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

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

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

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

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


Class		Outstanding at ~~August~~May 29, ~~2020~~2021
Common Stock, $.01 par value per share	~~310,245,594~~ 311,868,429 shares

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MACY’S, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(millions, except per share figures)

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

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

13 Weeks Ended 26 Weeks Ended
August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019
Net sales $ 3,559 $ 5,546 $ 6,576 $ 11,050
Credit card revenues, net 168 176 299 348
Cost of sales (2,718) (3,395) (5,219) (6,798)
Selling, general and administrative expenses (1,398) (2,177) (2,995) (4,287)
Gains on sale of real estate 0 7 16 49
Impairment, restructuring and other costs (242) (2) (3,426) (3)
Operating income (loss) (631) 155 (4,749) 359
Benefit plan income, net 12 8 21 15
Settlement charges (38) 0 (38) 0
Interest expense (70) (52) (120) (106)
Financing costs (3) 0 (3) 0
Interest income 1 5 3 12
Income (loss) before income taxes (729) 116 (4,886) 280
Federal, state and local income tax benefit (expense) 298 (30) 874 (57)
Net income (loss) $ (431) $ 86 (4,012) 223
Basic earnings (loss) per share $ (1.39) $ 0.28 $ (12.91) $ 0.72
Diluted earnings (loss) per share $ (1.39) $ 0.28 $ (12.91) $ 0.71

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

MACY’S, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(millions)

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

~~(Unaudited)~~

~~(millions)~~

13 Weeks Ended 26 Weeks Ended
August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019
Net income (loss) $ (431) $ 86 $ (4,012) $ 223
Other comprehensive income (loss):
Actuarial gain on post employment and postretirement benefit plans, before tax 19 0 19 0
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 11 7 23 15
Settlement charges, before tax 38 0 38 0
Tax effect related to items of other comprehensive income (17) (2) (20) (4)
Total other comprehensive income, net of tax effect 51 5 60 11
Comprehensive income (loss) $ (380) $ 91 $ (3,952) $ 234

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

MACY’S, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(millions)

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

~~(Unaudited)~~

~~(millions)~~

August 1, 2020 February 1, 2020 August 3, 2019
ASSETS
Current Assets:
Cash and cash equivalents $ 1,395 $ 685 $ 674
Receivables 184 409 240
Merchandise inventories 3,582 5,188 5,029
Prepaid expenses and other current assets 470 528 603
Total Current Assets 5,631 6,810 6,546
Property and Equipment - net of accumulated depreciation and
amortization of $4,642, $4,392 and $4,748 6,279 6,633 6,483
Right of Use Assets 3,035 2,668 2,636
Goodwill 828 3,908 3,908
Other Intangible Assets – net 438 439 440
Other Assets 1,403 714 728
Total Assets $ 17,614 $ 21,172 $ 20,741
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt $ 539 $ 539 $ 6
Merchandise accounts payable 1,409 1,682 1,674
Accounts payable and accrued liabilities 2,906 3,448 2,739
Income taxes 0 81 20
Total Current Liabilities 4,854 5,750 4,439
Long-Term Debt 4,851 3,621 4,680
Long-Term Lease Liabilities 3,269 2,918 2,836
Deferred Income Taxes 921 1,169 1,206
Other Liabilities 1,395 1,337 1,265
Shareholders' Equity 2,324 6,377 6,315
Total Liabilities and Shareholders’ Equity $ 17,614 $ 21,172 $ 20,741

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

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

(millions)

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

MACY’S, INC.

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

(Unaudited)

(millions)

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

~~(millions~~)

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

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

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

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

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(millions)

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

~~(Unaudited)~~

~~(millions)~~

26 Weeks Ended
August 1, 2020 August 3, 2019
Cash flows from operating activities:
Net income (loss) $ (4,012) $ 223
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Impairment, restructuring and other costs 3,426 3
Settlement charges 38 0
Depreciation and amortization 472 472
Stock-based compensation expense 13 28
Gains on sale of real estate (16) (49)
Benefit plans 23 15
Amortization of financing costs and premium on acquired debt 4 1
Deferred income taxes (265) 17
Changes in assets and liabilities:
Decrease in receivables 222 160
Decrease in merchandise inventories 1,598 234
Decrease in prepaid expenses and other current assets 31 19
Increase (decrease) in merchandise accounts payable (188) 55
Decrease in accounts payable and accrued liabilities
(605) (619)
Decrease in current income taxes (695) (149)
Change in other assets and liabilities (53) (60)
Net cash provided (used) by operating activities (7) 350
Cash flows from investing activities:
Purchase of property and equipment (228) (378)
Capitalized software (61) (123)
Disposition of property and equipment 31 59
Other, net (14) (12)
Net cash used by investing activities (272) (454)
Cash flows from financing activities:
Debt issued 2,780 0
Debt issuance costs (98) (3)
Debt repaid (1,504) (39)
Dividends paid (117) (233)
Decrease in outstanding checks (111) (128)
Issuance of common stock 0 6
Net cash provided (used) by financing activities 950 (397)
Net increase (decrease) in cash, cash equivalents and restricted cash 671 (501)
Cash, cash equivalents and restricted cash beginning of period 731 1,248
Cash, cash equivalents and restricted cash end of period $ 1,402 $ 747
Supplemental cash flow information:
Interest paid $ 104 $ 107
Interest received 4 12
Income taxes paid (net of refunds received) 86 189

Note: Restricted cash of $7$76 million and ~~$73~~$79 million have been included with cash and cash equivalents for the 2613 weeks ended ~~August~~May 1, 2021 and May 2, 2020, ~~and August 3, 2019,~~ respectively.

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

~~MACY’S,~~

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.
Organization and Summary of Significant Accounting Policies

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

Nature of Operations

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

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

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

Use of Estimates

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

The Consolidated Financial Statements for the 13 ~~and 26~~ weeks ended ~~August~~May 1, ~~2020~~2021 and ~~August 3, 2019,~~May 2, 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.

Seasonality

Because of the seasonal nature of the retail business, the results of operations for the 13 ~~and 26~~ weeks ended ~~August~~May 1, ~~2020~~2021 and ~~August 3, 2019~~May 2, 2020 (which do not include the Christmas season) are not necessarily indicative of such results for the full fiscal year.

Comprehensive Income (Loss)

Total comprehensive income (loss) represents the change in equity during a period from sources other than transactions with shareholders and, as such, includes net income (loss). For the Company, the only other components of total comprehensive income (loss) for the 13 ~~and 26~~ weeks ended ~~August~~May 1, ~~2020~~2021 and ~~August 3, 2019~~May 2, 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 8,6, "Benefit Plans," for further information.

COVID-19 Pandemic

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

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

~~2. Impact of COVID-19~~

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which continues to spread throughout the United States. The COVID-19 pandemic has had a negative impact on the Company's fiscal 2020 operations and financial results to date, and the full financial impact of the pandemic cannot be reasonably estimated at this time due to uncertainty as to the severity and duration of the pandemic. The following summarizes the actions taken and impacts from the COVID-19 pandemic during the 13 and 26 weeks ended August 1, 2020.

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

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

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

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

During the 13 and 26 weeks ended August 1, 2020, the Company deferred rent payments for a significant number of its stores. COVID-19 pandemic-related rent deferrals are included in accounts payable and accrued liabilities. The Company continues to recognize expense during the deferral periods based on the contractual terms of the lease agreements.

•During the 13 and 26 weeks ended August 1, 2020, the Company incurred non-cash impairment charges including those related to long-lived tangible and right of use assets to adjust the carrying value of certain store locations to their estimated fair value. The Company also incurred a non-cash impairment charge on goodwill as a result of the sustained decline in the Company's market capitalization and decline in projected cash flows primarily as a result of the COVID-19 pandemic. See Note 3, "Impairment, Restructuring and Other Costs" and Note 4, "Goodwill and Indefinite Lived Intangible Assets," respectively, for further discussion of these charges.

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

~~The impacts of~~ Based on the ~~CARES Act have been included in the estimation of the Company's annual effective tax rate and the~~Company’s 2020 fiscal results, a $520 million income tax ~~benefit~~receivable has been recognized ~~during the 13 and 26 weeks ended August~~as of May 1, ~~2020. Specifically, the Company has estimated an annual~~2021, associated with this net operating loss ~~that will be available for~~ carryback ~~at a 35% federal~~benefit. This income tax ~~rate rather than~~

~~MACY'S, INC.~~

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

~~(Unaudited)~~

the current 21% federal income tax rate. During the 26 weeks ended August 1, 2020, the resultant benefit of this rate differential was offset by the impact of the non-tax deductible component of the goodwill impairment charge and additional income tax expense associated with deferred tax remeasurement duringreceivable is estimated to be received in the first quarter of 2020. The net impact of these items is the primary driver of the effective tax rate decrease when compared to the same period in 2019. As of August 1, 2020, the Company recognized a $599 million income tax receivable, which2022 and is included within ~~Other Assets~~prepaid expenses and other current assets on the Company’s Consolidated Balance ~~Sheets.~~Sheet.

2.	Impairment, Restructuring and Other Costs

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

In addition, during the 13 and 26 weeks ended August 1, 2020, the Company recognized $18 million and $60 million, respectively, in employee retention payroll tax credits and elected to defer payment of the employer portion of social security taxes.

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

13 Weeks Ended 26 Weeks Ended
August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019
(millions)
Impairments $ 15 $ 1 $ 3,164 $ 1
Restructuring 169 0 194 0
Other 58 1 68 2
Total $ 242 $ 2 $ 3,426 $ 3

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

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

•

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

•

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

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

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

~~The Company also recognized~~ ~~$154 million of expense for severance during the~~ ~~13 and 26 weeks ended August 1, 2020 associated with the reduction in force in response to the COVID-19 pandemic. Nearly half of this severance was paid during the second quarter of 2020.~~

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

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

	Severance and other benefits			Professional fees and other related charges			Total
	(millions)
Balance at January 30, 2021	$	14		$	2		$	16
Additions charged to expense		5			0			5
Cash payments		(16	)		(2	)		(18	)
Balance at May 1, 2021	$	3		$	0		$	3

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

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

3.
Earnings (Loss) Per Share

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

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

As a result of the sustained decline in the Company's market capitalization and changes in the Company's long-term projections driven largely by the impacts of the COVID-19 pandemic, the Company determined a triggering event had occurred that required an interim impairment assessment for all of its reporting units and indefinite lived intangible assets during the first quarter of 2020. The Company determined the fair value of each of its reporting units using a market approach or a combination of a market approach and income approach, as appropriate. Relative to the prior assessment, as part of this current assessment, it was determined that an increase in the discount rate applied in the valuation was required to align with market-based assumptions and company-specific risk. This higher discount rate, in conjunction with revised long-term projections, resulted in lower fair values of the reporting units. As a result the Company recognized $2,982 million and $98 million of good~~will impairment for the Macy's and bluemercury reporting units, respectively, during the 26 weeks ended August 1, 2020, which included an additional~~ ~~$10 million~~ ~~impairment adjustment to properly reflect certain income tax considerations during the 13 weeks ended August 1, 2020.~~

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

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

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

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

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

13 Weeks Ended
August 1, 2020 August 3, 2019
Net
Loss Shares Net
Income Shares
(millions, except per share data)
Net income (loss) $ (431) 310.3 $ 86 308.9
Shares to be issued under deferred compensation and other plans 0.9 0.9
$ (431) 311.2 $ 86 309.8
Basic earnings (loss) per share $ (1.39) $ 0.28
Effect of dilutive securities:
Stock options and restricted stock units 0 1.8
$ (431) 311.2 $ 86 311.6
Diluted earnings (loss) per share $ (1.39) $ 0.28

~~MACY'S, INC.~~

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

~~(Unaudited)~~

26 Weeks Ended
August 1, 2020 August 3, 2019
Net
Loss Shares Net
Income Shares
(millions, except per share data)
Net income (loss) $ (4,012) 310.0 $ 223 308.6
Shares to be issued under deferred compensation and other plans 0.9 0.9
$ (4,012) 310.9 $ 223 309.5
Basic earnings (loss) per share $ (12.91) $ 0.72
Effect of dilutive securities:
Stock options and restricted stock units 0 2.0
$ (4,012) 310.9 $ 223 311.5
Diluted earnings (loss) per share $ (12.91) $ 0.71

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

For the 13 ~~and 26~~ weeks ended ~~August 1,~~May 2, 2020, as a result of the net loss for the quarter, ~~and year to date period,~~ all options and restricted stock units have been excluded from the calculation of diluted earnings per share and, therefore, there was no difference in the weighted average number of common shares for basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive. Stock options to purchase ~~16.7~~17.3 million shares of common stock and restricted stock units relating to ~~10.1~~3.4 million shares of common stock outstanding at ~~August 1,~~May 2, 2020 were excluded from the computation of diluted earnings per share.

Revenue

In addition to the stock options and restricted stock units reflected in the foregoing tables, stock options to purchase 18.9 million shares of common stock and restricted stock units relating to 1.3 million shares of common stock were outstanding at August 3, 2019, but were not included in the computation of diluted earnings per share because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.

~~6. Revenue~~

Net sales

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

Retail Sales

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

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~For the 13 and 26 weeks ended August 1, 2020, Macy's~~Macy’s accounted for ~~89% and 88%, respectively,~~87% of the ~~Company's~~Company’s net ~~sales. For~~sales for each of the 13 ~~and 26~~ weeks ended ~~August 3, 2019, Macy's~~May 1, 2021 and May 2, 2020. In addition, digital sales accounted for ~~88%~~approximately 37% and 43% of the ~~Company's~~Company’s net ~~sales.~~ sales for the 13 weeks ended May 1, 2021 and May 2, 2020, respectively.

Disaggregation of the Company's net sales by family of business for the 13 ~~and 26~~ weeks ended ~~August~~May 1, ~~2020~~2021 and ~~August 3, 2019~~May 2, 2020 were as follows:

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

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

13 Weeks Ended 26 Weeks Ended
Net sales by family of business August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019
(millions)
Women's Accessories, Intimate Apparel, Shoes, Cosmetics and Fragrances $ 1,381 $ 2,039 $ 2,596 $ 4,191
Women's Apparel 626 1,269 1,205 2,582
Men's and Kids' 727 1,266 1,299 2,468
Home/Other (a)
825 972 1,476 1,809
Total $ 3,559 $ 5,546 $ 6,576 $ 11,050

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

Merchandise Returns

The Company estimates merchandise returns using historical data and recognizes an allowance that reduces net sales and cost of sales. The liability for merchandise returns is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was ~~$140~~$225 million, ~~$269~~$159 million and ~~$227~~$184 million as of ~~August~~May 1, ~~2020, February 1, 2020~~2021, January 30, 2021 and ~~August 3, 2019,~~May 2, 2020, respectively. Included in prepaid expenses and other current assets is an asset totaling ~~$114~~$136 million, ~~$147~~$103 million and ~~$154~~$130 million as of ~~August~~May 1, ~~2020, February 1, 2020~~2021, January 30, 2021 and ~~August 3, 2019,~~May 2, 2020, respectively, for the recoverable cost of merchandise estimated to be returned by customers.

Gift Cards and Customer Loyalty Programs

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

The Company maintains customer loyalty programs in which customers earn points based on their purchases. Under the Macy’s ~~brand,~~Star Rewards loyalty program, points are earned based on customers’ spending on Macy’s private label and co-branded credit cards as well as ~~third-party credit~~non-proprietary cards. ~~Under the~~The Company’s Bloomingdale’s ~~brand, the Company offers a tender-neutral~~Loyallist and bluemercury BlueRewards programs provide tender neutral points-based ~~program.~~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 ~~$675~~$580 million, ~~$839~~$616 million and ~~$654~~$732 million as of ~~August~~May 1, 2021, January 30, 2021 and May 2, 2020, ~~February 1, 2020 and August 3, 2019,~~ respectively.

Credit Card Revenues, net

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

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

~~7. Financing Activities~~

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

Program Agreement. The Company and ~~agreed~~Citibank are required to ~~by the lenders. On March 19, 2020, due~~continue to the impacts of the COVID-19 pandemic, the Company elected to draw on the full $1,500 million available under the agreement. As discussed further below, during the second quarter of 2020, this amount was repaidmeet their respective obligations and ~~the credit agreement amended.~~

~~2020 Financing Activities~~

~~Secured Debt Issuance~~

5.	Financing Activities

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

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

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

~~Entry into Asset-Based Credit Facility~~

tender offer discussed below.

On ~~June 8, 2020, Macy’s Inventory Funding LLC (the “ABL Borrower”), an indirect wholly owned subsidiary of~~March 17, 2021, the Company completed a tender offer in which $500 million of senior notes and ~~its parent, Mac~~debentures were tendered for early settlement and purchased by MRH. ~~y’s Inventory Holdings LLC (the “ABL Parent”), entered into an asset-based credit agreement (the “ABL Credit Facility”)~~The total cash cost for the tender offer was $17 million with ~~Bank~~the remainder funded through the net proceeds from the private offering discussed above. The Company recognized $11 million of ~~America, N.A., as administrative agent and collateral agent, and the lenders party thereto. The ABL Credit Facility provides the ABL Borrower with (i) a~~ ~~$2,926 million r~~evolving credit facility (the “Revolving ABL Facility”), including a swingline sub-facility and a letter of credit sub-facility, and (ii) a bridge revolving credit facility of up to $300 million (the “Bridge Facility”). The ABL Borrower may request increases in the size of the Revolving ABL Facility up to an additional aggregate principal amount of $750 million.

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

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

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

2021.

6.
Benefit Plans

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

~~Amendment to Existing Credit Agreement~~

On June 8, 2020, the Company substantially reduced the credit commitments of its existing $1,500 million unsecured credit agreement, which now provides the Company with unsecured revolving credit of up to $25 million. The unsecured revolving credit facility contains covenants that provide for, among other things, limitations on fundamental changes, use of proceeds, and maintenance of property, as well as customary representations and warranties and events of default.

~~Exchange Offers and Consent Solicitations for Certain Outstanding Debt Securities of Macy’s Retail Holdings, LLC~~

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

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

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

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

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

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

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

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

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Debt Repayments~~

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

26 Weeks Ended
August 1, 2020 August 3, 2019
(millions)
Revolving credit agreement $ 1,500 $ 0
8.5% Senior debentures due 2019 0 36
9.5% amortizing debentures due 2021 2 2
9.75% amortizing debentures due 2021 1 1
$ 1,503 $ 39

~~8. Benefit Plans~~

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

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

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

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

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

Total Retirement Expense	$	8		$	5

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

7.
Fair Value Measurements

13 Weeks Ended 26 Weeks Ended
August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019
(millions) (millions)
401(k) Qualified Defined Contribution Plan $ 19 $ 24 $ 32 $ 49
Non-Qualified Defined Contribution Plan $ 0 $ 1 $ 0 $ 2
Pension Plan
Service cost $ 2 $ 1 $ 3 $ 2
Interest cost 18 26 38 52
Expected return on assets (46) (48) (92) (96)
Recognition of net actuarial loss 10 7 20 14
Amortization of prior service credit 0 0 0 0
$ (16) $ (14) $ (31) $ (28)
Supplementary Retirement Plan
Service cost $ 0 $ 0 $ 0 $ 0
Interest cost 4 6 8 12
Recognition of net actuarial loss 3 2 6 4
Amortization of prior service cost 0 0 0 0
$ 7 $ 8 $ 14 $ 16
Total Retirement Expense $ 10 $ 19 $ 15 $ 39
Postretirement Obligations
Service cost $ 0 $ 0 $ 0 $ 0
Interest cost 1 1 2 2
Recognition of net actuarial gain (2) (2) (3) (3)
Amortization of prior service credit 0 0 0 0
$ (1) $ (1) $ (1) $ (1)

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 are the result of an increase in lump sum distributions associated with retiree distribution elections and restructuring activity.

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~9. Fair Value Measurements~~

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

Level 1: Quoted prices in active markets for identical assets

Level 2: Significant observable inputs for the assets

Level 3: Significant unobservable inputs for the assets

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

August 1, 2020 August 3, 2019
Fair Value Measurements Fair Value Measurements
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
(millions)
Marketable equity and debt securities $ 143 $ 32 $ 111 $ 0 $ 112 $ 31 $ 81 $ 0

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

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

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

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

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

August 1, 2020 August 3, 2019
Notional
Amount Carrying
Amount Fair
Value Notional
Amount Carrying
Amount Fair
Value
(millions)
Long-term debt $ 4,903 $ 4,851 $ 4,050 $ 4,667 $ 4,680 $ 4,742

MACY'S, INC.

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

~~(Unaudited)~~

~~10. Condensed Consolidating Financial Information~~

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

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

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

Condensed Consolidating Statements of Comprehensive Income for the 13 and 26 weeks ended August 1, 2020 and August 3, 2019, Condensed Consolidating Balance Sheets as of August 1, 2020, August 3, 2019 and February 1, 2020, and the related Condensed Consolidating Statements of Cash Flows for the 26 weeks ended August 1, 2020 and August 3, 2019 are presented on the following pages.

~~MACY'S, INC.~~

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

~~(Unaudited)~~

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

~~For the 13 Weeks Ended August 1, 2020~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
Net sales $ 0 $ 166 $ 3,427 $ (34) $ 3,559
Consignment commission income 0 219 0 (219) 0
Credit card revenues (expense), net 0 (1) 169 0 168
Cost of sales 0 14 (2,766) 34 (2,718)
Selling, general and administrative expenses 0 (463) (1,154) 219 (1,398)
Restructuring, impairment and other costs 0 (85) (157) 0 (242)
Operating loss 0 (150) (481) 0 (631)
Benefit plan income, net 0 5 7 0 12
Settlement charges 0 (13) (25) 0 (38)
Interest (expense) income, net:
External (17) (48) (4) 0 (69)
Intercompany (21) 10 11 0 0
Financing costs 0 (3) 0 0 (3)
Equity in loss of subsidiaries (406) (473) 0 879 0
Loss before income taxes (444) (672) (492) 879 (729)
Federal, state and local income
tax benefit 13 75 210 0 298
Net loss $ (431) $ (597) $ (282) $ 879 $ (431)
Comprehensive loss $ (380) $ (551) $ (249) $ 800 $ (380)

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Statement of Comprehensive Income~~

~~For the 13 Weeks Ended August 3, 2019~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
Net sales $ 0 $ 2,219 $ 4,416 $ (1,089) $ 5,546
Credit card revenues, net 0 (2) 178 0 176
Cost of sales 0 (1,341) (3,143) 1,089 (3,395)
Selling, general and administrative expenses 0 (872) (1,305) 0 (2,177)
Gains on sale of real estate 0 0 7 0 7
Impairment and other costs 0 0 (2) 0 (2)
Operating income 0 4 151 0 155
Benefit plan income, net 0 3 5 0 8
Interest (expense) income, net:
External 4 (52) 1 0 (47)
Intercompany 0 (18) 18 0 0
Equity in earnings (loss) of subsidiaries 82 (108) 0 26 0
Income (loss) before income taxes 86 (171) 175 26 116
Federal, state and local income
tax benefit (expense) 0 7 (37) 0 (30)
Net income (loss) $ 86 $ (164) $ 138 $ 26 $ 86
Comprehensive income (loss) $ 91 $ (159) $ 142 $ 17 $ 91

~~MACY'S, INC.~~

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

~~(Unaudited)~~

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

~~For the 26 Weeks Ended August 1, 2020~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
Net sales $ 0 $ 1,033 $ 6,382 $ (839) $ 6,576
Consignment commission income 0 219 0 (219) 0
Credit card revenues (expense), net 0 (6) 305 0 299
Cost of sales 0 (782) (5,276) 839 (5,219)
Selling, general and administrative expenses 0 (1,025) (2,189) 219 (2,995)
Gains on sale of real estate 0 0 16 0 16
Impairment, restructuring and other costs 0 (2,807) (619) 0 (3,426)
Operating loss 0 (3,368) (1,381) 0 (4,749)
Benefit plan income, net 0 8 13 0 21
Settlement charges 0 (13) (25) 0 (38)
Interest (expense) income, net:
External (16) (97) (4) 0 (117)
Intercompany (21) (8) 29 0 0
Financing costs 0 (3) 0 0 (3)
Equity in loss of subsidiaries (3,988) (1,268) 0 5,256 0
Loss before income taxes (4,025) (4,749) (1,368) 5,256 (4,886)
Federal, state and local income
tax benefit 13 502 359 0 874
Net loss $ (4,012) $ (4,247) $ (1,009) $ 5,256 $ (4,012)
Comprehensive loss $ (3,952) $ (4,192) $ (970) $ 5,162 $ (3,952)

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Statement of Comprehensive Income~~

~~For the 26 Weeks Ended August 3, 2019~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
Net sales $ 0 $ 4,373 $ 9,184 $ (2,507) $ 11,050
Credit card revenues (expense), net 0 (5) 353 0 348
Cost of sales 0 (2,682) (6,623) 2,507 (6,798)
Selling, general and administrative expenses 1 (1,674) (2,614) 0 (4,287)
Gains on sale of real estate 0 24 25 0 49
Impairment, restructuring and other costs 0 0 (3) 0 (3)
Operating income 1 36 322 0 359
Benefit plan income, net 0 6 9 0 15
Interest (expense) income, net:
External 9 (105) 2 0 (94)
Intercompany 0 (37) 37 0 0
Equity in earnings (loss) of subsidiaries 214 (138) 0 (76) 0
Income (loss) before income taxes 224 (238) 370 (76) 280
Federal, state and local income
tax benefit (expense) (1) 31 (87) 0 (57)
Net income (loss) $ 223 $ (207) $ 283 $ (76) $ 223
Comprehensive income (loss) $ 234 $ (197) $ 291 $ (94) $ 234

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Balance Sheet~~

~~As of August 1, 2020~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
ASSETS:
Current Assets:
Cash and cash equivalents $ 737 $ 35 $ 623 $ 0 $ 1,395
Receivables 0 40 144 0 184
Merchandise inventories 0 187 3,395 0 3,582
Prepaid expenses and other current assets 15 90 376 (11) 470
Total Current Assets 752 352 4,538 (11) 5,631
Property and Equipment – net 0 2,463 3,816 0 6,279
Right of Use Assets 0 990 2,401 (356) 3,035
Goodwill 0 661 167 0 828
Other Intangible Assets – net 0 4 434 0 438
Other Assets 641 77 685 0 1,403
Deferred Income Taxes 12 0 0 (12) 0
Intercompany Receivable 314 0 2,314 (2,628) 0
Investment in Subsidiaries 1,982 3,907 0 (5,889) 0
Total Assets $ 3,701 $ 8,454 $ 14,355 $ (8,896) $ 17,614
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt $ 0 $ 539 $ 0 $ 0 $ 539
Merchandise accounts payable 0 223 1,186 0 1,409
Accounts payable and accrued liabilities 111 815 2,048 (68) 2,906
Total Current Liabilities 111 1,577 3,234 (68) 4,854
Long-Term Debt 1,240 3,611 0 0 4,851
Long-Term Lease Liabilities 0 882 2,686 (299) 3,269
Intercompany Payable 0 2,628 0 (2,628) 0
Deferred Income Taxes 0 370 563 (12) 921
Other Liabilities 26 426 943 0 1,395
Shareholders' Equity (Deficit) 2,324 (1,040) 6,929 (5,889) 2,324
Total Liabilities and Shareholders' Equity $ 3,701 $ 8,454 $ 14,355 $ (8,896) $ 17,614

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Balance Sheet~~

~~As of August 3, 2019~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
ASSETS:
Current Assets:
Cash and cash equivalents $ 320 $ 100 $ 254 $ 0 $ 674
Receivables 1 44 195 0 240
Merchandise inventories 0 2,138 2,891 0 5,029
Prepaid expenses and other current assets 0 139 464 0 603
Income taxes 39 0 0 (39) 0
Total Current Assets 360 2,421 3,804 (39) 6,546
Property and Equipment – net 0 3,162 3,321 0 6,483
Right of Use Assets 0 660 1,976 0 2,636
Goodwill 0 3,326 582 0 3,908
Other Intangible Assets – net 0 4 436 0 440
Other Assets 0 39 689 0 728
Deferred Income Taxes 9 0 0 (9) 0
Intercompany Receivable 2,564 0 643 (3,207) 0
Investment in Subsidiaries 3,484 2,957 0 (6,441) 0
Total Assets $ 6,417 $ 12,569 $ 11,451 $ (9,696) $ 20,741
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt $ 0 $ 6 $ 0 $ 0 $ 6
Merchandise accounts payable 0 717 957 0 1,674
Accounts payable and accrued liabilities 74 754 1,911 0 2,739
Income taxes 0 47 12 (39) 20
Total Current Liabilities 74 1,524 2,880 (39) 4,439
Long-Term Debt 0 4,680 0 0 4,680
Long-Term Lease Liabilities 0 594 2,242 0 2,836
Intercompany Payable 0 3,207 0 (3,207) 0
Deferred Income Taxes 0 643 572 (9) 1,206
Other Liabilities 28 364 873 0 1,265
Shareholders' Equity 6,315 1,557 4,884 (6,441) 6,315
Total Liabilities and Shareholders' Equity $ 6,417 $ 12,569 $ 11,451 $ (9,696) $ 20,741

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Balance Sheet~~

~~As of February 1, 2020~~

~~(millions)~~

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Statement of Cash Flows~~

~~For the 26 Weeks Ended August 1, 2020~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
Cash flows from operating activities:
Net loss $ (4,012) $ (4,247) $ (1,009) $ 5,256 $ (4,012)
Impairment, restructuring and other costs 0 2,807 619 0 3,426
Settlement charges 0 13 25 0 38
Equity in loss of subsidiaries 3,988 1,268 0 (5,256) 0
Dividends received from subsidiaries 427 300 0 (727) 0
Depreciation and amortization 0 148 324 0 472
Gains on sale of real estate 0 0 (16) 0 (16)
Changes in assets, liabilities and other items not separately identified (647) 1,046 (314) 0 85
Net cash provided (used) by operating activities (244) 1,335 (371) (727) (7)
Cash flows from investing activities:
Purchase of property and equipment and capitalized software, net of dispositions 0 (48) (210) 0 (258)
Other, net 0 0 (14) 0 (14)
Net cash used by investing activities 0 (48) (224) 0 (272)
Cash flows from financing activities:
Debt issued, net of debt issuance costs 1,240 1,493 (51) 0 2,682
Debt repaid 0 (1,503) (1) 0 (1,504)
Dividends paid (117) 0 (727) 727 (117)
Intercompany activity, net (526) (1,256) 1,782 0 0
Other, net (26) (50) (35) 0 (111)
Net cash provided (used) by financing activities 571 (1,316) 968 727 950
Net increase (decrease) in cash, cash equivalents and restricted cash 327 (29) 373 0 671
Cash, cash equivalents and restricted cash at beginning of period 413 64 254 0 731
Cash, cash equivalents and restricted cash at end of period $ 740 $ 35 $ 627 $ 0 $ 1,402

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Statement of Cash Flows~~

~~For the 26 Weeks Ended August 3, 2019~~

~~(millions)~~

Parent Subsidiary
Issuer Other
Subsidiaries Consolidating
Adjustments Consolidated
Cash flows from operating activities:
Net income (loss) $ 223 $ (207) $ 283 $ (76) $ 223
Impairment and other costs 0 0 3 0 3
Equity in loss (earnings) of subsidiaries (214) 138 0 76 0
Dividends received from subsidiaries 606 0 0 (606) 0
Depreciation and amortization 0 169 303 0 472
Gains on sale of real estate 0 (24) (25) 0 (49)
Changes in assets, liabilities and other items not separately identified (52) 47 (294) 0 (299)
Net cash provided (used) by operating activities 563 123 270 (606) 350
Cash flows from investing activities:
Purchase of property and equipment and capitalized software, net of dispositions 0 (97) (345) 0 (442)
Other, net 0 (11) (1) 0 (12)
Net cash used by investing activities 0 (108) (346) 0 (454)
Cash flows from financing activities:
Debt repaid 0 (42) 0 0 (42)
Dividends paid (233) 0 (606) 606 (233)
Issuance of common stock 6 0 0 0 6
Intercompany activity, net (813) 93 720 0 0
Other, net (92) (21) (15) 0 (128)
Net cash provided (used) by financing activities (1,132) 30 99 606 (397)
Net increase (decrease) in cash, cash equivalents and restricted cash (569) 45 23 0 (501)
Cash, cash equivalents and restricted cash at beginning of period 889 64 295 0 1,248
Cash, cash equivalents and restricted cash at end of period $ 320 $ 109 $ 318 $ 0 $ 747

~~MACY'S, INC.~~

~~Item 2.~~

Item 2.

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

For purposes of the following discussion, all references to ~~"second~~"first quarter of ~~2020"~~2021" and ~~"second~~"first quarter of ~~2019"~~2020" are to the Company's 13-week fiscal periods ended ~~August~~May 1, 2021 and May 2, 2020, ~~and August 3, 2019,~~ respectively. ~~References to "2020" and "2019" are to the Company's 26-week periods ended August 1, 2020 and August 3, 2019, respectively.~~

The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes included ~~elsewhere~~elsewhere in this report, as well as the financial and other information included in the ~~2019~~2020 10-K. The following discussion contains forward-looking statements that reflect the Company's plans, estimates and beliefs. The Company's actual results could materially differ from those discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this report (particularly in "Risk Factors" and in "Forward-Looking Statements") and in the ~~2019~~2020 10-K (particularly in "Risk Factors" and in "Forward-Looking Statements"). This discussion includes Non-GAAP financial measures. For information about these measures, see the disclosure under the caption "Important Information Regarding Non-GAAP Financial Measures" ~~on pages 38 and 39.~~

COVID-19 Update

~~Impact of COVID-19~~

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

•The Company temporarily closed all stores on March 18, 2020, which included all Macy’s, Bloomingdale’s, Bluemercury, Macy’s Backstage, Bloomingdales the Outlet and Market by Macy’s stores. Stores began reopening on May 4, 2020 and substantially all of the Company's stores have been reopened as of August 1, 2020. In conjunction with the reopening of its stores and facilities to protect the well-being of its customers and colleagues. The Company ~~implemented a number~~continuously monitors the ongoing impacts of COVID-19, including the evolving federal, state and local ordinances and health guidelines related to the mitigation of transmission risk associated with the pandemic. The Company has taken, and continues to take, numerous steps to promote health and safety ~~measures, including:~~

◦~~implementation~~at its stores and facilities, including establishment of vaccine distribution sites at different corporate facilities, increasing safety equipment in stores, offering contactless shopping opportunities, providing company-supplied personal protection equipment and wellness checks for colleagues, performing enhanced ~~sanitization~~cleaning and ~~cleaning processes,~~

◦~~reducing store hours,~~

◦~~requiring all colleagues and customers~~continuing to ~~wear masks and providing such personal protective equipment when needed,~~offer remote work plans for certain colleagues.

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

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

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

•~~In an effort to increase liquidity,~~Program Agreement between the Company ~~fully drew on its $1,500 million credit facility, announced~~and Citibank, if sales decrease by more than 34% over a twelve-month period as compared to the ~~suspension of quarterly cash dividends beginning~~Benchmark Year, defined as the twelve-month period from July 2006 to June 2007 in the ~~second quarter~~Program Agreement, Citibank has the ability to provide written notice to terminate the agreement prior to the end of ~~2020 and took additional steps~~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 ~~reduce discretionary spending. The Company's Board of Directors also rescinded its authorization of any unused amounts under~~ the ~~Company's share repurchase program. In~~Benchmark Year. On June ~~2020,~~4, 2021, the Company ~~completed financing activities totaling nearly $4.5 billion and used~~received a ~~portion~~written notice of termination of the ~~proceeds~~Program Agreement from ~~these activities,~~Citibank. The Company plans to continue negotiations with Citibank as well as ~~cash on hand,~~evaluate a potential transfer of its Credit Card Program to ~~repay its credit facility. To create greater flexibility for future liquidity needs,~~another financial service entity. Upon receipt of the written notice of termination, the Company ~~executed~~has six months to exercise, or not exercise, an ~~exchange offer~~option to purchase the assets of the Program Agreement, or nominate a third party to purchase such assets, and ~~consent solicitation in July 2020 for $465 million of previously issued unsecured notes.~~

•To improve the Company's cash position and reduce its cash expenditures, the Company's Board of Directors and Chief Executive Officer did not receive compensation from April 1, 2020 through June 30, 2020. In addition, the Company deferred cash expenditures where possible and temporarily implemented a ~~furlough for the majority of its colleague population which ended for most colleagues at the beginning of July 2020, with the remainder expected~~subsequent six month period to ~~return~~complete such transfer, subject to potential extensions as more fully described in the ~~third quarter of 2020. Certain executives not impacted by the furlough took a temporary reduction of their pay through June 30, 2020.~~

~~In June 2020, the Company announced a restructuring that aligns its cost base with anticipated near-term sales as the business recovers from the impact of the COVID-19 pandemic.~~Program Agreement. The Company ~~reduced corporate~~ and ~~management headcount by approximately 3,900. Additionally,~~Citibank are required to continue to meet their respective obligations and provide support pursuant to the ~~Company reduced staffing across its stores portfolio, supply chain and customer support network, which it will adjust as sales recover. The Company expects the actions~~

~~MACY'S, INC.~~

announced to generate expense savings of approximately $365 million in fiscal 2020 and approximately $630 million on an annualized basis. These savings will be on top of the anticipated $1.5 billion in annual expense savings announced in February, which the Company expects to fully realize by year-end 2022~~. During the second quarter of 2020, the Company recognized $154 million of expense for severance related to this reduction in force, of which nearly half was paid during the quarter.~~

During the 13 and 26 weeks ended August 1, 2020, the Company deferred rent payments for a significant number of its stores. Such COVID-19 pandemic-related rent deferrals are included in accounts payable and accrued liabilities. The Company continues to recognize expense during the deferral periods based on the contractual terms of the ~~lease agreements.~~

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

~~The COVID-19 pandemic continues to~~impact beyond fiscal 2021 this termination event or transfer might have ~~a material adverse impact~~ on the ~~Company's operational performance,~~Program Agreement or on the Company’s future financial results.

Although the Company has experienced recovery in operating results ~~and cash flows, although~~through the first quarter of 2021 as compared to fiscal 2020, certain stores continued to operate under local governmental orders or restrictions. The full impact of COVID-19 will continue to depend on future developments, including the continued spread and duration of the outbreak, variant strains of COVID-19, the availability and distribution of effective medical treatments or vaccines as well as any related ~~restrictions,~~federal, state or local governmental orders or restrictions. In addition, numerous uncertainties continue to surround the pandemic and its ultimate impact on the Company, including the timing and extent of any recovery in consumer traffic and spending, and potential delays, interruptions and disruptions in the Company’s supply chain, all of which are highly uncertain and cannot be predicted. 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.

Quarterly Overview

During the first quarter of 2021, the Company continued to build on the momentum of the fourth quarter of 2020 and exceeded its expectations from both a sales and profit standpoint. The ~~Company continues to monitor~~profitable first quarter results were driven by disciplined cost and inventory management through the ~~situation closely.~~

~~Management Overview~~

~~The Company's~~ongoing execution of the Company’s Polaris strategy, including investments in its digital platforms. Additionally, the Company’s performance during the ~~second~~first quarter of 2021 reflects the benefits from rapidly improving macroeconomic conditions, driven by the government’s stimulus program and heightened consumer confidence resulting from the roll-out of the COVID-19 vaccinations.

MACY'S, INC.

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

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

•

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

•

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

MACY'S, INC.

•

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

•

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

•

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

•

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

The Company began to see its Platinum, Gold and Silver Star Rewards customers re-engage with the Macy’s brand during the first quarter of 2021, with the average customer spend up 10% compared to the first quarter of 2019 and an 11 percentage point improvement from the fourth quarter of 2020. The Company’s Bronze Star Rewards tier continued to grow and had 3.2 million active customers during the quarter. During the first quarter of 2021, the Company acquired 4.6 million new Macy’s customers, of which approximately 47% occurred through Macy’s digital channel.

MACY'S, INC.

Results of Operations

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

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

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

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

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

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

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

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

Net Sales

Net sales ~~volumes recovered faster than expected~~for the first quarter of 2021 increased $1.7 billion, or 56.0%, compared to the first quarter of 2020. The Company’s first quarter of 2021 sales showed steady recovery across all three brands - Macy's, Bloomingdale's and ~~digital~~bluemercury. Digital sales ~~remained strong throughout~~during the ~~quarter. The Company's gross margin increased as~~first quarter of 2021 improved 34% compared to the first quarter of 2020 and accounted for approximately 37% of net sales. The Company experienced strength across all of its major merchandise categories driven by ~~improved sell-through of merchandise during~~ the quarter which also enabled the Company to exit the quarter with improved inventory levels heading into the second half of 2020. The Company is approaching the back half of the fiscal year conservatively given an anticipation of continued ~~turbulence associated with the COVID-19 pandemic and a moderation~~recovery of its ~~stores' recovery.~~

~~Second Quarter of 2020 Financial Highlights~~

•~~Comparable sales were down 34.7% on an owned basis; and down 35.1% on an owned plus licensed basis, better than expected due to faster paced~~ stores ~~recovery and continued growth of digital.~~

•~~Digital sales remained strong, growing 53% over second quarter 2019. Digital sales penetrated at 54% of total owned comparable sales.~~

•~~Delivered gross margin of 23.6%, an improvement of approximately 650 basis points from first quarter 2020.~~

•~~Inventory down 29% from a year ago.~~

•Selling, general and administrative ("SG&A") expense of $1.4 billion, down $779 million from second quarter of 2019 and driven by efficient expense management undertaken in response to the COVID-10 pandemic as well as ~~our Polaris strategy. SG&A expense rate of 39.2%, approximately the same as the SG&A expense rate for the second quarter of 2019.~~

•~~Diluted loss per share of $1.39 and adjusted diluted loss per share of $0.81.~~

•~~Finished the quarter in a strong liquidity position with approximately $1.4 billion in cash and approximately $3 billion of untapped capacity in the company’s new asset-based credit facility.~~

~~Polaris Strategy~~

On February 4, 2020, Macy’s, Inc. announced its Polaris strategy, a three-year plan designed to stabilize profitability and position the Company for sustainable, profitable growth. Over the course of the COVID-19 pandemic, the Company has refined the components of the Polaris strategy to focus where the Company can drive competitive advantage and differentiation to first recover the business and then drive both top- and bottom-line growth. The five major components of the Polaris strategy are

~~MACY'S, INC.~~

~~unchanged to those presented in February 2020 however the components have been re-focused, as needed, to align with customer demand in the COVID-19 pandemic environment.~~

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

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

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

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

•SG&A Cost Savings: After resetting the Company's cost base in the first half of 2020, the Company will continue to execute its operations with a disciplined cost focus to identify additional savings and drive the highest returns on its investments and expenditures.

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

~~MACY'S, INC.~~

~~Results of Operations~~

~~Comparison of the Second Quarter of 2020 and the Second Quarter of 2019~~

Second Quarter of 2020 Second Quarter of 2019
Amount % to Net Sales Amount % to Net Sales
(dollars in millions, except per share figures)
Net sales $ 3,559 $ 5,546
Credit card revenues, net 168 4.7 % 176 3.2 %
Cost of sales (2,718) (76.4) % (3,395) (61.2) %
Selling, general and administrative expenses (1,398) (39.2) % (2,177) (39.3) %
Gains on sale of real estate — — % 7 0.1 %
Restructuring, impairment and other costs (242) (6.8) % (2) — %
Operating income (loss) (631) (17.7) % 155 2.8 %
Benefit plan income, net 12 8
Settlement charges (38) —
Interest expense, net (69) (47)
Financing costs (3) —
Income (loss) before income taxes (729) 116
Federal, state and local income tax benefit (expense) 298 (30)
Net income (loss) $ (431) $ 86
Diluted earnings (loss) per share $ (1.39) $ 0.28
Supplemental Financial Measure
Gross margin (a)
$ 841 23.6 % $ 2,151 38.8 %
Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items $ (0.81) $ 0.28

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

~~Net Sales~~

Net sales for the second quarter of 2020 decreased $1,987 million, or 35.8%, compared to the second quarter of 2019. The Company's second quarter of 2020 sales were negatively impacted by the closure of all stores on March 18, 2020. During the current quarter, stores began reopening, with substantially all stores fully reopened by the end of the quarter. Digital sales during the second quarter of 2020 improved 53% compared to the second quarter of 2019 and accounted for 54% of comparable sales on an owned basis. The improvement in digital sales was driven by changes in consumer behavior, specifically an unprecedented consumer spending shift to e-commerce. The strongest performing categories during the second quarter of 2020 were home, particularly housewares and textiles, fine jewelry, fragrances, activewear and sleepwear. Sales performance continued to be weaker in men's tailored clothing and dresses driven by the work-from-home environment.

channel.

Credit Card Revenues, Net

Net credit card revenues were ~~$168~~$159 million in the ~~second~~first quarter of ~~2020, a decrease~~2021, an increase of $8$28 million, or ~~4.5%~~21.0%, compared to ~~$176~~$131 million recognized in the ~~second~~first quarter of ~~2019. Proprietary~~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, ~~was~~ down ~~590~~approximately 400 basis points, at ~~40.8%,~~42.0% in the ~~second~~first quarter of 2021 compared to 46.0% in the first quarter of 2020.

Gross Margin

Gross margin was 38.6% in the first quarter of 2021 compared to 17.1% 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 ~~compared~~was driven primarily by inventory productivity and the execution

MACY'S, INC.

of the Polaris strategy. Due to ~~46.7% in~~ the ~~second quarter~~impact of ~~2019. New accounts were down significantly in~~COVID-19 and store closures, the ~~second~~first quarter of 2020 versus the second quarter of 2019, which is primarily a reflection of the majority of the Company's stores being only open for a portion of the quarter as well as lower in-store traffic driven by the COVID-19 pandemic once the stores reopened.

~~MACY'S, INC.~~

~~Gross Margin~~

~~Gross margin was 23.6% in the second quarter of 2020 compared to 38.8% in the second quarter of 2019. The decline was due to increased net~~included an approximate $300 million inventory write-down from markdowns ~~as compared to the second quarter of 2019 as well as higher delivery expense driven by the increase in digital sales as compared to the second quarter of 2019.~~

on fashion merchandise.

Selling, General and Administrative Expenses

SG&A expenses for the ~~second~~first quarter of 2021 increased $150 million from the first quarter of 2020 but decreased ~~$779 million from the second quarter~~as a percentage of ~~2019.~~net sales by 15.8 percentage points. The ~~decrease~~increase in SG&A expense dollars corresponds with ~~lower~~higher net sales but ~~also~~the improvement in the SG&A expense rate reflects the expense management strategies implemented by the Company in response to the COVID-19 pandemic as well as execution against the Polaris strategy.

Impairment, Restructuring ~~Impairment~~ and Other Costs

During the ~~13 weeks ended August 1, 2020,~~first quarter of 2021, the Company ~~recognized expense of $242~~incurred impairment, restructuring and other costs totaling $19 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. See the discussion at Note 3, "Impairment, Restructuring and Other Costs" to the accompanying Consolidated Financial Statements for further information.

~~Settlement Charges~~

capitalized software assets. During the 13 weeks ended 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.

~~Interest Expense, Net~~

~~During the second~~first quarter of 2020, the Company recognized expense of $69 million compared to $47 million in the second quarter of 2019. The increase is primarily driven by the issuance of the new $1,300 million secured notes in June 2020.

~~Effective Tax Rate~~

~~The Company's effective tax rate of 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 (Loss) Per Share~~

~~Diluted loss per share for the second quarter of 2020 decreased $1.67 compared to the second quarter of 2019, reflecting lower net income resulting from the impact of the COVID-19 pandemic.~~

~~MACY'S, INC.~~

~~Comparison of the 26 Weeks Ended August 1, 2020 and August 3, 2019~~

2020 2019
Amount % to Net Sales Amount % to Net Sales
(dollars in millions, except per share figures)
Net sales $ 6,576 $ 11,050
Credit card revenues, net 299 4.5 % 348 3.1 %
Cost of sales (5,219) (79.4) % (6,798) (61.5) %
Selling, general and administrative expenses (2,995) (45.4) % (4,287) (38.8) %
Gains on sale of real estate 16 0.2 % 49 0.4 %
Restructuring, impairment and other costs (3,426) (52.1) % (3) — %
Operating income (loss) (4,749) (72.2) % 359 3.2 %
Benefit plan income, net 21 15
Settlement charges (38) —
Interest expense, net (117) (94)
Financing costs (3) —
Income (loss) before income taxes (4,886) 280
Federal, state and local income tax benefit (expense) 874 (57)
Net income (loss) $ (4,012) $ 223
Diluted earnings (loss) per share $ (12.91) $ 0.71
Supplemental Financial Measure
Gross margin (a)
$ 1,357 20.6 % $ 4,252 38.5 %
Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items $ (2.83) $ 0.72

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

~~Net Sales~~

Net sales for 2020 decreased $4,474 million, or 40.5%, compared to 2019. The Company's 2020 sales were negatively impacted by the closure of all stores on March 18, 2020, resulting in stores sales being significantly down compared to 2019. Stores began to reopen in early May 2020 and substantially all stores were fully reopened by August 1, 2020. As discussed within the quarterly analysis, digital sales experienced significant growth due to changes in consumer shopping behaviors and increased during 2020 by nearly 24% compared to 2019 and accounted for nearly 50% of comparable sales on an owned basis. The strongest performing categories during 2020 were home, particularly housewares, fine jewelry, fragrances, activewear, and sleepwear. Sales performance continued to be weaker in women’s and men's apparel, including dresses and suits.

~~Credit Card Revenues, Net~~

Net credit card revenues were $299 million in 2020, a decrease of $49 million, or 14.1%, compared to $348 million recognized in 2019. Proprietary credit penetration was down 320 basis points at 43.3% in 2020 compared to 46.5% in 2019. Consistent with the quarterly analysis, new accounts were down significantly compared to the prior year driven by the aforementioned store closures resulting from the COVID-19 pandemic.

~~Gross Margin~~

~~Gross margin was 20.6% in 2020 compared to 38.5% in 2019. The reason for the decline was due to increased net markdowns as compared to 2019 as well as higher delivery expense.~~

~~MACY'S, INC.~~

~~Selling, General and Administrative Expenses~~

~~SG&A expenses for 2020 decreased~~ ~~$1,292 million~~ from 2019. The decrease in SG&A expense dollars is a reflection of lower sales as well as the implementation of various expense management strategies undertaken in response to the COVID-19 pandemic, including a discretionary spending freeze, as well as the Company's Polaris strategy.

~~Impairment, Restructuring and Other Costs~~

~~During the 26 weeks ended August 1, 2020, the Company recognized expense of $3,426 million~~ primarily as a result of the COVID-19 pandemic, ~~including~~the Company incurred non-cash impairment charges totaling ~~$3,164~~$3,150 million ~~the majority~~ driven by recognition of ~~which consisted of:~~

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

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

~~Additionally, the Company recognized $194~~2020 also included $34 million ~~related to~~of restructuring and other costs ~~including~~related to severance ~~of $154 million~~activity and other costs associated with organizational restructuring, primarily associated with the reduction in force in response to the COVID-19 pandemic. See discussion at Note 3, "Impairment, Restructuring and Other Costs" to the accompanying Consolidated Financial Statements for more information.

~~Settlement Charges~~

During the 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.

Polaris strategy.

Interest Expense, Net

~~During 2020,~~

Net interest expense, excluding losses on early retirement of debt, was $79 million during the ~~Company recognized expense~~first quarter of ~~$117 million~~2021, compared to ~~$94~~$47 million ~~in 2019. As noted previously, the increase is primarily driven by the issuance of the new $1,300 million secured notes in June 2020.~~

~~Effective Tax Rate~~

The Company's effective tax rate of 17.9% on the pretax loss for 2020 reflects the impact of the carryback of net operating losses as permitted under the CARES Act offset by the impact of the non-tax deductible component of the goodwill impairment charge and additional income tax expense associated with the deferred tax remeasurement recognized during the first quarter of 2020. ~~Additionally,~~The increase is primarily driven by interest paid with respect to the $1,300 million of secured notes issued in June 2020.

Effective Tax Rate

The Company’s effective tax rate was 26.3% for ~~2020 and~~ the first quarter of 2021 compared to the federal income statutory tax rate of 21%. The effective tax rate ~~for 2019 of 20.4% were favorably~~was impacted by the ~~settlement or expiration~~tax shortfalls associated with the vesting and cancellation of certain ~~tax matters.~~

stock-based compensation awards.

Diluted Earnings (Loss) Per Share

Diluted earnings per share were $0.32 for the first quarter of 2021 compared to a diluted loss per share of $11.53 for the first quarter of 2020, ~~decreased $13.62 compared to 2019,~~ reflecting ~~lower~~higher net income ~~resulting~~as a result of the continued recovery from the impact of the COVID-19 ~~pandemic and goodwill impairment.~~

pandemic.

Cash Flow, Liquidity and Capital Resources

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

~~Because of the~~below

The COVID-19 outbreak ~~there is significant uncertainty surrounding~~and related store closure in 2020 negatively impacted the ~~potential impact on the Company's results of operations and cash flows. The~~ Company’s liquidity ~~has been negatively impacted by store closures.~~in 2020. The Company ~~has~~ proactively ~~taken~~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 ~~drawing the full $1,500 million available under the Company's credit agreement during the first quarter of 2020,~~ and executing additional financing transactions during the second quarter of ~~2020 as discussed in more detail below.~~2020. While the Company has obtained additional financing and, as of May 1, 2021, estimates that it has sufficient cash on hand and other capital resources to cover the Company's reasonably foreseeable working capital, capital expenditure and debt service and other cash requirements in both the near term and over the longer term, the continued uncertainty associated with the COVID-19 pandemic could have a significant impact on the Company’s cash flow and liquidity and further actions may be required to improve the Company’s cash ~~position, including but not limited~~position.

Operating Activities

Net cash provided by operating activities for the first quarter of 2021 was $494 million, compared to ~~monetizing Company assets, reinstituting colleague furloughs, and foregoing capital expenditures and other discretionary expenses.~~

~~Operating Activities~~

~~Net~~net cash used by operating activities ~~in 2020 was $7~~of $164 million ~~compared to net cash provided~~for the first quarter of ~~$350 million in 2019.~~2020. The ~~decline~~increase in operating cash flows period over period is due to significant improvement in the ~~operating losses in 2020 driven~~Company’s EBITDA, offset partly by ~~the impact of the COVID-19 pandemic, primarily resulting from the temporary closure of the Company's physical store locations. These losses were offset by net~~lower working capital inflows driven by a sell through of inventory during the period coupled with a reduction in inventory receipts as the Company executed its inventory management strategies in response to the COVID-19 pandemic.

~~MACY'S, INC.~~

benefits.

Investing Activities

Net cash used by investing activities was ~~$272~~$74 million ~~in 2020,~~for the first quarter of 2021, compared to ~~$454~~$113 million ~~in 2019.~~for the first quarter of 2020. The decrease ~~in 2020~~period over period is primarily due to a ~~$212 million~~ reduction in capital spending compared to ~~2019~~2020 as a result of the Company's updated plan for capital expenditures in response to the COVID-19 ~~pandemic.~~

pandemic and alignment with its Polaris strategy.

MACY'S, INC.

Financing Activities

Net cash used by financing activities was $300 million for the first quarter of 2021, driven by a decrease in outstanding checks. Net cash provided by ~~the Company for~~ financing activities was ~~$950~~$1,148 million for the first quarter of 2020, ~~including~~driven by the issuance of $1,500 million of debt ~~issued of $2,780 million~~ related to a ~~$1,500 million~~ draw on ~~its~~the Company’s revolving credit agreement, ~~and issuance of $1,300 million 8.375% senior secured notes, partially~~partly offset by ~~repayment~~cash dividend payments of ~~the $1,500 million of credit agreement draw. 2020 also included~~ $117 million ~~of cash dividends paid.~~and a decrease in outstanding checks. See below for further discussion ~~on 2020 financing activities. Net cash used by~~of the ~~Company for~~Company’s financing activities ~~was $397 million for 2019, driven by payment~~during the first quarter of ~~$233 million of cash dividends.~~

~~Secured Debt Issuance~~

2021.

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

~~Entry into Asset-Based Credit Facility~~

tender offer discussed below.

On ~~June 8, 2020, Macy’s Inventory Funding LLC (the “ABL Borrower”), an indirect wholly owned subsidiary of~~March 17, 2021, the Company completed a tender offer in which $500 million of senior notes and ~~its parent, Mac~~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.~~y’s Inventory Holdings LLC (the “ABL Parent”), entered into~~

The Company is party to an asset-based credit ~~agreement (the “ABL~~facility (“the ABL Credit Facility”) with ~~Bank of America, N.A., as administrative agent and collateral agent, and the lenders party thereto. The ABL Credit Facility provides the ABL Borrower with (i)~~certain financial institutions providing for a ~~$2,926~~$2,941 million revolving credit facility (the “Revolving ABL Facility”), including a swingline sub-facility and a letter of credit ~~sub-facility, and (ii) a bridge revolving credit facility of up to $300 million (the “Bridge Facility”).~~sub- facility. The ~~ABL Borrower~~Company may request increases in the size of the Revolving ABL Facility up to an additional aggregate principal amount of $750 million. As of August 1, 2020, the Company had $98 million of standby letters of credit outstanding under the ABL credit facility, which reduces the available borrowing capacity. The Company had no borrowings outstanding under the ABL credit facility as of August 1, 2020.

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

~~MACY'S, INC.~~

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

~~Amendment to Existing Credit Agreement~~

~~On June 8, 2020,~~

As of May 1, 2021, the Company ~~substantially reduced~~had $158 million of standby letters of credit outstanding under the ~~credit commitments~~ABL Credit Facility, which reduces the available borrowing capacity. The borrowing capacity of ~~its existing $1,500~~the ABL Credit Facility was $2,444 million unsecured credit agreement, which now provides the Company with unsecured revolving credit of up to $25 million. The unsecured revolving credit facility contains covenants that provide for, among other things, limitations on fundamental changes, use of proceeds, and maintenance of property, as well as customary representations and warranties and events of default. In conjunction with this amendment, the interest coverage ratio and leverage ratio were eliminated as covenant requirements. As of August 1, 2020, the Company had no borrowings outstanding under the ~~credit agreement.~~

~~Exchange Offers and Consent Solicitations for Certain Outstanding Debt Securities~~ABL Credit Facility as of ~~Macy’s Retail Holdings, LLC~~

~~MACY'S, INC.~~

~~Notes, (v) $6 million aggregate principal amount of outstanding Old 2032 Notes, and (vi) $185 million aggregate principal amount of outstanding Old 2034 Notes.~~

May 1, 2021.

Contractual Obligations

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

Capital Resources

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

MACY'S, INC.

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

Guarantor Summarized Financial Information

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

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

Summarized Balance Sheets

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

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

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

MACY'S, INC.

Summarized Statement of Operations

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

~~Expectations~~

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

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

Outlook and Recent Developments

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

•

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

•

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

•~~Comparable sales owned plus licensed are expected to be down in the low to mid-20% range for Fall Season. Annual digital sales penetration is estimated in the mid-40% range.~~•

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

•~~Credit card revenues as a percentage of net sales is expected to be relatively consistent with prior year Fall Season.~~•

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

•Gross margin as a percentage of net sales is expected to improve during the third and fourth quarters of 2020 as compared to the second quarter of 2020. Fall gross margin is expected to be mid-single-digit percentage points lower than prior year Fall Season.•

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

•~~SG&A as a percentage of net sales for the Fall Season is expected to be low to mid-single digit percentage points higher than the prior year Fall Season.~~•

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

•

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

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

•Earnings before interest, taxes, depreciation and amortization, excluding the impact of certain items, is expected to improve from the second quarter of 2020 sequentially in the third quarter and fourth quarter.

•~~Interest expense, net is expected to be approximately $300 million for fiscal 2020.~~

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

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

~~MACY'S, INC.~~

Important Information Regarding Non-GAAP Financial Measures

The Company reports its financial results in accordance with U.S. ~~GAAP.~~generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures provide users of the Company's financial information with additional useful information in evaluating operating performance. Management believes that providing supplemental changes in comparable sales on an owned plus licensed basis, ~~and changes in comparable sales on an owned plus licensed basis,~~ which includes adjusting for ~~growth in~~the impact of comparable sales of departments licensed to third parties, assists in evaluating the Company's ability to generate sales growth, whether through owned businesses or departments licensed to third parties, and in evaluating the impact of changes in the manner in which certain departments are operated. 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 to the most directly comparable forward-looking GAAP measures because the timing and amount of excluded items are unreasonably difficult to fully and accurately estimate. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.

MACY'S, INC.

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

Changes in Comparable Sales

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

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

Notes:

13 Weeks Ended 26 Weeks Ended
August 1, 2020 August 1, 2020
Decrease in comparable sales on an owned basis (Note 1) (34.7) % (40.0) %
Comparable sales growth impact of departments licensed to third parties (Note 2) (0.4) % (0.2) %
Decrease in comparable sales on an owned plus licensed basis (35.1) % (40.2) %
13 Weeks Ended 26 Weeks Ended
August 3, 2019 August 3, 2019
Increase in comparable sales on an owned basis (Note 1) 0.2 % 0.4 %
Comparable sales growth impact of departments licensed to third parties (Note 2) 0.1 % 0.1 %
Increase in comparable sales on an owned plus licensed basis 0.3 % 0.5 %

~~Notes:~~

~~(1)~~

(1)

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

(2)

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

MACY'S, INC.

Adjusted EBIT and EBITDA as a Percent to Net Sales

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

~~(2) Represents the impact of including the sales of departments licensed~~percent to third parties occurring in stores in operation throughout the year presented and the immediately preceding year and all online sales in the calculation of comparable sales. The company licenses third parties to operate certain departments in its stores and online and receives commissions from these third parties based on a percentage of their net sales. In its financial statements prepared in conformity with GAAP, the company includes these commissions (rather than sales of the departments licensed to third parties) in its net sales. The company does not, however, include any amounts in respect of

~~MACY'S, INC.~~

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

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

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

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

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

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

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

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

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

Second Quarter of 2020 Second Quarter of 2019
Net Income (Loss) Diluted Earnings (Loss) Per Share Net Income Diluted Earnings Per Share
As reported $ (431) $ (1.39) $ 86 $ 0.28
Restructuring, impairment and other costs (Note 3) 242 0.78 2 —
Settlement charges 38 0.12 — —
Losses on early retirement of debt 3 0.01 — —
Income tax impact of certain items noted above (103) (0.33) — —
As adjusted $ (251) $ (0.81) $ 88 $ 0.28

2020 2019
Net Income (Loss) Diluted Earnings (Loss) Per Share Net Income Diluted Earnings Per Share
As reported $ (4,012) $ (12.91) $ 223 $ 0.71
Impairment, restructuring and other costs 3,426 11.02 3 0.01
Settlement charges 38 0.12 — —
Financing costs 3 0.01 — —
Income tax impact of certain items identified above (Note 3) (336) (1.07) (1) —
As adjusted $ (881) $ (2.83) $ 225 $ 0.72

~~(3) The impact during the 13 and 26 weeks ended August 3, 2019 represents a value less than zero for net income or $0.01 per diluted share.~~

~~MACY'S, INC.~~

~~Critical Accounting Policies~~

~~Goodwill and Intangible Assets~~

New Pronouncements

The Company reviews the carrying value of its goodwill and other intangible assets with indefinite lives at least annually, as of the end of fiscal May, or more frequently if an event occurs or circumstances change, for possible impairment in accordance with ASC Topic 350, ~~Intangibles - Goodwill and Other~~. For impairment testing, goodwill has been assigned to reporting units which consist of the Company's retail operating divisions. Macy's and bluemercury are the only reporting units with goodwill as of August 1, 2020, and 98% of the Company's goodwill is allocated to the Macy's reporting unit.

~~U.S. GAAP Accounting Methodologies~~

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

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

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

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

~~2020 Impairment Analysis~~

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

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

consolidated financial statements.

MACY'S, INC.

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

~~New Pronouncements~~

~~Accounting Pronouncements Recently Adopted~~

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

~~Item 3.~~

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

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

~~Item 4.~~

Item 4.

Controls and Procedures.

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

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

MACY'S, INC.

PART II - OTHER INFORMATION

~~Item 1.~~

Item 1.

Legal Proceedings.

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

~~Item 1A.~~

Item 1A.

Risk Factors.

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

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

~~The recent outbreak~~

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

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

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

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

•On March 18, 2020, the Company temporarily closed all of its stores and subsequently furloughed the majority of its workforce. As different states and localities began to ease the regulations imposed to slow the spread of COVID-19, the Company began to reopen its stores and, as of August 1, 2020, substantially allassets of the ~~Company’s stores have reopened. As~~credit card program, or nominate a result of the COVID-19 pandemic, and particularly with the reopening of stores, the Company implemented safety measures and health and wellness precautions across its stores and facilities to mitigate risk to its customers and colleagues. These efforts to protect the health and well-being of customers and Company colleagues have resulted in, and will continue to result in, additional SG&A expenses. Recently, there has been a resurgence of COVID-19 in several states, which may negatively impact store performance in these areas as consumer shopping behaviors are impacted or government officials reinstate restrictions. Future outbreaks may continue to occur which could require the Company to close recently reopened stores. As a result, there can be no assurance as to whether recently reopened stores can remain open or whether further store closures may be required.

~~During the first and second quarters of 2020, the Company experienced significant reductions and volatility in demand for its retail products as customers were not able~~third party to purchase ~~merchandise in stores due~~such assets, and a subsequent six month period to quarantine or government or self-imposed restrictions placed on the Company’s stores’ operations. The shift in shopping patterns has also affected our inventory position and disrupted our supply chain. Additionally, social distancing measures or changes in consumer spending behaviors duecomplete such transfer, subject to ~~COVID-19 have impacted and may continue to impact traffic in stores after normal operations resume and could result in a loss of sales and profit.~~

~~In addition, the Company expects to be impacted by the deterioration~~potential extensions as more fully described in the economic conditions in North America, which could have an impact on discretionary consumer spending. In response to the disruption caused by the COVID-19 pandemic, the Company reconfigured its cost base through colleague reductions and reduced discretionary spending. While it is premature to accurately predict the ultimate impact of these developments, the Company expects its results of operations will be adversely impacted in a significant manner and such impacts could continue for an undetermined amount of time.

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

~~MACY'S, INC.~~

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

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

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

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

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

results.

MACY'S, INC.

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

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

Total
Number
of Shares
Purchased Average
Price Paid
per Share ($) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Value of Shares that may yet be Purchased Under the Plans or Programs (1)($)
(thousands) (thousands) (millions)
May 3, 2020 – May 30, 2020 — — — —
May 31, 2020 – July 4, 2020 3 7.29 — —
July 5, 2020 – August 1, 2020 — — — —
3 7.29 —

~~___________________~~

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

~~Item 5.~~

Item 5.

Other Information.

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

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

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

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

Forward-Looking Statements

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

•

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

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

the possible invalidity of the underlying beliefs and assumptions;

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

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

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

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

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

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

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

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

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

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

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

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

MACY'S, INC.

•

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

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

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

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

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

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

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

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

the seasonal nature of the Company's business;

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

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

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

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

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

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

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

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

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

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

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

our substantial level of indebtedness;

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

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

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

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

•

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

•

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

•

duties, taxes, other charges and quotas on imports.

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

MACY'S, INC.

~~Item 6.~~

Item 6.

Exhibits.



4.1	Indenture dated as of ~~June 8, 2020, among Macy's, Inc., as issuer, the guarantors party thereto~~March 17, 2021 by and U.S. Bank National Association, as trustee and collateral trustee, relating to the Company's 8.375% Senior Secured Notes due 2025 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed June 9, 2020)

~~4.2~~		~~Form of 8.375% Senior Secured Note due 2025 (incorporated by reference to Exhibit A to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed June 9, 2020)~~

~~4.3~~		First Supplemental Indenture to 1991 Indenture dated as of May 28, 2020 among Macy’s Retail Holdings, Inc., a Delaware corporation (as successor to Macy’s Retail Holdings, Inc., a New York corporation), Macy’s, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.4~~		Second Supplemental Indenture to 1991 Indenture dated as of June 3, 2020 among Macy’s Retail Holdings, LLC, a Delaware limited liability company (as successor to Macy’s Retail Holdings, Inc., a Delaware corporation), Macy’s, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.5~~		Eleventh Supplemental Indenture to 1994 Indenture dated as of May 28, 2020 among Macy’s Retail Holdings, Inc., a Delaware corporation (as successor to Macy’s Retail Holdings, Inc., a New York corporation), Macy’s, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.6~~		Twelfth Supplemental Indenture to 1994 Indenture dated as of June 3, 2020 among Macy’s Retail Holdings, LLC, a Delaware limited liability company (as successor to Macy’s Retail Holdings, Inc., a Delaware corporation), Macy’s, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.6 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.7~~		Second Supplemental Indenture to 1996 Indenture dated as of May 28, 2020 among Macy’s Retail Holdings, Inc., a Delaware corporation (as successor to Macy’s Retail Holdings, Inc., a New York corporation), Macy’s, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.7 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.8~~		Third Supplemental Indenture to 1996 Indenture dated as of June 3, 2020 among Macy’s Retail Holdings, LLC, a Delaware limited liability company (as successor to Macy’s Retail Holdings, Inc., a Delaware corporation), Macy’s, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.8 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.9~~		Eighth Supplemental Indenture to 1997 Indenture dated as of May 28, 2020 among Macy’s Retail Holdings, Inc., a Delaware corporation (as successor to Macy’s Retail Holdings, Inc., a New York corporation), Macy’s, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.9 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.10~~		Ninth Supplemental Indenture to 1997 Indenture dated as of June 3, 2020 among Macy’s Retail Holdings, LLC, a Delaware limited liability company (as successor to Macy’s Retail Holdings, Inc., a Delaware corporation), Macy’s, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.10 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.11~~		Seventh Supplement Indenture to 2006 Indenture dated as of May 28, 2020 among Macy's Retail Holdings, Inc., a Delaware corporation (as successor to Macy's Retail Holdings, Inc., a New York corporation), Macy's, Inc. and U.S. Bank National Association, as Trustee ~~(incorporated by reference to Exhibit 4.11 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)(incorporated by reference to Exhibit 4.11 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)~~



~~4.12~~		Eighth Supplemental Indenture to 2006 Indenture dated as of June 3, 2020 among Macy’s Retail Holdings, LLC, a Delaware limited liability company (as successor to Macy’s Retail Holdings, Inc., a Delaware corporation), Macy’s, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.12 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.13~~		Eighth Supplemental Indenture to 2012 Indenture dated as of May 28, 2020 among Macy’s Retail Holdings, Inc., a Delaware corporation (as successor to Macy’s Retail Holdings, Inc., a New York corporation), Macy’s, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.13 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.14~~		Ninth Supplemental Indenture to 2012 Indenture dated as of June 3, 2020 among Macy’s Retail Holdings, LLC, a Delaware limited liability company (as successor to Macy’s Retail Holdings, Inc., a Delaware corporation), Macy’s, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.14 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.15~~		Third Supplemental Indenture to 1991 Indenture dated as of June 26, 2020 among Macy’s Retail Holdings, LLC, an Ohio limited liability company (as successor to Macy’s Retail Holdings, LLC, a Delaware limited liability company), Macy’s, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.15 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.16~~		Thirteenth Supplemental Indenture to 1994 Indenture dated as of June 24, 2020 among Macy’s Retail Holdings, LLC, an Ohio limited liability company (as successor to Macy’s Retail Holdings, LLC, a Delaware limited liability company), Macy’s, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.16 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.17~~		Fourth Supplemental Indenture to 1996 Indenture dated as of June 26, 2020 among Macy’s Retail Holdings, LLC, an Ohio limited liability company (as successor to Macy’s Retail Holdings, LLC, a Delaware limited liability company), Macy’s, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.17 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)
~~4.18~~		Tenth Supplemental Indenture to 1997 Indenture dated as of June 24, 2020 among Macy’s Retail Holdings, LLC, an Ohio limited liability company (as successor to Macy’s Retail Holdings, LLC, a Delaware limited liability company), Macy’s, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.18 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.19~~		Ninth Supplemental Indenture to 2006 Indenture dated as of June 24, 2020 among Macy’s Retail Holdings, LLC, an Ohio limited liability company (as successor to Macy’s Retail Holdings, LLC, a Delaware limited liability company), Macy’s, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.19 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.20~~		Tenth Supplemental Indenture to 2012 Indenture dated as of June 26, 2020 among Macy’s Retail Holdings, LLC, an Ohio limited liability company (as successor to Macy’s Retail Holdings, LLC, a Delaware limited liability company), Macy’s, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.20 to the Company’s Quarterly Report on Form 10-Q (File No. 1-13536) for the quarter ended May 2, 2020)

~~4.21~~		~~Indenture, dated as of July 28, 2020,~~ among Macy’s Retail Holdings, LLC as issuer, Macy’s, Inc., as guarantor and U.S. Bank National Association as trustee, ~~and collateral trustee,~~ relating to Macy’s Retail Holdings, LLC’s ~~6.65%~~5.875% Senior ~~Secured Debentures~~Notes due ~~2024, 6.7% Senior Secured Debentures due 2028, 8.75% Senior Secured Debentures due~~ 2029 ~~7.875% Senior Secured Debentures due 2030, 6.9% Senior Secured Debentures due 2032 and 6.7% Senior Secured Debentures due 2034~~ (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed ~~July 28, 2020)~~March 17, 2021)

~~4.22~~	Form of 6.65% Senior Secured Debentures due 2024, 6.7% Senior Secured Debentures due 2028, 8.75% Senior Secured Debentures due 2029, 7.875% Senior Secured Debentures due 2030, 6.9% Senior Secured Debentures due 2032 and 6.7% Senior Secured Debentures due 2034 (incorporated by reference to Exhibit A to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed July 28, 2020)



~~4.23~~					Fifth Supplemental Trust Indenture to 1996 Indenture, dated as of July 10, 2020, among Macy’s Retail Holdings, LLC, as issuer, Macy’s, Inc. as guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to Macy’s Retail Holdings, LLC’s 6.65% Senior Debentures due 2024, 6.7% Senior Debentures due 2028, 8.75% Senior Debentures due 2029, 7.875% Senior Debentures due 2030, 6.9% Senior Debentures due 2032 and 6.7% Senior Debentures due 2034 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed July 28, 2020)

10.1				Credit Agreement, dated as of June 8, 2020, among Macy’s Inventory Funding LLC, as the Borrower, Macy’s Inventory Holdings LLC, as Parent, Bank of America, N.A., as Agent, L/C Issuer and Swing Line Lender, the other lenders party thereto, BofA Securities, Inc., Credit Suisse Loan Funding LLC, JPMorgan Chase Bank, N.A., Fifth Third Bank, National Association, MUFG Union Bank, N.A., PNC Capital Markets LLC and Wells Fargo Bank, National Association, as Joint Lead Arrangers and Joint Bookrunners, Credit Suisse Loan Funding LLC and JPMorgan Chase Bank, N.A., as Co-Syndication Agents and Fifth Third Bank, National Association, MUFG Union Bank, N.A., as Co-Syndication Agents and Fifth Third Bank, National Association, MUFG Union Bank, N.A., PNC Bank, National Association and Wells Fargo Bank, National Association, as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 9, 2020)

~~10.2~~					Amendment No. 1 to Credit Agreement dated as of June 8, 2020 among Macy’s Retail Holdings, LLC, a Delaware limited liability company (f/k/a Macy’s Retail Holdings, Inc.), as Borrower, Macy’s, Inc., a Delaware corporation, as Parent, the Lenders party thereto, and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 9, 2020)

~~10.3~~					~~2020-2022~~2021-2023 Performance-Based Restricted Stock Unit Terms and Conditions under the 2018 Equity and Incentive Compensation Plan*

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

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

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

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

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

101			The following financial statements from Macy's, Inc.'s Quarterly Report on Form 10-Q for the quarter ended ~~August~~May 1, ~~2020,~~2021, filed on ~~September 3, 2020, are~~June 7, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income (Loss), (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Changes in Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.

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

~~________~~

*Constitutes a compensatory plan or arrangement.

SIGNATURES

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

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

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

Date: ~~September 3, 2020~~

June 7, 2021


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


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

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



	13 Weeks Ended						26 Weeks Ended
	August 1, 2020		August 3, 2019		August 1, 2020		August 3, 2019
Net sales	$	3,559	$	5,546	$	6,576	$	11,050
Credit card revenues, net	168		176		299		348

Cost of sales	(2,718)		(3,395)		(5,219)		(6,798)
Selling, general and administrative expenses	(1,398)		(2,177)		(2,995)		(4,287)
Gains on sale of real estate	0		7		16		49
Impairment, restructuring and other costs	(242)		(2)		(3,426)		(3)
Operating income (loss)	(631)		155		(4,749)		359
Benefit plan income, net	12		8		21		15
Settlement charges	(38)		0		(38)		0
Interest expense	(70)		(52)		(120)		(106)
Financing costs	(3)		0		(3)		0
Interest income	1		5		3		12
Income (loss) before income taxes	(729)		116		(4,886)		280
Federal, state and local income tax benefit (expense)	298		(30)		874		(57)
Net income (loss)	$	(431)	$	86	(4,012)		223
Basic earnings (loss) per share	$	(1.39)	$	0.28	$	(12.91)	$	0.72
Diluted earnings (loss) per share	$	(1.39)	$	0.28	$	(12.91)	$	0.71



	August 1, 2020		February 1, 2020		August 3, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	1,395	$	685	$	674
Receivables	184		409		240
Merchandise inventories	3,582		5,188		5,029
Prepaid expenses and other current assets	470		528		603
Total Current Assets	5,631		6,810		6,546
Property and Equipment - net of accumulated depreciation and amortization of $4,642, $4,392 and $4,748	6,279		6,633		6,483
Right of Use Assets	3,035		2,668		2,636
Goodwill	828		3,908		3,908
Other Intangible Assets – net	438		439		440
Other Assets	1,403		714		728
Total Assets	$	17,614	$	21,172	$	20,741
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	539	$	539	$	6
Merchandise accounts payable	1,409		1,682		1,674
Accounts payable and accrued liabilities	2,906		3,448		2,739
Income taxes	0		81		20
Total Current Liabilities	4,854		5,750		4,439
Long-Term Debt	4,851		3,621		4,680
Long-Term Lease Liabilities	3,269		2,918		2,836
Deferred Income Taxes	921		1,169		1,206
Other Liabilities	1,395		1,337		1,265
Shareholders' Equity	2,324		6,377		6,315
Total Liabilities and Shareholders’ Equity	$	17,614	$	21,172	$	20,741


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


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


	Parent		Subsidiary Issuer		Other Subsidiaries		Consolidating Adjustments		Consolidated
Net sales	$	0	$	166	$	3,427	$	(34)	$	3,559
Consignment commission income	0		219		0		(219)		0
Credit card revenues (expense), net	0		(1)		169		0		168

Cost of sales	0		14		(2,766)		34		(2,718)
Selling, general and administrative expenses	0		(463)		(1,154)		219		(1,398)
Restructuring, impairment and other costs	0		(85)		(157)		0		(242)
Operating loss	0		(150)		(481)		0		(631)
Benefit plan income, net	0		5		7		0		12
Settlement charges	0		(13)		(25)		0		(38)
Interest (expense) income, net:
External	(17)		(48)		(4)		0		(69)
Intercompany	(21)		10		11		0		0
Financing costs	0		(3)		0		0		(3)
Equity in loss of subsidiaries	(406)		(473)		0		879		0
Loss before income taxes	(444)		(672)		(492)		879		(729)
Federal, state and local income tax benefit	13		75		210		0		298
Net loss	$	(431)	$	(597)	$	(282)	$	879	$	(431)

Comprehensive loss	$	(380)	$	(551)	$	(249)	$	800	$	(380)


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


	Second Quarter of 2020								Second Quarter of 2019
	Amount		% to Net Sales		Amount				% to Net Sales
	(dollars in millions, except per share figures)
Net sales	$	3,559			$	5,546
Credit card revenues, net	168		4.7	%			176			3.2	%

Cost of sales	(2,718)		(76.4)	%			(3,395)			(61.2)	%
Selling, general and administrative expenses	(1,398)		(39.2)	%			(2,177)			(39.3)	%
Gains on sale of real estate	—		—	%			7			0.1	%
Restructuring, impairment and other costs	(242)		(6.8)	%			(2)			—	%
Operating income (loss)	(631)		(17.7)	%			155			2.8	%
Benefit plan income, net	12				8
Settlement charges	(38)				—
Interest expense, net	(69)				(47)
Financing costs	(3)				—
Income (loss) before income taxes	(729)				116
Federal, state and local income tax benefit (expense)	298				(30)
Net income (loss)	$	(431)					$	86

Diluted earnings (loss) per share	$	(1.39)			$	0.28

Supplemental Financial Measure
Gross margin (a)	$	841	23.6	%			$	2,151		38.8	%

Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items	$	(0.81)			$	0.28


	2020								2019
	Amount		% to Net Sales		Amount				% to Net Sales
	(dollars in millions, except per share figures)
Net sales	$	6,576			$	11,050
Credit card revenues, net	299		4.5	%			348			3.1	%

Cost of sales	(5,219)		(79.4)	%			(6,798)			(61.5)	%
Selling, general and administrative expenses	(2,995)		(45.4)	%			(4,287)			(38.8)	%
Gains on sale of real estate	16		0.2	%			49			0.4	%
Restructuring, impairment and other costs	(3,426)		(52.1)	%			(3)			—	%
Operating income (loss)	(4,749)		(72.2)	%			359			3.2	%
Benefit plan income, net	21				15
Settlement charges	(38)				—
Interest expense, net	(117)				(94)
Financing costs	(3)				—
Income (loss) before income taxes	(4,886)				280
Federal, state and local income tax benefit (expense)	874				(57)
Net income (loss)	$	(4,012)					$	223

Diluted earnings (loss) per share	$	(12.91)			$	0.71

Supplemental Financial Measure
Gross margin (a)	$	1,357	20.6	%			$	4,252		38.5	%

Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items	$	(2.83)			$	0.72

Delaware		13-3324058


	Total Number of Shares Purchased	Average Price Paid per Share ($)	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Dollar Value of Shares that may yet be Purchased Under the Plans or Programs (1)($)
	(thousands)		(thousands)	(millions)
May 3, 2020 – May 30, 2020	—	—	—	—
May 31, 2020 – July 4, 2020	3	7.29	—	—
July 5, 2020 – August 1, 2020	—	—	—	—
	3	7.29	—

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Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

Emerging Growth Company