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What changed in Macy's, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Macy's, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+284 added−282 removedSource: 10-K (2023-03-24) vs 10-K (2022-03-25)

Top changes in Macy's, Inc.'s 2023 10-K

284 paragraphs added · 282 removed · 186 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeStarting in 2022, the Company has included the ethnic representation goal at the director level and above as part of annual incentive goals for the Company. Company-sponsored, employee-led resource groups (ERGs) provide an opportunity for colleagues to experience connection, achieve belonging and build community.
Biggest changeCompany-sponsored, employee-led resource groups (ERGs) provide an opportunity for colleagues to experience connection, achieve belonging and develop leadership skills. In 2022, ERGs continued to expand beyond our corporate offices to an additional 198 Store ERG chapters across the country to further reinforce community building.
The Company’s operations compete with many retail formats on the national and local level, including department stores, specialty stores, general merchandise stores, manufacturers' outlets, off-price and discount stores, online retailers and catalogs, among others. The Company seeks to attract customers by offering compelling, high-quality products, great prices and trusted service across all channels, including its digital platforms.
The Company’s operations compete with many retail formats on the national and local level, including department stores, specialty stores, general merchandise stores, manufacturers' outlets and websites, off-price and discount stores, online retailers and catalogs, among others. The Company seeks to attract customers by offering compelling, high-quality products, great prices and trusted service across all channels, including its digital platforms.
This includes transparency, product responsibility and supply chain and energy management. Macy’s is guided in its actions and reporting by its stakeholders and by third-party frameworks, including Sustainability Accounting Standards Board’s multiline and specialty retailers and distributors standard and the Task Force on Climate-Related Financial Disclosures.
This includes transparency, product responsibility and supply chain and energy management. Macy's, Inc. is guided in its actions and reporting by its stakeholders and by third-party frameworks, including Sustainability Accounting Standards Board’s multiline and specialty retailers and distributors standard and the Task Force on Climate-Related Financial Disclosures.
(“MMG”), a wholly-owned direct subsidiary of the Company, and its subsidiary Macy's Merchandising Group International, LLC, are responsible for the design and development of Macy’s private label brands and certain licensed brands. Bloomingdale’s uses MMG for a small portion of its private label merchandise.
(MMG), a wholly-owned direct subsidiary of the Company, and its subsidiary Macy's Merchandising Group International, LLC, are responsible for the design and development of Macy’s private label brands and certain licensed brands. Bloomingdale’s uses MMG for a small portion of its private label merchandise.
Diversity, Equity & Inclusion (DE&I) Macy’s commitment to diversity, equity and inclusion is guided by its values and starts from within by working to build a workforce that represents the communities it serves at all levels and making structural changes to implement practices and processes designed to be equitable and cultivate a culture of belonging.
Diversity, Equity & Inclusion (DE&I) The Company's commitment to diversity, equity and inclusion is guided by its values and starts from within by working to build a workforce that represents the customers and communities it serves at all levels and making structural changes to implement practices and processes designed to be equitable and cultivate a culture of belonging.
The Company’s principal executive office is located at 151 West 34 th Street, New York, New York 10001, telephone number: (212) 494-1621. Seasonality The retail business is seasonal in nature with a high proportion of sales and operating income generated in the months of November and December.
The Company’s principal executive office is located at 151 West 34th Street, New York, New York 10001, telephone number: (212) 494-1621. Seasonality The retail business is seasonal in nature with a high proportion of sales and operating income generated in the months of November and December.
The Company’s management is responsible for the development and implementation of its sustainability strategies and programs. Ultimate oversight by the Company’s Board of Directors is included in its committee charters and practices. The Chief Financial Officer along with the Disclosure Committee engages with stakeholders on sustainability and climate-related issues and provides feedback to management and the Board.
The Company's management is responsible for the development and implementation of its ESG strategies and programs. Ultimate oversight by the Company’s Board of Directors is included in its committee charters and practices. The Chief Financial Officer along with the management Disclosure Committee engages with stakeholders on ESG-related issues (including climate) and provides feedback to management and the Board.
In 2021 , the Company’s subsidiaries provided various support functions to the Company’s retail operations on an integrated, company-wide basis. • The Company’s wholly-owned bank subsidiary, FDS Bank, provides certain collections, customer service and credit marketing services in respect of all credit card accounts that are owned either by Department Stores National Bank, a subsidiary of Citibank, N.A., or FDS Bank and that constitute a part of the credit programs of the Company’s retail operations. • Macy’s Systems and Technology, Inc., a wholly-owned indirect subsidiary of the Company, provides operational electronic data processing and management information services to all of the Company’s operations other than bluemercury. • Macy’s Merchandising Group, Inc.
In 2022, the Company’s subsidiaries provided various support functions to the Company’s retail operations on an integrated, company-wide basis. • The Company’s wholly-owned bank subsidiary, FDS Bank, provides certain collections, customer service and credit marketing services in respect of all credit card accounts that are owned either by Citibank, N.A. or FDS Bank and that constitute a part of the credit programs of the Company’s retail operations. • Macy’s Systems and Technology, Inc., a wholly-owned indirect subsidiary of the Company, provides operational electronic data processing and management information services to all of the Company’s operations other than bluemercury. • Macy’s Merchandising Group, Inc.
Elisa D. Garcia has been Executive Vice President, Chief Legal Officer and Secretary of the Company since September 2016; prior thereto she served as Chief Legal Officer of Office Depot, Inc. from December 2013 to September 2016, Executive Vice President and Secretary from July 2007 to September 2016 and General Counsel from July 2007 to December 2013. Danielle L.
Elisa D. Garcia has been Executive Vice President, Chief Legal Officer and Secretary of the Company since 2016; prior thereto she served as Chief Legal Officer of Office Depot, Inc. from 2013 to 2016, Executive Vice President and Secretary from 2007 to 2016 and General Counsel from 2007 to 2013. Danielle L.
Mitchell has been Executive Vice President and Chief Financial Officer of the Company since November 2020; prior thereto he served as a Managing Director and Partner in the Digital BCG and Consumer Practices of Boston Consulting Group, a global management consulting firm, from July 2017 to October 2020, Chief Executive Officer of Arhaus LLC, a retail chain that designs and sells home furnishings, from January 2016 to March 2017, executive positions at Crate and Barrel Holdings, Inc. from October 2010 to October 2015 including interim CEO, Chief Operating & Chief Financial Officer and Chief Financial Officer, and management positions at Target Corporation from March 2007 to October 2010 including Director of Strategy & Interactive Design for target.com and Director of Innovation & Productivity leading enterprise-wide projects for Target Corporation .
Mitchell has been Executive Vice President and Chief Financial Officer of the Company since 2020; prior thereto he served as a Managing Director and Partner in the Digital BCG and Consumer Practices of Boston Consulting Group, a global management consulting firm, from 2017 to 2020, Chief Executive Officer of Arhaus LLC, a retail chain that designs and sells home furnishings, from 2016 to 2017, in various executive positions at Crate and Barrel Holdings, Inc. from 2010 to 2015 including interim CEO, Chief Operating & Chief Financial Officer and Chief Financial Officer, and in management positions at Target Corporation from 2007 to 2010 including Director of Strategy & Interactive Design for target.com and Director of Innovation & Productivity leading company-wide projects for Target Corporation.
The Chief Supply Chain Officer reports directly to the Chief Executive Officer and is responsible for the teams that manage sustainability initiatives and supply 8 chain transparency. The Sustainability Executive Steering Committee, Disclosure Committee and Corporate Strategy Group also approve the sustainability strategy and priorities, guide risk management and link to growth opportunities.
The Chief Supply Chain Officer reports directly to the Chief Executive Officer and is responsible for the management teams that manage ESG initiatives and supply chain transparency. Management committees, including the Sustainability Executive Steering Committee, Disclosure Committee and Corporate Strategy Group, also approve the ESG strategy and priorities, guide risk management and link to growth opportunities.
We have achieved a score of 100 every year since 2015 on the Human Rights Campaign Foundation’s Corporate Equity Index, earning the designation as “Best Place to Work for LGBTQ+ Equity.” This index is the nation’s foremost benchmarking survey and report measuring corporate policies and practices related to LGBTQ+ workplace equality.
The Company has achieved a score of 100 every year since 2015 on the Human Rights Campaign Foundation’s Corporate Equality Index, earning the designation as “Best Place to Work for LGBTQ+ Equality.” This index is the nation’s foremost benchmarking survey and report measuring corporate policies and practices related to LGBTQ+ workplace equality.
Kirgan has been Executive Vice President and Chief Transformation and Human Resources Officer of the Company since February 2020 and Chief Human Resources Officer since October 2017; prior thereto she served as Senior Vice President, People at American Airlines Group, Inc., an airline holding company, from October 2016 to October 2017, Chief Human Resources Officer at Darden Restaurants, Inc. from January 2015 to October 2016 and Senior Vice President from May 2010, Vice President, Global Human Resources at ACI Worldwide, Inc. from January 2009 to December 2009, and Vice President, Human Resources at Conagra Foods, Inc. from 2004 to 2008.
Kirgan has been Executive Vice President and Chief Transformation and Human Resources Officer of the Company since 2020 and Chief Human Resources Officer since 2017; prior thereto she served as Senior Vice President, People at American Airlines Group, Inc., an airline holding company, from 2016 to 2017, Chief Human Resources Officer at Darden Restaurants, Inc. from 2015 to 2016 and Senior Vice President from 2010, Vice President, Global Human Resources at ACI Worldwide, Inc. in 2009, and Vice President, Human Resources at Conagra Foods, Inc. from 2004 to 2008.
Working capital requirements fluctuate during the year, increasing in mid-summer in anticipation of the fall merchandising season and increasing substantially prior to the months of November and December when the Company carries significantly higher inventory levels. 4 Purchasing The Company purchases merchandise from many suppliers, none of which accounted for more than 5% of the Company’s purchases during 2021 .
Working capital requirements fluctuate during the year, increasing in mid-summer in anticipation of the fall merchandising season and increasing substantially prior to the months of November and December when the Company carries significantly higher inventory levels. 3 Table of Contents Purchasing The Company purchases merchandise from many suppliers, none of which accounted for more than 5% of the Company's purchases during 2022.
Item 1. Business. General The Company is a corporation organized under the laws of the State of Delaware in 1985. The Company and its predecessors have been operating department stores since 1830. As of January 29, 2022, the Company operated 725 store locations in 43 states, the District of Columbia, Puerto Rico and Guam.
Item 1. Business. General The Company is a corporation organized under the laws of the State of Delaware in 1985. The Company and its predecessors have been operating department stores since 1830. As of January 28, 2023, the Company operated 722 store locations in 43 states, the District of Columbia, Puerto Rico and Guam.
Garcia 64 Executive Vice President, Chief Legal Officer and Secretary Danielle L.
Garcia 65 Executive Vice President, Chief Legal Officer and Secretary Danielle L.
In addition, the Company has made the following available free of charge through its website at https://www.macysinc.com : • Charters of the Audit Committee, Compensation and Management Development Committee, Finance Committee, and Nominating and Corporate Governance Committee, • Corporate Governance Principles, • Lead Independent Director Policy, • Non-Employee Director Code of Business Conduct and Ethics, • Code of Conduct, • Standards for Director Independence, • Related Person Transactions Policy, • Method to Facilitate Receipt, Retention and Treatment of Communications, and • Proxy Access By-Laws.
In addition, the Company has made the following available free of charge through its website at https://www.macysinc.com : • Charters of the Audit Committee, Compensation and Management Development Committee, Finance Committee, and Nominating and Corporate Governance Committee, • Corporate Governance Principles, • Lead Independent Director Policy, • Non-Employee Director Code of Business Conduct and Ethics, • Code of Conduct, • Standards for Director Independence, • Related Person Transactions Policy, • Method to Facilitate Receipt, Retention and Treatment of Communications, and • Proxy Access By-Laws. 4 Table of Contents Any of these items are also available in print to any shareholder who requests them.
Bluemercury’s Shooting Stars is a six-month mentorship program that empowers mentees to own their journey by creating a development plan, becoming an inclusive leader and leveraging resources to support their career aspirations.
Bluemercury’s Shooting Stars is a six-month mentorship program that empowers mentees to own their journey by creating a development plan, becoming an inclusive leader and leveraging resources to support their career aspirations. In 2022, the Company launched a multi-year career development initiative.
Learning & Development Macy’s believes that learning goes hand in hand with career growth, personal satisfaction and outstanding results. The Company aspires to create a learning culture where colleagues actively learn, apply what they have learned to address business challenges and share their knowledge, including their mistakes, to help others grow.
Learning & Development Macy’s, Inc. believes that learning goes hand in hand with career growth, personal satisfaction and outstanding results. The Company aspires to create a learning culture where colleagues can build their skills, apply their learning to address business challenges and share their knowledge, including their mistakes, to help others grow.
The Company makes investments in its people leaders and future leaders. Macy’s and Bloomingdale’s Executive Development Programs offer immersive, hands-on learning experiences for recent college graduates from top universities across the U.S. to jump start a career in retail, with specialization in technology, digital, stores, merchandising, and supply chain.
Macy’s Executive Development Program and Bloomingdale’s Leadership Development Program offer immersive, hands-on learning experiences for recent college graduates from top universities across the U.S. to jump-start a career in retail, with specialization in technology, digital, stores, merchandising, and supply chain.
Paul Griscom has been Senior Vice President and Controller of the Company since August 2020; prior thereto he served as Vice President and interim Principal Accounting Officer from June to August 2020, Vice President, Financial Reporting and Accounting Services from May 2019 to August 2020, Vice President, Financial Reporting from June 2017 to April 2019, Director of Financial Reporting from July 2016 to May 2017, Director, Training & Products, GAAP Dynamics from January 2012 to July 2016 and held various positions at KPMG LLP from November 2000 to January 2012. 9
Paul Griscom has been Senior Vice President and Controller of the Company since 2020; prior thereto he served as Vice President and interim Principal Accounting Officer in 2020, Vice President, Financial Reporting and Accounting Services from 2019 to 2020, Vice President, Financial Reporting from 2017 to 2019, Director of Financial Reporting from 2016 to 2017, Director, Training & Products, GAAP Dynamics from 2012 to 2016 and held various positions at KPMG LLP from 2000 to 2012. 8 Table of Contents
Information about our Executive Officers The following table sets forth certain information as of March 24 , 2022 regarding the Executive Officers of the Company: Name Age Position with the Company Jeff Gennette 60 Chief Executive Officer, Chairman of the Board and Director Adrian V. Mitchell 48 Executive Vice President and Chief Financial Officer Elisa D.
Information about our Executive Officers The following table sets forth certain information as of March 23, 2023 regarding the Executive Officers of the Company: Name Age Position with the Company Jeff Gennette 61 Chief Executive Officer and Chairman of the Board of Directors Adrian V. Mitchell 49 Executive Vice President and Chief Financial Officer Elisa D.
The trademarks associated with the Company's private label brands, other than Martha Stewart Collection, are owned by the Company. The Martha Stewart Collection is owned by a third party, which licenses the trademark associated with the brand to Company pursuant to an agreement. The agreement for the Martha Stewart Collection extends through 2022. Competition The retail industry is highly competitive.
The trademarks associated with the Company's private label brands, other than Martha Stewart Collection, are owned by the Company. The Martha Stewart Collection is owned by a third party, which licenses the trademark associated with the brand to Company pursuant to an agreement.
The guiding principles of the Company’s sustainability strategy are: • Managing the environmental impact of its business • Promoting positive social impact, and • Continuing to ensure strong governance that holds Macy’s accountable. The Company proactively and continually engages with its stakeholders on sustainability issues that span the breadth of its operations.
The guiding principles of the Company's ESG strategy are: • managing the environmental impact of its business; • promoting positive social impact; and • implementing strong governance practices that hold Macy's, Inc. accountable. The Company proactively engages with its stakeholders on ESG issues that span the breadth of its operations.
Kirgan 46 Executive Vice President and Chief Transformation Officer Paul Griscom 41 Senior Vice President and Controller Executive Officer Biographies Jeff Gennette has been Chief Executive Officer of the Company since March 2017 and Chairman of the Board since January 2018; prior thereto he was President from March 2014 to August 2017, Chief Merchandising Officer from February 2009 to March 2014, Chairman and Chief Executive Officer of Macy’s West in San Francisco from February 2008 to February 2009 and Chairman and Chief Executive Officer of Seattle-based Macy’s Northwest from February 2006 through February 2008.
Kirgan 47 Executive Vice President and Chief Transformation and Human Resources Officer Tony Spring 57 Executive Vice President, Macy's Inc. and Chairman and Chief Executive Officer, Bloomingdale's Paul Griscom 42 Senior Vice President and Controller Executive Officer Biographies Jeff Gennette has been Chief Executive Officer of the Company since 2017 and Chairman of the Board since January 2018; prior thereto he was President from 2014 to 2017, Chief Merchandising Officer from 2009 to 2014, Chairman and Chief Executive Officer of Macy’s West in San Francisco from 2008 to 2009 and Chairman and Chief Executive Officer of Seattle-based Macy’s Northwest from 2006 through 2008. 7 Table of Contents Adrian V.
The Company seeks to empower colleagues to harness and unleash the power of their individuality to help drive better business decisions for customers and shareholders.
The Company seeks to empower colleagues to harness and unleash the power of their individuality to help drive better business decisions for customers and shareholders. In 2019, the Company launched its MOSAIC program to advance the diversity of its leadership.
Macy’s believes people leaders play an important role in driving performance and an inclusive culture. In 2020, the Company incorporated People Leader Commitments (which were launched in 2019) and DE&I into the performance review process. In 2021, the Company included standardized DE&I goals into annual reviews at the director level and above.
We have made significant progress towards our aspiration to increase ethnically diverse representation at the director level and above by 2025. The Company believes people leaders play an important role in driving performance and an inclusive culture. In 2020, the Company incorporated People Leader Commitments (which were launched in 2019) and DE&I into the performance review process.
One of the Company’s measures to advance the diversity of its leadership is the MOSAIC program, a one-year professional development program with continued support available as participants progress through their careers, launched in 2019 for its top talent at the manager and director levels who self-identify as ethnically diverse.
The MOSAIC program is a one-year professional development program for colleagues at the manager and director levels who self-identify as ethnically diverse, with continued support available as participants progress through their careers. Approximately 68% of program participants were promoted or moved into a new role since the program was launched.
Disaggregation of the Company's net sales by family of business for 2021 , 2020 and 2019 were as follows: 2021 2020 2019 Women’s Accessories, Intimate Apparel, Shoes, Cosmetics and Fragrances $ 10,119 $ 7,206 $ 9,454 Women’s Apparel 4,433 2,909 5,411 Men’s and Kids’ 5,252 3,486 5,628 Home/Other (a) 4,656 3,745 4,067 Total $ 24,460 $ 17,346 $ 24,560 (a) Other primarily includes restaurant sales, allowance for merchandise returns adjustments, breakage income from unredeemed gift cards and certain loyalty program income.
Disaggregation of the Company's net sales by family of business for 2022, 2021 and 2020 was as follows: 2022 2021 2020 Women’s Accessories, Shoes, Cosmetics and Fragrances $ 9,597 $ 9,385 $ 6,667 Women’s Apparel 5,349 5,174 3,454 Men’s and Kids’ 5,297 5,247 3,477 Home/Other (a) 4,199 4,654 3,748 Total $ 24,442 $ 24,460 $ 17,346 (a) Other primarily includes restaurant sales, allowance for merchandise returns adjustments and breakage income from unredeemed gift cards.
Requests should be sent to the Corporate Secretary of Macy’s, Inc. at 151 West 34 th Street, New York, New York 10001. 5 Human Capital Resources Culture & Engagement At Macy’s, culture is how the Company serves and supports its customers, communities and employees (called colleagues).
Requests should be sent to the Corporate Secretary of Macy’s, Inc. at 151 West 34th Street, New York, New York 10001. Human Capital Resources Culture & Engagement At Macy's Inc., we strive to be the preferred employer across our brands through an unwavering passion and commitment to our customers, communities and employees (called colleagues).
The Company’s workplace is rooted in equity and guided by its values of acceptance, respect, integrity and giving back. The Company gathers colleague feedback at key times throughout the colleague lifecycle from onboarding to offboarding and provides regular venues for colleagues to ask questions and share their opinions, such as Ask Me Anything sessions, town halls and colleague resource groups.
The Company gathers colleague feedback at key times throughout the colleague lifecycle from onboarding to offboarding and provides regular venues for colleagues to ask questions and share their opinions, such as Ask Me Anything sessions, town halls and colleague resource groups. The Company formally solicits feedback from all colleagues twice a year through company-wide Culture Pulse Survey.
These programs include policies and procedures designed to ensure compliance with federal, state and local environmental laws.
The Environmental Services team is responsible for the development of the Company's environmental programs for all facilities across the organization. These programs include policies and procedures designed to ensure compliance with federal, state and local environmental laws.
People leaders participate annually in required leadership development training and have access to robust on-demand development resources. Professional colleagues participate in a 90-day onboarding experience with performance milestones, support resources and role-specific training Data Analytics During 2021, Macy’s continued to make progress in embedding data and analytics in Human Capital strategies and program measurements.
People leaders participate annually in required leadership development training and have access to robust on-demand development resources. Professional colleagues participate in a 90-day onboarding experience with performance milestones, support resources and role-specific training Total Rewards Macy’s, Inc. offers comprehensive benefits and an awards strategy that is designed to recognize performance and talent development.
The Company formally solicits feedback from all colleagues twice a year through an enterprise-wide Culture Pulse Survey. The results are shared across the organization to provide visibility to both managers (called people leaders) and colleagues and help create an opportunity for open and constructive discussions among teams.
The results are shared across the organization to provide visibility to both managers (called people leaders) and colleagues, to help create opportunities for open and constructive discussions among teams and to facilitate action planning to improve the colleague experience.
Learning is accessible through Ignite (powered by Degreed), the Company’s self-directed learning experience platform as well as through technology, social learning and meaningful experiences and exposures with colleagues. We have also partnered with Guild, a leading education and upskilling platform, to provide “Fully Funded Education for Everyone,” including over 50 programs that lead to college degrees.
Learning is accessible through Ignite (powered by Degreed), the Company’s self-directed learning experience platform as well as through technology, social learning and meaningful experiences and exposures with colleagues.
In November 2021, Macy’s was recognized by the NBIC, a coalition of the nation’s leading business organizations representing diverse communities, as one of the Top 50 Best-of-the-Best Corporations for Inclusion.
For the past two years, the Company was recognized by the NBIC, a coalition of the nation’s leading business organizations representing diverse communities, as one of the Top 50 Best-of-the-Best Corporations for Inclusion and Women's Enterprise National Council with America's Top Corporations Award for the commitment to create a brighter future for women-owned businesses.
Number of Employees As of January 29, 2022, excluding seasonal employees, Macy’s had 88,857 full-time and part-time employees. Because of the seasonal nature of the retail business, the number of employees peaks during the holiday season. Approximately 8% of employees are represented by unions.
Number of Employees As of January 28, 2023, excluding seasonal employees, Macy's, Inc. had 94,570 full-time and part-time employees. The Company’s workforce is comprised of approximately 64% ethnically diverse colleagues and 73% female colleagues. Because of the seasonal nature of the retail business, the number of employees peaks during the holiday season.
Sustainability Macy’s relationships with its customers, colleagues and the communities it serves drives a deep sense of stewardship in how the Company interacts with its stakeholders and underpins its commitment to promoting sustainability.
Approximately 8% of employees are represented by unions. 6 Table of Contents Environmental, Social, and Governance (ESG) The Company's relationships with its customers, colleagues and the communities it serves drive a deep sense of stewardship in how the Company interacts with its stakeholders.
Compensation is based on job position, responsibilities, experience and performance with incentive opportunities that allow colleagues to share in the Company’s success. In 2021, the Company achieved greater than 99% pay equity across gender and race.
Compensation is based on job, responsibilities, experience and performance with incentive opportunities that allow colleagues to share in the Company’s success. In 2022, the Company began sharing more pay information with our colleagues and educate our colleagues about our pay programs. All colleagues nationwide have access to view their job’s pay zone and salary range.
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The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC .
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The agreement for the Martha Stewart Collection ended on January 31, 2023 and the Company will sell through remaining inventory during 2023. Competition The retail industry is highly competitive.
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Any of these items are also available in print to any shareholder who requests them.
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Government Regulation We are subject to extensive and varied laws and regulations in the jurisdictions in which we operate in connection with both our core business operations and our credit card and other ancillary operations, including those relating to anti-bribery, customs, child labor, truth-in-advertising, consumer protection, zoning, occupancy, anti‑corruption and trade, anti money laundering, import and export compliance, antitrust, data privacy and data protection, employment, workplace safety, public health and safety, environmental compliance, intellectual property, transportation, and fire codes.
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The Company actively promotes an inclusive and welcoming environment for all customers and is also focused on supporting and developing underrepresented suppliers; investing in economic and workforce development; contributing to organizations fighting for social justice; and awarding scholarships to cultivate future leaders.
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Our policies mandate compliance with all applicable laws and regulations, and we operate our business in accordance with standards and procedures designed to comply with these laws and regulations.
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From 2020 to 2021, approximately 74% of program participants were promoted or moved into a new role, with approximately 18% promoted to senior director level. The Company achieved 27.5% ethnic diversity representation at the director level and above, with a goal to reach 28.3% in 2022 and 30% by 2025.
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We believe that we are in compliance with such laws and regulations in all material respects and do not expect that continued compliance with such regulations will have a material effect upon capital expenditures, earnings, or our competitive position.
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In 2021, ERGs expanded beyond our corporate offices to all supply chain locations and 124 stores and continue to be a resource for attracting and retaining talent. We also launched the Interfaith ERG across Macy’s and Bloomingdales, based on colleague feedback that there is a need to incorporate dialogue and education about religion and non-religious beliefs in the workplace.
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The Company's workplace is rooted in equity and guided by its social purpose, called Mission Every One , to create a brighter future with bold representation for all.
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Macy’s DE&I focus areas extend beyond its colleagues and include community, customers, marketing and suppliers.
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In 2021, the Company included standardized DE&I goals into annual reviews at the director level and above. In 2022, the Company included a diversity goal as part of its annual incentive program.
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For example, here are a few highlights from the past year: • Two Macy’s colleagues continued their second year as fellows, solely dedicated to the work of CEO Action for Racial Equity Taskforce—the mission of the taskforce is to identify, develop and promote scalable and sustainable public policies and corporate engagement strategies that will address systemic racism, social justice and improve societal well-being . 6 • Added pronouns to colleague name badges and email signatures to foster a more inclusive environment for customers and colleagues . • Advanced diverse representation in advertising to reflect customers and expanded media to reach more ethnically diverse audiences . • Launched a new partnership with a strategic marketing and creative agency, JOY Collective, to integrate deeper cultural fluency across marketing activities including heritage and history month campaigns. • Celebrated a decade of The Workshop at Macy’s with expanded class size and month-long e-commerce activation.
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To increase data accuracy and better understand the diverse dimensions of our colleagues, the Company plans to build the framework to capture DE&I-related dimensions beyond what is self-identified at the time of hire to advance the Company's benefits offering and colleague engagement efforts.
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In 2019, Macy’s partnered with Parsons School of Design to launch Macy’s Fashion Academy – a custom executive education program designed to offer best-in-class development across all disciplines of its merchant talent. As a result of this partnership, we have been able to offer our Merchants custom experiences aligned with key pillars of our Polaris Strategy.
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In 2023, the Company plans to rebrand ERGs to Colleague Resource Groups (CRGs) and continue to strengthen the model through greater executive sponsorship, tools and community visibility. By the end of 2023, we expect that all Macy's and Bloomingdale's colleagues in both corporate offices and stores will have the opportunity to join a CRG chapter.
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Taking advantage of cloud-based HR technology has enabled real-time access to information and driven more colleague and people leader self-service. • Career & leadership development: Online learning platform enables the development of targeted learning driven by Company-desired skill sets and/or colleague-driven skill development • Culture: Through the analysis of culture surveys, the Company can gauge progress over time and identify areas where enhancements need to be introduced • Human resources: Leveraging technology to automate responses for common colleague questions related to pay and benefits • Talent recruitment and retention: Leveraging recruiting data from previous years enables the forecasting of talent needs and leads to more improved onboarding, leadership spans of control and marketing investments • Workplace structure: Through customer analysis, the Company has identified opportunities for sales growth, which in turn have led to the launch and build-out of specialized teams targeted on delivering these opportunities 7 Total Rewards Macy’s offers comprehensive benefits and an awards strategy that is designed to recognize performance and talent development.
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The Company's DE&I focus areas extend beyond its colleagues and include community, customers, marketing and suppliers. Below are a few additional highlights from the past year: • Hosted first Vendor Pitch Competition and awarded over $250,000 in business grants to graduates of The Workshop at Macy’s 2022 program. • Launched S.P.U.R.
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In terms of both base pay and total compensation, the Company expects to pay female colleagues at greater than 99% of what it pays male colleagues, and it expects that minorities will be paid at greater than 99% of what it pays non-minorities in the U.S.
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Pathways: Shared Purpose, Unlimited Reach to help businesses gain access to capital to accelerate growth and create new jobs in historically underserved and underfunded communities. 5 Table of Contents • Expanded our portfolio of diverse suppliers, adding over 175 new diverse-owned businesses online and in-store.
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In 2021, we continued our path to clear and competitive compensation programs by making the following investments: • Introduced long-term incentive opportunities for our director-level colleagues effective in 2022. • Provided our colleagues with access to view earned wages on a daily basis. • Committed to raising our hourly colleagues’ pay rate to $15/hour minimum nationwide in 2022. • Added a flexible paid holiday to support our colleagues’ well-being and provide further flexibility to take a day off on a holiday that is important to them. • Partnered with Guild to provide “Fully Funded Education for Everyone,” including over 50 programs that lead to college degrees.
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Increased number of Black-owned brands by 8 times since signing the Fifteen Percent Pledge in 2020. • Launched DE&I simulation-based training across the Company, which established new benchmarks and insights to inform future programming and people leader development efforts. • Donated $1M to advance social justice and racial equity causes; additionally, $1M was donated to various Divine Nine Sorority education and research foundations, in honor of the first-of-its-kind Divine Nine Sorority Collection. • Leveraged best in class partners, such as JOY Collective and Publicis Once & For All Coalition, to advance the cultural fluency of our marketing and media.
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The Company continues to advance its sustainability strategy as it responds to evolving stakeholder expectations. Certain highlights of recent sustainability accomplishments include earning a B score on its 2021 CDP Climate Change Report and launching a sustainable products retail sitelet and Oake, a sustainable private brand textiles brand.
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We have also partnered with Guild Education to provide eligible colleagues with a fully-funded education benefit, including more than 100 programs that range from foundational learning–such as high school completion and English language–to college degrees. The Company makes investments in its people leaders and future leaders.
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Macy’s is committed to minimizing the environmental impacts across its operations and supply chain and seeks to responsibly manage the resources it consumes and the waste it produces across its stores and logistics network. The Environmental Services team is responsible for the development of the Company’s environmental programs for all facilities across the organization.
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This incentive included the launch of a Career Hub on the Company intranet to offer user-friendly tools to assist colleagues at any part of their career journey; a two-week virtual Career Expo that featured 18 workshops, panel discussions, external speakers and functional showcases to give colleagues a better sense of career opportunities across the Company; and people leader support with learning plans focused on career coaching and development.
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Additionally, all job postings nationwide include the job’s salary range. People leaders and salaried colleagues were given the opportunity to attend Compensation Education Webinars to learn how pay is determined, and deep dive into our incentive programs. The Company also enhanced strategic investments in colleagues, providing free education and increasing the minimum wage to $15 per hour.
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The Company continues to advance its ESG strategy as it responds to evolving stakeholder expectations.
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Certain highlights of recent ESG accomplishments include earning a B score on its 2021 CDP Climate Change Report, joining Better Cotton and the Ellen MacArthur Foundation, launching a Restricted Substance List and testing protocol for Private Brands, and investing in our female factory workers by rolling out 10 Worker Well Being programs in private brand factories with BSR’s HERProject.
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Tony Spring has been Executive Vice President of the Company since 2021 and Chairman and Chief Executive Officer of Bloomingdale's since 2014; prior thereto he served as President and Chief Operations Officer at Bloomingdale's from 2008 to 2014, Senior Executive Vice President from 2004 to 2008, Executive Vice President of Marketing from 1998 to 2004 and held various other roles within the Bloomingdale's organization from 1987 to 1998 where he assumed positions of increasing responsibility in the home furnishings area before being promoted to Senior Vice President for home furnishings.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny failure to provide user-friendly, secure e-commerce platforms that offer merchandise, delivery options and shopping experiences that resonate with customers could place us at a competitive disadvantage, result in the loss of online and other sales, harm our reputation with customers and have a material adverse impact on the growth of our business and our operating results. 14 Information Security, Cybersecurity, Privacy and Data Management Risks A breach of our information technology systems could adversely affect our reputation, business partner and customer relationships and operations, and result in high costs.
Biggest changeInformation Security, Cybersecurity, Privacy and Data Management Risks A breach of our information technology systems could adversely affect our reputation, business partner and customer relationships and operations, and result in higher costs.
An alleged or actual unauthorized access or unauthorized disclosure of non-public personal information could : • materially damage our reputation and brand, negatively affect customer satisfaction and loyalty, expose us to individual claims or consumer class actions, administrative, civil or criminal investigations or actions, and infringe on proprietary information; and 15 • cause us to incur substantial costs, including costs associated with remediation of information technology systems, customer protection costs and incentive payments for the maintenance of business relationships, litigation costs, lost revenues resulting from negative changes in consumer shopping patterns, unauthorized use of proprietary information or the failure to retain or attract customers following an attack.
An alleged or actual unauthorized access or unauthorized disclosure of non-public personal information could: • materially damage our reputation and brand, negatively affect customer satisfaction and loyalty, expose us to individual claims or consumer class actions, administrative, civil or criminal investigations or actions, and infringe on proprietary information; and • cause us to incur substantial costs, including costs associated with remediation of information technology systems, customer protection costs and incentive payments for the maintenance of business relationships, litigation costs, lost revenues resulting from negative changes in consumer shopping patterns, unauthorized use of proprietary information or the failure to retain or attract customers following an attack.
For example, unfavorable changes related to interest rates, rates of economic growth, fiscal and monetary policies of governments, inflation, deflation, tax rates and policy, unemployment trends, energy prices, and other matters that influence the availability and cost of merchandise, consumer 17 confidence, spending and tourism could negatively affect our business and results of operations.
For example, unfavorable changes related to interest rates, rates of economic growth, fiscal and monetary policies of governments, inflation, deflation, tax rates and policy, unemployment trends, energy prices, and other matters that influence the availability and cost of merchandise, consumer confidence, spending and tourism could negatively affect our business and results of operations.
Although we have implemented policies and procedures designed to facilitate compliance with laws and regulations relating to production of merchandise, doing business in foreign countries and importing merchandise, and to screen, train and monitor our private label vendors to ensure safe and ethical treatment of workers in our supply chain, there can be no assurance that our vendors and other third parties with whom we do business will not violate such laws and regulations or our policies, which could subject us to liability and could adversely impact our reputation, results of operations and business .
Although we have implemented policies and procedures designed to facilitate compliance with laws and regulations relating to production of merchandise, doing business in foreign countries and importing merchandise, and to screen, train and monitor our private label vendors to confirm safe and ethical treatment of workers in our supply chain, there can be no assurance that our vendors and other third parties with whom we do business will not violate such laws and regulations or our policies, which could subject us to liability and could adversely impact our reputation, results of operations and business.
We are identifying, tracking and mitigating advanced phishing, malware and credential compromises daily. These attacks are typically occurring on home networks and migrate to the corporate network.
We are identifying, tracking and mitigating advanced phishing, malware and attempted credential compromises daily. These attacks are typically occurring on home networks and migrate to the corporate network.
For example, it could: • make it more difficult for us to satisfy our debt obligations; • increase our vulnerability to general adverse economic and external conditions, including the COVID-19 pandemic; • impair our ability to obtain additional debt or equity financing in the future for working capital, capital expenditures, acquisitions or general corporate or other purposes; • require us to dedicate a material portion of our cash flows from operations to the payment of principal and interest on our indebtedness, thereby reducing the availability of our cash flows to fund working capital needs, capital expenditures, acquisitions and other general corporate purposes; • expose us to the risk of increased interest rates to the extent we make borrowings under our asset-based credit facility, which bears interest at a variable rate; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • place us at a disadvantage compared to our competitors that have less indebtedness; and • limit our ability to adjust to changing market conditions.
For example, it could: • make it more difficult for us to satisfy our debt obligations; • increase our vulnerability to general adverse economic and external conditions; • impair our ability to obtain additional debt or equity financing in the future for working capital, capital expenditures, acquisitions or general corporate or other purposes; • require us to dedicate a material portion of our cash flows from operations to the payment of principal and interest on our indebtedness, thereby reducing the availability of our cash flows to fund working capital needs, capital expenditures, acquisitions and other general corporate purposes; • expose us to the risk of increased interest rates to the extent we make borrowings under our asset-based credit facility, which bears interest at a variable rate; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • place us at a disadvantage compared to our competitors that have less indebtedness; and • limit our ability to adjust to changing market conditions.
Through memberships in industry groups such as the Sustainable Apparel Coalition (SAC), we are working to reduce the environmental and social impact of apparel and footwear products around the world. The use of recycled material textiles emits fewer greenhouse gas (GHG) emissions and conserves water and energy as compared to making virgin fiber.
Through memberships in industry groups such as the Sustainable Apparel Coalition, we are working to reduce the environmental and social impact of apparel and footwear products around the world. The use of recycled material textiles emits fewer greenhouse gas emissions and conserves water and energy as compared to making virgin fiber.
In recent months, we have experienced delays in merchandise inventory receipts and product delivery due to a continuing global shortage of vessels and air freight, port congestion, a global worker shortage impacting shipping and ports, truck driver shortages, rail congestion at major freight hubs and increasing demand for consumer goods.
We have experienced delays in merchandise inventory receipts and product delivery due to a continuing global shortage of vessels and air freight, port congestion, a global worker shortage impacting shipping and ports, truck driver shortages, rail congestion at major freight hubs and increasing demand for consumer goods.
Subsequent to this initial arrangement and associated amendments, on December 13, 2021, the Company entered into the sixth amendment to the amended and restated Credit Card Program with Citibank (the “Program Agreement”), pursuant to which Citibank issues, maintains and services Macy’s and Bloomingdale’s private label and co-branded credit cards.
Subsequent to this initial arrangement and associated amendments, on December 13, 2021, the Company entered into the sixth amendment to the amended and restated Credit Card Program with Citibank (the Program Agreement), pursuant to which Citibank issues, maintains and services Macy’s and Bloomingdale’s private label and co-branded credit cards.
The adoption and expansion of trade restrictions, retaliatory tariffs, or other governmental action related to tariffs or international trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and/or the U.S. economy, which in turn could adversely impact our business and results of operations. 16 If our vendors, or any raw material vendors on which our vendors or our private label business relies, suffer prolonged manufacturing or transportation disruptions due to public health conditions or other unforeseen events, such as the COVID-19 pandemic, our ability to source product could be adversely impacted which would adversely affect our results of operations .
The adoption and expansion of trade restrictions, retaliatory tariffs, or other governmental action related to tariffs or international trade agreements or policies have the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and/or the U.S. economy, which in turn could adversely impact our business and results of operations. 15 Table of Contents If our vendors, or any raw material vendors on which our vendors or our private label business relies, suffer prolonged manufacturing or transportation disruptions due to public health conditions or other unforeseen events, such as the COVID-19 pandemic, our ability to source product could be adversely impacted which would adversely affect our results of operations.
Our ability to react, mitigate and restore services from an interruption of our systems and processes is key to avoiding adverse financial impacts resulting from loss of sales, services and the cost of paying a ransom. Remote work due to the COVID-19 pandemic has also created additional challenges to our ability to protect remote workers, corporate networks and cloud environments.
Our ability to react, mitigate and restore services from an interruption of our systems and processes is key to avoiding adverse financial impacts resulting from loss of sales, services and the cost of paying a ransom. Remote work has also created additional challenges to our ability to protect remote workers, corporate networks and cloud environments.
Overestimating customer demand for merchandise will likely result in the need to record unplanned and incremental inventory markdowns and sell excess inventory at clearance prices, which would negatively impact our gross margins and operating results.
Overestimating customer demand for merchandise can result in the need to record unplanned and incremental inventory markdowns and sell excess inventory at clearance prices, which would negatively impact our gross margins and operating results.
The California Consumer Privacy Act (CCPA), California Privacy Rights Act (CPRA) and other applicable U.S. privacy laws or new state or federal laws may limit our ability to collect and use data, require us to modify our data processing practices or result in the possibility of fines, litigation or orders which may have an adverse effect on our business and 18 results of operations.
The California Consumer Privacy Act (CCPA), California Privacy Rights Act (CPRA), Virginia Consumer Privacy Act, Colorado Privacy Act, Utah Consumer Privacy Act, Connecticut Data Privacy Act and other applicable U.S. privacy laws or new state or federal laws may limit our ability to collect and use data, require us to modify our data processing practices or result in the possibility of fines, litigation or orders which may have an adverse effect on our business and results of operations.
Other methods of attack include advanced malware, the exploitation of software and operating vulnerabilities, and physical device tampering/skimming at card reader units. We believe these attack methods will continue to evolve. In addition, the risk of cyber-based attacks is heightened with many of our employees working and accessing our technology infrastructure remotely as a result of the COVID-19 pandemic.
Other methods of attack include advanced malware, the exploitation of software and operating vulnerabilities, and physical device tampering/skimming at card reader units. We believe these attack methods will continue to evolve. In addition, the risk of cyber-based attacks is heightened with many of our employees working and accessing our technology infrastructure remotely.
We are also experiencing increases in shipping rates from Trans-Pacific ocean carriers due increases in spot market rates and to shortage of shipping capacity from China and other parts of Asia, and increases in trucking costs due to truck driver shortages and fuel costs.
We have also experienced increases in shipping rates from Trans-Pacific ocean carriers due to increases in spot market rates and shortage of shipping capacity from China and other parts of Asia, and increases in trucking costs due to truck driver shortages and fuel costs.
Under the Program Agreement, which extends until March 31, 2030, Citibank owns the credit card receivables generated from sales through the credit cards and Macy’s receives fees and shares in profits based on a tiered return on the receivables portfolio net of program expenses. Credit card revenues, net were $832 million, or approximately 3.4% of net sales, for 2021.
Under the Program Agreement, which extends until March 31, 2030, Citibank owns the credit card receivables generated from sales through the credit cards and Macy’s receives fees and shares in profits based on a tiered return on the receivables portfolio net of program expenses. Credit card revenues, net were $863 million, or approximately 3.5% of net sales, for 2022.
Pressure from regulators, consumers and other stakeholders to find alternatives and/or green solutions to sharply reduce our use of natural resources are escalating. We continue to look for ways to address these issues and continue to explore developing best practices within the industry.
Pressure from regulators, consumers and other stakeholders to find alternatives and/or energy-efficient solutions to sharply reduce our use of natural resources is escalating. We continue to look for ways to address these issues and continue to explore developing best practices within the industry.
Cyber threats are increasing in scope, sophistication and frequency and bad actors are exploiting vulnerabilities to gain access to networks for the purpose of implementing ransomware, which is used to encrypt and steal data and causes public facing business interruptions.
Cyber threats are increasing in scope, sophistication and frequency and bad actors are exploiting vulnerabilities to gain access to networks for the purpose of implementing ransomware, which is used to encrypt and steal data both from main and backup systems and causes public-facing business interruptions.
We are also subject to anti-bribery, customs, child labor, truth-in-advertising and other laws, including consumer protection regulations and zoning and occupancy ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise and the operation of retail stores and warehouse facilities.
We are assessing these impacts on our consolidated financial statements. We are also subject to anti-bribery, customs, child labor, truth-in-advertising and other laws, including consumer protection regulations and zoning and occupancy ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise and the operation of retail stores and warehouse facilities.
We employ safeguards for the protection of this information and have made significant investments to secure access to our information technology network, the importance of which has increased due to many of our colleagues working remotely as a result of the COVID-19 pandemic .
We employ safeguards for the protection of this information and have made significant investments to secure access to our information technology network, the importance of which has increased due to many of our colleagues working remotely.
If we are not successful in executing our sales strategy during this period, we may have to sell the inventory at significantly reduced prices or may not be able to sell the inventory at all, which could have a material adverse effect on our results of operations and cash flows. 12 We depend on our ability to attract, train, develop and retain quality colleagues .
If we are not successful in executing our sales strategy during this period, we may have to sell the inventory at significantly reduced prices or may not be able to sell the inventory at all, which could have a material adverse effect on our results of operations and cash flows.
As consumers continue to migrate online, a trend that has accelerated with the COVID-19 pandemic, we face pressures to not only compete from a price perspective with our competitors, some of whom sell the same products, but also to differentiate Macy's, Inc’s. merchandise offerings, services and shopping experiences to stay relevant in retail's ever-changing environment.
As consumers continue to migrate to digital shopping channels, we face pressures to not only compete from a price perspective with our competitors, some of whom sell the same products, but also to differentiate Macy’s, Inc’s. merchandise offerings, services and shopping experiences to stay relevant as a modern department store in retail’s ever-changing environment.
This may include phone numbers, driver license numbers, contact preferences, personal information stored on electronic devices, and payment information, including credit and debit card data. We gather and retain information about employees in the normal course of business. We may share information about such persons with vendors that assist with certain aspects of our business.
This may include phone numbers, driver license numbers, contact preferences, personal information stored on electronic devices, and payment information, including credit and debit card data. We gather and retain information about employees in the normal course of business.
Natural disasters such as hurricanes, tornadoes and earthquakes, or a combination of these or other factors, could damage or destroy our facilities or make it difficult for customers to travel to our stores, thereby negatively affecting our business and results of operations.
Natural disasters such as hurricanes, tornadoes and earthquakes, or a combination of these or other factors, could damage or destroy our facilities or make it difficult for customers to travel to our stores, thereby negatively affecting our business and results of operations. The COVID-19 pandemic had a significant impact on the retail industry, including our business.
Extreme weather conditions , including those that may be caused by climate change, in the areas in which our stores are located could negatively affect our business and results of operations.
Our business could be materially adversely affected by extreme weather conditions, natural disasters or regional or global health pandemics. Extreme weather conditions, including those that may be caused by climate change, in the areas in which our stores are located could negatively affect our business and results of operations.
Significant changes in interest rates, decreases in the fair value of plan assets and timing and amount of benefit payments could affect the funded status of our plans and could increase future funding requirements of the plans.
Significant changes in interest rates, decreases in the fair value of plan assets and timing and amount of benefit payments could affect the funded status of our plans and could increase future funding requirements of the plans. A significant increase in future funding requirements could have a negative impact on our cash flows, financial condition or results of operations.
We have also opened new off-mall smaller store formats – Market by Macy’s and Bloomie’s – in selected markets to promote customer acquisition, test replacement, expansion or market entry locations, and support our omni-market capabilities.
We have invested in facilities and fixtures upgrades, merchandise assortment and customer service in selected stores to improve customer retention rates and overall customer satisfaction. We have opened new off-mall smaller store formats – Market by Macy’s and Bloomie’s – in selected markets to promote customer acquisition, test replacement, expansion or market entry locations, and support our omni-market capabilities.
Supply Chain and Third-Party Risks We depend on vendors and other sources of merchandise, goods and services outside the U.S. Our business could be affected by disruptions in, or other legal, regulatory, political, economic or public health issues associated with, our supply network. We depend on vendors for timely and efficient access to products we sell.
Our business has been and could in the future continue to be affected by disruptions in, or other legal, regulatory, political, economic or public health issues associated with, our supply network. We depend on vendors for timely and efficient access to products we sell. We source the majority of our merchandise from manufacturers located outside the U.S., primarily Asia.
Increases in labor costs and the cost of employee benefits could impact our financial results and cash flow. Minimum wage increases by states and wage and benefit increases to attract and retain workers in a tight labor market have increased labor costs in the retail sector.
Minimum wage increases by states and wage and benefit increases to attract and retain workers in a tight labor market have increased labor costs in the retail sector. These increased costs pressure our margins and could have a negative impact on our financial results. Our expenses relating to employee health benefits are significant.
We source the majority of our merchandise from manufacturers located outside the U.S., primarily Asia. In the normal course of business, we provide credit enhancement to our vendors to support accounts receivable factoring and financing with third parties.
In the normal course of business, we provide credit enhancement to our vendors to support accounts receivable factoring and financing with third parties.
Insufficient, untimely or misguided investments in these areas could significantly impact our profitability and growth . In addition, a continued decline of customer store traffic and migration of sales from brick-and-mortar stores to digital platforms could lead to additional store closures, restructuring and other costs that could adversely impact our results of operations and cash flows.
In addition, a significant decline of customer store traffic or migration of sales from brick-and-mortar stores to digital platforms could lead to additional store closures, restructuring and other costs that could adversely impact our results of operations and cash flows. Our ability to grow depends in part on our stores remaining relevant to customers.
While these store investments and off-mall store formats are intended to improve the customer store experience and drive traffic, realization of these benefits may not occur .
We also introduced permanent Toys “R” Us shops within all Macy’s locations. While these store investments, off-mall store formats, and in-store shops are intended to improve the customer store experience and drive traffic, realization of these benefits may not occur.
Our revenues and cash requirements are affected by the seasonal nature of our business. Our business is seasonal, with a high proportion of revenues and operating cash flows generated during the second half of the year, which includes the fall and the months of November and December.
Our business is seasonal, with a high proportion of revenues and operating cash flows generated during the second half of the year, which includes the fall and the months of November and December. A disproportionate amount of our revenues is realized in the fourth quarter due to this seasonality.
We cannot make any assurances that we would be able to obtain such an alternate source of funding on satisfactory terms, if at all, and our inability to do so could cause the holders of our securities to experience a partial or total loss of their investments in the Company.
We cannot make any assurances that we would be able to obtain such an alternate source of funding on satisfactory terms, if at all, and our inability to do so could cause the holders of our securities to experience a partial or total loss of their investments in the Company. 19 Table of Contents Our level of indebtedness may adversely affect our ability to operate our business, remain in compliance with debt covenants, react to changes in our business or the industry in which we operate, or prevent us from making payments on our indebtedness.
Underestimating customer demand for merchandise can lead to inventory shortages, missed sales opportunities and negative customer experiences. 11 The Company face s significant competition and challenges as consumers continue to migrate to online shopping and depend s on its ability to differentiate itself in retail's ever-changing environment . We conduct our retail merchandising business under highly competitive conditions.
Underestimating customer demand for merchandise can lead to inventory shortages, missed sales opportunities and negative customer experiences. 9 Table of Contents The Company faces significant competition and challenges as consumers continue to migrate to digital shopping channels and depends on its ability to differentiate itself in retail ’ s ever-changing environment.
In 2005, in connection with the sale of most of the Company's credit card accounts and related receivable balances to Citibank, N.A. (“Citibank”), the Company and Citibank entered into a long-term marketing and servicing alliance pursuant to the terms of a Credit Card Program Agreement ("Credit Card Program").
(Citibank), the Company and Citibank entered into a long-term marketing and servicing alliance pursuant to the terms of a Credit Card Program Agreement (Credit Card Program).
Although Macy's, Inc. is one of the nation’s largest retailers, we have numerous and varied competitors at the national and local levels, including department stores, specialty stores, general merchandise stores, manufacturers’ outlets, off-price and discount stores, online retailers and catalogs, among others. Competition is characterized by many factors, including assortment, advertising, price, quality, service, location, reputation and credit availability.
We conduct our retail merchandising business under highly competitive conditions. Although Macy’s, Inc. is one of the nation’s largest retailers, we have numerous and varied competitors at the national and local levels, including department stores, specialty stores, general merchandise stores, manufacturers’ outlets and websites, off-price and discount stores, online retailers and catalogs, among others.
Our business is also susceptible to unseasonable weather conditions, which could reduce demand for a portion of our inventory and reduce sales and profitability or could result in disruption or delay of materials in our supply chain or impact staffing in our stores. 19 Financial Risks Inability to access capital markets could adversely affect our business or financial condition.
In addition, extreme weather conditions could result in disruption or delay of production and delivery of materials and products in our supply chain or impact staffing in our stores. Financial Risks Inability to access capital markets could adversely affect our business or financial condition.
In 2020, we announced the Polaris strategy, a multi-year plan designed to stabilize profitability and position the Company for sustainable, profitable growth.
Strategic, Operational and Competitive Risks Our strategic plans and initiatives may not be successful, which could negatively affect our profitability and growth. In 2020, we announced the Polaris strategy, a multi-year plan designed to stabilize profitability and position the Company for sustainable, profitable growth.
We generally incur significant additional expenses in the period leading up to the months of November and December in anticipation of higher sales volume in those periods, including costs for additional inventory, advertising and employees.
Should sales during this period fall below our expectations, a disproportionately negative impact on our annual results of operations could occur. 10 Table of Contents We generally incur significant additional expenses in the period leading up to the months of November and December in anticipation of higher sales volume in those periods, including costs for additional inventory, advertising and employees.
For example, energy or carbon policies (both existing and emerging) that apply to our energy suppliers have the ability to impact indirect costs to our operations through shifts in energy prices. Current environmental and climate-related regulation, both at the state and federal levels, are monitored as part of our enterprise risk management process. • Reputational Risk.
For example, energy or carbon policies (both existing and emerging) that apply to our energy suppliers have the ability to impact indirect costs to our operations through shifts in energy prices.
All of these factors may affect our ability to access suitable merchandise on acceptable terms, are beyond our control and could negatively affect our business, results of operations and liquidity.
All of these factors may affect our ability to access suitable merchandise on acceptable terms, are beyond our control and could negatively affect our business, results of operations and liquidity. We source a significant amount of our private label products from factories in China and, to a lesser extent, from factories in Vietnam, India, Indonesia, Jordan and other countries.
The interpretation and application of existing laws regarding data privacy and data protection are in flux and many states are considering new regulations in this area.
The Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination and security of data. The interpretation and application of existing laws regarding data privacy and data protection are in flux and many states are considering new regulations in this area.
Changes in applicable environmental regulations, including increased or additional regulations to limit carbon emissions or other greenhouse gases may result in increased compliance costs, capital expenditures and other financial obligations which could affect our profitability.
Changes in applicable environmental regulations, including increased or additional regulations to limit carbon emissions or other greenhouse gases may result in increased compliance costs, capital expenditures and other financial obligations which could affect our profitability. 17 Table of Contents In addition, our business is subject to complex and rapidly evolving laws addressing data privacy and data protection and companies are under increased regulatory scrutiny with respect to these matters.
Protections we have in place to safeguard this information may be compromised as a result of third-party security breaches, theft, cyberattacks, errors by employees or employees of third-party vendors, or contractors, misappropriation of data by employees, vendors or unaffiliated third-parties, or other irregularities that may result in persons obtaining unauthorized access to company data.
We also employ encryption and other methods to protect our data, promote security awareness with our employees and work with business partners in an effort to create secure and compliant systems. 13 Table of Contents Protections we have in place to safeguard this information may be compromised as a result of third-party security breaches, theft, cyberattacks, including the use of malicious codes, worms, phishing, spyware, denial of service attacks and ransomware errors by employees or employees of third-party vendors, or contractors, misappropriation of data by employees, vendors or unaffiliated third-parties, or other irregularities that may result in persons obtaining unauthorized access to company data.
Our level of indebtedness could have important consequences for the holders of our debt and equity securities.
As of January 28, 2023, the aggregate principal amount of our total outstanding indebtedness was $2,996 million. Our level of indebtedness could have important consequences for the holders of our debt and equity securities.
For instance, we have implemented authentication protocols, installed firewalls and anti-virus/anti-malware software, established data security breach preparedness and response plans , and conduct continuous risk assessments . We also employ encryption and other methods to protect our data, promote security awareness with our employees and work with business partners in an effort to create secure and compliant systems.
For instance, we have implemented authentication protocols, installed firewalls and anti-virus/anti-malware software, established data security breach preparedness and response plans, conduct continuous risk assessments, and mitigate software vulnerability with security patches.
Any failure by us to compete effectively could negatively affect our business and results of operations.
Competition is characterized by many factors, including assortment, advertising, price, quality, service, location, reputation and credit availability. Any failure by us to compete effectively could negatively affect our business and results of operations.
Our digitally-led omni-channel strategy is committed to creating a seamless integration between physical stores and digital shopping. We plan to continue our focus on strengthening our omni-channel capabilities with investments in digital shopping experiences, data and analytics, technology infrastructure and more efficient fulfillment capabilities.
We plan to continue our focus on strengthening our omni-channel capabilities with investments in digital shopping experiences, data and analytics, physical stores, technology infrastructure and more efficient fulfillment capabilities. These initiatives have required and will continue to require our management, colleagues, and contractors to make transformational changes in our business operations and to improve productivity.
This strategy is multi-pronged and may include transactions, strategic alliances or other arrangements with mall developers or other unrelated third-parties. Due to the cyclical nature of real estate markets, the performance of our real estate strategy is inherently volatile and could have a significant impact on our results of operations or financial condition.
Due to the cyclical nature of real estate markets and the risks of real estate development, the performance of our real estate strategy is inherently volatile and could have a significant impact on our results of operations or financial condition. Our revenues and cash requirements are affected by the seasonal nature of our business.
Additionally, we have rolled out a framework to measure the social and environmental performance of over 500 facilities, benchmarking by facility type to allow comparison of performance against that of peers. • Extreme Weather Events and Natural Disasters. The risk of extreme weather events is integrated into our climate change–related enterprise risk management assessment.
Additionally, we have rolled out a framework to measure the social and environmental performance of over 500 facilities, benchmarking by facility type to allow comparison of performance against that of peers. Macy’s, Inc.’s greatest opportunity for energy reduction continues to be through our lighting.
Over the course of the COVID-19 pandemic, we have refined the components of the Polaris strategy to focus where we believe we can create differentiation and drive competitive advantage, including a focus on winning with fashion and style, delivering clear value, excelling in digital shopping, enhancing store experience, modernizing supply chain and enabling transformation.
We continue to refine the components of the Polaris strategy, including a focus on winning with fashion and style, delivering clear value, excelling in digital shopping, enhancing store experience, modernizing supply chain and enabling transformation. Our digitally-led omni-channel strategy is committed to creating a seamless integration between physical stores and digital shopping.
We continue to significantly invest in our omnichannel capabilities, seeking to improve the profitability of our digital business through delivery expense reduction, gross margin expansion and other initiatives to support digital sales growth. We also are seeking to improve the delivery experience of our customers with strategic investments to fulfill digital sales demand and elevated delivery speed expectations.
We continue to seek to improve the delivery experience of our customers with strategic investments to fulfill digital sales demand and elevated delivery speed expectations. Insufficient, untimely or misguided investments in these areas could significantly impact our profitability and growth.
Our ability to meet labor needs while controlling costs associated with hiring and training new employees is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation and changing demographics. In recent years, low unemployment, labor shortages, intense competition for talent and a competitive wage environment have impacted our ability to attract, recruit and retain talent.
Macy’s, Inc. has a large number of employees, many of whom are in entry level or part-time positions with historically high rates of turnover. Our ability to meet labor needs while controlling costs associated with hiring and training new employees is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation and changing demographics.
Unstable political conditions, civil unrest, terrorist activities, armed conflicts or events of extreme violence , including any escalation of the conflict between Russia and Ukraine , may disrupt commerce and could negatively affect our business and results of operations. Our business could be materially adversely affected by extreme weather conditions, natural disasters or regional or global health pandemics.
Unstable political conditions, civil unrest, terrorist activities, armed conflicts or events of extreme violence, including any escalation of the conflict between Russia and Ukraine, may disrupt commerce and could negatively affect our business and results of operations. 16 Table of Contents We regularly maintain cash balances at third-party financial institutions in excess of the Federal Deposit Insurance Corporation (the “FDIC”) insurance limit.
Due to uncertainty regarding legislative or regulatory changes, we are not able to fully determine the impact that future healthcare reform could have on our company-sponsored medical plans . If cash flows from our private label and co-branded credit cards decrease, our financial and operational results may be negatively impacted.
Healthcare costs have risen significantly in recent years, and legislative and private sector initiatives regarding healthcare reform have resulted and could continue to result in significant changes to the U.S. healthcare system. Due to uncertainty regarding legislative or regulatory changes, we are not able to fully determine the impact that future healthcare reform could have on our company-sponsored medical plans.
In addition, our online operations depend upon the transmission of confidential information over the Internet, such as information permitting cashless payments.
We may share sensitive company data with vendors that assist with certain aspects of our business, such as social media and data analytics firms. In addition, our digital operations depend upon the transmission of confidential information over the Internet, such as information permitting cashless payments.
Our business is dependent upon attracting, training, developing and retaining quality employees at all levels of the organization, and management personnel to develop and effectively execute successful business strategies. Macy's, Inc. has a large number of employees, many of whom are in entry level or part-time positions with historically high rates of turnover.
We depend on our ability to attract, train, develop and retain quality colleagues. Our business is dependent upon attracting, training, developing and retaining quality employees at all levels of the organization, and management personnel to develop and effectively execute successful business strategies.
Our sales and operating results depend on our ability to anticipate and respond to consumer preferences and manage our inventory and merchandise selection. The fashion and retail industries are subject to sudden shifts in consumer trends and consumer spending.
Our sales and operating results depend on our ability to manage our inventory and merchandise selection. Our profitability depends on our ability to manage inventory levels and merchandise selection.
Reputational risk in relation to climate-related issues encompasses both supply chain issues (e.g., supply disruption caused by weather events) and our position and progress toward cleaner energy production and consumption. • Risk Related to Resource Use. There is increasing scrutiny on the use of resources, particularly energy sources and energy use.
Maintaining our Company’s reputation and brand image at a high level is critical to our operations and financial results. Reputational risk in relation to climate-related issues encompasses both supply chain issues and our position and progress toward cleaner energy production and consumption.
A significant increase in future funding requirements could have a negative impact on our cash flows, financial condition or results of operations. 13 These plans allow eligible retiring employees to receive lump sum distributions of benefits earned.
These plans allow eligible retiring employees to receive lump sum distributions of benefits earned.
As states and localities began to ease the regulations imposed to slow the spread of COVID-19, the Company began to reopen its stores and by the end of the second quarter of 2020, substantially all of the Company’s stores had reopened. The store closures resulted in a temporary material decline in revenue and operating cash flow.
The Company temporarily closed all of its stores and subsequently furloughed the majority of its workforce from March 2020 through the second quarter of 2020 in response to government regulations, causing a temporary material decline in revenue and operating cash flow.
COVID-19 Pandemic Risks The COVID-19 pandemic has had and could continue to have a significant negative impact on the Company’s business, financial condition, results of operations and cash flows. Since the first quarter of fiscal 2020, the COVID-19 pandemic has had a significant impact on the retail industry, including our business.
Should we experience a regional or global pandemic or other public health crisis, including from a COVID-19 variant, influenza, Respiratory Syncytial Virus, other microorganism, infectious disease or other cause, it could have a significant negative impact on the Company’s business, financial condition, results of operations and cash flows.
A material disruption in our information technology systems could adversely affect our business or results of operations. We rely extensively on our information technology systems to process transactions, summarize results and manage our business.
Failure of a key information technology system or process could adversely affect our business. We rely extensively on information technology systems and related personnel to collect, analyze, process, store, manage, transmit and protect transactions and data. Some of these systems are managed or provided by third-party service providers, including certain cloud platform providers.
Removed
Although the Company has experienced a 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.
Added
These initiatives are also subject to the ability to attract and retain skilled personnel to support the initiatives. We face challenges in executing our Polaris strategy and initiatives in the current environment of inflation, increased interest rates, economic uncertainty and other macroeconomic conditions that may impact discretionary spending.
Removed
The full impact of the COVID-19 pandemic is uncertain at this time, but we expect that it could continue to have adverse impacts on the Company’s business, 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.
Added
We may not timely identify or effectively respond to consumer needs, expectations, or trends, which could adversely affect our relationship with customers, the demand for our products and services, and our market share.
Removed
The Company has seen significant improvement in its operations in 2021.
Added
The success of our business depends in part on our ability to identify and respond to evolving trends in demographics, shifts in consumer preferences, expectations and needs, unexpected weather conditions, public health issues (including pandemics and related shut-downs or other actions by government regulators or others) or natural disasters, while also managing appropriate inventory levels in our stores and distribution or fulfillment centers and maintaining an excellent customer experience.
Removed
However, pockets of resurgence and variant strains of COVID-19 continue to emerge in parts of the world and the U.S., which could negatively impact future store performance if consumer shopping behaviors are impacted, the health of our customers and colleagues is compromised or government officials reinstate restrictions that impact our operations.
Added
It is difficult to successfully predict the products and services our customers will demand. As customers expect a more personalized experience, our ability to collect, use and protect relevant customer data is important to our ability to effectively meet their expectations, but is subject to the impact of legislation or regulations governing data privacy, security and other external factors.
Removed
As a result, there can be no assurance as to whether store closures may again be required. • As a result of the COVID-19 pandemic, and particularly since the reopening of stores in 2020, the Company implemented safety measures and health and wellness precautions across its stores and facilities to mitigate risk to its customers and Company colleagues.
Added
Customer preferences and expectations related to sustainability of products and operations are also increasing. If we do not successfully differentiate the shopping experience to meet the individual needs and expectations of or within a customer group, we may lose market share with respect to those customers.
Removed
These efforts to protect the health and well-being of customers and Company colleagues have resulted in, and will continue to result in, additional selling, general and administrative (“SG&A”) expenses.
Added
We launched Macy’s digital Marketplace in September 2022 featuring a collection of new brands and products from third party sellers to introduce customers to new merchandise options. We continue to significantly invest in our omni-channel capabilities, seeking to improve the profitability of our digital business through delivery expense reduction, gross margin expansion and other initiatives to support digital sales growth.
Removed
Further efforts to mitigate the impact of the COVID-19 pandemic, such as governmental requirements for employers to implement workforce vaccination-or-testing mandates, could require additional management time and focus and, possibly, significant SG&A expenses. • During fiscal 2020, the COVID-19 pandemic had a significant impact on economic conditions and discretionary consumer spending and consumer shopping behaviors in North America.
Added
This strategy is multi-pronged and may include transactions, strategic alliances or other arrangements with mall developers or other unrelated third-parties.
Removed
In response to the disruption caused by the COVID-19 pandemic, the Company reconfigured its cost base through colleague reductions, reduced discretionary spending and made investments to adapt to the changes in consumer behavior. An increased percentage of sales are now originating through digital channels.
Added
Where feasible, we may subdivide an existing parcel, continue to operate a store and redevelop any excess parcel for mixed-use, or close the store and redevelop an entire parcel into a mixed-use development, in either event selling the parcel once the site development plan is approved by governmental authorities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company's operations were conducted through the following branded store locations: 2021 Boxes Locations Macy's 570 510 Bloomingdale's 57 55 bluemercury 160 160 787 725 Store count activity was as follows: 2021 Boxes Locations Store count at beginning of fiscal year 789 727 Stores opened 9 9 Stores closed, consolidated into or relocated from existing centers (11 ) (11 ) Store count at end of fiscal year 787 725 Additional information about the Company’s store boxes as of January 29, 2022 is as follows: By Brand Total Owned Leased Subject to a Ground Lease Partly Owned and Partly Leased Macy's 570 309 160 97 4 Bloomingdale's 57 14 36 7 — bluemercury 160 — 160 — — 787 323 356 104 4 21 Additional information about the Company’s logistics network as of January 29, 2022 is as follows: Location Primary Function Owned or Leased Square Footage (thousands) Cheshire, CT Direct to customer Owned 719 Chicago, IL Stores Owned 862 Columbus, OH Stores Leased 673 Dayton, OH Stores Leased 107 Denver, CO Stores Leased 20 Goodyear, AZ Direct to customer Owned 1,560 Hayward, CA Stores Owned 310 Houston, TX Stores Leased 872 Joppa, MD Stores Owned 850 Kapolei, HI Stores Leased 260 Los Angeles, CA Stores Owned 1,529 Martinsburg, WV Direct to customer Owned 2,200 Miami, FL Stores Leased 535 Portland, TN Direct to customer Owned 1,455 Raritan, NJ Stores Owned 980 Sacramento, CA Direct to customer Leased 385 Secaucus, NJ Stores Leased 675 South Windsor, CT Stores Owned 595 Stone Mountain, GA Stores Owned 920 Tulsa, OK Direct to customer Owned 2,195 Tukwila, WA Stores Leased 500 Union City, CA Stores Leased 165 Youngstown, OH Stores Owned 610
Biggest changeThe Company's operations were conducted through the following branded store locations: 2022 Boxes Locations Macy's 566 507 Bloomingdale's 57 55 bluemercury 160 160 783 722 20 Table of Contents Store count activity was as follows: 2022 Boxes Locations Store count at beginning of fiscal year 787 725 Stores opened 10 10 Stores closed, consolidated into or relocated from existing centers (14) (13) Store count at end of fiscal year 783 722 Additional information about the Company's store boxes as of January 28, 2023 is as follows: By Brand Total Owned Leased Subject to a Ground Lease Partly Owned and Partly Leased Macy's 566 302 164 96 4 Bloomingdale's 57 14 37 6 — bluemercury 160 — 160 — — 783 316 361 102 4 Additional information about the Company's logistics network as of January 28, 2023 is as follows: Location Primary Function Owned or Leased Square Footage (thousands) Bridgeton, MO Stores Leased 43 Cheshire, CT Direct to customer Owned 719 Chicago, IL Stores Owned 862 Columbus, OH Stores Leased 673 Dayton, OH Stores Leased 107 Denver, CO Stores Leased 20 Goodyear, AZ Direct to customer Owned 1,560 Hayward, CA Stores Owned 310 Houston, TX Stores Leased 872 Joppa, MD Stores Owned 850 Kapolei, HI Stores Leased 260 Los Angeles, CA Stores Owned 1,529 Martinsburg, WV Direct to customer Owned 2,200 Miami, FL Stores Leased 535 Portland, TN Direct to customer Owned 1,455 Raritan, NJ Stores Owned 980 Sacramento, CA Direct to customer Leased 385 Secaucus, NJ Stores Leased 675 South Windsor, CT Stores Owned 595 Stone Mountain, GA Stores Owned 920 Tukwila, WA Stores Leased 500 Tulsa, OK Direct to customer Owned 2,195 Union City, CA Stores Leased 165 Youngstown, OH Stores Owned 610 21 Table of Contents
At these locations, store boxes consisted of 323 owned boxes, 356 leased boxes, 104 boxes operated under arrangements where the Company owned the building and leased the land and four boxes of partly owned and partly leased buildings. All owned properties are held free and clear of mortgages.
At these locations, store boxes consisted of 316 owned boxes, 361 leased boxes, 102 boxes operated under arrangements where the Company owned the building and leased the land and four boxes of partly owned and partly leased buildings. All owned properties are held free and clear of mortgages.
As of January 29, 2022 , the operations of the Company included 725 store locations in 43 states, the District of Columbia, Puerto Rico and Guam, comprising a total of approximately 112 million square feet.
As of January 28, 2023, the operations of the Company included 722 store locations in 43 states, the District of Columbia, Puerto Rico and Guam, comprising a total of approximately 111 million square feet.
As of January 29, 2022, certain properties secured certain senior notes, as disclosed 20 further in Item 7 . Pursuant to various shopping center agreements, the Company is obligated to operate certain stores for periods of up to 15 years. Some of these agreements require that the stores be operated under a particular name.
Pursuant to various shopping center agreements, the Company is obligated to operate certain stores for periods of up to 15 years. Some of these agreements require that the stores be operated under a particular name.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed4 unchanged
Biggest changeThe reserve, included within accounts payable and accrued liabilities on the Consolidated Balance Sheet as of January 29, 2022, reflects the expected loss.
Biggest changeThe reserve, included within accounts payable and accrued liabilities on the Consolidated Balance Sheet as of January 28, 2023, reflects the expected loss. Item 4. Mine Safety Disclosures. Not applicable. 22 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+2 added−2 removed3 unchanged
Biggest changeThe Company may continue, discontinue or resume purchases of common stock under these 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. 23 The following graph compares the cumulative total stockholder return on the Company's common stock with the Standard & Poor's 500 Composite Index and the Company's peer group s for the period from January 28 , 201 7 through January 29, 2022 , assuming an initial investment of $100 and the reinvestment of all dividends, if any .
Biggest changeThe following graph compares the cumulative total stockholder return on the Company's common stock with the Standard & Poor's 500 Composite Index and the Company's peer groups for the period from February 3, 2018 through January 28, 2023, assuming an initial investment of $100 and the reinvestment of all dividends, if any.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company's common stock is listed on the New York Stock Exchange under the trading symbol “M.” As of January 29, 2022, the Company had approximately 13,037 stockholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company's common stock is listed on the New York Stock Exchange under the trading symbol “M.” As of January 28, 2023, the Company had approximately 12,571 stockholders of record.
As of January 29, 2022, zero dollars remained available for repurchase under this authorization. On February 22, 2022, the Company announced that its Board of Directors authorized a new $2.0 billion share repurchase program, which does not have an expiration date.
On February 22, 2022, the Company announced that its Board of Directors authorized a $2.0 billion share repurchase program, which does not have an expiration date.
The companies included in the peer group are Bed, Bath & Beyond, Best Buy, Dillard’s, Dollar Tree, Gap, Kohl’s, Lowe’s, Nordstrom, Ross Stores, Target, TJX Companies, Burlington Stores, Dicks Sporting Goods, Foot Locker and Williams-Sonoma. L Brands was removed from the peer group as compared to 2020 due to the spin-off of Victoria’s Secret during 2021.
The companies included in Peer Group 2021 are Bed, Bath & Beyond, Best Buy, Burlington Stores, Dicks Sporting Goods, Dillard’s, Dollar Tree, Foot Locker, Gap, Kohl’s, Lowes Companies, Nordstrom, Ross Stores, Target, TJX Companies, and Williams-Sonoma.
Removed
The following table provides information regarding the Company’s purchases of common stock during the fourth quarter of 2021.
Added
The Company may continue, discontinue or resume purchases of common stock under this 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. As of January 28, 2023, $1.4 billion remained available for repurchase under this authorization.
Removed
Total Number of Shares Purchased Average Price Paid per Share ($) Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs ($)(1) (thousands) (thousands) (millions) October 31, 2021 - November 27, 2021 — — — 200 November 28, 2021 - January 1, 2022 7,463 26.82 7,463 — January 2, 2022 - January 29, 2022 — — — — 7,463 26.82 7,463 (1) On August 19, 2021, the Company announced that its Board of Directors authorized a new $500 million share repurchase program.
Added
Peer Group 2022 includes all the companies in Peer Group 2021 with the addition of Ulta Beauty, which was added in 2022 following review of the peer group by the Compensation and Management Development Committee of the Board of Directors.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

73 edited+29 added−48 removed39 unchanged
Biggest changeFor 2021, after eliminating repeat visits between quarters, the Company’s new customers increased 40% over 2020 and 26% over 2019 to 19.4 million. 27 Analysis of Results of Operations 2021 2020 2019 Amount % to Sales Amount % to Sales Amount % to Sales (dollars in millions, except per share figures) Net sales $ 24,460 $ 17,346 $ 24,560 Increase (decrease) in comparable sales 43.0 % (27.9 )% (0.8 )% Credit card revenues, net 832 3.4 % 751 4.3 % 771 3.1 % Cost of sales (14,956 ) (61.1 )% (12,286 ) (70.8 )% (15,171 ) (61.8 )% Selling, general and administrative expenses (8,047 ) (32.9 )% (6,767 ) (39.0 )% (8,998 ) (36.6 )% Gains on sale of real estate 91 0.4 % 60 0.3 % 162 0.6 % Impairment, restructuring and other costs (30 ) (0.1 )% (3,579 ) (20.6 )% (354 ) (1.4 )% Operating income (loss) 2,350 9.6 % (4,475 ) (25.8 )% 970 3.9 % Diluted earnings (loss) per share $ 4.55 $ (12.68 ) $ 1.81 Supplemental Financial Measure Gross margin $ 9,504 38.9 % $ 5,060 29.2 % $ 9,389 38.2 % Digital sales as a percent of net sales 35.0 % 44.3 % 25.3 % Supplemental Non-GAAP Financial Measures Increase (decrease) in comparable sales on an owned plus licensed basis 42.9 % (27.9 )% (0.7 )% Adjusted diluted earnings (loss) per share $ 5.31 $ (2.21 ) $ 2.91 EBITDA $ 3,194 $ (3,546 ) $ 1,924 Adjusted EBITDA $ 3,320 $ 117 $ 2,336 ROIC 27.2 % 3.0 % 17.1 % See pages 34 to 36 for a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.
Biggest changeAnalysis of Results of Operations 2022 2021 2020 Amount % to Sales Amount % to Sales Amount % to Sales (dollars in millions, except per share figures) Net sales $ 24,442 $ 24,460 $ 17,346 Increase (decrease) in comparable sales 0.3 % 43.0 % (27.9) % Credit card revenues, net 863 3.5 % 832 3.4 % 751 4.3 % Cost of sales (15,306) (62.6) % (14,956) (61.1) % (12,286) (70.8) % Selling, general and administrative expenses (8,317) (34.0) % (8,047) (32.9) % (6,767) (39.0) % Gains on sale of real estate 89 0.4 % 91 0.4 % 60 0.2 % Impairment, restructuring and other costs (41) (0.2) % (30) (0.1) % (3,579) (20.6) % Operating income (loss) $ 1,730 7.1 % $ 2,350 9.6 % $ (4,475) (25.8) % Diluted earnings (loss) per share $ 4.19 $ 4.55 $ (12.68) Supplemental Financial Measure Gross margin $ 9,136 37.4 % $ 9,504 38.9 % $ 5,060 29.2 % Digital sales as a percent of net sales 33 % 35 % 44 % Supplemental Non-GAAP Financial Measures Increase (decrease) in comparable sales on an owned plus licensed basis 0.6 % 42.9 % (27.9) % Adjusted diluted earnings (loss) per share $ 4.48 $ 5.31 $ (2.21) EBITDA $ 2,568 $ 3,194 $ (3,546) Adjusted EBITDA $ 2,648 $ 3,320 $ 117 See pages 32 to 34 for reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measure and for other important information. 26 Table of Contents Comparison of 2022 and 2021 2022 2021 Net sales $ 24,442 $ 24,460 Increase in comparable sales 0.3 % 43.0 % Increase in comparable sales on an owned plus licensed basis 0.6 % 42.9 % Digital sales as a percent of net sales 33 % 35 % Net sales for 2022 were relatively flat to the same period in the prior year as the Company navigated a volatile macroeconomic environment and inflation; however, comparable store sales increased from 2021 on both an owned and owned plus licensed basis.
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.
Holders of the Company’s secured indebtedness, including 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.
Definitions and calculations of comparable sales differ among companies in the retail industry. 34 (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.
Definitions and calculations of comparable sales 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.
However, the terms of approximately $2,574 million in aggregate principal amount of the Company's senior notes outstanding at that date require the Company to offer to purchase such notes at a price equal to 101% of their principal amount plus accrued and unpaid interest if there is both a change of control (as defined in the applicable indenture) of the Company and the notes are rated by specified rating agencies at a level below investment grade.
However, the terms of approximately $2,409 million in aggregate principal amount of the Company's senior notes outstanding at that date require the Company to offer to purchase such notes at a price equal to 101% of their principal amount plus accrued and unpaid interest if there is both a change of control (as defined in the applicable indenture) of the Company and the notes are rated by specified rating agencies at a level below investment grade.
For the Company's annual impairment assessment as of the end of fiscal May 2020 and 2021, the Company elected to perform a qualitative impairment test on its goodwill and intangible assets with indefinite lives and concluded that it is more likely than not that the fair values exceeded the carrying values and goodwill and intangible assets with indefinite lives were not impaired.
For the Company's annual impairment assessment as of the end of fiscal May 2022 and 2021, the Company elected to perform a qualitative impairment test on its goodwill and intangible assets with indefinite lives and concluded that it is more likely than not that the fair values exceeded the carrying values and goodwill and intangible assets with indefinite lives were not impaired.
MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying Notes to Financial Statements (Part II, Item 8 of this Form 10-K). This section generally discusses the results of operations for 2021 compared to 2020 and 2019.
MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying Notes to Financial Statements (Part II, Item 8 of this Form 10-K). This section generally discusses the results of operations for 2022 compared to 2021 and 2020.
Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure which the company believes provides meaningful information about its operational efficiency by excluding the impact of changes in tax law and structure, debt levels and capital investment.
Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure that the company believes provides meaningful information about its operational efficiency by excluding the impact of changes in tax law and structure, debt levels and capital investment.
No funding contributions were required, and the Company made no funding contributions to the Pension Plan in 2021 and 2020. As of the date of this report, the Company does not anticipate making funding contributions to the Pension Plan in 2022. The calculation of pension expense and pension liabilities requires the use of a number of assumptions.
No funding contributions were required, and the Company made no funding contributions to the Pension Plan in 2022 and 2021. As of the date of this report, the Company does not anticipate making funding contributions to the Pension Plan in 2023. The calculation of pension expense and pension liabilities requires the use of a number of assumptions.
These spot rates align to each of the projected benefit obligation and service cost cash flows. 39
These spot rates align to each of the projected benefit obligation and service cost cash flows.
Changes in Comparable Sales The following is a tabular reconciliation of the non-GAAP financial measure of changes in comparable sales on an owned plus licensed basis, to GAAP comparable sales (i.e., on an owned basis), which the Company believes to be the most directly comparable GAAP financial measure. Macy's, Inc.
Changes in Comparable Sales The following is a tabular reconciliation of the non-GAAP financial measure of changes in comparable sales on an owned plus licensed basis, to GAAP comparable sales (i.e., on an owned basis), which the Company believes to be the most directly comparable GAAP financial measure.
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.
For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results. 32 Table of Contents 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.
Polaris Strategy During 2021, the Company continued to execute its Polaris strategy and these actions impacted its operating results for the year, 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 2021.
Company Strategy During 2022, the Company continued to execute its Polaris strategy and these actions impacted its operating results for the year, notably: • Win With Fashion and Style: By offering a wide assortment of categories, products and brands from off-price to luxury, the Company continued to reach a broad and diverse range of customers during 2022.
The Company does not provide reconciliations of the forward-looking non-GAAP measures of adjusted EBITDA, adjusted diluted earnings per share, comparable owned-plus-licensed sales three-year CAGR, and adjusted tax rate to the most directly comparable forward-looking GAAP measures because the timing and amount of excluded items are unreasonably difficult to fully and accurately estimate.
The Company does not provide reconciliations of the forward-looking non-GAAP measures of comparable owned plus licensed sales change, adjusted EBITDA, adjusted tax rate 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.
Income T axes Income taxes are estimated based on the tax statutes, regulations and case law of the various jurisdictions in which the Company operates.
Income Taxes Income taxes are estimated based on the tax statutes, regulations and case law of the various jurisdictions in which the Company operates.
See Notes 4, 6 and 9 to the consolidated financial statements included in Item 8 of this Report for amounts outstanding on January 29, 2022, related to leases, debt, and retirement plans, respectively. 30 Merchandise purchase obligations represent future merchandise payables for inventory purchased from various suppliers through contractual arrangements and are expected to be funded through cash from operations.
See Notes 4, 6 and 9 to the consolidated financial statements included in Item 8 of this Report for amounts outstanding on January 28, 2023, related to leases, debt, and retirement plans, respectively. Merchandise purchase obligations represent future merchandise payables for inventory purchased from various suppliers through contractual arrangements and are expected to be funded through cash from operations.
For a full discussion of changes from the fiscal year ended January 30, 2021 to the fiscal year ended February 1, 2020, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021 (filed March 29, 2021).
For a full discussion of changes from the fiscal year ended January 29, 2022 to the fiscal year ended January 30, 2021, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2022 (filed March 25, 2022).
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 January 29, 2022 , and 98% of the Company's goodwill is allocated to the Macy's reporting unit.
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 January 28, 2023, and 98% of the Company's goodwill is allocated to the Macy's reporting unit.
Pension and Supplementary Retirement Plans The Company has a funded defined benefit pension plan (the “Pension Plan”) and an unfunded defined benefit supplementary retirement plan (the “SERP”). The Company accounts for these plans in accordance with ASC Topic 715, Compensation - Retirement Benefits.
Pension and Supplementary Retirement Plans The Company has a funded defined benefit pension plan (the Pension Plan) and an unfunded defined benefit supplementary retirement plan (the SERP). The Company accounts for these plans in accordance with ASC Topic 715, Compensation - Retirement Benefits.
Lowering or raising the expected long-term rate of return assumption on the Pension Plan's assets by 0.25% would increase or decrease the estimated 2022 pension expense by approximately $7 million.
Lowering or raising the expected long-term rate of return assumption on the Pension Plan's assets by 0.25% would increase or decrease the estimated 2023 pension expense by approximately $6 million.
Comparable Sales vs. 52 Weeks Ended January 30, 2021 Comparable Sales vs. 52 Weeks Ended February 1, 2020 Increase in comparable sales on an owned basis (Note 1) 43.0 % 3.1 % Impact of growth in comparable sales of departments licensed to third parties (Note 2) (0.1 )% (0.1 )% Increase in comparable sales on an owned plus licensed basis 42.9 % 3.0 % (1) Represents the period-to-period percentage change in 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.
Macy's, Inc. 52 Weeks Ended January 28, 2023 vs. 52 Weeks Ended January 29, 2022 52 Weeks Ended January 29, 2022 vs. 52 Weeks Ended January 30, 2021 52 Weeks Ended January 30, 2021 vs. 52 Weeks Ended February 1, 2020 Increase (decrease) in comparable sales on an owned basis (Note 1) 0.3 % 43.0 % (27.9) % Impact of growth in comparable sales of departments licensed to third parties (Note 2) 0.3 % (0.1) % — % Increase (decrease) in comparable sales on an owned plus licensed basis 0.6 % 42.9 % (27.9) % (1) Represents the period-to-period percentage change in 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.
The Company's assumed annual long-term rate of return for the Pension Plan's assets was 5.75% for 2021, 6.25% for 2020 and 6.50% for 2019 based on expected future returns on the portfolio of assets.
The Company's assumed annual long-term rate of return for the Pension Plan's assets was 4.60% for 2022, 5.75% for 2021 and 6.25% for 2020 based on expected future returns on the portfolio of assets.
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the fiscal years ended January 29, 2022 to January 30, 2021 and February 1, 2020.
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the fiscal years ended January 28, 2023 to January 29, 2022 and January 30, 2021.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to promote understanding of the results of operations and financial condition of the Company.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote understanding of the results of operations and financial condition of the Company.
The Company’s future contractual obligations and commitments as it relates to operating activities as of January 29, 2022 are approximately $6.8 billion of operating lease obligations primarily due after 2026 and $3.2 billion of other obligations, primarily consisting of merchandise purchase obligations due in less than one year.
The Company's future material contractual obligations and commitments as it relates to operating activities as of January 28, 2023 are approximately $6.8 billion of operating lease obligations primarily due after 2027 and $2.6 billion of other obligations, primarily consisting of merchandise purchase obligations due in less than one year.
Repurchases may be made from time to time in the open market or through privately negotiated transactions in accordance with applicable securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, on terms determined by the Company.
As of January 28, 2023, $1.4 billion remains available under the 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 Securities Exchange Act of 1934, on terms determined by the Company.
The following tables include combined financial information of the Obligor Group. Investments in subsidiaries of $7,975 million as of January 29, 2022 have been excluded from the Summarized Balance Sheets. Equity in the earnings of non-Guarantor subsidiaries of $2,208 million have been excluded from the Summarized Statement of Operations.
The following tables include combined financial information of the Obligor Group. Investments in subsidiaries of $9,146 million as of January 28, 2023 have been excluded from the Summarized Balance Sheets. Equity in the earnings of non-Guarantor subsidiaries of $2,169 million have been excluded from the Summarized Statement of Operations.
Increasing the discount rates by 0.25% would decrease the projected benefit obligations at January 29, 2022 by approximately $64 million and would increase estimated 2022 pension expense by approximately $3 million. The Company estimates the service and interest cost components of net periodic benefit costs for the Pension Plan and SER P.
Increasing the discount rates by 0.25% would decrease the projected benefit obligations at January 28, 2023 by approximately $46 million and would increase estimated 2023 pension expense by approximately $2 million. The Company estimates the service and interest cost components of net periodic benefit costs for the Pension Plan and SERP.
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.
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).
During 2021, the Company repurchased 20.5 million shares of its common stock, which represents more than 6.5% of shares outstanding, at an average cost of $24.40 per share. On February 22, 2022, the Company’s announced that its Board of Directors authorized a new $2.0 billion share repurchase program, which does not have an expiration date.
On February 22, 2022, the Company announced that its Board of Directors authorized a new $2.0 billion share repurchase program, which does not have an expiration date. During 2022 , the Company repurchased approximately 24.0 million shares of its common stock at an average cost of $24.98 per share for $600 million.
The Company’s future contractual obligations and commitments as it relates to financing activities as of January 29, 2022 are $3.3 billion of long-term debt obligations and $1.6 billion of related interest, $116 million of standby letters of credit and $27 million of finance lease obligations.
The Company's future contractual obligations and commitments as it relates to financing activities as of January 28, 2023 are $3.0 billion of long-term debt obligations and $1.8 billion of related interest, $65 million of standby letters of credit and $24 million of finance lease obligations.
Lowering the discount rates by 0.25% would increase the projected benefit obligations at January 29, 2022 by approximately $67 million and would decrease estimated 2022 pension expense by approximately $3 million.
Lowering the discount rates by 0.25% would increase the projected benefit obligations at January 28, 2023 by approximately $49 million and would decrease estimated 2023 pension expense by approximately $2 million.
Management also believes that EBITDA and Adjusted EBITDA are frequently used by investors and securities analysts in their evaluations of companies, and that such supplemental measures facilitate comparisons between companies that have different capital and financing structures and/or tax rates.
Management also believes that EBITDA and Adjusted EBITDA are frequently used by investors and securities analysts in their evaluations of companies, and that such supplemental measures facilitate comparisons between companies that have different capital and financing structures and/or tax rates. The Company uses certain non-GAAP financial measures as performance measures for components of executive compensation.
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 expense 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.
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. 35 Table of Contents 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 projected sales, gross margin and SG&A expense 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.
Uncertain tax positions meeting the more-likely-than-not recognition threshold are then measured to determine the amount of benefit eligible for recognition in the financial statements.
Uncertain tax positions meeting the more-likely-than-not recognition threshold are then measured to determine the amount of benefit eligible for recognition in the financial statements. Each uncertain tax position is measured at the largest amount of benefit that is more likely than not to be realized upon ultimate settlement.
Additionally, pension expense is generally recognized on an accrual basis over the average remaining lifetime of participants. The pension expense calculation is generally independent of funding decisions or requirements. The Pension Protection Act of 2006 provides the funding requirements for the Pension Plan which are different from the employer's accounting for the plan as outlined in ASC Topic 715.
The pension expense calculation is generally independent of funding decisions or requirements. 36 Table of Contents The Pension Protection Act of 2006 provides the funding requirements for the Pension Plan which are different from the employer's accounting for the plan as outlined in ASC Topic 715.
The Company ended the year with a cash and cash equivalents balance of $1,712 million, an increase from $1,679 million in 2020. Also, the Company is party to the ABL Credit Facility with certain financial institutions providing for a $2,941 million Revolving ABL Facility.
The Company ended the year with a cash and cash equivalents balance of $862 million, a decrease from $1,712 million in 2021. Also, the Company is party to the Asset Based Lending (ABL) Credit Facility with certain financial institutions providing for a $3,000 million Revolving ABL Facility.
The Board of Directors declared regular quarterly dividend of 15 cents per share on the Company’s common stock, paid on October 1, 2021 and January 3, 2022, to Macy’s shareholders of record at the close of business on September 15, 2021 and December 15, 2021, respectively. 31 On February 22, 2022, the Company's B oard of D irectors declared a regular quarterly dividend of 15.75 cents per share on its common stock, payable April 1, 2022, to shareholders of record at the close of business on March 15, 2022.
The Board of Directors declared regular quarterly dividends of 15.75 cents per share on the Company’s common stock, paid on April 1, 2022, July 1, 2022, October 3, 2022 and January 3, 2023, to Macy’s, Inc. shareholders of record at the close of business on March 15, 2022, June 15, 2022, September 15, 2022 and December 15, 2022, respectively.
Borrowings under the New ABL Credit Facility are subject to reduced interest at a rate. • On March 8, 2022, the Company completed a tender offer in which $8 million of certain senior secured notes were tendered for early settlement and the collateral that secured the remaining $352 million of the Company’s senior secured notes was automatically released. • On March 10, 2022, the Company issued $425 million of senior notes due 2030 and $425 million of senior notes due 2032 in a private offering.
Debt Transactions The Company completed the following debt transactions in 2022: • On March 3, 2022, the Company entered into a third amendment to the ABL Credit Facility which provides for a new Revolving Credit Facility of $3.0 billion. 30 Table of Contents • On March 8, 2022, the Company completed a tender offer in which $8 million of certain senior secured notes were tendered for early settlement and the collateral that secured the remaining $352 million of the Company’s senior secured notes was automatically released. • On March 10, 2022, the Company issued $425 million of senior notes due 2030 and $425 million of senior notes due 2032 in a private offering.
The Company discounted its future pension obligations using a weighted-average rate of 3.06% at January 29, 2022 and 2.43% at January 30, 2021 for the Pension Plan and 3.10% at January 29, 2022 and 2.51% at January 30, 2021 for the SER P.
The Company discounted its future pension obligations using a weighted-average rate of 4.73% at January 28, 2023 and 3.06% at January 29, 2022 for the Pension Plan and 4.74% at January 28, 2023 and 3.10% at January 29, 2022 for the SERP.
As of January 29, 2022, available borrowing capacity of the ABL Credit Facility was $2,536 million, which considers a $116 million reduction due to standby letters of credit outstanding. 2021 2020 2019 Net cash provided by operating activities $ 2,712 $ 649 $ 1,608 Net cash used by investing activities (370 ) (325 ) (1,002 ) Net cash provided (used) by financing activities (2,381 ) 699 (1,123 ) Operating Activities Net cash provided by operating activities was $2,712 million in 2021 compared to $649 million in 2020.
As of January 28, 2023, borrowing capacity of the ABL Credit Facility was $2,935 million, which considers a $65 million reduction due to standby letters of credit outstanding and borrowing availability was $2,531 million, which considers a further $404 million reduction due to inventory levels and its impact on the ABL borrowing base. 29 Table of Contents 2022 2021 2020 Net cash provided by operating activities $ 1,615 $ 2,712 $ 649 Net cash used by investing activities (1,169) (370) (325) Net cash provided (used) by financing activities (1,296) (2,381) 699 Operating Activities Net cash provided by operating activities was $1,615 million in 2022 compared to $2,712 million in 2021.
Material contractual obligations arising in the normal course of business primarily consist of long-term debt and related interest payments, lease obligations, merchandise purchase obligations, retirement plan benefits, and self-insurance reserves.
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. Material contractual obligations arising in the normal course of business primarily consist of long-term debt and related interest payments, lease obligations, merchandise purchase obligations, retirement plan benefits, and self-insurance reserves.
Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) Per Share The following is a tabular reconciliation of the non-GAAP financial measures adjusted net income (loss) to GAAP net income (loss) and adjusted diluted earnings (loss) per share to GAAP diluted earnings (loss) per share, which the Company believes to be the most directly comparable GAAP measures. 2021 2020 2019 Net Income Diluted Earnings Per Share Net Income (Loss) Diluted Earnings (Loss) Per Share Net Income Diluted Earnings Per Share As reported $ 1,430 $ 4.55 $ (3,944 ) $ (12.68 ) $ 564 $ 1.81 Impairment, restructuring and other costs 30 0.10 3,579 11.50 354 1.13 Settlement charges 96 0.31 84 0.27 58 0.19 Losses on early retirement of debt 199 0.63 — — 30 0.10 Financing costs — — 5 0.02 — — Income tax impact of certain items identified above (87 ) (0.28 ) (412 ) (1.32 ) (100 ) (0.32 ) As adjusted $ 1,668 $ 5.31 $ (688 ) $ (2.21 ) $ 906 $ 2.91 EBITDA and Adjusted EBITDA The following is a tabular reconciliation of the non-GAAP financial measure EBITDA and Adjusted EBITDA to GAAP net income, which the Company believes to be the most comparable GAAP measure. 2021 2020 2019 (millions) Net income (loss) $ 1,430 $ (3,944 ) $ 564 Interest expense - net 255 280 185 Losses on early retirement of debt 199 — 30 Financing costs — 5 — Federal, state and local income tax expense (benefit) 436 (846 ) 164 Depreciation and amortization 874 959 981 EBITDA $ 3,194 $ (3,546 ) $ 1,924 Impairment, restructuring and other costs 30 3,579 354 Settlement charges 96 84 58 Adjusted EBITDA $ 3,320 $ 117 $ 2,336 ROIC Historically, the Company defined ROIC as adjusted EBITDA, excluding net lease expense, as a percent to average invested capital.
The amounts of commissions earned on sales of departments licensed to third parties are not material to its net sales for the periods presented. 33 Table of Contents Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) Per Share The following is a tabular reconciliation of the non-GAAP financial measures adjusted net income (loss) to GAAP net income (loss) and adjusted diluted earnings (loss) per share to GAAP diluted earnings (loss) per share, which the Company believes to be the most directly comparable GAAP measures. 2022 2021 2020 Net Income Diluted Earnings Per Share Net Income Diluted Earnings Per Share Net Income (Loss) Diluted Earnings (Loss) Per Share (millions, except per share data) As reported $ 1,177 $ 4.19 $ 1,430 $ 4.55 $ (3,944) $ (12.68) Impairment, restructuring and other costs 41 0.15 30 0.10 3,579 11.50 Settlement charges 39 0.14 96 0.31 84 0.27 Losses on early retirement of debt 31 0.11 199 0.63 — — Financing costs — — — — 5 0.02 Income tax impact of certain items identified above (29) (0.11) (87) (0.28) (412) (1.32) As adjusted $ 1,259 $ 4.48 $ 1,668 $ 5.31 $ (688) $ (2.21) EBITDA and Adjusted EBITDA The following is a tabular reconciliation of the non-GAAP financial measure EBITDA and Adjusted EBITDA to GAAP net income, which the Company believes to be the most comparable GAAP measure. 2022 2021 2020 (millions) Net income (loss) $ 1,177 $ 1,430 $ (3,944) Interest expense - net 162 255 280 Losses on early retirement of debt 31 199 — Financing costs — — 5 Federal, state and local income tax expense (benefit) 341 436 (846) Depreciation and amortization 857 874 959 EBITDA $ 2,568 $ 3,194 $ (3,546) Impairment, restructuring and other costs 41 30 3,579 Settlement charges 39 96 84 Adjusted EBITDA $ 2,648 $ 3,320 $ 117 Critical Accounting Estimates The preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles (U.S.
("Parent" together with the "Subsidiary Issuer" are the "Obligor Group"), and are fully and unconditionally guaranteed on a senior unsecured basis by Parent.
The Unsecured Notes constitute debt obligations of Macy's Retail Holdings, LLC (MRH, or Subsidiary Issuer), a 100%-owned subsidiary of Macy's, Inc. (Parent together with the Subsidiary Issuer are the Obligor Group), and are fully and unconditionally guaranteed on a senior unsecured basis by Parent.
These expenditures are expected to be financed with cash from operations and existing cash and cash equivalents. There can be no assurance that current expectations will be realized and plans are subject to change upon further review of capital expenditure needs or based on the current economic environment.
There can be no assurance that current expectations will be realized and plans are subject to change upon further review of capital expenditure needs or based on the current economic environment. Financing Activities Dividends The Company paid dividends totaling $173 million in 2022 and $90 million in 2021.
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. 37 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.
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.
Summarized Balance Sheet January 29, 2022 (in millions) ASSETS Current Assets $ 1,517 Noncurrent Assets 6,784 LIABILITIES Current Liabilities $ 2,243 Noncurrent Liabilities (a) 10,407 a) Includes net amounts due to non-Guarantor subsidiaries of $4,337 million Summarized Statement of Operations 2021 (in millions) Net Sales $ 867 Consignment commission income (a) 3,793 Cost of sales (460 ) Operating loss (746 ) Loss before income taxes (b) (203 ) Net income 277 a) Income pertains to transactions with ABL Borrower, a non-Guarantor subsidiary b) Includes $1,055 million of dividend income from non-Guarantor subsidiaries 33 Important Information Regarding Non-GAAP Financial Measures The Company reports its financial results in accordance with GAAP.
The combined financial information of the Obligor Group is presented on a combined basis with intercompany balances and transactions within the Obligor Group eliminated. 31 Table of Contents Summarized Balance Sheet January 28, 2023 (in millions) ASSETS Current Assets $ 1,154 Noncurrent Assets 8,261 LIABILITIES Current Liabilities $ 1,958 Noncurrent Liabilities (a) 12,517 a) Includes net amounts due to non-Guarantor subsidiaries of $6,784 million Summarized Statement of Operations 2022 (in millions) Net Sales $ 1,012 Consignment commission income (a) 3,807 Cost of sales (488) Operating loss (894) Loss before income taxes (b) (135) Net loss 16 a) Income pertains to transactions with ABL Borrower, a non-Guarantor subsidiary b) Includes $1,008 million of dividend income from non-Guarantor subsidiaries Important Information Regarding Non-GAAP Financial Measures The Company reports its financial results in accordance with GAAP.
Resolution of these matters could have a material impact on the Company's consolidated financial position, results of operations or cash flows. Significant judgment is required in evaluating the Company's uncertain tax positions, provision for income taxes, and any valuation allowance recorded against deferred tax assets.
Significant judgment is required in evaluating the Company's uncertain tax positions, provision for income taxes, and any valuation allowance recorded against deferred tax assets.
Merchandise Inventories Merchandise inventories are valued at the lower of cost or market using the last-in, first-out ("LIFO") retail inventory method. Under the retail inventory method, inventory is segregated into departments of merchandise having similar characteristics and is stated at its current retail selling value.
Under the retail inventory method, inventory is segregated into departments of merchandise having similar characteristics and its cost value is derived from the current retail selling value.
Note 4 and Note 14 to the Financial Statements provide additional information on operating leases and other obligations, respectively. Investing Activities The Company’s 2021 capital expenditures were $597 million, mainly driven by its technology-based initiatives, including those that support the digital business, data science initiatives and the simplification of its technology structure.
Note 4 and Note 14 to the Financial Statements provide additional information on operating leases and other obligations, respectively. Investing Activities The Company's 2022 capital expenditures were $1,295 million, mainly driven by enhanced omni-channel capabilities, digital and technology, data and analytics, and supply chain modernization.
As of January 29, 2022, the Company lowered the assumed annual long-term rate of return for the Pension Plan's assets from 5.75% to 4.60% based on expected future returns on the portfolio of assets, which considers a shift in the Company’s investment strategy to invest more heavily in fixed income securities.
As of January 28, 2023, the Company increased the assumed annual long-term rate of return for the Pension Plan's assets from 4.60% to 5.30% based on expected future returns on the portfolio of assets.
This also compares to adjusted net income of $906 million in 2019. • Earnings before interest, taxes, depreciation and amortization excluding restructuring, impairment, store closings and other costs and settlement charges ("Adjusted EBITDA") were $3,320 million in 2021, as compared to $117 million in 2020 and $2,336 million in 2019. • Diluted earnings per share were $4.55 in 2021, compared to diluted loss per share of $(12.68) in 2020 and diluted earnings per share of $1.81 in 2019.
Net income adjusted for impairment, restructuring and other costs, settlement charges, and losses on early retirement of debt declined from adjusted net income of $1,668 million to adjusted net income of $1,259 million. • Earnings before interest, taxes, depreciation and amortization excluding restructuring, impairment, store closings and other costs and settlement charges (Adjusted EBITDA) were $2,648 million, a decline from $3,320 million. • Diluted earnings per share were $4.19, compared to diluted earnings per share of $4.55.
The increase was driven by higher adjusted EBITDA and a $582 million income tax refund as a result of the CARES Act. This was offset by higher cash interest and a net decrease in working capital, mainly driven by an increase in merchandise inventories.
The decrease from 2021 to 2022 was mainly driven by lower adjusted EBITDA and a $582 million income tax refund as a result of the CARES Act received in 2021.
Note 6 and Note 4 to the Financial Statements provide additional information on debt and finance leases, respectively. As a result of the subsequent event financing activities noted above, interest obligations were increased to $1.9 billion. 32 As of January 29 , 202 2 , the Company's credit rating and outlook were as described in the table below.
Note 6 and Note 4 to the Financial Statements provide additional information on debt and finance leases, respectively. As of January 28, 2023, the Company's credit rating and outlook were as described in the table below, reflecting the substantially improved credit profile of the Company.
See pages 34 to 36 for reconciliations of the non-GAAP financial measures presented above to the most comparable U.S. generally accepted accounting principles ("GAAP") financial measures and other important information.
On an adjusted basis, diluted earnings per share were $4.48, compared to adjusted diluted earnings per share of $5.31. • Merchandise inventories were down 3% and inventory turnover decreased 4%. See pages 30 to 32 for reconciliations of the non-GAAP financial measures presented above to the most comparable U.S. generally accepted accounting principles (GAAP) financial measures and other important information.
Proceeds from the issuance, together with cash on hand, were used to redeem certain of its outstanding senior notes and pay fees and expenses in connection with the offering. At January 29, 2022, no notes or debentures contained provisions requiring acceleration of payment upon a debt rating downgrade.
Proceeds from the issuance, together with cash on hand, were used to redeem $1.1 billion of certain of its outstanding senior notes and pay fees and expenses in connection with the offering. • The Company borrowed and repaid $1,959 million under the ABL Credit Facility in 2022.
Capital Allocation The Company’s capital allocation goals include maintaining a healthy balance sheet and investment-grade credit metrics, followed by investing in growth initiatives and returning capital to shareholders through modest yet predictable dividends and meaningful share repurchases. In 2020, in response to COVID-19, the Company suspended its share repurchase program and its quarterly dividend.
Capital Allocation The Company's capital allocation goals include maintaining a healthy balance sheet and investment-grade credit metrics to be best-positioned for access to bank and capital market funding under all economic scenarios, followed by investing in the business through initiatives to drive long-term profitable growth and returning capital to shareholders through modest yet predictable dividends and share repurchases, absent more attractive investment alternatives.
Digital sales are expected to approximate 37% of net sales. • Comparable owned-plus-licensed sales three-year compound annual growth rate (CAGR) versus 2019 of approximately 1.1% to 1.4% • Credit card revenues, net, approximately 2.9% of net sales • Gross margin rate between 38.1% and 38.3% • SG&A expenses as a percentage of net sales between 33.7% and 33.9% • Gains on sale of real estate between $60 million and $90 million • Benefit plan income of approximately $28 million • Depreciation and amortization expense of approximately $865 million • Adjusted EBITDA between 11.0% and 11.5% of net sales • Net interest expense of approximately $190 million • An adjusted tax rate of approximately 24% • Diluted shares outstanding of approximately 300 million (assumes no share repurchase during 2022) • Adjusted diluted earnings per share between $4.13 and $4.52 • Capital expenditures of approximately $1 billion 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.
The 2023 outlook was as follows: • Net sales between $23.7 billion to $24.2 billion, 28 Table of Contents • Comparable owned-plus-licensed sales, on a 52-week basis, are expected to be down approximately 2% to 4% from 2022, • Digital sales approximately 32% to 34% of net sales, • Credit card revenue, net approximately 3.1% of net sales, • Gross margin rate between approximately 38.7% and 39.2%, • SG&A expenses as a percentage of net sales approximately 36.3%, • Gains on sale of real estate between $60 million and $75 million, • Benefit plan income of approximately $12 million, • Depreciation and amortization expense of approximately $910 million, • Adjusted EBITDA between approximately 10.3% and 10.8% of net sales, • Net interest expense of approximately $165 million, • An adjusted tax rate of approximately 24.5%, • Diluted shares outstanding of approximately 282 million, • Adjusted diluted EPS between $3.67 and $4.11, and • Capital expenditures of approximately $1 billion.
Guarantor Summarized Financial Information The Company has senior unsecured notes and senior unsecured debentures (collectively the “Unsecured Notes”) outstanding with an aggregate principal amount of $2,935 million outstanding as of January 29, 2022, with maturities ranging from 2022 to 2043. The Unsecured Notes constitute debt obligations of MRH ("Subsidiary Issuer"), a 100%-owned subsidiary of Macy's, Inc.
Moody's Standard & Poor's Fitch Long-term debt Ba1 BB+ BBB- Outlook Stable Stable Stable Guarantor Summarized Financial Information The Company has senior unsecured notes and senior unsecured debentures (collectively the Unsecured Notes) outstanding with an aggregate principal amount of $3,007 million outstanding as of January 28, 2023, with maturities ranging from 2025 to 2043.
We base our estimates on historical experience and on assumptions that we believe to be reasonable, and we continue to review and evaluate these estimates. For further information on significant accounting policies, see discussion in Note 1 to the consolidated financial statements included in Item 8 of this Report.
We base our estimates on historical experience and on assumptions that we believe to be reasonable, and we continue to review and evaluate these estimates.
The charges in 2020 related to the pro-rata recognition of net actuarial losses associated with the Company’s defined benefit retirement plans as the result of lump sum distributions associated with retiree distribution elections and restructuring activity. 29 2021 2020 Net interest expense $ (255 ) $ (280 ) The decrease in net interest expense, excluding losses on early retirement of debt, was primarily driven by interest savings associated with the redemption of $1.3 billion 2025 Notes in August 2021 . 2021 2020 Losses on early retirement of debt $ (199 ) $ — In 2021, losses on early retirement of debt were recognized primarily due to the redemption of the entire outstanding $1.3 billion amount of the 2025 Notes in the third quarter as well as a $500 million tender offer executed in the first quarter. 2021 2020 Effective tax rate 23.4 % 17.7 % Federal income statutory rate 21 % 21 % The effective tax rate varies from the Company’s federal income tax statutory rate of 21% in both periods.
In 2021, losses on early retirement of debt were recognized primarily due to redemption of the entire outstanding $1.3 billion amount of the Company's senior secured notes due 2025 in the third quarter of 2021, as well as the repurchase of $500 million aggregate principal amount of notes in a tender offer in the first quarter of 2021. 2022 2021 Effective tax rate 22.5 % 23.4 % Federal income statutory rate 21 % 21 % In 2022, income tax expense of $341 million, or 22.5% of pretax income reflects a different effective tax rate as compared to the company’s federal income tax statutory rate of 21% driven primarily by the impact of state and local taxes, offset by the benefit of state tax settlements.
These investments include launching a tuition benefit program, raising the company-wide minimum rate to $15 per hour and increasing compensation and benefits for colleagues across Macy’s Inc. As a result of the execution of its Polaris strategy, the Company also recognized improvement in customer engagement.
As part of the Company's ongoing commitment to attract and retain talent, it made significant investments in its colleagues’ benefit programs in 2022, including launching the Guild Education partnership that provides free education benefits, raising the company-wide minimum rate to $15 per hour and increasing compensation and benefits for colleagues across Macy’s Inc.
Keeping these cash-positive stores open also helps to fund the investments the Company is making to reposition its store fleet over the next several years. • 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.
Finally, the Company introduced permanent Toys “R” Us shops within all Macy’s locations which resulted in toy sales for the year more than doubling from 2021. • 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 and productivity.
The Company had no outstanding borrowings under the ABL Credit Facility as of January 29, 2022.
The Company had no outstanding borrowings under the ABL Credit Facility as of January 28, 2023. At January 28, 2023, no notes or debentures contained provisions requiring acceleration of payment upon a debt rating downgrade.
Certain financial highlights are as follows: • Comparable sales increased 43.0% on an owned basis and 42.9% on an owned-plus-licensed basis versus 2020; up 3.1% and up 3.0%, respectively, versus 2019. 25 • The continued change in consumer shopping behaviors , driven in part by the COVID-19 pandemic , resulted in a 1 3 % and 39% increase in digital sales compared to 2020 and 2019, respectively . • Net credit card revenue increased $81 million and $61 million from 2020 and 2019, respectively, to $832 million. • The gross margin rate for 2021 was 38.9%, an increase from 29.2% in 2020 and up 70 basis points from 2019. • SG&A expenses increased $1,280 million from 2020 and decreased $951 million from 2019.
Certain financial highlights are as follows: • Comparable sales increased 0.3% on an owned basis and 0.6% on an owned-plus-licensed basis. • Net credit card revenue increased $31 million to $863 million. • The gross margin rate was 37.4%, a decrease from 38.9%. • Selling, general & administrative (SG&A) expenses increased $270 million to $8,317 million, or 34.0% of net sales, an increase of 110 basis points. • Net income was $1,177 million, a decrease from net income of $1,430 million.
The Company also opened nine new stores in 2021 and continued to invest in its current stores. The Company expects capital expenditures to be approximately $1 billion during 2022. The Company’s spend will be primarily allocated towards technology architecture, data science applications for retail operations, digital platform enhancements, fulfilment capabilities in store and further upstream, and personalization efforts.
The Company also opened ten new stores in 2022 across nameplates and formats, and continued to invest in its current stores. The Company expects capital expenditures to be approximately $1.0 billion during 2023.
Inventory turnover improved 21% over 2020 mainly due to further evolving and scaling the Company’s data science in terms of pricing and promotional initiatives as well as maintaining disciplined buying behavior. 2021 2020 SG&A expenses $ (8,047 ) $ (6,767 ) As a percent to net sales 32.9 % 39.0 % SG&A expenses increased in 2021 but decreased as a percent to net sales.
Inventory turnover decreased 4% over 2021 and inventory was down 3% compared to 2021, mainly due to disciplined inventory management, strategic use of data analytics, the alignment of the merchandising team and the successful integrations and modernization of the supply chain. 2022 2021 SG&A expenses $ (8,317) $ (8,047) As a percent to net sales 34.0 % 32.9 % SG&A expenses increased in 2022 both in dollars and as a percent to net sales.
The increase in SG&A expense dollars corresponds with higher net sales but the improvement in the SG&A expense rate reflects the expense management strategies implemented by the Company in response to the COVID-19 pandemic as part of the Polaris strategy and the number of open job positions during the year. 2021 2020 Gains on sale of real estate $ 91 $ 60 2021 asset sale gains mainly consist of gains from the sale of 18 properties, an increase from approximately 12 properties sold at a gain in 2020, due to the recovery in the macroeconomic environment. 2021 2020 Impairment, restructuring and other costs $ (30 ) $ (3,579 ) Impairment, restructuring and other costs in 2021 primarily related to the write-off of capitalized software assets.
The increase in SG&A expense and as a percent to net sales corresponds with the Company filling a significant number of positions that were open in the prior year as well as adjustments to colleague compensation and benefits to remain competitive and attract the best talent, including increasing the Company's minimum wage to $15/hour starting May 1, 2022. 2022 2021 Gains on sale of real estate $ 89 $ 91 202 2 asset sale gains mainly consist of gains from the sale of 6 properties, versus approximately 18 properties sold at a gain in 2021. 27 Table of Contents 2022 2021 Impairment, restructuring and other costs $ (41) $ (30) Impairment, restructuring and other costs in 2022 and 2021 primarily related to the write-off of capitalized software assets . 2022 2021 Benefit plan income, net $ 20 $ 66 The Company records non-cash net benefit plan income relating to the Company's defined benefit plans.
The Company also entered into an exclusive 26 omnichannel partnership with Toys ‘R’ Us to expand its toy business and added Fanatics and Pandora as new brand partners . • 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 pricing work.
Modernizing the supply chain allowed the Company to maintain freshness in every category and brand during 2022, including those that were down-trending. 24 Table of Contents • Deliver Clear Value: The Company has leveraged data analytics and pricing tools to efficiently plan, place and price inventory, including location level pricing, competitive pricing and point-of -sale pricing work.
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 “Forward-Looking Statements.” Overview 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.
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 "Forward-Looking Statements." Fiscal 2022 Overview The Company successfully navigated 2022 from a position of financial and operational strength.
Subsequent dividends will be subject to approval of the Board of Directors, which will depend on market and other conditions. Stock Repurchases The Company completed its 2021 $500 million share repurchase program by January 29, 2022.
On February 24, 2023, the Company's Board of Directors declared a regular quarterly dividend of 16.54 cents per share on its common stock, payable April 3, 2023, to shareholders of record at the close of business on March 15, 2023. Subsequent dividends will be subject to approval of the Board of Directors, which will depend on market and other conditions.
Each uncertain tax position is measured at the largest amount of benefit that is more likely than not to be realized upon ultimate settlement. 38 Uncertain tax positions are evaluated and adjusted as appropriate, while taking into account the progress of audits of various taxing jurisdictions.
Uncertain tax positions are evaluated and adjusted as appropriate, while taking into account the progress of audits of various taxing jurisdictions. Resolution of these matters could have a material impact on the Company's consolidated financial position, results of operations or cash flows.
Inventory turnover increased 21% and 22% over 2020 and 2019, respectively. • During 2021, the Company repaid early approximately $1.6 billion of debt, reinstated its regular quarterly dividend and paid $90 million in cash dividends, and repurchased approximately 20.5 million shares of its common stock at an average cost of $24.40 per share for a total cost of $500 million.
Stock Repurchases The Company completed its 2021 $500 million share repurchase program by January 29, 2022. During 2021, the Company repurchased 20.5 million shares of its common stock, which represents more than 6.5% of shares outstanding, at an average cost of $24.40 per share.
The increase in benefit plan income from 2020 to 2021 was mainly driven by a reduction in interest and amortization of prior service costs, offset by a decrease in the expected return on assets. 2021 2020 Settlement charges $ (96 ) $ (84 ) The settlement charges in 2021 were primarily driven by the transfer of fully funded pension obligations for certain retirees and beneficiaries through the purchase of a group annuity contract with an insurance company.
The charges in 2021 were higher than 2022 as they primarily related to the transfer of fully funded pension obligations for certain retirees and beneficiaries through the purchase of a group annuity contract with an insurance company . 2022 2021 Net interest expense $ (162) $ (255) The decrease in net interest expense, excluding losses on early retirement of debt, was primarily driven by interest savings associated with the redemption of the Company's $1.3 billion aggregate principal amount of its senior secured notes due 2025 in August 2021, as well as the financing activities completed in the first quarter of 2022. 2022 2021 Losses on early retirement of debt $ (31) $ (199) In 2022, losses on early retirement of debt were recognized due to the early payment of $1.1 billion aggregate principal amount of senior notes and debentures in the first quarter of 2022.
Removed
As of January 29, 2022 , the Company's operations were conducted through Macy's, Market by Macy’s, Macy’s Backstage, Bloomingdale’s, Bloomingdale’s The Outlet, Bloomies and bluemercury, which are aggregated into one reporting segment in accordance with the FASB Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting.
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Despite an increasingly volatile macroeconomic climate, through the ongoing execution of the Company's Polaris strategy detailed further below, it remained agile, pivoted to meet customer demand and elevated its approach to inventory management.
Removed
Bloomingdale's in Dubai, United Arab Emirates and Al Zahra, Kuwait are operated under a license agreement with Al Tayer Insignia, a company of the Al Tayer Group, LLC. 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.
Added
The Company built a solid foundation for long-term, profitable sales growth through investments in its supply chain, data and analytics, pricing science, digital and technology which have enabled its operations and colleagues to become more efficient and flexible. In evaluating 2022 performance, the Company considered its results against 2021.
Removed
The COVID-19 pandemic had a negative impact on the Company's 2020 operations and financial results, 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. 2020 was a year of unprecedented challenges and required the Company to adapt its business to address the disruption caused by the COVID-19 pandemic.
Added
The Company is committed to providing quality fashion newness through reimagining its private brand portfolio, which is in its early stages and is expected to begin to take shape in fiscal 2023, building best-in-class experiences though partnerships with brands such as, but not limited to, Pandora and Sunglass Hut and growing relevancy for the next generation of customers through its omni-channel brand platform Own Your Style .
Removed
Faced with the temporary closure of stores and changes in consumer shopping behaviors, the Company had to right-size its cost base and operating model, offer new fulfillment options to customers, focus on product categories with higher consumer demand, and accelerate its focus on digital shopping and underlying investments to support these trends.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAt January 29, 2022 , the Company was not a party to any material derivative financial instruments and based on the Company’s lack of market risk sensitive instruments outstanding at January 29, 2022, the Company has determined that there was no material market risk exposure to the Company’s consolidated financial position, results of operations or cash flows as of such date. 40
Biggest changeAt January 28, 2023, the Company was not a party to any derivative financial instruments and based on the Company's lack of market risk sensitive instruments outstanding at January 28, 2023, the Company has determined that there was no material market risk exposure to the Company’s consolidated financial position, results of operations or cash flows as of such date. 37 Table of Contents

Other M 10-K year-over-year comparisons