Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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.

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. ☐

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

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

	13 Weeks Ended						13 Weeks Ended						26 Weeks Ended
	May 1, 2021			May 2, 2020			July 31, 2021			August 1, 2020			July 31, 2021			August 1, 2020
Net sales	$	4,706		$	3,017		$	5,647		$	3,559		$	10,353		$	6,576
Credit card revenues, net		159			131			197			168			356			299

Cost of sales		(2,889	)		(2,501	)		(3,353	)		(2,718	)		(6,242	)		(5,219	)
Selling, general and administrative expenses		(1,748	)		(1,598	)		(1,898	)		(1,398	)		(3,646	)		(2,995	)
Gains on sale of real estate		6			16			6			0			12			16
Impairment, restructuring and other costs		(19	)		(3,184	)		(2	)		(242	)		(21	)		(3,426	)
Operating income (loss)		215			(4,119	)		597			(631	)		812			(4,749	)
Benefit plan income, net		15			9			17			12			32			21
Settlement charges								(81	)		(38	)		(81	)		(38	)
Interest expense		(79	)		(49	)		(80	)		(70	)		(159	)		(120	)
Losses on early retirement of debt		(11	)		0			(3	)		0			(14	)		0
Financing costs								0			(3	)		0			(3	)
Interest income		0			2			0			1			0			3
Income (loss) before income taxes		140			(4,157	)		450			(729	)		590			(4,886	)
Federal, state and local income tax benefit (expense)		(37	)		576			(105	)		298			(142	)		874
Net income (loss)	$	103		$	(3,581	)	$	345		$	(431	)	$	448		$	(4,012	)
Basic earnings (loss) per share	$	0.33		$	(11.53	)	$	1.11		$	(1.39	)	$	1.44		$	(12.91	)
Diluted earnings (loss) per share	$	0.32		$	(11.53	)	$	1.08		$	(1.39	)	$	1.41		$	(12.91	)

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

	13 Weeks Ended						13 Weeks Ended						26 Weeks Ended
	May 1, 2021			May 2, 2020			July 31, 2021			August 1, 2020			July 31, 2021			August 1, 2020
Net income (loss)	$	103		$	(3,581	)	$	345		$	(431	)	$	448		$	(4,012	)
Other comprehensive income (loss):
Actuarial gain on post employment and postretirement benefit plans, before tax								63			19			63			19
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
Amortization of net actuarial loss and prior service credit on post employment and postretirement benefit plans included in net income (loss), before tax								9			11			19			23
Settlement charges, before tax								81			38			81			38
Tax effect related to items of other comprehensive income		(2	)		(3	)		(38	)		(17	)		(40	)		(20	)
Total other comprehensive income, net of tax effect		8			9			115			51			123			60
Comprehensive income (loss)	$	111		$	(3,572	)	$	460		$	(380	)	$	571		$	(3,952	)

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

	May 1, 2021		January 30, 2021		May 2, 2020		July 31, 2021			January 30, 2021		August 1, 2020
ASSETS
Current Assets:									��
Cash and cash equivalents	$	1,798	$	1,679	$	1,523	$	2,137		$	1,679	$	1,395
Receivables		205		276		170		221			276		184
Merchandise inventories		4,230		3,774		4,923		4,298			3,774		3,582
Prepaid expenses and other current assets		1,007		455		519		955			455		470
Total Current Assets		7,240		6,184		7,135		7,611			6,184		5,631
Property and Equipment - net of accumulated depreciation and amortization of $4,550, $4,400 and $4,560		5,798		5,940		6,425
Property and Equipment - net of accumulated depreciation and amortization of $4,689, $4,400 and $4,642								5,713			5,940		6,279
Right of Use Assets		2,853		2,878		2,672		2,819			2,878		3,035
Goodwill		828		828		838		828			828		828
Other Intangible Assets – net		436		437		439		436			437		438
Other Assets		927		1,439		1,072		1,010			1,439		1,403
Total Assets	$	18,082	$	17,706	$	18,581	$	18,417		$	17,706	$	17,614
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	294	$	452	$	739	$	1,546		$	452	$	539
Merchandise accounts payable		2,545		1,978		2,196		2,476			1,978		1,409
Accounts payable and accrued liabilities		2,616		2,927		2,757		2,660			2,927		2,906
Income taxes		63		0		80		18			0		0
Total Current Liabilities		5,518		5,357		5,772		6,700			5,357		4,854
Long-Term Debt		4,558		4,407		4,918		3,295			4,407		4,851
Long-Term Lease Liabilities		3,166		3,185		2,923		3,096			3,185		3,269
Deferred Income Taxes		868		908		944		913			908		921
Other Liabilities		1,297		1,296		1,327		1,267			1,296		1,395
Shareholders' Equity		2,675		2,553		2,697		3,146			2,553		2,324
Total Liabilities and Shareholders’ Equity	$	18,082	$	17,706	$	18,581	$	18,417		$	17,706	$	17,614

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

	Common Stock		Additional Paid-In Capital			Accumulated Equity		Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity		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	$	3	$	571		$	3,928	$	(1,161	)	$	(788	)	$	2,553
Net income							103								103							103								103
Other comprehensive income												8			8												8			8
Stock-based compensation expense				11											11				11											11
Stock issued under stock plans				(24	)				24						0				(24	)				24						0
Balance at May 1, 2021	$	3	$	558		$	4,031	$	(1,137	)	$	(780	)	$	2,675		3		558			4,031		(1,137	)		(780	)		2,675
Net income																						345								345
Other comprehensive income																											115			115
Stock-based compensation expense																			11											11
Stock issued under stock plans																			(71	)				71						0
Balance at July 31, 2021																$	3	$	498		$	4,376	$	(1,066	)	$	(665	)	$	3,146

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

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

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

	13 Weeks Ended						26 Weeks Ended
	May 1, 2021			May 2, 2020			July 31, 2021			August 1, 2020
Cash flows from operating activities:
Net income (loss)	$	103		$	(3,581	)	$	448		$	(4,012	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Impairment, restructuring and other costs		19			3,184			21			3,426
Settlement charges								81			38
Depreciation and amortization		224			237			444			472
Stock-based compensation expense		11			6			22			13
Gains on sale of real estate		(6	)		(16	)		(12	)		(16	)
Benefit plans		10			12			19			23
Amortization of financing costs and premium on acquired debt		8			0			14			4
Deferred income taxes		(43	)		(225	)		(36	)		(265	)
Changes in assets and liabilities:
Decrease in receivables		71			236			55			222
(Increase) decrease in merchandise inventories		(457	)		265			(525	)		1,598
(Increase) decrease in prepaid expenses and other current assets		(56	)		12			(41	)		31
Increase in merchandise accounts payable		674			629
Increase (decrease) in merchandise accounts payable								647			(188	)
Decrease in accounts payable and accrued liabilities		(114	)		(531	)		(78	)		(605	)
(Increase) decrease in current income taxes		75			(353	)
Increase (decrease) in current income taxes								12			(695	)
Change in other assets, liabilities, and other items not separately identified		(25	)		(39	)		(106	)		(53	)
Net cash provided (used) by operating activities		494			(164	)		965			(7	)
Cash flows from investing activities:
Purchase of property and equipment		(61	)		(122	)		(142	)		(228	)
Capitalized software		(38	)		(38	)		(88	)		(61	)
Disposition of property and equipment		8			21			34			31
Other, net		17			26			52			(14	)
Net cash used by investing activities		(74	)		(113	)		(144	)		(272	)
Cash flows from financing activities:
Debt issued		500			1,500			500			2,780
Debt issuance costs		(9	)		0			(9	)		(98	)
Debt repurchase premium and expenses		(12	)		0			(15	)		0
Debt repaid		(503	)		(4	)		(518	)		(1,504	)
Dividends paid		0			(117	)		0			(117	)
Decrease in outstanding checks		(276	)		(231	)		(318	)		(111	)
Net cash provided (used) by financing activities		(300	)		1,148			(360	)		950
Net increase in cash, cash equivalents and restricted cash		120			871			461			671
Cash, cash equivalents and restricted cash beginning of period		1,754			731			1,754			731
Cash, cash equivalents and restricted cash end of period	$	1,874		$	1,602		$	2,215		$	1,402
Supplemental cash flow information:
Interest paid	$	52		$	38		$	152		$	104
Interest received		0			3			0			4
Income taxes paid (net of refunds received)		5			2			166			86

Note: Restricted cash of ~~$76~~$78 million and ~~$79~~$7 million have been included with cash and cash equivalents for the 1326 weeks ended ~~May 1,~~July 31, 2021 and ~~May 2,~~August 1, 2020, respectively.

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

Macy's, Inc., 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, Puerto Rico and Guam. As of ~~May 1,~~July 31, 2021, the Company's operations were conducted through Macy's, Market by Macy’s, Macy’s Backstage, Bloomingdale's, Bloomingdale's The Outlet, 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 January 30, 2021 (the "2020 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 2020 10-K.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. 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 26 weeks ended ~~May 1,~~July 31, 2021 and ~~May 2,~~August 1, 2020, 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.

Because of the seasonal nature of the retail business, the results of operations for the 13 and 26 weeks ended ~~May 1,~~July 31, 2021 and ~~May 2,~~August 1, 2020 (which do not include the Christmas season) are not necessarily indicative of such results for the full fiscal year.

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 26 weeks ended ~~May 1,~~July 31, 2021 and ~~May 2,~~August 1, 2020 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 6, "Benefit Plans," for further information.

As the COVID-19 pandemic continues ~~into~~through 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.~~colleagues while also focusing on prudent cash management, maintaining strong liquidity and executing its strategic initiatives. Although the Company has experienced strong recovery in operating results during ~~the first quarter of~~fiscal 2021 as compared to fiscal 2020, ~~certain stores continued~~the Company continues to ~~operate under local governmental orders or restrictions.~~monitor the impacts of COVID-19 on the macro economy as well as on the Company’s and its vendor partners’ operations. The full impact of ~~COVID-19~~the pandemic will continue to depend on future developments, including the continued spread and duration of the pandemic, the emergence of future 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, maintenance of temporary government stimulus programs, labor shortages and intense competition for talent, all of which are highly uncertain and cannot be predicted.

As further disclosed in the Company’s 2020 Form 10-K, on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law, which permitted, among other benefits, the carryback of certain net operating losses. Based on the Company’s 2020 fiscal results, a $520 million income tax receivable ~~has been recognized as of May 1, 2021,~~ associated with this net operating loss carryback ~~benefit.~~benefit is included within prepaid expenses and other current assets on the Company’s Consolidated Balance Sheet. This income tax receivable is estimated to be received in the first quarter of ~~2022 and is included within prepaid expenses and other current assets on the Company’s Consolidated Balance Sheet.~~2022.

	13 Weeks Ended					13 Weeks Ended				26 Weeks Ended
	May 1, 2021			May 2, 2020		July 31, 2021		August 1, 2020		July 31, 2021			August 1, 2020
	(millions)					(millions)
Impairments	$	18		$	3,150	$	2	$	15	$	20		$	3,164
Restructuring		(1	)		25		0		169		(1	)		194
Other		2			9		0		58		2			68
Total	$	19		$	3,184	$	2	$	242	$	21		$	3,426

During the 13 and 26 weeks ended ~~May 1,~~July 31, 2021, the Company incurred non-cash impairment charges totaling ~~$18~~$2 million and $20 million, respectively, primarily related to capitalized software assets.

During the 13 and 26 weeks ended ~~May 2,~~August 1, 2020, primarily as a result of the COVID-19 pandemic, the Company incurred non-cash impairment charges totaling $15 million and $~~3,150~~3,164 million ~~consisting~~, respectively, the majority of which consisted of:

A summary of the restructuring and other cash activity for the 13 and 26 weeks ended ~~May 1,~~July 31, 2021 and ~~May 2,~~August 1, 2020 related to the Polaris strategy, which was announced in February 2020 and included within accounts payable and accrued liabilities, is as follows:

	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		$	115		$	9		$	124
Additions charged to expense		25			7			32			25			7			32
Cash payments		(82	)		(6	)		(88	)		(82	)		(6	)		(88	)
Balance at May 2, 2020	$	58		$	10		$	68			58			10			68
Additions charged to expense											15			6			21
Cash payments											(67	)		(6	)		(73	)
Balance at August 1, 2020										$	6		$	10		$	16

	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 January 30, 2021	$	14		$	2		$	16		$	14		$	2		$	16
Additions charged to expense		5			0			5			5			0			5
Cash payments		(16	)		(2	)		(18	)		(16	)		(2	)		(18	)
Balance at May 1, 2021	$	3		$	0		$	3			3			0			3
Additions charged to expense											0			0			0
Cash payments											(1	)		0			(1	)
Balance at July 31, 2021										$	2		$	0		$	2

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

	13 Weeks Ended														13 Weeks Ended
	May 1, 2021						May 2, 2020								July 31, 2021						August 1, 2020
	Net Income				Shares		Net Loss						Shares		Net Income				Shares		Net Loss						Shares
	(millions, except per share data)														(millions, except per share data)
Net income (loss)	$	103				310.7	$	(3,581	)					309.7	$	345				311.5	$	(431	)					310.3
Shares to be issued under deferred compensation and other plans						0.9								0.9						0.9								0.9
	$	103				311.6	$	(3,581	)					310.6	$	345				312.4	$	(431	)					311.2
Basic earnings (loss) per share			$	0.33						$	(11.53	)					$	1.11						$	(1.39	)
Effect of dilutive securities:
Stock options and restricted stock units						7.0								0						6.2								0
	$	103				318.6	$	(3,581	)					310.6	$	345				318.6	$	(431	)					311.2
Diluted earnings (loss) per share			$	0.32						$	(11.53	)					$	1.08						$	(1.39	)

	26 Weeks Ended
	July 31, 2021						August 1, 2020
	Net Income				Shares		Net Loss						Shares
	(millions, except per share data)
Net income (loss)	$	448				311.1	$	(4,012	)					310.0
Shares to be issued under deferred compensation and other plans						0.9							0.9
	$	448				312.0	$	(4,012	)					310.9
Basic earnings (loss) per share			$	1.44						$	(12.91	)
Effect of dilutive securities:
Stock options and restricted stock units						6.6								0
	$	448				318.6	$	(4,012	)					310.9
Diluted earnings (loss) per share			$	1.41						$	(12.91	)

In addition to the stock options and restricted stock units reflected in the foregoing tables, stock options to purchase ~~14.7~~14.4 million shares of common stock and restricted stock units relating to ~~11.7~~1.0 million shares of common stock were outstanding at ~~May 1,~~July 31, 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 26 weeks ended ~~May 2,~~August 1, 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 ~~17.3~~16.7 million shares of common stock and restricted stock units relating to ~~3.4~~10.1 million shares of common stock outstanding at ~~May 2,~~August 1, 2020 were excluded from the computation of diluted earnings per share.

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 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.

Macy’s accounted for ~~87% of the Company’s net sales for each of the 13 weeks ended May 1, 2021~~88% and ~~May 2, 2020. In addition, digital sales accounted for approximately 37% and 43%~~89% of the Company’s net sales for the 13 weeks ended ~~May 1,~~July 31, 2021 and ~~May 2,~~August 1, 2020, respectively. Macy’s accounted for 88% of the Company’s net sales for each of the 26 weeks ended July 31, 2021 and August 1, 2020. In addition, digital sales accounted for approximately 32% and 54% of the Company’s net sales for the 13 weeks ended July 31, 2021and August 1, 2020, respectively, and 34% and 49% of the Company’s net sales for the 26 weeks ended July 31, 2021 and August 1, 2020, respectively.

Disaggregation of the Company's net sales by family of business for the 13 and 26 weeks ended ~~May 1,~~July 31, 2021 and ~~May 2,~~August 1, 2020 were as follows:

	13 Weeks Ended				13 Weeks Ended				26 Weeks Ended
Net sales by family of business	May 1, 2021		May 2, 2020		July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020
	(millions)				(millions)
Women's Accessories, Intimate Apparel, Shoes, Cosmetics and Fragrances	$	2,023	$	1,215	$	2,277	$	1,381	$	4,300	$	2,596
Women's Apparel		913		579		1,113		626		2,026		1,205
Men's and Kids'		932		573		1,224		727		2,156		1,299
Home/Other (a)		838		650		1,033		825		1,871		1,476
Total	$	4,706	$	3,017	$	5,647	$	3,559	$	10,353	$	6,576

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 ~~$225~~$196 million, $159 million and ~~$184~~$140 million as of ~~May 1,~~July 31, 2021, January 30, 2021 and ~~May 2,~~August 1, 2020, respectively. Included in prepaid expenses and other current assets is an asset totaling ~~$136~~$115 million, $103 million and ~~$130~~$114 million as of ~~May 1,~~July 31, 2021, January 30, 2021 and ~~May 2,~~August 1, 2020, respectively, for the recoverable cost of merchandise estimated to be returned by customers.

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 the Macy’s Star Rewards loyalty program, points are earned based on customers’ spending on Macy’s private label and co-branded credit cards as well as non-proprietary ~~cards.~~cards and other forms of tender. The Company’s Bloomingdale’s Loyallist and bluemercury BlueRewards programs provide tender 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 ~~$580~~$547 million, $616 million and ~~$732~~$675 million as of ~~May 1,~~July 31, 2021, January 30, 2021 and ~~May 2,~~August 1, 2020, respectively.

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

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.

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 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 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~~is evaluating options for its Credit Card Program including potential transfer to another financial service ~~entity.~~entity or modified arrangement with Citibank. 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. The Company estimates that these events will not have an impact on the financial results of the Credit Card Program in fiscal 2021. The Company is currently unable to estimate the impact beyond fiscal 2021 this termination event or transfer might have on the Program Agreement or on the Company’s future financial results.

	13 Weeks Ended				26 Weeks Ended
	May 1, 2021		May 2, 2020		July 31, 2021		August 1, 2020
	(millions)				(millions)
Revolving credit agreement					$	0	$	1,500
9.5% Amortizing debentures due 2021	$	2	$	2		2		2
9.75% Amortizing debentures due 2021		1		1		1		1
3.875% Senior notes due 2022		156		0		156		0
2.875% Senior notes due 2023		136		0		136		0
4.375% Senior notes due 2023		49		0		49		0
3.625% Senior notes due 2024		150		0		150		0
6.65% Senior debentures due 2024		5		0		4		0
7.6% Senior debentures due 2025		4		0		19		0
	$	503	$	3	$	517	$	1,503

On August 17, 2021, subsequent to the end of the second quarter of 2021, Macy’s Inc. redeemed the entire outstanding $1.3 billion aggregate principal amount of its 8.375% Senior Secured Notes due 2025 (the “2025 Notes”). The redemption price was equal to 100% of the principal amount of the 2025 Notes ($1.3 billion), plus accrued and unpaid interest of $19 million, plus the applicable premium due to holders of the 2025 Notes in connection with an early redemption of $138 million, plus unamortized deferred debt costs of $47 million. The total pre-tax charge of $185 million will be recorded in the 13 weeks ending October 30, 2021. The $1.3 billion principal amount of 2025 Notes were classified as short-term debt as of July 31, 2021.

On March 17, 2021, Macy’s Retail Holdings, LLC (“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 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 from the Notes Offering, together with cash on hand, to fund the tender offer discussed below.

On March 17, 2021, the Company completed a tender offer in which $500 million of senior notes and debentures were tendered for early settlement and purchased by MRH. The total cash cost for the tender offer was $17 million with the remainder funded through the net proceeds from the private offering discussed above. The Company recognized $11 million of loss related to the early retirement of debt on the Consolidated Statements of Operation during the first quarter of 2021.

The Company has defined contribution plans ~~which~~that 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.

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.

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						13 Weeks Ended						26 Weeks Ended
	May 1, 2021			May 2, 2020			July 31, 2021			August 1, 2020			July 31, 2021			August 1, 2020
	(millions)						(millions)						(millions)
401(k) Qualified Defined Contribution Plan	$	22		$	13		$	17		$	19		$	39		$	32
Pension Plan
Service cost	$	0		$	1		$	1		$	2		$	1		$	3
Interest cost		12			19			13			18			25			38
Expected return on assets		(40	)		(45	)		(43	)		(46	)		(83	)		(92	)
Recognition of net actuarial loss		8			10			9			10			17			20
	$	(20	)	$	(15	)	$	(20	)	$	(16	)	$	(40	)	$	(31	)
Supplementary Retirement Plan
Interest cost		3			4			3			4			6			8
Recognition of net actuarial loss		3			3			3			3			6			6
	$	6		$	7		$	6		$	7		$	12		$	14

Total Retirement Expense	$	8		$	5		$	3		$	10		$	11		$	15

Postretirement Obligations
Interest cost		0			1			0			1			0			2
Recognition of net actuarial gain		(1	)		(1	)		(2	)		(2	)		(3	)		(3	)
	$	(1	)	$	0		$	(2	)	$	(1	)	$	(3	)	$	(1	)

During the 13 and 26 weeks ended July 31, 2021, the Company transferred pension obligations for certain retirees and beneficiaries under the Pension Plan through the purchase of a group annuity contract with an insurance company. The Company transferred $256 million of Pension Plan assets to the insurance company, thereby reducing its Pension Plan benefit obligations. The transaction had no cash impact on the Company but required a remeasurement of the Pension Plan’s funded status, resulting in the recognition of a non-cash settlement charge of $81 million.

In connection with the Company's defined benefit plans, for the 13 and 26 weeks ended August 1, 2020, the Company incurred a non-cash settlement charge of $38 million. This charge relates to the pro-rata recognition of net actuarial losses associated with the Company's defined benefit plans and is the result of an increase in lump sum distributions associated with retiree distribution elections and restructuring activity.

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:

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

	July 31, 2021								August 1, 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	$	46	$	39	$	7	$	0	$	143	$	32	$	111	$	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.

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

The Company reviews the carrying amount of goodwill and intangible assets with indefinite lives for impairment annually and whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable. For the Company's annual impairment assessment as of the end of fiscal May 2021, 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 therefore goodwill and intangible assets with indefinite lives were not impaired.

For purposes of the following discussion, all references to ~~"first~~"second quarter of 2021" and ~~"first~~"second quarter of 2020" are to the Company's 13-week fiscal periods ended ~~May 1,~~July 31, 2021 and ~~May 2,~~August 1, 2020, respectively. References to "2021"and "2020" are to the Company’s 26-week fiscal periods ended July 31, 2021 and August 1, 2020, 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 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 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".

As the COVID-19 pandemic continues ~~into~~through 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.~~colleagues, while also focusing on prudent cash management, maintaining strong liquidity and executing its strategic initiatives. The Company continuously monitors the ongoing impacts of COVID-19, including the outbreaks of any variant strains, as well as the evolving federal, state and local ordinances and health guidelines related to the mitigation of transmission risk associated with the pandemic. The Company has taken, and continues to take, numerous steps to promote health and safety at its stores and facilities, including ~~establishment~~following federal, state and local guidelines regarding the use of ~~vaccine distribution sites at different corporate facilities, increasing~~masks, supporting vaccination efforts, maintaining increased safety equipment in stores, offering contactless shopping opportunities, providing company-supplied personal protection equipment and wellness checks for colleagues, ~~performing~~continuing enhanced cleaning throughout our various locations 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 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. The Company is currently unable to estimate the impact beyond fiscal 2021 this termination event or transfer might have on the Program Agreement or on the Company’s future financial results.

Although the Company has experienced strong recovery in operating results ~~through the first quarter of~~during fiscal 2021 as compared to fiscal 2020, ~~certain stores continued~~the Company continues to ~~operate under local governmental orders or restrictions.~~monitor the impact of COVID-19 on the macro economy as well as on the Company’s and its vendor partners’ operations. The full impact of ~~COVID-19~~the pandemic will continue to depend on future developments, including the continued spread and duration of the ~~outbreak,~~pandemic, the emergence of future 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, maintenance of temporary government stimulus programs, labor shortages and intense competition for talent, all of which are highly uncertain and cannot be predicted. Further discussion of the risks and uncertainties posed by the COVID-19 pandemic are disclosed in “Risk Factors” under Part I Item 1A of the Company’s 2020 Form 10-K.

During the ~~first~~second quarter of 2021, the Company continued to build on the momentum of the ~~fourth~~first quarter of ~~2020~~2021 and exceeded its expectations from both a sales and profit standpoint. The profitable ~~first~~second quarter results were driven by strong consumer behavior, disciplined cost and inventory management, ~~through~~and the ~~ongoing~~continued execution of the Company’s Polaris strategy, including investments in its digital platforms. Additionally, the Company’s performance during the 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.

In evaluating the performance of the ~~first~~second quarter of 2021, the Company considered its results against the ~~first~~second quarter of 2020 as well as the ~~first~~second 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:

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

The Company ~~began to see its~~saw Platinum, Gold and Silver Star Rewards customers continue to re-engage with the Macy’s brand during the ~~first~~second quarter of 2021, with the average customer spend up ~~10%~~15% compared to the ~~first~~second quarter of 2019 and ~~an 11~~a five percentage point improvement from the ~~fourth~~first quarter of ~~2020.~~2021. The Company’s Bronze Star Rewards tier, its youngest and most diverse loyalty tier, continued to grow ~~and had 3.2~~by adding approximately 2.0 million ~~active customers~~members during the quarter. During the ~~first~~second quarter of 2021, the Company acquired ~~4.6~~approximately 5 million new Macy’s customers, of which approximately ~~47%~~41% occurred through Macy’s digital channel.

The Company’s operations during the ~~first~~second quarter of 2020 were significantly impacted by the closure of its stores due to the COVID-19 pandemic. The Company’s performance during the ~~first~~second quarter of 2021 showed significant improvement over the results of the prior year period as it continued to recover from the pandemic.

Comparison of the ~~First~~Second Quarter of 2021 and the ~~First~~Second Quarter of 2020

	First Quarter of 2021						First Quarter of 2020						Second Quarter of 2021						Second Quarter of 2020
	Amount			% to Net Sales			Amount			% to Net Sales			Amount			% to Net Sales			Amount			% to Net Sales
	(dollars in millions, except per share figures)												(dollars in millions, except per share figures)
Net sales	$	4,706					$	3,017					$	5,647					$	3,559
Credit card revenues, net		159			3.4	%		131			4.3	%		197			3.5	%		168			4.7	%

Cost of sales		(2,889	)		(61.4	)%		(2,501	)		(82.9	)%		(3,353	)		(59.4	)%		(2,718	)		(76.4	)%
Selling, general and administrative expenses		(1,748	)		(37.1	)%		(1,598	)		(52.9	)%		(1,898	)		(33.6	)%		(1,398	)		(39.2	)%
Gains on sale of real estate		6			0.1	%		16			0.5	%		6			0.1	%		—			0.0	%
Impairment, restructuring and other costs		(19	)		(0.4	)%		(3,184	)		(105.5	)%		(2	)		(0.0	)%		(242	)		(6.8	)%
Operating income (loss)		215			4.6	%		(4,119	)		(136.5	)%		597			10.6	%		(631	)		(17.7	)%
Benefit plan income, net		15						9						17						12
Settlement charges														(81	)					(38	)
Losses on early retirement of debt		(11	)					0						(3	)					—
Interest expense, net		(79	)					(47	)					(80	)					(69	)
Financing costs														—						(3	)
Income (loss) before income taxes		140						(4,157	)					450						(729	)
Federal, state and local income tax benefit (expense)		(37	)					576						(105	)					298
Net income (loss)	$	103					$	(3,581	)				$	345					$	(431	)

Diluted earnings (loss) per share	$	0.32					$	(11.53	)				$	1.08					$	(1.39	)

Supplemental Financial Measure
Gross margin (a)	$	1,817			38.6	%	$	516			17.1	%	$	2,294			40.6	%	$	841			23.6	%

Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items	$	0.39					$	(2.03	)				$	1.29					$	(0.81	)

Net sales for the ~~first~~second quarter of 2021 increased ~~$1.7~~$2.1 billion, or ~~56.0%~~58.7%, compared to the ~~first~~second quarter of 2020. The Company’s ~~first~~second quarter of 2021 sales showed ~~steady~~ recovery across all three brands - Macy's, Bloomingdale's and bluemercury. Digital sales during the ~~first~~second quarter of 2021 ~~improved 34%~~decreased 6% compared to the ~~first~~second quarter of 2020 and accounted for approximately ~~37%~~32% of net sales. The Company experienced strength across nearly all of its major merchandise categories driven by continued consumer strength, growth in the Company’s digital channel and continued recovery of its stores.

Net credit card revenues were $197 million in the second quarter of 2021, an increase of $29 million, or 17.3%, compared to $168 million recognized in the second quarter of 2020. This increase was driven by improvement in the credit card portfolio's delinquency rates and bad debt and an increase in proprietary credit card sales penetration, up approximately 60 basis points, at 41.4% in the second quarter of 2021 compared to 40.8% in the second quarter of 2020.

Gross margin was 40.6% in the second quarter of 2021 compared to 23.6% in the second quarter of 2020. The increase in the gross margin rate in the second quarter of 2021 compared to the second quarter of 2020 was driven primarily by continued recovery of its stores, inventory productivity and the continued execution of the Polaris strategy, including pricing science initiatives such as location level pricing and point-of-sale promotion testing.

SG&A expense for the second quarter of 2021 increased $500 million from the second quarter of 2020 but decreased as a percentage of net sales by 560 basis points. The increase in SG&A expense dollars corresponds with higher net sales but the improvement in the SG&A expense rate reflects the expense management strategies implemented by the Company in response to the COVID-19 pandemic, execution against the Polaris strategy and a tight labor market.

During the second quarter of 2021, the Company incurred impairment, restructuring and other costs totaling $2 million, primarily related to impairment of fixed assets. During the second quarter of 2020, the Company recognized expense of $242 million primarily related to restructuring and other costs, including severance of $154 million associated with the reduction in force in response to the COVID-19 pandemic.

During the second quarter of 2021, the Company recognized a non-cash settlement charge of $81 million associated with the transfer of fully funded pension obligations for certain retirees and beneficiaries through the purchase of a group annuity contract with an insurance company.

During the second quarter of 2020, the Company recognized expense of $38 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.

Net interest expense, excluding losses on early retirement of debt and financing costs, was $80 million during the second quarter of 2021, compared to $69 million during the second quarter of 2020. The increase was primarily driven by interest paid with respect to the $1,300 million of secured notes issued in June 2020.

The Company’s effective tax rate was 23.3% for the second quarter of 2021, which is slightly higher as compared to the federal income statutory tax rate of 21% driven primarily by the impact of state and local taxes.

The Company’s effective tax rate of 40.9% on the pretax loss for the second quarter of 2020 reflects the impact of the carryback of net operating losses as permitted under the CARES Act.

Diluted earnings per share were $1.08 for the second quarter of 2021 compared to a diluted loss per share of $1.39 for the second quarter of 2020, reflecting higher net income as a result of the continued recovery from the impact of the COVID-19 pandemic.

	2021						2020
	Amount			% to Net Sales			Amount			% to Net Sales
	(dollars in millions, except per share figures)
Net sales	$	10,353					$	6,576
Credit card revenues, net		356			3.4	%		299			4.5	%

Cost of sales		(6,242	)		(60.3	)%		(5,219	)		(79.4	)%
Selling, general and administrative expenses		(3,646	)		(35.2	)%		(2,995	)		(45.4	)%
Gains on sale of real estate		12			0.1	%		16			0.2	%
Impairment, restructuring and other costs		(21	)		(0.2	)%		(3,426	)		(52.1	)%
Operating income (loss)		812			7.8	%		(4,749	)		(72.2	)%
Benefit plan income, net		32						21
Settlement charges		(81	)					(38	)
Losses on early retirement of debt		(14	)					—
Interest expense, net		(159	)					(117	)
Financing costs		—						(3	)
Income (loss) before income taxes		590						(4,886	)
Federal, state and local income tax benefit (expense)		(142	)					874
Net income (loss)	$	448					$	(4,012	)

Diluted earnings (loss) per share	$	1.41					$	(12.91	)

Supplemental Financial Measure
Gross margin (a)	$	4,111			39.7	%	$	1,357			20.6	%

Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items	$	1.68					$	(2.83	)

Net sales for 2021 increased $3.8 billion, or 57.4%, compared to 2020. The Company’s 2021 sales showed recovery across all three brands - Macy's, Bloomingdale's and bluemercury. Digital sales during 2021 improved 11% compared to 2020 and accounted for approximately 34% of net sales. The Company experienced strength across nearly all of its major merchandise categories driven by continued customer strength, the continued recovery of its stores as well as continued growth in its digital channel.

Net credit card revenues were ~~$159~~$356 million in ~~the first quarter of~~ 2021, an increase of ~~$28~~$57 million, or ~~21.0%~~19.1%, compared to ~~$131 million recognized in the first quarter of~~ 2020. This increase was driven by improvement in the credit card portfolio's delinquency rates and bad debt, partially offset by a decrease in proprietary credit card sales penetration, down approximately ~~400~~160 basis points, at ~~42.0%~~41.7% in ~~the first quarter of~~ 2021 compared to ~~46.0%~~43.3% in ~~the first quarter of~~ 2020.

Gross margin was ~~38.6%~~39.7% in ~~the first quarter of~~ 2021 compared to ~~17.1%~~20.6% in ~~the first quarter of~~ 2020. The increase in the gross margin rate in ~~the first quarter of~~ 2021 compared to ~~the first quarter of~~ 2020 was driven primarily by continued recovery of its stores, inventory productivity and the execution

of the Polaris strategy. Due to the impact of COVID-19 and store closures, the first quarter of 2020 included an approximate $300 million inventory write-down from markdowns on fashion merchandise.

SG&A ~~expenses~~expense for ~~the first quarter of~~ 2021 increased ~~$150~~$651 million from ~~the first quarter of~~ 2020 but decreased as a percentage of net sales by ~~15.8~~10.2 percentage points. The increase in SG&A expense dollars corresponds with higher net sales but 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.~~strategy and a tight labor market.

During the ~~first quarter of~~26 weeks ended July 31, 2021, the Company incurred impairment, restructuring and other costs totaling ~~$19~~$21 million, primarily related to capitalized software assets.

During the ~~first quarter~~26 weeks ended August 1, 2020, the Company recognized expense of ~~2020,~~$3,426 million primarily as a result of the COVID-19 pandemic, ~~the Company incurred~~including non-cash impairment charges totaling ~~$3,150~~$3,164 million ~~driven by recognition~~ the majority of ~~$3,070 million of goodwill impairment and $80 million of impairments on long-lived tangible and right of use assets. The first quarter of 2020 also included $34~~which consisted of:

Additionally, the Company recognized $194 million related to restructuring and other costs, ~~related to~~including severance ~~activity and other costs associated with organizational restructuring, primarily~~of $154 million associated with the ~~Polaris strategy.~~ reduction in force in response to the COVID-19 pandemic.

During the 26 weeks ended July 31, 2021, the Company recognized a non-cash settlement charge of $81 million associated with the transfer of fully funded pension obligations for certain retirees and beneficiaries through the purchase of a group annuity contract with an insurance company.

During the 26 weeks ended August 1, 2020, the Company recognized expense of $38 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.

Net interest expense, excluding losses on early retirement of debt and financing costs, was ~~$79~~$159 million during ~~the first quarter of~~ 2021, compared to ~~$47~~$117 million during ~~the first quarter of~~ 2020. The increase is primarily driven by interest paid with respect to the $1,300 million of secured notes issued in June 2020.

The Company’s effective tax rate was ~~26.3%~~24.1% for ~~the first quarter of~~ 2021, which is slightly higher as compared to the federal income statutory tax rate of 21%~~. T~~he driven primarily by the impact of state and local taxes.

The Company’s effective tax rate of17.9% on the pretax loss for 2020 reflects the impact 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 and additional income tax expense associated with the deferred tax remeasurement recognized during the first quarter of 2020. Additionally, the effective tax rate for 2020 was favorably impacted by the ~~tax shortfalls associated with the vesting and cancellation~~settlement or expiration of certain ~~stock-based compensation awards.~~tax matters.

Diluted earnings per share were ~~$0.32~~$1.41 for ~~the first quarter of~~ 2021 compared to a diluted loss per share of ~~$11.53~~$12.91 for ~~the first quarter of~~ 2020, reflecting higher net income as a result of the continued recovery from the impact of the COVID-19 ~~pandemic.~~pandemic as well as the goodwill impairment charge recognized in 2020.

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

The COVID-19 outbreak and related store closure in 2020 negatively impacted the Company’s liquidity 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. ~~While~~During 2021, the Company has ~~obtained additional financing~~seen significant improvement in its operations and combined with its strong liquidity position as of ~~May 1,~~July 31, 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,~~term. However, 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.

Net cash provided by operating activities ~~for the first quarter of~~in 2021 was ~~$494~~$965 million, compared to net cash used by operating activities of ~~$164~~$7 million for ~~the first quarter of~~ 2020. The increase in operating cash flows period over period is due to significant improvement in the Company’s EBITDA, offset ~~partly~~slightly by ~~lower~~net working capital ~~benefits.~~changes, primarily driven by changes in merchandise inventories.

Net cash used by investing activities was ~~$74~~$144 million for ~~the first quarter of~~ 2021, compared to ~~$113~~$272 million for ~~the first quarter of~~ 2020. The decrease period over period is primarily due to a reduction in capital spending compared to 2020 as a result of the Company's updated plan for capital expenditures in response to the COVID-19 pandemic and alignment with its Polaris ~~strategy.~~strategy, as well as the sale of certain asset backed investments.

Net cash used by financing activities was ~~$300~~$360 million for ~~the first quarter of~~ 2021, driven by a decrease in outstanding checks. Net cash provided by financing activities was ~~$1,148~~$950 million for ~~the first quarter of~~ 2020, driven by the issuance of ~~$1,500~~$2,780 million ~~of debt~~ related to a $1,500 million draw on the Company’s revolving credit agreement ~~partly~~and issuance of $1,300 million aggregate principal amount of 8.375% Senior Secured Notes due 2025 (the “2025 Notes”), partially offset by ~~cash dividend payments~~the repayment of the $1,500 million of credit agreement draw. 2020 also included $117 million ~~and a decrease~~of cash dividends paid, while no dividends have been paid in ~~outstanding checks.~~2021. See below for further discussion of the Company’s financing activities during ~~the first quarter of~~ 2021.

On March 17, 2021, the Company completed a tender offer in which $500 million of senior notes and 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 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”) with certain financial institutions providing for a $2,941 million revolving credit facility (the “Revolving ABL Facility”), including a swingline sub-facility and a letter of credit sub- facility. The Company may request increases in the size of the Revolving ABL Facility up to an additional aggregate principal amount of $750 million.

The ABL Credit Facility contains customary borrowing conditions including a borrowing base equal to the sum of (a) 90% 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 Company’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 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 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,~~July 31, 2021, no such events had occurred triggering such requirement.

As of ~~May 1,~~July 31, 2021, the Company had ~~$158~~$136 million of standby letters of credit outstanding under the ABL Credit Facility, which reduces the available borrowing capacity. The borrowing capacity of the ABL Credit Facility was ~~$2,444~~$2,457 million and the Company had no borrowings outstanding under the ABL Credit Facility as of ~~May~~July 31, 2021.

As of July 31, 2021, the Company’s credit rating and outlook were as described in the table below.

Subsequent to July 31, 2021, Moody’s upgraded the Company’s long-term debt rating to Ba2 and the outlook to stable, Standard & Poor’s upgraded the Company’s long-term debt rating to BB-, and Fitch upgraded the Company’s long-term debt rating to BB+ and the outlook to stable.

On August 17, 2021, subsequent to the end of the second quarter of 2021, Macy’s Inc. redeemed the entire outstanding $1.3 billion aggregate principal amount of the 2025 Notes. The redemption price was equal to 100% of the principal amount of the 2025 notes, plus accrued and unpaid interest of $19 million, plus the applicable premium due to holders of the 2025 Notes in connection with an early redemption of $138 million, plus unamortized deferred debt costs of $47 million. The total pre-tax charge of $185 million was recorded in the 13 weeks ended October 30, 2021, and the $1.3 billion of 2025 Notes were classified as short-term debt as of July 31, 2021.

On August 19, 2021, the Company announced that it is reinstating its regular quarterly dividend. The Board of Directors declared a regular quarterly dividend of $0.15 per share on the Company’s common stock, payable October 1, 2021, to shareholders of record at the close of business on September 15, 2021. Subsequent dividends will be subject to approval of the Board of Directors, which will depend on market and other conditions. On August 19, 2021, the Company also announced that its Board of Directors authorized a share repurchase program for up to $500 million of Macy’s, Inc. common stock. Repurchases may be made from time to time in the open market or through privately negotiated transactions in accordance with applicable securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, on terms determined by the Company. The share repurchase program has no expiration date.

As of ~~May 1,~~July 31, 2021, other than the financing transactions discussed above and in Note 5 to the accompanying Consolidated Financial Statements, there were no material changes to our contractual obligations and commitments outside the ordinary course of business since January 30, 2021, as reported in the Company’s 2020 Form 10-K.

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.

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.

The Company had ~~$3,243~~$3,229 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,~~July 31, 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~~$6,717 million and $6,126 million as of ~~May 1,~~July 31, 2021 and January 30, 2021, respectively, have been excluded from the Summarized Balance Sheets. Equity in earnings of non-Guarantor subsidiaries of ~~$428~~$531 million and $959 million for the ~~first quarter of~~13-weeks and 26-weeks ended July 31, 2021, ~~has~~respectively, have 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.

		May 1, 2021		January 30, 2021			July 31, 2021		January 30, 2021
		(in millions)					(in millions)
ASSETS	ASSETS					ASSETS
Current Assets		$	1,422	$	1,297		$	1,812	$	1,297
Noncurrent Assets			6,807		7,491			6,969		7,491

LIABILITIES	LIABILITIES					LIABILITIES
Current Liabilities		$	1,990	$	2,216		$	1,948	$	2,216
Noncurrent Liabilities (a)			9,906		10,145			10,404		10,145

	First Quarter of 2021			13 Weeks Ended July 31, 2021			26 Weeks Ended July 31, 2021
	(in millions)			(in millions)
Net Sales	$	157		$	228		$	385
Consignment commission income (a)		713			911			1,624
Cost of sales		(109	)		(96	)		(205	)
Operating income		(251	)
Operating loss					(244	)		(495	)
Loss before income taxes (b)		(132	)		(191	)		(323	)
Net loss		(110	)		4			(106	)

The ~~Company expects the~~ COVID-19 pandemic tomay have a material impact on ~~its~~the Company’s 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 ~~May 18,~~August 19, 2021, the Company disclosed, in connection with its ~~preliminary first~~second quarter of 2021 earnings release, its updated estimates of performance expectations for fiscal 2021, which have been revised from the performance expectations disclosed on ~~February 23,~~May 18, 2021. The revisions are due to the Company’s performance for the ~~first~~second quarter of 2021, combined with the faster than anticipated economic recovery from the COVID-19 pandemic.

The Company reports its financial results in accordance with U.S. 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, which includes adjusting for 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. 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 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 and the adjusted effective tax rate 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.

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.

	~~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~~	)%

	Comparable Sales vs. 13 Weeks Ended			Comparable Sales vs. 13 Weeks Ended
	August 1, 2020			August 3, 2019
Increase in comparable sales on an owned basis (Note 1)		61.2	%		5.8	%
Comparable sales growth impact of departments licensed to third parties (Note 2)		1.0	%		0.1	%
Increase in comparable sales on an owned plus licensed basis		62.2	%		5.9	%

	Comparable Sales vs. 26 Weeks Ended			Comparable Sales vs. 26 Weeks Ended
	August 1, 2020			August 3, 2019
Increase (decrease) in comparable sales on an owned basis (Note 1)		61.8	%		(2.4	)%
Comparable sales growth impact of departments licensed to third parties (Note 2)		1.2	%		0.3	%
Increase (decrease) in comparable sales on an owned plus licensed basis		63.0	%		(2.1	)%

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 to GAAP net income as a percent to net sales, which the 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			13 Weeks Ended July 31, 2021			13 Weeks Ended August 1, 2020			13 Weeks Ended August 3, 2019
	(millions, except percentages)									(millions, except percentages)
Net sales	$	4,706		$	3,017		$	5,504		$	5,647		$	3,559		$	5,546

Net income (loss)	$	103		$	(3,581	)	$	136		$	345		$	(431	)	$	86

Net income (loss) as a percent to net sales		2.2	%		(118.7	)%		2.5	%		6.1	%		(12.1	)%		1.6	%

Net income (loss)	$	103		$	(3,581	)	$	136		$	345		$	(431	)	$	86
Impairment, restructuring and other costs	$	19		$	3,184		$	1
Interest expense - net		79			47			47			80			69			47
Losses on early retirement of debt		11			—			—			3			—			—
Financing costs											—			3			—
Federal, state and local income tax expense (benefit)		37			(576	)		27			105			(298	)		30
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
Depreciation and amortization											220			235			237
EBITDA										$	753		$	(422	)	$	400
Impairment, restructuring and other costs											2			242			2
Settlement charges											81			38			—
Adjusted EBITDA	$	473		$	(689	)	$	447		$	836		$	(142	)	$	402
Adjusted EBITDA as a percent to net sales		10.1	%		(22.8	)%		8.1	%		14.8	%		(4.0	)%		7.2	%

	26 Weeks Ended July 31, 2021			26 Weeks Ended August 1, 2020			26 Weeks Ended August 3, 2019
	(millions, except percentages)
Net sales	$	10,353		$	6,576		$	11,050

Net income (loss)	$	448		$	(4,012	)	$	223

Net income (loss) as a percent to net sales		4.3	%		(61.0	)%		2.0	%

Net income (loss)	$	448		$	(4,012	)	$	223
Interest expense - net		159			117			94
Losses on early retirement of debt		14			—			—
Financing costs		—			3			—
Federal, state and local income tax expense (benefit)		142			(874	)		57
Depreciation and amortization		444			472			472
EBITDA	$	1,207		$	(4,294	)	$	846
Impairment, restructuring and other costs		21			3,426			3
Settlement charges		81			38			—
Adjusted EBITDA	$	1,309		$	(830	)	$	849
Adjusted EBITDA as a percent to net sales		12.6	%		(12.6	)%		7.7	%

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				Second Quarter of 2021						Second Quarter of 2020						Second Quarter of 2019
	Net Income			Diluted Earnings Per Share			Net Income (Loss)			Diluted Earnings (Loss) Per Share			Net Income		Diluted Earnings Per Share		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)																(millions, except per share figures)
As reported	$	103		$	0.32		$	(3,581	)	$	(11.53	)	$	136	$	0.44	$	345		$	1.08		$	(431	)	$	(1.39	)	$	86	$	0.28
Impairment, restructuring and other costs		19			0.06			3,184			10.25			1		-		2			0.01			242			0.78			2		—
Settlement charges																		81			0.25			38			0.12
Losses on early retirement of debt		11			0.03			-			-			-		-		3			0.01			—			—			—		—
Financing costs																		—			—			3			0.01			—		—
Income tax impact of certain items noted above		(7	)		(0.02	)		(233	)		(0.75	)		-		-		(20	)		(0.06	)		(103	)		(0.33	)		—		—
As adjusted to exclude certain items above	$	126		$	0.39		$	(630	)	$	(2.03	)	$	137	$	0.44	$	411		$	1.29		$	(251	)	$	(0.81	)	$	88	$	0.28

	2021						2020						2019
	Net Income			Diluted Earnings (Loss) Per Share			Net Income (Loss)			Diluted Earnings Per Share			Net Income			Diluted Earnings Per Share
	(millions, except per share figures)
As reported	$	448		$	1.41		$	(4,012	)	$	(12.91	)	$	223		$	0.71
Impairment, restructuring and other costs		21			0.07			3,426			11.02			3			0.01
Settlement charges		81			0.25			38			0.12			—			—
Losses on early retirement of debt		14			0.04			—			—			—			—
Financing costs		—			—			3			0			—			—
Income tax impact of certain items noted above		(27	)		(0.09	)		(336	)		(1.07	)		(1	)		—
As adjusted to exclude certain items above	$	537		$	1.68		$	(881	)	$	(2.83	)	$	225		$	0.72

The Company does not expect that any recently issued accounting pronouncements will have a material effect on its consolidated financial statements.

There have been no material changes to the Company’s market risk as described in the Company's 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 2020 10-K.

The Company's Chief Executive Officer and Chief Financial Officer have carried out, as of ~~May 1,~~July 31, 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) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of ~~May 1,~~July 31, 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.

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 and in July 2021, the District Attorneys updated their settlement demand. Settlement discussions are ongoing. It is possible that the Company will pay penalties between $1,000,000 and $2,000,000 in connection with this matter and have adjusted our reserve against potential loss to reflect the most recent 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.

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 2020 Form ~~10-K.~~10-K and Part II, Item 1A. “Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended May 1, 2021.

The risk factor “~~If cash flows from~~We depend on our ~~private label credit card decrease, our financial~~ability to attract, train, develop and ~~operational results may be negatively impacted”~~retain quality employees” is deleted and replaced as follows:

~~If cash flows from~~We depend on our ~~private label credit card decrease,~~ability to attract, train, develop and retain quality employees

Our business is dependent upon attracting, training, developing and retaining quality employees. Macy's, Inc. has a large number of employees, many of whom are in entry level or part-time positions with historically high rates of turnover. Our ability to meet labor needs while controlling costs associated with hiring and training new employees is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation and changing demographics. Low unemployment, labor shortages, an intense competition for talent and a competitive wage environment have impacted our ~~financial~~ability to attract and ~~operational results may be negatively impacted.~~recruit talent. In addition, the continued uncertainties surrounding COVID-19, including changing national and local regulations related to protective measures to mitigate its spread, could cause the Company to incur additional unexpected labor costs and other expenses or impact the Company’s ability to attract, recruit or retain employees needed for its operations.

~~We previously sold most of our credit accounts~~The Company operates in a highly competitive and ~~related receivables~~challenging business environment and is highly dependent upon management personnel 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 balancesdevelop and ~~the ability of credit card holders to pay their balances. These conditions could~~effectively execute successful business strategies and tactics. Restructurings and organizational changes can have near-term impacts on knowledge transfer and result in the ~~Company receiving lower payments under the credit card program.~~

~~Under the terms~~loss of ~~the credit card program, Citibank has the right~~key subject matter experts and leaders. Any circumstances that adversely impact our ability 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 theattract, train, develop and retain quality employees could negatively affect our business and results of 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 Benchmark Year. On June 4, 2021, we received a written notice of termination of the Program Agreement from Citibank. We plan 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, we have six months to exercise, or not exercise, an option to purchase the assets of the credit card program, 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 credit card program agreement. Both parties are required to continue to meet their respective obligations and provide support pursuant to the 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 on terms less favorable to us than the current credit card program. operations.

Credit card operations are subject to many federal and state laws that may impose certain requirements and limitations on credit card providers. Citibank and our subsidiary bank, FDS Bank, may be required to comply with regulations that may negatively impact the operation of our private label credit card. This negative impact may affect our revenue streams derived from the sale of such credit card accounts and our financial results.

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.

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:

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.

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.

Delaware		13-3324058
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

Class		Outstanding at ~~May 29,~~August 28, 2021
Common Stock, $.01 par value per share		~~311,868,429~~309,704,845 shares

	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

	July 31, 2021						August 1, 2020
	Notional Amount		Carrying Amount		Fair Value		Notional Amount		Carrying Amount		Fair Value
	(millions)
Long-term debt	$	3,296	$	3,295	$	3,298	$	4,903	$	4,851	$	4,050

	Moody's	Standard & Poor's	Fitch
Long-term debt	Ba3	B+	BB
Outlook	Negative	Positive	Negative

4.1		Fourth Supplemental Indenture to 1991 Indenture dated as of ~~March 17,~~June 30, 2021 by and among Macy’s Retail Holdings, LLC, ~~as issuer,~~ Macy’s, Inc. and The Bank of New York Mellon Trust Company, N.A., 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)Trustee

10.1		~~2021-2023 Performance-Based Restricted Stock Unit Terms and Conditions under the 2018~~Macy’s, Inc. 2021 Equity and Incentive Compensation PlanPlan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on April 6, 2021)

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 ~~May 1,~~July 31, 2021, filed on ~~June 7,~~September 3, 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.~~

	MACY’S, INC.

	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

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

Emerging Growth Company