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

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

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

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

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


Class		Outstanding at November ~~28, 2020~~27, 2021
Common Stock, $.01 par value per share	~~310,477,909~~ 299,269,416 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						39 Weeks Ended
	October 30, 2021			October 31, 2020			October 30, 2021			October 31, 2020
Net sales	$	5,440		$	3,990		$	15,794		$	10,566
Credit card revenues, net		213			195			568			494

Cost of sales		(3,207	)		(2,569	)		(9,449	)		(7,788	)
Selling, general and administrative expenses		(1,973	)		(1,726	)		(5,618	)		(4,723	)
Gains on sale of real estate		50			3			61			20
Impairment, restructuring and other costs		0			(20	)		(21	)		(3,445	)
Operating income (loss)		523			(127	)		1,335			(4,876	)
Benefit plan income, net		17			16			49			37
Settlement charges		(8	)		(26	)		(90	)		(65	)
Interest expense		(53	)		(80	)		(212	)		(199	)
Losses on early retirement of debt		(185	)		0			(199	)		0
Financing costs		0			0			0			(4	)
Interest income		0			0			1			3
Income (loss) before income taxes		294			(217	)		884			(5,104	)
Federal, state and local income tax benefit (expense)		(55	)		126			(197	)		1,000
Net income (loss)	$	239		$	(91	)	$	687		$	(4,104	)
Basic earnings (loss) per share	$	0.78		$	(0.29	)	$	2.21		$	(13.20	)
Diluted earnings (loss) per share	$	0.76		$	(0.29	)	$	2.17		$	(13.20	)

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

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

MACY’S, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(millions)

	13 Weeks Ended						39 Weeks Ended
	October 30, 2021			October 31, 2020			October 30, 2021			October 31, 2020
Net income (loss)	$	239		$	(91	)	$	687		$	(4,104	)
Other comprehensive income (loss):
Actuarial gain (loss) on post employment and postretirement benefit plans, before tax		(9	)		(36	)		53			(17	)
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 (loss), before tax		7			13			27			36
Settlement charges, before tax		8			26			90			65
Tax effect related to items of other comprehensive income		(2	)		(1	)		(43	)		(21	)
Total other comprehensive income, net of tax effect		4			2			127			63
Comprehensive income (loss)	$	243		$	(89	)	$	814		$	(4,041	)

~~(Unaudited)~~

~~(millions)~~

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

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

MACY’S, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(millions)

	October 30, 2021		January 30, 2021		October 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	316	$	1,679	$	1,551
Receivables		212		276		185
Merchandise inventories		6,141		3,774		5,144
Prepaid expenses and other current assets		922		455		477
Total Current Assets		7,591		6,184		7,357
Property and Equipment - net of accumulated depreciation and amortization of $4,826, $4,400 and $4,816		5,600		5,940		6,122
Right of Use Assets		2,808		2,878		3,028
Goodwill		828		828		828
Other Intangible Assets – net		435		437		437
Other Assets		1,017		1,439		1,442
Total Assets	$	18,279	$	17,706	$	19,214
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	140	$	452	$	536
Merchandise accounts payable		3,796		1,978		3,267
Accounts payable and accrued liabilities		2,735		2,927		2,848
Total Current Liabilities		6,671		5,357		6,651
Long-Term Debt		3,295		4,407		4,852
Long-Term Lease Liabilities		3,090		3,185		3,266
Deferred Income Taxes		970		908		917
Other Liabilities		1,245		1,296		1,285
Shareholders' Equity		3,008		2,553		2,243
Total Liabilities and Shareholders’ Equity	$	18,279	$	17,706	$	19,214

~~(Unaudited)~~

~~(millions)~~

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

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

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

(millions)

	Common Stock		Additional Paid-In Capital			Accumulated Equity			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
Balance at January 30, 2021	$	3	$	571		$	3,928		$	(1,161	)	$	(788	)	$	2,553
Net income							103									103
Other comprehensive income													8			8
Stock-based compensation expense				11												11
Stock issued under stock plans				(24	)					24						0
Balance at May 1, 2021		3		558			4,031			(1,137	)		(780	)		2,675
Net income							345									345
Other comprehensive income													115			115
Stock-based compensation expense				11												11
Stock issued under stock plans				(71	)					71						0
Balance at July 31, 2021		3		498			4,376			(1,066	)		(665	)		3,146
Net income							239									239
Other comprehensive income													4			4
Common stock dividends ($0.30 per share)							(92	)								(92	)
Stock repurchases										(300	)					(300	)
Stock-based compensation expense				11												11
Stock issued under stock plans				(2	)					2						—
Balance at October 30, 2021	$	3	$	507		$	4,523		$	(1,364	)	$	(661	)	$	3,008

~~(Unaudited)~~

~~(millions~~)

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

~~MACY’S, INC.~~

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

~~(Unaudited)~~

~~(millions~~)

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

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

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

MACY’S, INC.

CONSOLIDATED STATEMENTS OF 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
Net loss							(431	)								(431	)
Other comprehensive income													51			51
Stock-based compensation expense				7												7
Stock issued under stock plans				(4	)					4						0
Balance at August 1, 2020		3		568			3,860			(1,176	)		(931	)		2,324
Net loss							(91	)								(91	)
Other comprehensive income													2			2
Stock-based compensation expense				8												8
Stock issued under stock plans				(1	)					1						—
Balance at October 31, 2020	$	3	$	575		$	3,769		$	(1,175	)	$	(929	)	$	2,243

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

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(millions)

	39 Weeks Ended
	October 30, 2021			October 31, 2020
Cash flows from operating activities:
Net income (loss)	$	687		$	(4,104	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Impairment, restructuring and other costs		21			3,445
Settlement charges		90			65
Depreciation and amortization		668			722
Stock-based compensation expense		32			21
Gains on sale of real estate		(61	)		(20	)
Benefit plans		27			36
Amortization of financing costs and premium on acquired debt		66			11
Deferred income taxes		19			(270	)
Changes in assets and liabilities:
Decrease in receivables		64			223
(Increase) decrease in merchandise inventories		(2,367	)		34
(Increase) decrease in prepaid expenses and other current assets		(44	)		29
Increase in merchandise accounts payable		1,758			1,612
Increase (decrease) in accounts payable and accrued liabilities		73			(598	)
Decrease in current income taxes		(50	)		(818	)
Change in other assets, liabilities, and other items not separately identified		(142	)		(144	)
Net cash provided by operating activities		841			244
Cash flows from investing activities:
Purchase of property and equipment		(230	)		(290	)
Capitalized software		(155	)		(96	)
Disposition of property and equipment		118			39
Other, net		64			33
Net cash used by investing activities		(203	)		(314	)
Cash flows from financing activities:
Debt issued		975			2,780
Debt issuance costs		(9	)		(102	)
Debt repurchase premium and expenses		(152	)		0
Debt repaid		(2,448	)		(1,508	)
Dividends paid		(46	)		(117	)
Decrease in outstanding checks		(97	)		(90	)
Acquisition of treasury stock		(294	)		0
Net cash provided (used) by financing activities		(2,071	)		963
Net increase (decrease) in cash, cash equivalents and restricted cash		(1,433	)		893
Cash, cash equivalents and restricted cash beginning of period		1,754			731
Cash, cash equivalents and restricted cash end of period	$	321		$	1,624
Supplemental cash flow information:
Interest paid	$	407		$	140
Interest received		1			4
Income taxes paid (net of refunds received)		228			88

~~(Unaudited)~~

~~(millions)~~

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

Note: Restricted cash of ~~$73~~$5 million and ~~$50~~$73 million have been included with cash and cash equivalents for the 39 weeks ended October 30, 2021 and October 31, 2020, ~~and November 2, 2019,~~ respectively.

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

~~MACY’S,~~

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.
Organization and Summary of Significant Accounting Policies

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

Nature of Operations

Macy's, Inc. ~~and~~, together with its subsidiaries (the "Company"), is an omnichannel retail organization operating stores, websites and mobile applications under three brands (Macy's, Bloomingdale's and bluemercury) that sell a wide range of merchandise, including apparel and accessories (men's, women's and kids'), cosmetics, home furnishings and other consumer goods. The Company has stores in 43 states, the District of Columbia, ~~Guam~~Puerto Rico and ~~Puerto Rico.~~Guam. As of October ~~31, 2020,~~30, 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~~Bloomies, and bluemercury.

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

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

Use of Estimates

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

The Consolidated Financial Statements for the 13 and 39 weeks ended October 30, 2021 and October 31, 2020, ~~and November 2, 2019,~~ in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly, in all material respects, the consolidated financial position and results of operations of the Company.

Seasonality

Because of the seasonal nature of the retail business, the results of operations for the 13 and 39 weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~(which do not include the Christmas season) are not necessarily indicative of such results for the full fiscal year.

~~Reclassifications~~

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

Comprehensive Income (Loss)

Total comprehensive income (loss) represents the change in equity during a period from sources other than transactions with shareholders and, as such, includes net income (loss). For the Company, the only other components of total comprehensive income (loss) for the 13 and 39 weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ relate to post employment and postretirement plan items. Settlement charges incurred are included as a separate component of income (loss) before income taxes in the Consolidated Statements of Operations. Amortization reclassifications out of accumulated other comprehensive loss are included in the computation of net periodic benefit cost (income) and are included in benefit plan income, net on the Consolidated Statements of Operations. See Note 8,6, "Benefit Plans," for further information.

COVID-19 Pandemic

As the COVID-19 pandemic continues through fiscal 2021, the Company continues to prioritize health and safety measures in its stores and facilities to protect the well-being of its customers and colleagues while also focusing on prudent cash management, maintaining strong liquidity and executing its strategic initiatives. Although the Company has experienced strong recovery in operating results during fiscal 2021 as compared to fiscal 2020, the Company continues to monitor the impacts of COVID-19 on the macro economy as well as on the Company’s and its vendor partners’ operations. The full impact of the pandemic will continue to depend on future developments, including the continued spread and duration of the pandemic, the emergence of future variant strains of COVID-19, the availability and distribution of effective medical treatments or vaccines as well as any related federal, state or local governmental orders, restrictions or mandates. 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, potential delays, interruptions and disruptions in the Company’s supply chain, maintenance of temporary government stimulus programs, labor shortages and intense competition for talent, all of which are highly uncertain and cannot be predicted.

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

~~2. Impact of COVID-19~~

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

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

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

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

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

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

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

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

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

differential was offset by the impact of the non-tax deductible component of the goodwill impairment charge and additional income tax expense associated with deferred tax remeasurement during the first quarter of 2020. The net impact of these items is the primary driver of the effective tax rate decrease when compared to the same period in 2019. As of October 31, 2020, the Company recognized a $705return, an approximate $590 million income tax receivable ~~which~~associated with this net operating loss carryback benefit is included within ~~Other Assets~~prepaid expenses and other current assets on the Company’s Consolidated Balance ~~Sheets.~~

~~In addition, during the 39 weeks ended October 31, 2020, the Company recognized $60 million in employee retention payroll~~Sheet. This income tax ~~credits and elected~~receivable is estimated to ~~defer payment of approximately $100 million of the employer portion of social security taxes. The Company expects to repay the deferred payroll taxes~~be received in the ~~third quarter~~first half of ~~fiscal 2021.~~2022.

2.	Impairment, Restructuring and Other Costs

	13 Weeks Ended					39 Weeks Ended
	October 30, 2021			October 31, 2020		October 30, 2021			October 31, 2020
	(millions)
Impairments	$	(10	)	$	6	$	10		$	3,170
Restructuring		0			2		(1	)		196
Other		10			12		12			79
Total	$	0		$	20	$	21		$	3,445

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

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

During the 39 weeks ended October 31, 2020, primarily as a result of the COVID-19 pandemic, the Company incurred non-cash impairment charges totaling $3,170~~$3,170~~ million, the majority of which was recognized during the first quarter of 2020 and consisted of:

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

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

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

•

$3,080 million of goodwill impairments, with $2,982 million attributable to the Macy's reporting unit and $98 million attributable to the bluemercury reporting unit.

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

A summary of the restructuring and other cash activity for the 13 and 39 weeks ended October 30, 2021 and October 31, 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
Additions charged to expense		15			6			21
Cash payments		(67	)		(6	)		(73	)
Balance at August 1, 2020		6			10			16
Additions charged to expense		1			4			5
Cash payments		(6	)		(10	)		(16	)
Balance at October 31, 2020	$	1		$	4		$	5

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
Additions charged to expense 1 4 5
Cash payments (6) (10) (16)
Balance at October 31, 2020 $ 1 $ 4 $ 5

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	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
Additions charged to expense		0			0			0
Cash payments		(1	)		0			(1	)
Balance at July 31, 2021		2			0			2
Additions charged to expense		0			0			0
Cash payments		(1	)		0			(1	)
Balance at October 30, 2021	$	1		$	0		$	1

~~(Unaudited)~~

3.
Earnings (Loss) Per Share

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

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

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

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

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

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

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

	13 Weeks Ended
	October 30, 2021						October 31, 2020
	Net Income				Shares		Net Loss						Shares
	(millions, except per share data)
Net income (loss)	$	239				305.8	$	(91	)					310.2
Shares to be issued under deferred compensation and other plans						1.1								1.0
	$	239				306.9	$	(91	)					311.2
Basic earnings (loss) per share			$	0.78						$	(0.29	)
Effect of dilutive securities:
Stock options and restricted stock units						6.9								0
	$	239				313.8	$	(91	)					311.2
Diluted earnings (loss) per share			$	0.76						$	(0.29	)

	39 Weeks Ended
	October 30, 2021						October 31, 2020
	Net Income				Shares		Net Loss						Shares
	(millions, except per share data)
Net income (loss)	$	687				309.3	$	(4,104	)					310.1
Shares to be issued under deferred compensation and other plans						1.0							0.9
	$	687				310.3	$	(4,104	)					311.0
Basic earnings (loss) per share			$	2.21						$	(13.20	)
Effect of dilutive securities:
Stock options and restricted stock units						6.7								0
	$	687				317.0	$	(4,104	)					311.0
Diluted earnings (loss) per share			$	2.17						$	(13.20	)

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

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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

In addition to the stock options and restricted stock units reflected in the foregoing tables, stock options to purchase 14.3 million shares of common stock and restricted stock units relating to 1.0 million shares of common stock were outstanding at October 30, 2021, but were not included in the computation of diluted earnings per share because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.

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

Revenue

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

~~6. Revenue~~

Net sales

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

Retail Sales

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

~~For each~~

Macy’s accounted for 87% and 88% of the Company’s net sales for the 13 weeks ended October 30, 2021 and October 31, 2020, respectively. Macy’s accounted for 87% and 88% of the Company’s net sales for the 39 weeks ended October 30, 2021 and October 31, 2020, ~~Macy's~~respectively. In addition, digital sales accounted for ~~88%~~approximately 33% and 38% of the ~~Company's~~Company’s net ~~sales. For~~sales for the 13 weeks ended October 30, 2021and October 31, 2020, respectively, and 34% and 45% of the Company’s net sales for the 39 weeks ended ~~November 2, 2019, Macy's accounted for 87%~~October 30, 2021 and ~~88%, respectively, of the Company's net sales.~~ October 31, 2020, respectively.

Disaggregation of the Company's net sales by family of business for the 13 and 39 weeks ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~ were as follows:

	13 Weeks Ended				39 Weeks Ended
Net sales by family of business	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
	(millions)
Women's Accessories, Intimate Apparel, Shoes, Cosmetics and Fragrances	$	2,180	$	1,677	$	6,480	$	4,273
Women's Apparel		1,042		690		3,068		1,895
Men's and Kids'		1,195		790		3,351		2,089
Home/Other (a)		1,023		833		2,895		2,309
Total	$	5,440	$	3,990	$	15,794	$	10,566

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

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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

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

Merchandise Returns

The Company estimates merchandise returns using historical data and recognizes an allowance that reduces net sales and cost of sales. The liability for merchandise returns is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was ~~$182~~$243 million, ~~$213~~$159 million and ~~$245~~$182 million as of October 30, 2021, January 30, 2021 and October 31, 2020, ~~February 1, 2020 and November 2, 2019,~~ respectively. Included in prepaid expenses and other current assets is an asset totaling ~~$116~~$142 million, ~~$147~~$103 million and ~~$164~~$116 million as of October 30, 2021, January 30, 2021 and October 31, 2020, ~~February 1, 2020 and November 2, 2019,~~ respectively, for the recoverable cost of merchandise estimated to be returned by customers.

Gift Cards and Customer Loyalty Programs

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

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

The liability for unredeemed gift cards and customer loyalty programs is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was ~~$639~~$500 million, ~~$839~~$616 million and ~~$705~~$639 million as of October 30, 2021, January 30, 2021 and October 31, 2020, ~~February 1, 2020 and November 2, 2019,~~ respectively.

Credit Card Revenues, net

In 2005, the Company entered into an arrangement with Citibank, N.A. ("Citibank") to sell the Company's private label and co-branded credit cards ("Credit Card Program"). Subsequent to this initial arrangement and associated amendments, in 2014, the Company entered into an amended and restated Credit Card Program Agreement (the "Program Agreement") with Citibank. As part of the Program Agreement, the Company receives payments for providing a combination of interrelated services and intellectual property to Citibank in support of the underlying Credit Card Program. Revenue based on the spending activity of the underlying accounts is recognized as the respective card purchases occur and the Company’s profit share is recognized based on the performance of the underlying portfolio. Revenue associated with the establishment of new credit accounts and assisting in the receipt of payments for 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. 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 uppotential extensions as more fully described in the Program Agreement. The Company and Citibank are required to ~~two one-year extensions~~continue to meet their respective obligations and provide support pursuant to the terms of the Program Agreement through this period. The Company estimates that ~~could be requested by~~these events will not have an impact on the financial results of the Credit Card Program in fiscal 2021. The Company is evaluating options for its Credit Card Program including potential transfer to another financial service entity or modified arrangement with Citibank and is in the final stages of a decision. Based on current estimates, the Company ~~and agreed to by~~does not expect the ~~lenders. On March 19, 2020, due~~forthcoming changes to the ~~impacts of the COVID-19 pandemic, the Company~~

Credit Card Program’s financial structure to be materially different from its current terms.

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

5.
Financing Activities

~~elected to draw on~~

The following table shows the ~~full $1,500 million available under the agreement. As discussed further below, during the second quarter~~detail of ~~2020, this amount was repaid and the credit agreement amended.~~debt repayments:

	39 Weeks Ended
	October 30, 2021		October 31, 2020
	(millions)
Revolving credit agreement	$	335	$	1,500
9.5% Amortizing debentures due 2021		2		4
9.75% Amortizing debentures due 2021		1		2
3.875% Senior notes due 2022		450		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
8.375% Senior notes due 2025		1,300		0
6.65% Senior debentures due 2024		4		0
7.6% Senior debentures due 2025		19		0
	$	2,446	$	1,506

~~2020 Financing Activities~~

~~Secured Debt Issuance~~

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 by Macy’s Retail Holdings, LLC (f/k/a Macy’s Retail Holdings, Inc.) (“MRH”), a direct, wholly owned subsidiary of Macy’s, Inc.

The Company ~~used the proceeds of the Notes offering, along with cash on hand,~~is party to ~~repay the outstanding borrowings under the existing $1,500 million unsecured credit agreement.~~

~~Entry into Asset-Based Credit Facility~~

~~On June 8, 2020, Macy’s Inventory Funding LLC (the “ABL Borrower”), an indirect wholly owned subsidiary of the Company, and its parent, Macy’s Inventory Holdings LLC (the “ABL Parent”), entered into~~ 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. As of October 31, 2020, the ABL Credit Facility provides the ABL Borrower with (i)~~certain financial institutions providing for a ~~$2,941~~$2,941 million r~~evolving~~revolving credit facility (the “Revolving ABL Facility”), including a swingline sub-facility and a letter of credit ~~sub-facility, and (ii) a bridge revolving credit facility of up to $300 million (the “Bridge Facility”).~~sub- facility. The ~~ABL Borrower~~Company may request increases in the size of the Revolving ABL Facility up to an additional aggregate principal amount of $750 million. As of October ~~31, 2020,~~30, 2021, the Company had ~~$124~~$140 million of ~~standby letters of credit~~ outstanding borrowings under the ABL Credit ~~Facility, which reduces~~Facility.

On October 15, 2021, Macy’s Inc. redeemed the ~~available borrowing capacity. The Company had 0 borrowings~~entire outstanding ~~under the ABL Credit Facility as of October 31, 2020.~~

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

The ABL Credit Facility contains customary borrowing conditions including a borrowing base equal 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 option, either (a) adjusted LIBOR plus a margin of 2.75% to 3.00% or (b) a base rate plus a margin of 1.75% to 2.00%, in each case depending on revolving line utilization and (ii) after the Step Down Date, at the ABL Borrower’s option, either (a) adjusted LIBOR plus a margin of 2.25% to 2.50% or (b) a base rate plus a margin of 1.25% to 1.50%, in each case depending on revolving line utilization. The ABL Credit Facility also contains customary covenants that provide for, among other things, limitations on indebtedness, liens, fundamental changes, restricted payments, cash hoarding, and prepayment of certain indebtedness as well as customary representations and warranties and events of default typical for credit facilities of this type.

~~MACY'S, INC.~~

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

~~(Unaudited)~~

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

~~Amendment to Existing Credit Agreement~~

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

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

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

~~(i) $81~~$294 million aggregate principal amount of ~~6.65% Senior Secured Debentures~~its 3.875% senior notes due ~~2024 (“New 2024~~2022 (the “2022 Notes”) ~~issued by MRH for validly tendered (and not validly withdrawn)~~. The redemption price was equal to 100% of the outstanding ~~6.65% Senior Debentures due 2024 issued by MRH (“Old 2024 Notes”);~~

~~(ii) $74 million~~principal amount of the 2022 Notes ($294 million), plus accrued and unpaid interest of $3 million.

On August 17, 2021, Macy’s Inc. redeemed the entire outstanding $1.3 billion aggregate principal amount of ~~6.7%~~its 8.375% Senior Secured ~~Debentures~~Notes due ~~2028~~2025 (the “2025 Notes”). The redemption price was equal to 100% of the outstanding principal amount of the 2025 Notes ($1.3 billion), plus accrued and unpaid interest of $19 million, plus the applicable premium due to holders of the 2025 Notes in connection with an early redemption of $138 million, plus unamortized deferred debt costs of $47 million. The Company recognized the redemption premium and unamortized deferred debt costs of $185 million as losses on early retirement of debt during the 13 weeks ending October 30, 2021.

On March 17, 2021, Macy’s Retail Holdings, LLC (“~~New 2028 Notes”~~MRH”), a direct, wholly owned subsidiary of Macy’s, Inc., 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~~$500 million in aggregate principal amount of ~~8.75% Senior Secured Debentures~~5.875% senior notes due 2029 ~~(“New~~(the “2029 Notes”) in a private offering (the “Notes Offering”). The 2029 ~~Notes”) issued~~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 ~~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,~~used the net proceeds from the Notes Offering, together with cash on hand, to fund the ~~New 2024 Notes, New 2028 Notes, New 2029 Notes, New 2030 Notes~~tender offer discussed below.

On March 17, 2021, the Company completed a tender offer in which $500 million of senior notes and ~~New 2032 Notes,~~debentures were tendered for early settlement and purchased by MRH. The total cash cost for 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, togethertender offer was $17 million with the ~~Old 2024~~remainder funded through the net proceeds from the Notes ~~Old 2028 Notes, Old 2029 Notes, Old 2030 Notes and Old 2032 Notes, the “Old Notes” and each series, a “series~~Offering discussed above. The Company recognized $11 million 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~~losses on early retirement 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 liendebt on the ~~same collateral securing~~Consolidated Statements of Operation during the ~~Notes. Following the settlement, the aggregate principal amounts~~first quarter 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.

2021.

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)~~

6.
Benefit Plans

~~Debt Repayments~~

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

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

~~8. Benefit Plans~~

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

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

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

	13 Weeks Ended						39 Weeks Ended
	October 30, 2021			October 31, 2020			October 30, 2021				October 31, 2020
	(millions)						(millions)
401(k) Qualified Defined Contribution Plan	$	20		$	17		$	59			$	49
Pension Plan
Service cost	$	0		$	1		$	1			$	4
Interest cost		11			13			36				51
Expected return on assets		(39	)		(46	)		(122	)			(138	)
Recognition of net actuarial loss		5			11			22				31
	$	(23	)	$	(21	)	$	(63	)		$	(52	)
Supplementary Retirement Plan
Interest cost		3			3			8				11
Recognition of net actuarial loss		3			3			10				9
	$	6		$	6		$	18			$	20
										��
Total Retirement Expense	$	3		$	2		$	14			$	17

Postretirement Obligations
Interest cost		1			1			1				3
Recognition of net actuarial gain		(1	)		(1	)		(4	)			(4	)
	$	0		$	0		$	(3	)		$	(1	)

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

In connection with the Company’s Pension Plan, for the 13 and 39 weeks ended October 30, 2021, the Company incurred non-cash settlement charges of $8 million and $90 million, respectively. For the 13 weeks ended October 30, 2021, these charges relate to the pro-rata recognition of net actuarial losses associated with the Company's Pension Plan and are the result of an increase in lump sum distributions associated with retiree distribution elections. For the 39 weeks ended October 30, 2021, these charges relate to the pro-rata recognition of net actuarial losses associated with the Company’s Pension Plan and is the result of the transfer of pension obligations for certain retirees and beneficiaries under the Pension Plan through the purchase of a group annuity contract with an insurance company. The Company transferred $256 million of Pension Plan assets to the insurance company

in the second quarter of 2021, thereby reducing its Pension Plan benefit obligations.

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

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

7.
Fair Value Measurements

~~9. Fair Value Measurements~~

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

Level 1: Quoted prices in active markets for identical assets

Level 2: Significant observable inputs for the assets

Level 3: Significant unobservable inputs for the assets

	October 30, 2021								October 31, 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	$	41	$	41	$	0	$	0	$	95	$	32	$	63	$	0

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

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

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

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

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

	October 30, 2021						October 31, 2020
	Notional Amount		Carrying Amount		Fair Value		Notional Amount		Carrying Amount		Fair Value
	(millions)
Long-term debt	$	3,295	$	3,295	$	3,377	$	4,903	$	4,852	$	3,967

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

MACY'S, INC.

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

~~(Unaudited)~~

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~10. Condensed Consolidating Financial Information~~

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

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

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

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

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

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

~~(millions)~~

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Statement of Comprehensive Income~~

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

~~(millions)~~

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

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

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

~~(millions)~~

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Statement of Comprehensive Income~~

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

~~(millions)~~

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Balance Sheet~~

~~As of October 31, 2020~~

~~(millions)~~

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Balance Sheet~~

~~As of November 2, 2019~~

~~(millions)~~

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Balance Sheet~~

~~As of February 1, 2020~~

~~(millions)~~

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Statement of Cash Flows~~

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

~~(millions)~~

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

~~MACY'S, INC.~~

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

~~(Unaudited)~~

~~Condensed Consolidating Statement of Cash Flows~~

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

~~(millions)~~

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

~~MACY'S, INC.~~

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

For purposes of the following discussion, all references to "third quarter of ~~2020"~~2021" and "third quarter of ~~2019"~~2020" are to the Company's 13-week fiscal periods ended October 30, 2021 and October 31, 2020, ~~and November 2, 2019,~~ respectively. References to ~~"2020"~~ "2021"and ~~"2019"~~"2020" are to the ~~Company's~~Company’s 39-week fiscal periods ended October 30, 2021 and October 31, 2020, ~~and November 2, 2019,~~ respectively.

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

COVID-19 Update

~~Impact of COVID-19~~

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

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

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

◦~~reducing store hours,~~

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

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

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

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

~~The Company continues to prioritize the health and safety~~well-being of its customers and colleagues, while also focusing on prudent cash management, maintaining strong liquidity and executing its strategic initiatives. The Company continuously monitors the ongoing impacts of COVID-19, including the outbreaks of any variant strains, as well as the evolving federal, state and local ordinances and health guidelines related to the mitigation of transmission risk associated with the pandemic. The Company has ~~implemented further enhancements during the Holiday 2020 season in response~~taken, and continues to ~~an expected increase in the level of activity~~take, numerous steps to promote health and safety at its stores and ~~facilities. Specifically,~~facilities, including following federal, state and local guidelines regarding the use of masks, supporting vaccination efforts, maintaining increased safety equipment in stores, offering contactless shopping opportunities, providing company-supplied personal protection equipment and wellness checks for colleagues, continuing enhanced cleaning throughout our various locations and continuing to offer remote work plans for certain colleagues.Modifications to work environment policies could impact the use of certain corporate assets, and as such could lead to additional long-lived tangible and right of use corporate asset impairment.

Under the terms of the Program Agreement, if sales decrease by more than 34% over a twelve-month period as compared to the Benchmark Year, defined as the twelve-month period from July 2006 to June 2007 in the Program Agreement, Citibank has the ability to provide written notice to terminate the agreement prior to the end of its current term. Based on the results for the Company’s February 2021 fiscal period, sales for the twelve-month period ended February 27, 2021 decreased by more than 34% as compared to the Benchmark Year. On June 4, 2021, the Company received a written notice of termination of the Program Agreement from Citibank. Upon receipt of the written notice of termination, the Company has ~~implemented protocols~~six months to ~~systemically monitor~~exercise, or not exercise, an option to purchase the ~~health~~assets of the Program Agreement, or nominate a third party to purchase such assets, and ~~wellness~~a subsequent six month period to complete such transfer, subject to potential extensions as more fully described in the Program Agreement. The Company and Citibank are required to continue to meet their respective obligations and provide support pursuant to the terms of the Program Agreement through this period. The Company estimates that these events will not have an impact on the financial results of the Credit Card Program in fiscal 2021. The Company is evaluating options for its ~~stores’ colleague population as well as~~Credit Card Program including potential transfer to another financial service entity or modified arrangement with Citibank and is in the ~~health risk at~~final stages of a ~~store location level based~~decision. Based on ~~public health data.Such measures allow~~current estimates, the Company does not expect the forthcoming changes to ~~anticipate potential COVID-19 resurgences and alter stores’ operations as appropriate or necessary as well as monitor store occupancy levels~~the Credit Card Program’s financial structure to ~~ensure they are within jurisdictional guidelines. The implementation of these measures has resulted in~~be materially different from its current terms.

Although the Company ~~incurring additional costs and such expenses will continue~~has experienced strong recovery in operating results during fiscal 2021 as compared to fiscal 2020, the Company continues to ~~ensure~~monitor the ~~health and safety~~impact of ~~its customers and colleagues.~~

•~~In an effort to increase liquidity,~~COVID-19 on the Company fully drew on its $1,500 million credit facility, announced the suspension of quarterly cash dividends beginning in the second quarter of 2020 and took additional steps to reduce discretionary spending. The Company's Board of Directors also rescinded its authorization of any unused amounts under the Company's share repurchase program. In June 2020, the Company completed financing activities totaling nearly $4.5 billion and used a portion of the proceeds from these activities,macro economy as well as ~~cash~~ on ~~hand, to repay~~the Company’s and 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.

vendor partners’ operations. T

~~MACY'S, INC.~~

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

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

•Through October 31, 2020, the Company has deferred approximately $75 million of occupancy payments for a significant number of its stores. 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, the Company utilized the benefits provided in the CARES Act signed into law on March 27, 2020, which included payroll tax credits for employee retention, deferral of payroll taxes, and several income tax provisions, including modifications to the net interest deduction limitation, changes to certain property depreciation and carryback of certain operating losses.

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

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

MACY'S, INC.

Quarterly Overview

~~Management Overview~~

~~The Company's performance during~~During the third quarter of ~~2020~~2021, the Company continued to ~~be impacted by~~build on the ~~COVID-19 pandemic.~~momentum of the first half of 2021 and exceeded its expectations from both a sales and profit standpoint. The profitable third quarter results were driven by strong consumer behavior, disciplined cost and inventory management, ~~strong~~and the continued execution ~~by colleagues~~of the Company’s Polaris strategy.

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

•

Comparable sales were up 37.2% on an owned basis; and up 35.6% on an owned plus licensed basis compared to the third quarter of 2020. Compared to the third quarter of 2019, comparable sales were up 8.9% on an owned basis and up 8.7% on an owned plus licensed basis. On a comparable owned plus licensed basis, the third quarter of 2021 benefitted by approximately 200 bps from the shift of a Friends and Family promotional event into the quarter from the fourth quarter, compared to the third quarter of 2019.

•

Digital sales increased 19% versus the third quarter of 2020 and grew 49% versus the third quarter of 2019. Digital penetration was at 33% of net sales for the third quarter of 2021, a 5-percentage point decline from the third quarter of 2020 but a 10-percentage point increase over the third quarter of 2019.

•

Gross margin was 41.0%, compared to 35.6% in the third quarter of 2020, representing an improvement of approximately 540 basis points. Compared to the third quarter of 2019, gross margin increased 100 basis points.

•

Net credit card revenues were $213 million, up $18 million from the third quarter of 2020, and up $30 million from the third quarter of 2019.

•

Selling, general and administrative ("SG&A") expense was $1.97 billion, up $247 million from the third quarter of 2020. Compared to the third quarter of 2019, SG&A expense was down $229 million. SG&A expense as a percent of sales was 36.3%, down from 43.3% in the third quarter of 2020 and 630 basis points lower than the third quarter of 2019 rate of 42.6%.

•

Net income was $239 million and 4.4% of net sales in the third quarter of 2021, compared to a net loss of $91 million and (2.3)% of net sales in the third quarter of 2020 and net income of $2 million and 0.04% of net sales in the third quarter of 2019. Net income adjusted for impairment, restructuring and other costs, settlement charges and losses on early retirement of debt, improved from a loss of $60 million in the third quarter of 2020 to adjusted net income of $386 million for the third quarter of 2021. This compares to adjusted net income of $21 million in the third quarter of 2019.

•

The third quarter of 2021 had positive earnings before interest, taxes, depreciation and amortization ("EBITDA") of $757 million compared to EBITDA of $113 million during the third quarter of 2020. EBITDA was $300 million for the third quarter of 2019. On an adjusted basis, EBITDA was $765 million, or 14.1% of net sales, compared to $159 million, or 4.0% of net sales, and $325 million, or 6.3% of net sales for the third quarters of 2021, 2020, and 2019, respectively.

•

Diluted earnings per share and adjusted diluted earnings per share were $0.76 and $1.23, respectively, during the third quarter of 2021. This compares to a diluted loss per share and adjusted diluted loss per share of $0.29 and $0.19, respectively, for the third quarter of 2020, and diluted earnings per share and adjusted diluted earnings per share of $0.01 and $0.07 for the third quarter of 2019, respectively.

•

Inventory was up 19.4% from the third quarter of 2020 and down 15.4% from the third quarter of 2019.

•

During the third quarter of 2021, the Company repaid early approximately $1.6 billion of debt, reinstated its regular quarterly dividend and paid $46 million in cash dividends, and repurchased 13,043,200 shares of its common stock at an average cost of $23.02 per share for a total cost of approximately $300 million, which accounts for 60% of the $500 million share repurchase program authorized by the Company’s Board of Directors during the quarter.

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

•

Win With Fashion and Style: By offering a wide assortment of categories, products and brands from off-price to luxury, the Company was able to reach a broad and diverse range of customers during the third quarter. In merchandise, strengths continued in pandemic-driven products such as home, fragrance, jewelry, watches and sleepwear and the Company also saw

MACY'S, INC.

continued recovery in occasion-based categories such as dresses, men’s tailored and luggage. 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. Most notably, during the third quarter the Company launched Oake, a sustainable private brand textiles brand, announced an exclusive omnichannel partnership with Toys ‘R’ Us to expand its toy business, and added Fanatics as a new brand partner to offer customers one of the largest selections of licensed sports products that significantly increases the Company’s offering of fan apparel.

•

Deliver Clear Value: The Company has leveraged data analytics and pricing tools to efficiently plan, place and price inventory, including location level pricing and point-of -sale (“POS”) pricing work. With these actions, the Company has lowered its volume of markdowns and improved inventory placement and assortment allocations among its distribution centers and stores. These collective activities have resulted in higher average unit retail prices and gross margin performance. In addition, inventory turn for the trailing 12 months has improved by almost 18% and has improved for the trailing 6 months by approximately 22%.

•

Excel in Digital Shopping: The Company continued to improve its digital offerings and launched several initiatives during the third quarter of 2021 including a refreshed mobile app, live shopping functionality, fragrance finder, 3D room planning

expansion, a sustainability sitelet and added Venmo to in-store and PayPal to in-store and online payments. As a result of these and other investments, digital conversion for the quarter was 4.25%, up 14% compared to the ~~holiday shopping season.~~ third quarter of 2020 and up 27% compared to the third quarter of 2019. In addition, in November 2021, the Company announced its plan to launch a curated, digital marketplace in the second half of 2022.

•

Enhance Store Experience: The Company continues to invest in physical stores to support its digitally-led omnichannel business model and added five off-mall, smaller format stores (Market by Macy’s, freestanding Macy’s Backstage locations, and Bloomingdale’s new off-mall, smaller store format concept, Bloomies) across Dallas, Atlanta and Washington D.C. markets during the third quarter. Although early, these new store formats saw strong sales and solid Net Promotor Scores (“NPS”). Overall, the Company is seeing ongoing trend improvement in store conversion. During the third quarter, sales in the Company’s non-downtown locations continued to sequentially improve as compared to the previous quarters of 2021. However, the slow return of international tourism and office workers continued to impact the Company’s downtown stores as their sales performance significantly lagged the Company’s other stores as compared to the third quarter of 2019.

•

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 and improving inventory placement. The Company is navigating supply chain disruptions by adjusting freight strategies, diversifying ports and working closely with international carriers and brand partners to prioritize product.

•

Enable Transformation: The Company has continued to modernize its technology foundations to increase agility in reacting 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. As part of the Company’s ongoing commitment to attract and retain talent, in November 2021, the Company announced significant new investments in its colleagues’ benefit programs. These investments include launching a tuition benefit program, raising its company-wide minimum rate to $15 per hour and increasing compensation and benefits for colleagues across Macy’s Inc.

The ~~Company's gross~~ ~~margin rate~~Company saw Platinum, Gold and Silver Star Rewards customers continue to engage with the Macy’s brand during the third quarter of 2020 increased sequentially as compared to the second quarter of 2020, driven by improved sell-through of merchandise during the quarter that also enabled the Company to exit the quarter with healthy inventory levels heading into the fourth quarter of 2020. The Company is approaching the fourth quarter of 2020 conservatively given anticipated continued turbulence associated2021, with the ~~COVID-19 pandemic and a moderation of its stores' recovery.~~

~~Third Quarter of 2020 Financial Highlights~~

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

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

•~~Gross margin of 35.6%, compared to 23.6% in the second quarter of 2020, an improvement of approximately 12 percentage points.~~

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

~~MACY'S, INC.~~

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

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

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

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

~~Polaris Strategy~~

On February 4, 2020, Macy’s, Inc. announced its Polaris strategy, a three-year plan designed to stabilize profitability and position the Company for sustainable, profitable growth. Over the course 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 unchanged to those presented in February 2020: however, the components were re-focused during the second quarter of 2020 to ~~align with~~average customer ~~demand in the COVID-19 pandemic environment.~~

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

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

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

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

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

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

~~MACY'S, INC.~~

~~Results of Operations~~

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

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

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

~~Net Sales~~

~~Net sales for the third quarter of 2020 decreased $1,183 million, or 22.9%,~~spend up 16% compared to the third quarter of 2019. The ~~Company's~~Company’s Bronze Star Rewards tier, its youngest and most diverse loyalty tier, continued to grow by adding approximately 2.3 million members during the quarter. During the third quarter of 2021, the Company acquired approximately 4.4 million new Macy’s customers, an increase of 28% compared to the third quarter of 2019. 41% of the new customers were acquired through the digital channel during the third quarter and approximately 30% were dormant customers over the last 12 months who have since re-engaged.

From a nameplate perspective, Macy’s brand comparable sales were up 36.4% on an owned basis and up 35.1% on an owned-plus-licensed basis compared to the third quarter of 2020, and up 9.0% and 8.4%, respectively, compared to the third quarter of 2019. Bloomingdale’s comparable sales ~~are showing steady~~on an owned basis were up 43.4% and on an owned-plus-licensed basis were up 38.5% compared to the third quarter of 2020, and up 9.1% and 11.2%, respectively, compared to the third quarter of 2019. Bluemercury comparable sales were up 39.5% on an owned and owned-plus licensed basis compared to the third quarter of 2020, but down 2.2% on an owned and owned-plus-licensed basis compared to the third quarter of 2019.

MACY'S, INC.

Results of Operations

Comparison of the Third Quarter of 2021 and the Third Quarter of 2020

	Third Quarter of 2021						Third Quarter of 2020
	Amount			% to Net Sales			Amount			% to Net Sales
	(dollars in millions, except per share figures)
Net sales	$	5,440					$	3,990
Credit card revenues, net		213			3.9	%		195			4.9	%

Cost of sales		(3,207	)		(59.0	)%		(2,569	)		(64.4	)%
Selling, general and administrative expenses		(1,973	)		(36.3	)%		(1,726	)		(43.3	)%
Gains on sale of real estate		50			0.9	%		3			0.1	%
Impairment, restructuring and other costs		—			—			(20	)		(0.5	)%
Operating income (loss)		523			9.6	%		(127	)		(3.2	)%
Benefit plan income, net		17						16
Settlement charges		(8	)					(26	)
Losses on early retirement of debt		(185	)					—
Interest expense, net		(53	)					(80	)
Income (loss) before income taxes		294						(217	)
Federal, state and local income tax benefit (expense)		(55	)					126
Net income (loss)	$	239					$	(91	)

Diluted earnings (loss) per share	$	0.76					$	(0.29	)

Supplemental Financial Measure
Gross margin (a)	$	2,233			41.0	%	$	1,421			35.6	%

Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items	$	1.23					$	(0.19	)

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

Net Sales

Net sales for the third quarter of 2021 increased $1.45 billion, or 36.3%, compared to the third quarter of 2020. The Company’s third quarter of 2021 sales showed recovery across all three brands - Macy's, Bloomingdale's and bluemercury. Digital sales during the third quarter of ~~2020 improved 27%~~2021 increased 19% compared to the third quarter of ~~2019~~2020 and accounted for approximately ~~38%~~33% of ~~comparable sales on an owned basis.~~net sales. The ~~strongest performing~~Company experienced strength across nearly all of its major merchandise categories during the third quarter of 2020 were home furnishings, as customers continue to work, cook, dine and learn from home, and both luxury items, including fine jewelry and fragrances, and off-price items. Sales performance continued to be weaker in apparel driven by continued consumer strength, growth in the ~~work-from-home environment.~~

Company’s digital channel and continued recovery of its stores.

Credit Card Revenues, Net

Net credit card revenues were ~~$195~~$213 million in the third quarter of ~~2020,~~2021, an increase of ~~$12~~$18 million, or ~~6.6%~~9.2%, compared to ~~$183~~$195 million recognized in the third quarter of ~~2019.~~2020. This increase was driven by ~~improvement in~~higher credit sales and the continuation of the strong credit health of the credit card portfolio's ~~delinquency rates and~~customers leading to lower levels of bad debt, partially offset ~~slightly~~ by a decrease in proprietary credit card sales penetration, down ~~330~~approximately 200 basis points, at ~~45.0%,~~43% in 2021 compared to 45% in 2020.

Gross Margin

Gross margin was 41.0% in the third quarter of ~~2020~~2021 compared to ~~48.3% in the third quarter of 2019.~~

~~MACY'S, INC.~~

~~Gross Margin~~

~~Gross margin was~~ 35.6% in the third quarter of ~~2020 compared to 40.0% in the third quarter of 2019, but up from 23.6% for the second quarter of~~ 2020. The ~~decline~~increase in the gross margin rate in the third quarter of ~~2020~~2021 compared to the third quarter of ~~2019~~2020 was driven primarily by ~~higher delivery expense resulting from~~continued recovery of its stores, inventory productivity and the ~~improvement in digital sales. The Company experienced an improved trend~~continued execution of the Polaris strategy, including pricing science initiatives such as ~~compared to the second quarter of 2020 from disciplined inventory management, better sell through of both full-price~~location level pricing and ~~clearance merchandise and lower clearance markdowns.~~

POS promotion testing.

MACY'S, INC.

Selling, General and Administrative ~~Expenses~~

Expense

SG&A ~~expenses~~expense for the third quarter of ~~2020 decreased $476~~2021 increased $247 million from the third quarter of ~~2019.~~2020 but decreased as a percentage of net sales by 700 basis 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 and as part of the Polaris strategy as well as ~~execution against~~a tight labor market.

Gains on Sale of Real Estate

The third quarter of 2021 included asset sale gains of $50 million compared to $3 million in the ~~Polaris strategy.~~

third quarter of 2020. The third quarter of 2021 asset sale gains included approximately $33 million related to the Macy’s Baldwin Hills transaction.

Impairment, Restructuring ~~Impairment~~ and Other Costs

During the ~~13 weeks ended October 31,~~third quarter of 2020, ~~the~~the Company recognized expense of $20 million primarily related to restructuring and other costs. ~~See~~

Losses on Early Retirement of Debt

During the ~~discussion at Note 3, "Impairment, Restructuring and Other Costs"~~third quarter of 2021, the Company recognized $185 million of losses on early retirement of debt due to the ~~accompanying Consolidated Financial Statements for further information.~~

redemption of the entire outstanding $1.3 billion aggregate principal amount of the 2025 Notes.

Settlement Charges

During the ~~13 weeks ended October 31,~~third quarter of 2021 and 2020, the Company recognized ~~expense~~non-cash settlement charges of $8 million and $26 million, respectively, 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~~

Net interest expense, excluding losses on early retirement of debt, was $53 million during the third quarter of ~~2020, the Company recognized expense of~~2021, compared to $80 million ~~compared to $48 million in~~during the third quarter of ~~2019.~~2020. The ~~increase is~~decrease was primarily driven by interest savings associated with the ~~issuance~~redemption of ~~the new~~ $1,300 million of secured notes in ~~June 2020.~~

August 2021.

Effective Tax Rate

The ~~Company's~~Company’s effective tax rate was 18.7% for the third quarter of 2021 compared to the federal income statutory tax rate of 21% driven primarily by the impact of return-to-provision adjustments that were identified in connection with the filing of the U.S. federal income tax return during the quarter resulting in an increase of the net operating loss carryback permitted under the CARES Act.

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

Act.

Diluted Earnings (Loss) Per Share

Diluted earnings per share were $0.76 for the third quarter of 2021 compared to a diluted loss per share of $0.29 for the third quarter of 2020, ~~decreased $0.30 compared to the third quarter of 2019,~~ reflecting ~~lower~~higher net income ~~resulting~~as a result of the Company’s continued recovery from the impact of the COVID-19 pandemic.

MACY'S, INC.

Comparison of the 39 Weeks Ended October 30, 2021 and October 31, 2020 ~~and November 2, 2019~~

	2021						2020
	Amount			% to Net Sales			Amount			% to Net Sales
	(dollars in millions, except per share figures)
Net sales	$	15,794					$	10,566
Credit card revenues, net		568			3.6	%		494			4.7	%

Cost of sales		(9,449	)		(59.8	)%		(7,788	)		(73.7	)%
Selling, general and administrative expenses		(5,618	)		(35.6	)%		(4,723	)		(44.7	)%
Gains on sale of real estate		61			0.4	%		20			0.2	%
Impairment, restructuring and other costs		(21	)		(0.1	)%		(3,445	)		(32.6	)%
Operating income (loss)		1,335			8.5	%		(4,876	)		(46.1	)%
Benefit plan income, net		49						37
Settlement charges		(90	)					(65	)
Losses on early retirement of debt		(199	)					—
Interest expense, net		(211	)					(196	)
Financing costs		—						(4	)
Income (loss) before income taxes		884						(5,104	)
Federal, state and local income tax benefit (expense)		(197	)					1,000
Net income (loss)	$	687					$	(4,104	)

Diluted earnings (loss) per share	$	2.17					$	(13.20	)

Supplemental Financial Measure
Gross margin (a)	$	6,345			40.2	%	$	2,778			26.3	%

Supplemental Non-GAAP Financial Measure
Diluted earnings (loss) per share, excluding the impact of certain items	$	2.91					$	(3.03	)

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

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

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

Net Sales

Net sales for ~~2020 decreased $5,657 million,~~2021 increased $5.2 billion, or ~~34.9%~~49.5%, compared to ~~2019.~~2020. The ~~Company's 2020~~Company’s 2021 sales ~~were negatively impacted by the closure of~~showed recovery across all ~~stores on March 18, 2020, resulting in stores~~three brands - Macy's, Bloomingdale's and bluemercury. Digital sales ~~being significantly down~~during 2021 improved 13% compared to ~~2019. Stores began to reopen in early May~~ 2020 and substantially all stores were fully reopened by August 1, 2020. As discussed within the quarterly analysis, digital sales experienced significant growth due to changes in consumer shopping behaviors and increased during 2020 by nearly 25% compared to 2019 and accounted for approximately 34% of net sales. The Company experienced strength across nearly ~~45%~~all of ~~comparable sales on an owned basis. The strongest performing~~its major merchandise categories ~~during 2020 were home, particularly housewares, textiles and soft home, fine jewelry, fragrances, activewear, and sleepwear. Sales performance~~driven by continued ~~to be weaker~~customer strength, the continued recovery of its stores as well as continued growth in ~~women’s and men's apparel, including dresses and suits.~~

its digital channel.

Credit Card Revenues, Net

Net credit card revenues were ~~$494~~$568 million in ~~2020, a decrease~~2021, an increase of ~~$37~~$74 million, or 7%15.0%, compared to ~~$531 million recognized~~2020. This increase was driven by higher credit sales and improvement in ~~2019. Proprietary credit penetration was down 320 basis points at 43.9% in 2020 compared to 47.1% in 2019. The decrease in net~~the credit card ~~revenue is associated with lower credit sales as compared to the prior year, driven by the aforementioned store closures resulting from the COVID-19 pandemic.~~

portfolio's delinquency rates and bad debt.

Gross Margin

Gross margin was 40.2% in 2021 compared to 26.3% in ~~2020~~2020. The increase in the gross margin rate in 2021 compared to ~~38.9% in 2019. The reason for~~2020 was driven primarily by continued recovery of its stores, inventory productivity and the ~~decline was due~~execution of the Polaris strategy. Due to ~~increased net~~the impact of COVID-19 and store closures, the first quarter of 2020 included an approximate $300 million inventory write-down from markdowns ~~as compared to 2019 as well as higher delivery expense.~~

~~MACY'S, INC.~~

on fashion merchandise.

Selling, General and Administrative ~~Expenses~~

Expense

SG&A ~~expenses~~expense for 2021 increased $895 million from 2020 but decreased ~~$1,766 million~~ ~~from 2019.~~as a percentage of net sales by 910 basis points. The ~~decrease~~increase in SG&A expense dollars ~~is a reflection of lower~~corresponds with higher net sales ~~as well as~~but the ~~implementation of various~~improvement in the SG&A expense rate reflects the expense management strategies ~~undertaken~~implemented by the Company in response to the COVID-19 pandemic ~~including~~and as part of the ~~July 2020 restructuring~~Polaris strategy as well as a tight labor market.

MACY'S, INC.

Gains on Sale of Real Estate

2021 included asset sale gains of $61 million compared to ~~align~~$20 million in 2020. 2021 asset sale gains primarily consist of approximately $33 million related to the ~~cost base with anticipated near-term sales, a significant reduction in discretionary spending, the employee furlough, and the Company's Polaris strategy.~~

Macy’s Baldwin Hills transaction.

Impairment, Restructuring and Other Costs

During the 39 weeks ended October 30, 2021, the Company incurred impairment, restructuring and other costs totaling $21 million, primarily related to the write-off of capitalized software assets.

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

•

$3,080 million of goodwill impairments, with $2,982 million attributable to the Macy's reporting unit and $98 million attributable to the Bluemercury reporting unit.

•

$90 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.

Additionally, during 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" to the accompanying Consolidated Financial Statements for more information.

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

~~Additionally,~~39 weeks ended October 31, 2020, the Company recognized $196 million related to restructuring and other costs, including severance of $154 million ~~of severance recognized during the 13 weeks ended August 1, 2020~~ associated with the reduction in force in response to the COVID-19 pandemic. ~~See discussion at Note 3, "Impairment, Restructuring~~

Settlement Charges

During 2021, the Company recognized a non-cash settlement charge of $90 million primarily driven by the transfer of fully funded pension obligations for certain retirees and ~~Other Costs" to~~beneficiaries through the ~~accompanying Consolidated Financial Statements for more information.~~

~~Settlement Charges~~

purchase of a group annuity contract with an insurance company.

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

~~Interest Expense, Net~~

Losses on Early Retirement of Debt

During ~~2020,~~2021, the Company recognized $199 million of losses on early retirement of debt primarily due to the redemption of the entire outstanding $1.3 billion aggregate principal amount of the 2025 Notes in the third quarter of 2021 as well as the tender offer in the first quarter of 2021.

Interest Expense, Net

Net interest expense, excluding losses on early retirement of debt and financing costs, was $211 million during 2021, compared to $196 million ~~compared to $143 million in 2019. As noted previously, the~~during 2020. The increase is primarily driven by interest paid with respect to the ~~issuance~~$1,300 million of secured notes issued in June 2020 (redeemed in August 2021).

Effective Tax Rate

The Company’s effective tax rate was 22.3% for 2021, which is slightly higher as compared to the federal income statutory tax rate of 21% driven primarily by the impact of state and local taxes, offset partly by the impact of return-to-provision adjustments that were identified in connection with the filing of the ~~new $1,300 million secured notes~~U.S. federal income tax return in ~~June 2020.~~

~~Effective Tax Rate~~

the third quarter of 2021 resulting in an increase of the net operating loss carryback permitted under the CARES Act.

The ~~Company's~~Company’s effective tax rate of 19.6% 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.~~charge and additional income tax expense associated with the deferred tax remeasurement recognized during the first quarter of 2020. Additionally, the effective tax rate for 2020 ~~and the effective tax rate for 2019 of 19.7% were~~was favorably impacted by the settlement orand expiration of certain tax matters.

Diluted Earnings (Loss) Per Share

Diluted earnings per share were $2.17 for 2021 compared to a diluted loss per share of $13.20 for 2020, ~~decreased $13.92 compared to 2019,~~ reflecting ~~lower~~higher net income ~~resulting~~as a result of the continued recovery from the impact of the COVID-19 ~~pandemic and~~pandemic. 2020 also included a goodwill ~~impairment.~~

impairment charge.

MACY'S, INC.

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~~

The COVID-19 outbreak ~~there is significant uncertainty surrounding~~and related store closure in 2020 negatively impacted the ~~potential impact on the Company's results of operations and cash flows. The~~ Company’s liquidity ~~was negatively impacted by store closures.~~in 2020. The Company proactively took steps to increase available cash on hand including, but not limited to, targeted reductions in discretionary operating expenses and capital expenditures, suspension of the Company's quarterly dividend and executing additional financing transactions during the second quarter of ~~2020 as discussed in more detail below. While~~2020. During 2021, the Company has ~~obtained additional financing,~~seen significant improvement in its operations and combined with its strong liquidity position as of October 30, 2021, estimates that it has sufficient cash on hand and other capital resources to cover the Company's reasonably foreseeable working capital, capital expenditure, debt service and other cash requirements in both the near term and over the longer term. However, the continued uncertainty associated with the COVID-19 pandemic could have a significant impact on the Company’s cash flow and liquidity and further actions may be required to improve the Company’s cash ~~position, including but not limited to, monetizing Company assets, reinstituting colleague furloughs, and foregoing capital expenditures and other discretionary expenses.~~

~~MACY'S, INC.~~

position.

Operating Activities

Net cash provided by operating activities in ~~2020~~2021 was ~~$244~~$841 million compared to ~~$172~~net cash provided by operating activities of $244 million ~~in 2019.~~for 2020. The increase in operating cash flows period over period is due to significant improvement in the ~~lower level of~~Company’s EBITDA, offset slightly by net working capital changes, primarily driven by increases in merchandise inventories ~~including a reduction~~ in ~~inventory receipts as the Company executed its inventory management strategies in response to the COVID-19 pandemic, partially offset by operating losses in 2020 driven by the impact~~anticipation of the ~~COVID-19 pandemic, primarily resulting from the temporary closure of the Company's physical store locations in the first and second quarters of 2020.~~

2021 Holiday shopping season.

Investing Activities

Net cash used by investing activities was $203 million for 2021, compared to $314 million ~~in 2020, compared to $729 million in 2019.~~for 2020. The decrease ~~in 2020~~period over period is primarily due to ~~a $426 million reduction~~an increase in ~~capital spending~~proceeds resulting from asset sales during 2021 as compared to ~~2019~~2020 as ~~a result~~well as the sale of ~~the Company's proactive steps to reduce discretionary spending to address the COVID-19 pandemic.~~

certain asset backed investments.

Financing Activities

Net cash used by financing activities was $2,071 million for 2021, driven by the early redemption of approximately $1.6 billion of debt, net borrowings of approximately $140 million under the ABL Credit facility, cash dividend payments of $46 million and cash payments of $294 million associated with share repurchases during the third quarter of 2021. Net cash provided by ~~the Company for~~ financing activities was $963 million for 2020, ~~including debt issued~~driven by inflows of $2,780 million related to a $1,500 million draw on ~~its~~the Company’s revolving credit agreement and issuance of ~~$1,300~~$1,300 million ~~8.375% senior secured notes,~~aggregate principal amount of the 2025 Notes, partially offset by the repayment of the $1,500 million ~~revolving~~of credit agreement draw. 2020 also included $117 million of cash dividends paid. See below for further discussion ~~on 2020 financing activities. Net cash used by~~of the ~~Company for~~Company’s financing activities ~~was $340 million for 2019, driven by payment of $349 million of cash dividends.~~

~~Secured Debt Issuance~~

during 2021.

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

On March 17, 2021, the Company completed a tender offer in which $500 million of senior notes and debentures were tendered for early settlement and purchased by MRH 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 on early retirement of debt on the Consolidated Statements of Operation during 2021.

On August 17, 2021, Macy’s Inc. redeemed the entire outstanding $1.3 billion aggregate principal amount of the 2025 Notes. The redemption price was equal to 100% of the outstanding ~~borrowings under the existing $1,500 million unsecured credit agreement.~~

~~Entry into Asset-Based Credit Facility~~

~~On June 8, 2020, the ABL Borrower, an indirect wholly owned subsidiary~~principal amount of the 2025 notes ($1.3 billion), plus accrued and unpaid interest of $19 million, plus the applicable premium due to holders of the 2025 Notes in connection with an early redemption of $138 million, plus unamortized deferred debt costs of $47 million. The total pre-tax charge of $185 million was recorded in the 13 weeks ended October 30, 2021.The Company recognized the redemption premium and ~~its parent,~~ unamortized deferred debt costs of $185 million as losses on early retirement of debt during the ~~ABL Parent, entered into~~13 weeks ending October 30, 2021.

MACY'S, INC.

On October 15, 2021, Macy’s Inc. redeemed the entire outstanding $294 million aggregate principal amount of the 2022 Notes. The redemption price was equal to 100% of the outstanding principal amount of the 2022 Notes ($294 million), plus accrued and unpaid interest of $3 million.

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

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

~~MACY'S, INC.~~

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

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

As of October 30, 2021, no such events had occurred triggering such requirement.

~~Amendment to Existing Credit Agreement~~

~~On June 8, 2020,~~

As of October 30, 2021, the Company ~~substantially reduced~~had $116 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 $2,825 million ~~unsecured credit agreement, which~~and the Company had $140 million of outstanding borrowings under the ABL Credit Facility as of October ~~31, 2020 provides~~30, 2021.

On August 19, 2021, the Company ~~with unsecured revolving credit~~announced that it reinstated its regular quarterly dividend. The Board of upDirectors declared a regular quarterly dividend of $0.15 per share on the Company’s common stock, paid on October 1, 2021, to ~~$1 million. The unsecured revolving credit facility contains covenants~~Macy’s shareholders of record at the close of business on September 15, 2021. On October 22, 2021, the Company announced that ~~provide for, among~~the Board of Directors declared a quarterly dividend of $0.15 cents per share on its common stock, payable on January 3, 2022, to Macy’s shareholders of record at the close of business of December 15, 2021. Subsequent dividends will be subject to approval of the Board of Directors, which will depend on market and other ~~things, limitations on fundamental changes, use~~conditions.

On August 19, 2021, the Company also announced that its Board 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.Directors authorized a new $500 million share repurchase program, which does not have an expiration date. As of October ~~31, 2020,~~30, 2021, the Company ~~had no borrowings outstanding~~repurchased 13,043,200 shares of its common stock at an average cost of $23.02 per share for a total cost of approximately $300 million. $200 million of shares remained available for repurchase pursuant to this authorization. Repurchases may be made from time to time in the open market or through privately negotiated transactions in accordance with applicable securities laws, including Rule 10b-18 under the ~~credit agreement.~~

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

~~During~~1934, on terms determined by 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:

Company.

(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”);

(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.

~~MACY'S, INC.~~

Contractual Obligations

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

MACY'S, INC.

Capital Resources

~~Expectations~~

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, debt service and other cash requirements in both the near term and over the longer term. The ~~Company expects~~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 $2,795 million and $3,246 million aggregate principal amount of senior unsecured notes and senior unsecured debentures (collectively the “Unsecured Notes”) outstanding as of October 30, 2021 and January 30, 2021, respectively, with maturities ranging from 2023 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 $6,822 million and $6,126 million as of October 30, 2021 and January 30, 2021, respectively, have been excluded from the Summarized Balance Sheets. Equity in earnings of non-Guarantor subsidiaries of $444 million and $1,403 million for the 13-weeks and 39-weeks ended October 30, 2021, respectively, have been excluded from the Summarized Statement of Operations. The combined financial information of the Obligor Group is presented on a combined basis with intercompany balances and transactions within the Obligor Group eliminated.

Summarized Balance Sheets

	October 30, 2021		January 30, 2021
	(in millions)
ASSETS
Current Assets	$	1,797	$	1,297
Noncurrent Assets		6,790		7,491

LIABILITIES
Current Liabilities	$	1,738	$	2,216
Noncurrent Liabilities (a)		10,664		10,145

(a)	Includes net amounts due to non-Guarantor subsidiaries of $4,524 million and $2,702 million as of October 30, 2021 and January 30, 2021, respectively.

MACY'S, INC.

Summarized Statement of Operations

	13 Weeks Ended October 30, 2021			39 Weeks Ended October 30, 2021
	(in millions)
Net Sales	$	163		$	549
Consignment commission income (a)		859			2,482
Cost of sales		(90	)		(295	)
Operating loss		(263	)		(757	)
Loss before income taxes (b)		(159	)		(482	)
Net income		134			28

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

(b)	Includes $339 million and $744 million of dividend income from non-Guarantor subsidiaries for the 13 and 39 weeks ended October 30, 2021, respectively.

Outlook and Recent Developments

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

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

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

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

•~~SG&A rate as a percentage of net sales in~~2021, combined with the ~~second half of fiscal 2020 is expected to be low to mid-single digit percentage points higher~~faster than ~~the same period last year.~~

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

•~~Earnings before interest, taxes, depreciation and amortization, excluding the impact of certain items, are expected to improve sequentially in the fourth quarter~~anticipated economic recovery from the ~~third quarter.~~COVID-19 pandemic.

•

Net sales are expected to be between $24,115 million and $24,275 million, an increase between 39% to 40% compared to fiscal 2020. Annual digital sales are estimated to be between $8,750 million and $8,800 million.

•

Net credit card revenues are expected to be approximately 3.3% of net sales.

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

•

Gross margin as a percentage of net sales is expected to increase by up to 950 basis points from 2020.

•

SG&A expense as a percentage of net sales is expected to improve up to 325 basis points compared to 2019 levels.

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

Gains on sale of real estate is expected to be between $70 million and $85 million.

•

Benefit plan income is expected to be approximately $67 million.

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

Depreciation and amortization is expected to be approximately $890 million.

•

Earnings before interest, taxes, depreciation and amortization, excluding the impact of certain items, are expected to be more than 12.5% of net sales.

•

Net interest expense is expected to be approximately $260 million.

•

Adjusted diluted earnings per share are expected to be between $4.57 and $4.76.

MACY'S, INC.

Important Information Regarding Non-GAAP Financial Measures

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

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

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.

MACY'S, INC.

Changes in Comparable Sales – 13 Weeks Ended October 30, 2021

Macy's Inc.	Comparable Sales vs. 13 Weeks Ended			Comparable Sales vs. 13 Weeks Ended
	October 31, 2020			November 2, 2019
Increase in comparable sales on an owned basis (Note 1)		37.2	%		8.9	%
Comparable sales growth impact of departments licensed to third parties (Note 2)		(1.6	)%		(0.2	)%
Increase in comparable sales on an owned plus licensed basis		35.6	%		8.7	%

Macy's	Comparable Sales vs. 13 Weeks Ended			Comparable Sales vs. 13 Weeks Ended
	October 31, 2020			November 2, 2019
Increase in comparable sales on an owned basis (Note 1)		36.4	%		9.0	%
Comparable sales growth impact of departments licensed to third parties (Note 2)		(1.3	)%		(0.6	)%
Increase in comparable sales on an owned plus licensed basis		35.1	%		8.4	%

Bloomingdale's	Comparable Sales vs. 13 Weeks Ended			Comparable Sales vs. 13 Weeks Ended
	October 31, 2020			November 2, 2019
Increase in comparable sales on an owned basis (Note 1)		43.4	%		9.1	%
Comparable sales growth impact of departments licensed to third parties (Note 2)		(4.9	)%		2.1	%
Increase in comparable sales on an owned plus licensed basis		38.5	%		11.2	%

bluemercury	Comparable Sales vs. 13 Weeks Ended			Comparable Sales vs. 13 Weeks Ended
	October 31, 2020			November 2, 2019
Increase (decrease) in comparable sales on an owned basis (Note 1)		39.5	%		(2.2	)%
Comparable sales growth impact of departments licensed to third parties (Note 2)		0.0	%		0.0	%
Increase (decrease) in comparable sales on an owned plus licensed basis		39.5	%		(2.2	)%

MACY'S, INC.

Changes in Comparable Sales – 39 Weeks Ended October 30, 2021

Macy's, Inc.	Comparable Sales vs. 39 Weeks Ended			Comparable Sales vs. 39 Weeks Ended
	October 31, 2020			November 2, 2019
Increase in comparable sales on an owned basis (Note 1)		52.4	%		1.2	%
Comparable sales growth impact of departments licensed to third parties (Note 2)		0.1	%		0.2	%
Increase in comparable sales on an owned plus licensed basis		52.5	%		1.4	%

Notes:

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

~~Notes:~~

~~(1)~~

(1)

Represents the period-to-period percentage change in net sales from stores in operation during the 13 and 39 weeks ended October 30, 2021 and the 13 and 39 weeks ended October 31, 2020 and November 2, 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.

Adjusted EBITDA as a Percent to Net Sales

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

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

~~MACY'S, INC.~~

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

	13 Weeks Ended October 30, 2021			13 Weeks Ended October 31, 2020			13 Weeks Ended November 2, 2019
	(millions, except percentages)
Net sales	$	5,440		$	3,990		$	5,173

Net income (loss)	$	239		$	(91	)	$	2

Net income (loss) as a percent to net sales		4.4	%		(2.3	)%		0.0	%

Net income (loss)	$	239		$	(91	)	$	2
Interest expense - net		53			80			48
Losses on early retirement of debt		185			—			—
Federal, state and local income tax expense (benefit)		55			(126	)		(2	)
Depreciation and amortization		225			250			252
EBITDA	$	757		$	113		$	300
Impairment, restructuring and other costs		—			20			13
Settlement charges		8			26			12
Adjusted EBITDA	$	765		$	159		$	325
Adjusted EBITDA as a percent to net sales		14.1	%		4.0	%		6.3	%

MACY'S, INC.

	39 Weeks Ended October 30, 2021			39 Weeks Ended October 31, 2020			39 Weeks Ended November 2, 2019
	(millions, except percentages)
Net sales	$	15,794		$	10,566		$	11,050

Net income (loss)	$	687		$	(4,104	)	$	224

Net income (loss) as a percent to net sales		4.3	%		(38.8	)%		2.0	%

Net income (loss)	$	687		$	(4,104	)	$	224
Interest expense - net		211			196			143
Losses on early retirement of debt		199			—			—
Financing costs		—			4			—
Federal, state and local income tax expense (benefit)		197			(1,000	)		55
Depreciation and amortization		668			722			725
EBITDA	$	1,962		$	(4,182	)	$	1,147
Impairment, restructuring and other costs		21			3,445			16
Settlement charges		90			65			12.0
Adjusted EBITDA	$	2,073		$	(672	)	$	1,175
Adjusted EBITDA as a percent to net sales		13.1	%		(6.4	)%		10.6	%

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.

	Third Quarter of 2021						Third Quarter of 2020						Third 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	$	239		$	0.76		$	(91	)	$	(0.29	)	$	2		$	0.01
Impairment, restructuring and other costs		—			—			20			0.06			13			0.04
Settlement charges		8			0.03			26			0.09			12			0.04
Losses on early retirement of debt		185			0.59			—			—			—			—
Income tax impact of certain items noted above		(46	)		(0.15	)		(15	)		(0.05	)		(6	)		(0.02	)
As adjusted to exclude certain items above	$	386		$	1.23		$	(60	)	$	(0.19	)	$	21		$	0.07

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

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

MACY'S, INC.

	2021						2020						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	$	687		$	2.17		$	(4,104	)	$	(13.20	)	$	224		$	0.72
Impairment, restructuring and other costs		21			0.07			3,445			11.08			16			0.05
Settlement charges		90			0.28			65			0.21			12			0.04
Losses on early retirement of debt		199			0.63			—			—			—			—
Financing costs		—			—			4			0.01			—			—
Income tax impact of certain items noted above		(73	)		(0.24	)		(351	)		(1.13	)		(6	)		(0.02	)
As adjusted to exclude certain items above	$	924		$	2.91		$	(941	)	$	(3.03	)	$	246		$	0.79

~~Critical Accounting Policies~~

~~Goodwill and Intangible Assets~~

New Pronouncements

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

~~U.S. GAAP Accounting Methodologies~~

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

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

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

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

~~2020 Impairment Analysis~~

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

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

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.

~~MACY'S, INC.~~

~~New Pronouncements~~

~~Accounting Pronouncements Recently Adopted~~

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

~~Item 3. 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.

Controls and Procedures.

~~Item 4. Controls and Procedures.~~

The Company's Chief Executive Officer and Chief Financial Officer have carried out, as of October ~~31, 2020,~~30, 2021, with the participation of the Company's management, an evaluation of the effectiveness of the Company's disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities ~~and~~ Exchange Act of 1934 (the "Exchange Act"). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of October ~~31, 2020,~~30, 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.

Legal Proceedings.

~~Item 1. Legal Proceedings.~~

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

Item 1A.

Risk Factors.

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

~~Item 1A. Risk Factors.~~

~~Except as set forth below, there~~

There have been no material changes to the Risk Factors described in Part I, Item 1A."Risk Factors" in the Company's ~~2019 10-K.~~

~~The risk factor “The recent outbreak of COVID-19 may have a significant negative impact on the Company's business~~2020 Form 10-K and ~~financial results”~~ ~~is deleted and replaced as follows:~~

~~The recent outbreak of COVID-19 has had and will continue to have a significant negative impact on the Company’s business and financial results.~~

In December 2019, there was an outbreak of COVID-19 in China that has since spread to the other regions of the world. The outbreak was subsequently labeled as a global pandemic by the World Health Organization in March 2020. As the pandemic continues to spread throughout the United States, businesses as well as federal, state and local governments have implemented significant actions to attempt to mitigate this public health crisis. Although the ultimate severity of the COVID-19 outbreak is uncertain at this time, the pandemic has had and will continue to have adverse impacts on the Company’s financial condition and results of operations, including, but not limited to:

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

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

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

~~MACY'S, INC.~~

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

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

•The Company has been and may continue to be 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’ ability to meet their obligations to the Company may be impacted or the Company may also be required to identify new brand partner relationships.

•COVID-19 has impacted the recoverability of certain of the Company’s assets resulting in the recognition of significant goodwill and long-lived asset impairment charges during the 39 weeks ended October 31, 2020. The continued impact of the pandemic, including the reinstatement of closures or restrictions on retail capacity as well as changesPart II, Item 1A. “Risk Factors” in the Company’s ~~work environment during~~Quarterly Reports on Form 10-Q for the quarterly periods ended May 1, 2021 and ~~post-pandemic, may impact the recoverability of the Company’s assets and lead to increased impairment risk and related charges in the future.~~July 31, 2021.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

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

The Company cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can it predict the severity and duration of its impact or the timing and availability of effective medical treatments and vaccines. As such, impacts of COVID-19 to the Company are highly uncertain and the Company will continue to assess the 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.

~~MACY'S, INC.~~

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

The following table provides information regarding the ~~Company's purchases~~Company’s purchase of Common Stock during the third quarter of ~~2020.~~2021.

	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)
August 1, 2021 – August 28, 2021		2,828		23.00		2,828		435
August 29, 2021 – October 2, 2021		7,487		22.49		7,487		267
October 3, 2021 – October 30, 2021		2,728		24.47		2,728		200
		13,043		23.02		13,043

(1)

On August 19, 2021, the Company announced that its Board of Directors authorized a new $500 million share repurchase program, which does not have an expiration date. As of October 30, 2021, $200 million of shares remained available for repurchase pursuant to this authorization. The Company may continue, discontinue or resume purchases of common stock under this authorization or possible future authorizations in the open market, in privately negotiated transactions or otherwise at any time and from time to time without prior notice.

Item 5.

Total
Number
of Shares
Purchased

Average
Price Paid
per Share ($)

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

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

~~(thousands)~~

~~(millions)~~

~~August 2, 2020 – August 29, 2020~~

—

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

—

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

—

Other Information.

~~___________________~~

~~(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. Other Information.~~

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 Growth stores, Backstage on-mall off-price business, and vendor direct expansion;

•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 the Internet and catalogs;

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

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

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

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

MACY'S, INC.

•

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

general consumer shopping 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;

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

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;

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

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;

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

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;

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

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

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

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

the seasonal nature of the Company's business;

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

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

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

•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•

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

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

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;

•

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

•

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

•

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

•

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

•

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

•

duties, taxes, other charges and quotas on imports;

•

labor shortages; and

•

the amount and timing of future dividends and share repurchases.

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. Exhibits.~~

Item 6.

Exhibits.

22		List of Subsidiary Guarantors

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

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

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

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

101	The following financial statements from Macy's, Inc.'s Quarterly Report on Form 10-Q for the quarter ended October ~~31, 2020,~~30, 2021, filed on December ~~8, 2020, are~~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)

SIGNATURES

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

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

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

Date: December ~~8, 2020~~

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



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


	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
Additions charged to expense	1		4		5
Cash payments	(6)		(10)		(16)
Balance at October 31, 2020	$	1	$	4	$	5


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


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

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

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


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

Delaware		13-3324058

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