colleague or company information, or the failure to comply with various laws applicable to the Company in the event of such a breach;

•~~the cost of colleague benefits as well as attracting and retaining quality colleagues;~~

•~~transactions and strategy involving the Company's real estate portfolio;~~

MACY'S, INC.

•

the Company’s ability to remain competitive and relevant as consumers’ shopping behaviors continue to migrate to online and other shopping channels and to maintain its brand and reputation;

•~~the seasonal nature of the Company's business;~~•

possible systems failures and/or security breaches, including any security breach that results in the theft, transfer or unauthorized disclosure of customer, colleague or company information, or the failure to comply with various laws applicable to the Company in the event of such a breach;

•~~conditions to, or changes in the timing of, proposed transactions, and changes in expected synergies, cost savings and non-recurring charges;~~•

the cost of colleague benefits as well as attracting and retaining quality colleagues;

•~~the potential for the incurrence of charges in connection with the impairment of intangible assets, including goodwill;~~•

transactions and strategy involving the Company's real estate portfolio;

•~~possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions;~~•

the seasonal nature of the Company's business;

•possible actions taken or omitted to be taken by third parties, including customers, suppliers, business partners, competitors and legislative, regulatory, judicial and other governmental authorities and officials;•

conditions to, or changes in the timing of, proposed transactions, and changes in expected synergies, cost savings and non-recurring charges;

•~~changes in relationships with vendors and other product and service providers;~~•

the potential for the incurrence of charges in connection with the impairment of intangible assets, including goodwill;

•~~currency, interest~~

•

possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and ~~exchange rates and other capital market, economic and geo-political~~ conditions;

•~~unstable political conditions, civil unrest, terrorist activities and armed conflicts;~~•

possible actions taken or omitted to be taken by third parties, including customers, suppliers, business partners, competitors and legislative, regulatory, judicial and other governmental authorities and officials;

•~~the possible inability of the Company's manufacturers or transporters to deliver products in a timely manner or meet the Company's quality standards;~~•

changes in relationships with vendors and other product and service providers;

•the Company’s reliance on foreign sources of production, including risks related to the disruption of imports by labor disputes, regional and global health pandemics, and regional political and economic conditions; and•

our substantial level of indebtedness;

•~~duties, taxes, other charges and quotas on imports.~~•

currency, interest and exchange rates and other capital market, economic and geo-political conditions;

•

unstable political conditions, civil unrest, terrorist activities and armed conflicts;

•

the possible inability of the Company's manufacturers or transporters to deliver products in a timely manner or meet the Company's quality standards;

•

the Company’s reliance on foreign sources of production, including risks related to the disruption of imports by labor disputes, regional and global health pandemics, and regional political and economic conditions; and

•

duties, taxes, other charges and quotas on imports.

In addition to any risks and uncertainties specifically identified in the text surrounding such forward-looking statements, the statements in the immediately preceding sentence and the statements under captions such as "Risk Factors" in this report and in reports, statements and information filed by the Company with the SEC from time to time constitute cautionary statements identifying important factors that could cause actual amounts, results, events and circumstances to differ materially from those expressed in or implied by such forward-looking statements.

MACY'S, INC.

~~Item 6.~~

Item 6.

Exhibits.

4.1				Indenture dated as of March 17, 2021 by and among Macy’s Retail Holdings, LLC as issuer, Macy’s, Inc. as guarantor and U.S. Bank National Association as trustee, relating to Macy’s Retail Holdings, LLC’s 5.875% Senior Notes due 2029 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed March 17, 2021)

10.1		2021-2023 Performance-Based Restricted Stock Unit Terms and Conditions under the 2018 Equity and Incentive Compensation Plan*

22		List of Subsidiary Guarantors (incorporated by reference to Exhibit 22 to the Company’s Annual Report on Form 10-K (file No. 1-13536) for the fiscal year ended January 30, 2021)

31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a)

31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a)

32.1			Certification by Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act

32.2			Certification by Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act

101			The following financial statements from Macy's, Inc.'s Quarterly Report on Form 10-Q for the quarter ended ~~October 31, 2020,~~May 1, 2021, filed on ~~December 8, 2020, are~~June 7, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income (Loss), (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Changes in Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.

104	*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) Constitutes a compensatory plan or arrangement. Portions of this exhibit have been omitted.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			MACY’S, INC.
~~MACY’S, INC.~~
By:
	~~By:~~	/s/ ELISA D. GARCIA
	Elisa D. Garcia Executive Vice President, Chief Legal Officer and Secretary

By:	/s/ PAUL GRISCOM
	Paul Griscom Senior Vice President and Controller

Date: ~~December 8, 2020~~

June 7, 2021


Title of each class			Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	M	M	New York Stock Exchange


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	13 Weeks Ended				39 Weeks Ended
	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019
Net sales	$	3,990	$	5,173	$	10,566	$	16,223
Credit card revenues, net	195		183		494		531

Cost of sales	(2,569)		(3,106)		(7,788)		(9,905)
Selling, general and administrative expenses	(1,726)		(2,202)		(4,723)		(6,489)
Gains on sale of real estate	3		17		20		67
Impairment, restructuring and other costs	(20)		(13)		(3,445)		(16)
Operating income (loss)	(127)		52		(4,876)		411
Benefit plan income, net	16		8		37		23
Settlement charges	(26)		(12)		(65)		(12)
Interest expense	(80)		(52)		(199)		(159)
Financing costs	0		0		(4)		0
Interest income	0		4		3		16
Income (loss) before income taxes	(217)		0		(5,104)		279
Federal, state and local income tax benefit (expense)	126		2		1,000		(55)
Net income (loss)	$	(91)	$	2	(4,104)		224
Basic earnings (loss) per share	$	(0.29)	$	0.01	$	(13.20)	$	0.72
Diluted earnings (loss) per share	$	(0.29)	$	0.01	$	(13.20)	$	0.72



	October 31, 2020		February 1, 2020		November 2, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	1,551	$	685	$	301
Receivables	185		409		175
Merchandise inventories	5,144		5,188		7,256
Prepaid expenses and other current assets	477		528		569
Total Current Assets	7,357		6,810		8,301
Property and Equipment - net of accumulated depreciation and amortization of $4,816, $4,392 and $4,926	6,122		6,633		6,558
Right of Use Assets	3,028		2,668		2,596
Goodwill	828		3,908		3,908
Other Intangible Assets – net	437		439		440
Other Assets	1,442		714		744
Total Assets	$	19,214	$	21,172	$	22,547
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	536	$	539	$	6
Merchandise accounts payable	3,267		1,682		3,427
Accounts payable and accrued liabilities	2,848		3,448		3,046
Income taxes	0		81		0
Total Current Liabilities	6,651		5,750		6,479
Long-Term Debt	4,852		3,621		4,677
Long-Term Lease Liabilities	3,266		2,918		2,819
Deferred Income Taxes	917		1,169		1,200
Other Liabilities	1,285		1,337		1,315
Shareholders' Equity	2,243		6,377		6,057
Total Liabilities and Shareholders’ Equity	$	19,214	$	21,172	$	22,547


	October 31, 2020		February 1, 2020		November 2, 2019
	(millions)
Non-amortizing intangible assets
Goodwill	$	9,290	$	9,290	$	9,290
Accumulated impairment losses	(8,462)		(5,382)		(5,382)
	828		3,908		3,908
Tradenames	403		403		403
	$	1,231	$	4,311	$	4,311


	Parent		Subsidiary Issuer		Other Subsidiaries		Consolidating Adjustments		Consolidated
Net sales	$	0	$	97	$	3,893	$	0	$	3,990
Consignment commission income	0		353		0		(353)		0
Credit card revenues, net	0		2		193		0		195

Cost of sales	0		(32)		(2,537)		0		(2,569)
Selling, general and administrative expenses	0		(624)		(1,455)		353		(1,726)
Gains on sale of real estate	0		0		3		0		3
Restructuring, impairment and other costs	0		(5)		(15)		0		(20)
Operating income (loss)	0		(209)		82		0		(127)
Benefit plan income, net	0		6		10		0		16
Settlement charges	0		(12)		(14)		0		(26)
Interest (expense) income, net:
External	(29)		(44)		(7)		0		(80)
Intercompany	(33)		26		7		0		0
Equity in loss of subsidiaries	(53)		(92)		0		145		0
Income (loss) before income taxes	(115)		(325)		78		145		(217)
Federal, state and local income tax benefit	24		95		7		0		126
Net income (loss)	$	(91)	$	(230)	$	85	$	145	$	(91)

Comprehensive income (loss)	$	(89)	$	(227)	$	85	$	142	$	(89)


	Parent		Subsidiary Issuer		Other Subsidiaries		Consolidating Adjustments		Consolidated
ASSETS:
Current Assets:
Cash and cash equivalents	$	413	59		$	213	$	0	$	685
Receivables	0		83		326		0		409
Merchandise inventories	0		2,239		2,949		0		5,188
Prepaid expenses and other current assets	0		118		410		0		528
Total Current Assets	413		2,499		3,898		0		6,810
Property and Equipment – net	0		3,103		3,530		0		6,633
Right of Use Assets	0		611		2,057		0		2,668
Goodwill	0		3,326		582		0		3,908
Other Intangible Assets – net	0		4		435		0		439
Other Assets	0		37		677		0		714
Deferred Income Taxes	12		0		0		(12)		0
Intercompany Receivable	2,675		0		1,128		(3,803)		0
Investment in Subsidiaries	3,433		2,796		0		(6,229)		0
Total Assets	$	6,533	$	12,376	$	12,307	$	(10,044)	$	21,172
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt	$	0	$	539	$	0	$	0	$	539
Merchandise accounts payable	0		702		980		0		1,682
Accounts payable and accrued liabilities	126		909		2,413		0		3,448
Income taxes	5		11		65		0		81
Total Current Liabilities	131		2,161		3,458		0		5,750
Long-Term Debt	0		3,621		0		0		3,621
Long-Term Lease Liabilities	0		543		2,375		0		2,918
Intercompany Payable	0		3,803		0		(3,803)		0
Deferred Income Taxes	0		595		586		(12)		1,169
Other Liabilities	25		414		898		0		1,337
Shareholders' Equity	6,377		1,239		4,990		(6,229)		6,377
Total Liabilities and Shareholders' Equity	$	6,533	$	12,376	$	12,307	$	(10,044)	$	21,172


	Third Quarter of 2020				Third Quarter of 2019
	Amount		% to Net Sales		Amount		% to Net Sales
	(dollars in millions, except per share figures)
Net sales	$	3,990			$	5,173
Credit card revenues, net	195		4.9	%	183		3.5	%

Cost of sales	(2,569)		(64.4)	%	(3,106)		(60.0)	%
Selling, general and administrative expenses	(1,726)		(43.3)	%	(2,202)		(42.6)	%
Gains on sale of real estate	3		0.1	%	17		0.3	%
Restructuring, impairment and other costs	(20)		(0.5)	%	(13)		(0.2)	%
Operating income (loss)	(127)		(3.2)	%	52		1.0	%
Benefit plan income, net	16				8
Settlement charges	(26)				(12)
Interest expense, net	(80)				(48)
Income (loss) before income taxes	(217)				—
Federal, state and local income tax benefit	126				2
Net income (loss)	$	(91)			$	2

Diluted earnings (loss) per share	$	(0.29)			$	0.01

Supplemental Financial Measure
Gross margin (a)	$	1,421	35.6	%	$	2,067	40.0	%

Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items	$	(0.19)			$	0.07


	2020				2019
	Amount		% to Net Sales		Amount		% to Net Sales
	(dollars in millions, except per share figures)
Net sales	$	10,566			$	16,223
Credit card revenues, net	494		4.7	%	531		3.3	%

Cost of sales	(7,788)		(73.7)	%	(9,905)		(61.1)	%
Selling, general and administrative expenses	(4,723)		(44.7)	%	(6,489)		(40.0)	%
Gains on sale of real estate	20		0.2	%	67		0.4	%
Restructuring, impairment and other costs	(3,445)		(32.6)	%	(16)		(0.1)	%
Operating income (loss)	(4,876)		(46.1)	%	411		2.5	%
Benefit plan income, net	37				23
Settlement charges	(65)				(12)
Interest expense, net	(196)				(143)
Financing costs	(4)				—
Income (loss) before income taxes	(5,104)				279
Federal, state and local income tax benefit (expense)	1,000				(55)
Net income (loss)	$	(4,104)			$	224

Diluted earnings (loss) per share	$	(13.20)			$	0.72

Supplemental Financial Measure
Gross margin (a)	$	2,778	26.3	%	$	6,318	38.9	%

Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items	$	(3.03)			$	0.79

Delaware		13-3324058

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