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Macy's, Inc.

Macy's, Inc.M财报

NYSE · retail

Macy's, Inc. is an American holding company of department stores. Upon its establishment in 1929, Federated held ownership of the regional department store chains Abraham & Straus, Lazarus, Filene's, and Shillito's. Bloomingdale's joined Federated Department Stores the next year. Throughout its early history, frequent acquisitions and divestitures saw the company operate a number of nameplates. In 1994, Federated took over Macy's, the old department store chain originally founded in 1858 by A...

What changed in Macy's, Inc.'s 10-K — 2023 vs 2024

Top changes in Macy's, Inc.'s 2024 10-K

228 paragraphs added · 239 removed · 166 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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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.
People leaders participate annually in 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.
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.
In 2023, 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.
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
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. 7 Table of Contents
(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 subsidiaries Macy's Merchandising Group International, LLC and Macy's Merchandising Group Procurement, 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.
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.
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. 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.
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.
Mitchell served as Chief Operating Officer of the Company starting in March 2023 and has been 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.
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.
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. 5 Table of Contents The Company makes investments in its people leaders and future leaders.
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.
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. Purchasing The Company purchases merchandise from many suppliers, none of which accounted for more than 5% of the Company's purchases during 2023.
The Company's operations are conducted through Macy's, Macy's Backstage, Market by Macy's, Bloomingdale's, Bloomingdale's The Outlet, Bloomies, and bluemercury. In addition, Bloomingdale's in Dubai, United Arab Emirates, and Al Zahra, Kuwait are operated under license agreements with Al Tayer Insignia, a company of Al Tayer Group, LLC.
The Company's operations are conducted through Macy's, Macy's Backstage, Macy's small format, Bloomingdale's, Bloomingdale's The Outlet, Bloomie's, and Bluemercury. In addition, Bloomingdale's in Dubai, United Arab Emirates, and Al Zahra, Kuwait are operated under license agreements with Al Tayer Insignia, a company of Al Tayer Group, LLC.
The Company has no material long-term purchase commitments with any of its suppliers and believes that it is not dependent on any one supplier. The Company considers its relations with its suppliers to be good.
The Company has no material long-term purchase commitments with any of its suppliers and believes that it is not dependent on any one supplier.
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.
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 February 3, 2024, the Company operated 718 store locations in 43 states, the District of Columbia, Puerto Rico and Guam.
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.
Prior thereto he served as President and Chief Executive Officer-Elect of the Company from 2023 to 2024, Executive Vice President of the Company from 2021 to 2023 and Chairman and Chief Executive Officer of Bloomingdale's from 2014 to 2023, President and Chief Operating Officer of Bloomingdale's from 2008 to 2014, Executive Vice President of Bloomingdale's from 2004 to 2008, Executive Vice President of Marketing at Bloomingdale's 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.
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.
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.
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.
This initiative 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 virtual Career Expo that featured workshops, panel discussions, external speakers and functional showcases; and people leader support with learning plans focused on career coaching and development.
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.
Since 2015, the Company has achieved a score of 100 every year 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 national benchmarking tool measuring corporate policies, practices and benefits pertinent to LGBTQ+ workplace equality.
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.
Ultimate oversight by the Company's Board of Directors is included in its committee charters and practices. The Chief Operating Officer (COO) and Chief Financial Officer (CFO), along with the Disclosure Committee, engages with stakeholders on ESG-related issues (including climate) and provides feedback to management and the Board.
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.
Disaggregation of the Company's net sales by family of business for 2023, 2022 and 2021 was as follows: 2023 2022 2021 Women's Accessories, Shoes, Cosmetics and Fragrances $ 9,520 $ 9,597 $ 9,385 Women's Apparel 4,861 5,349 5,174 Men's and Kids' 4,918 5,297 5,247 Home/Other (a) 3,793 4,199 4,654 Total $ 23,092 $ 24,442 $ 24,460 (a) Other primarily includes restaurant sales, allowance for merchandise returns adjustments and breakage income from unredeemed gift cards.
Private Label Brands and Related Trademarks The principal private label brands currently offered by the Company include Alfani, And Now This, Aqua, Bar III, Belgique, Charter Club, Club Room, Epic Threads, Family PJ’s, first impressions, Giani Bernini, Holiday Lane, Home Design, Hotel Collection, Hudson Park, Ideology, I-N-C, jenni, JM Collection, Karen Scott, lune+aster, M-61, Maison Jules, Martha Stewart Collection, Oake, Sky, Style & Co., Sun + Stone, Sutton Studio, Tasso Elba, The Cellar, Tools of the Trade and Wild Pair.
The Company considers its relations with its suppliers to be good. 3 Table of Contents Private Label Brands and Related Trademarks The principal private label brands offered by the Company as of February 3, 2024 include Alfani, And Now This, Aqua, Bar III, Belgique, Cerulean 6, Charter Club, Club Room, Epic Threads, Family PJ's, first impressions, Giani Bernini, Holiday Lane, Home Design, Hotel Collection, Hudson Park, Ideology, I-N-C, jenni, JM Collection, lune+aster, M-61, Maison Jules, Morgan Taylor, Oake, On 34th, Sky, Style & Co., Sun + Stone, Sutton Studio, Tasso Elba, The Cellar, Tools of the Trade and Wild Pair.
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.
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.
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).
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 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.
The Company formally solicits feedback from all colleagues twice a year through company-wide Culture Pulse Survey. 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.
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.
Information about our Executive Officers The following table sets forth certain information as of March 21, 2024 regarding the Executive Officers of the Company: Name Age Position with the Company Tony Spring 59 Chief Executive Officer and Chairman-Elect of the Board of Directors Adrian V. Mitchell 50 Chief Operating Officer and Chief Financial Officer Tracy M.
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.
Compensation is based on job, responsibilities, experience and performance with incentive opportunities that allow colleagues to share in the Company's success. As part of our commitment to pay transparency, all colleagues have access to view their role's pay zone and salary range to ensure colleagues understand their earnings potential. In addition, pay ranges are viewable on all job postings nationwide.
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.
These programs include policies and procedures designed to ensure compliance with federal, state and local environmental laws.
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.
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. The Environmental Services team is responsible for the development of the Company's environmental programs for all facilities across the organization.
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.
Macy's and Bloomingdale's offer internships for college students and Bloomingdale's offers an early immersion program focused on providing experiential learning and career exposure to foster inclusivity. 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.
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.
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. 4 Table of Contents 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'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.
Below are a few additional highlights from the past year: • Hosted second Vendor Pitch Competition and awarded $250,000 in business grants to graduates of The Workshop at Macy's 2023 program. • Deployed $6.2 million in capital to historically underfunded businesses and businesses serving underserved communities through S.P.U.R.
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.
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 enhance diversity and inclusion across all levels of our organization to enable us to more closely and effectively engage with all of our customers and cultivate a culture of belonging.
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.
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. Company-sponsored, colleague-led resource groups (CRGs) provide an opportunity for colleagues to experience connection, achieve belonging and develop leadership skills.
Garcia 65 Executive Vice President, Chief Legal Officer and Secretary Danielle L.
Preston 57 Chief Legal Officer and Corporate Secretary Danielle L.
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 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 experiences, to help others grow. Learning is accessible through the Company's self-directed learning experience platform as well as through technology, social learning and meaningful experiences and exposures with colleagues.
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.
Macy's and Bloomingdale's workforce, on a combined basis, is comprised of approximately 65% ethnically diverse colleagues (with 30% at the Director+ levels) and 76% female colleagues. 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.
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.
Kirgan 48 Chief Transformation and Human Resources Officer Paul Griscom 43 Senior Vice President and Controller Executive Officer Biographies Tony Spring was appointed Chief Executive Officer of the Company in February 2024 and is expected to succeed Jeff Gennette as Chairman of the Board upon conclusion of the 2024 Annual Meeting.
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.
Preston has been Chief Legal Officer and Corporate Secretary of the Company since January 2024; prior thereto she served as Chief Compliance Officer, Chief Legal Officer and Corporate Secretary of HanesBrands Inc., an apparel company, from 2021 to 2023, Chief Compliance Officer, Chief Legal Officer and Corporate Secretary of Neiman Marcus Group, Inc., a retail company, from 2013 to 2021, Executive Vice President, General Counsel and Secretary of Levi Strauss & Co. from 2002 to 2013, Partner at Orrick, Herrington & Sutcliffe LLP, a law firm, from 1997 to 2002, and held various positions at several law firms from 1991 to 1997.
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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.
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The Company began to exit its Women's Alfani and Karen Scott brands during fiscal 2023. The trademarks associated with the Company's private label brands are owned by the Company. Competition The retail industry is highly competitive.
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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. Requests should be sent to the Corporate Secretary of Macy's, Inc. at 151 West 34th Street, New York, New York 10001.
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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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In 2023, the Company completed its first phase of the CRG refresh, which included further expansion of chapters resulting in 100% of Macy's and Bloomingdale's colleagues now having access to a CRG.
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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.
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In 2023, the Company received the Equality 100 Award marking the ninth consecutive year that the Company has received a score of 100. Additionally, the Company broadened the Week of Understanding programming in 2023 to encompass two additional topics, Disability Inclusion and Religion, as part of the Company's efforts to foster a more inclusive culture.
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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.
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Other enterprise-wide events included our CEO-led "Can We Talk?" discussion series featuring external keynote speakers designed to further build critical DE&I skills. The Company'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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Pathways: Shared Purpose, Unlimited Reach to accelerate growth and create new jobs in these communities. • Expanded our portfolio of diverse suppliers, onboarding over 130 new diverse-owned businesses online and in-store. • Donated $1 million to advance social justice and racial equity causes; added three new partners, supporting the Hispanic/Latino, People with Disabilities and Environmental Justice communities for greater balance across diversity dimensions. • Continued to leverage best in class partners, such as Seven Elements Group and Publicis Once & For All Coalition, to advance the cultural fluency of our marketing and media. • Recognized as one of the Top 50 Best-of-the-Best Corporations for Inclusion for the third consecutive year by the National Business Inclusion Consortium (NBIC), a coalition of the nation's leading business organizations representing diverse communities. • Recognized by Women's Enterprise National Council (WBENC) with America's Top Corporations Award, which has been received since 2012, for our commitment to create opportunities for women-owned businesses within the Macy's supply chain. • Recognized by the National Minority Supplier Development Council (NMSDC) with the National Corporation of the Year Award (Category 2 winner).
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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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Also recognized as part of NMSDC's The Forefront 25: Top Corporations for Minority Businesses for ensuring access and equity for systemically excluded entrepreneurs of color. Learning & Development Macy's, Inc. believes that learning goes hand in hand with career growth, personal satisfaction and outstanding results.
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Company-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.
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In 2022, the Company launched a multi-year career development initiative.
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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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In 2023, the Company expanded the Career Expo from two weeks to a three-month-long series of small-group interactive sessions, which enabled colleagues to interact directly with experts and leaders to learn about career resources and build skills.
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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.
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Over the course of the series, the Company featured 18 workshops, panel discussions and career-planning sessions that gave colleagues a better sense of the many career opportunities that exist at Macy's, Inc. and how colleagues can enhance their skills within their current role or enable them to take the next step in their career.
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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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People leaders and salaried colleagues have access to on-demand Compensation Education webinars to learn how pay is determined and to deep dive into our incentive programs. Number of Employees As of February 3, 2024 Macy's, Inc. had approximately 85,581 full-time and part-time U.S. employees, on a combined basis.
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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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Certain highlights of recent ESG accomplishments include earning a B score on its 2023 CDP Climate Change Report covering fiscal year 2022, joining US Cotton Trust Protocol, partnering with World Wildlife Fund to publish Water Stewardship policy, publishing Animal Welfare Policy, Exotic Skins Policy, an updated Fur Policy, a Preferred Materials Policy, and a Human Rights Policy.
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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.
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We continued our investment in our female factory workers by rolling out 14 Worker Well Being programs in private brand factories with RISE: Reimagining Industry to Support Equality. 6 Table of Contents The Company's management is responsible for the development and implementation of its ESG strategies and programs.
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Macy’s and Bloomingdale’s offer internships for college students and Bloomingdale’s offers an early immersion program focused on providing experiential learning and career exposure to those who identify with underrepresented groups.
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The Sustainability Team, which sits within the COO and CFO's office, reports to the Senior Vice President of Private Brand Sourcing, Product Development & Production, and is responsible for the teams that manage ESG initiatives and supply chain transparency.
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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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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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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.
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; 17 Table of Contents • 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.
Although we and our third-party service providers seek to maintain our respective systems effectively and to successfully address the risk of compromise of the integrity, security and consistent operations of these systems, such efforts are not always successful.
Although we and our third-party service providers seek to maintain our respective systems effectively and to successfully address the risk of compromise of the integrity, security and consistent operations of these systems, these efforts are not always successful.
We also use the Higg Index to collect data about the likely resiliency of our supply chains and as an engagement tool to strengthen relationships and make continuous improvement. 18 Table of Contents We face increasing pressure to demonstrate our products are environmentally-friendly.
We also use the Higg Index to collect data about the likely resiliency of our supply chains and as an engagement tool to strengthen relationships and make continuous improvement. 16 Table of Contents We face increasing pressure to demonstrate our products are environmentally-friendly.
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.
In 2022, we 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.
These efforts can result in significant potential risks, including failure of the systems to operate as designed, potential loss or corruption of data, changes in security processes and internal controls, cost overruns, implementation delays or errors and disruption of operations. Disruptions in our customer-facing technology systems could impair our digital retail strategy and give rise to negative customer experiences.
These efforts can result in significant potential risks, including failure of the systems to operate as designed, potential loss or corruption of data, changes in security processes and internal controls, cost overruns, implementation delays or errors and disruption of operations. 11 Table of Contents Disruptions in our customer-facing technology systems could impair our digital retail strategy and give rise to negative customer experiences.
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 are assessing these impacts on our consolidated financial statements. 15 Table of Contents 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.
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.
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.
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.
Should sales during this period fall below our expectations, a disproportionately negative impact on our annual results of operations could occur. 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.
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.
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. 12 Table of Contents Remote work has also created additional challenges to our ability to protect remote workers, corporate networks and cloud environments.
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.
Additionally, we have rolled out a framework to measure the social and environmental performance of more than 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.
Any failure to appropriately address these risks could damage our reputation and have an adverse effect on our business and results of operations. 14 Table of Contents We depend on vendors and other sources of merchandise, goods and services outside the U.S.
Any failure to appropriately address these risks could damage our reputation and have an adverse effect on our business and results of operations. We depend on vendors and other sources of merchandise, goods and services outside the U.S.
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.
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 and results of operations. 13 Table of Contents 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.
Since 2010, across Macy's and Bloomingdale's store locations, total energy consumption has been reduced by more than 18.4% through LED lighting retrofits. • Extreme Weather Events and Natural Disasters. The risk of extreme weather events is integrated into our climate change–related enterprise risk management assessment.
Since 2010, across Macy's and Bloomingdale's store locations, total energy consumption has been reduced by more than 19.7% through LED lighting retrofits. • Extreme Weather Events and Natural Disasters. The risk of extreme weather events is integrated into our climate change–related enterprise risk management assessment.
These investments involve replacing existing systems, some of which are older, legacy systems, outsourcing certain technology and business processes to third-party service providers, making changes to existing systems including the migration of applications to the cloud, maintaining or enhancing legacy systems, or designing or acquiring new systems.
These investments involve replacing existing systems, some of which are older, legacy systems, outsourcing certain technology and business processes to third-party service providers, including the adoption of Generative AI in certain processes, making changes to existing systems including the migration of applications to the cloud, maintaining or enhancing legacy systems, or designing or acquiring new systems.
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 shortage of vessels and air freight, port congestion, worker shortage impacting shipping and ports, truck driver shortages, rail congestion at major freight hubs and increased demand for consumer goods.
Although these delays have not materially impacted our operations to date, they could potentially have a material adverse impact on future product availability, product mix and sales if the delays do not improve.
Although these delays have not materially impacted our operations to date, they could potentially have a material adverse impact on future product availability, product mix and sales if the delays escalate.
In addition, our procurement of goods and services from outside the U.S. is subject to risks associated with political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs, health pandemics and other factors relating to foreign trade.
Our procurement of goods and services from outside the U.S. is subject to risks associated with political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs, health pandemics, armed conflicts and other factors relating to foreign trade.
Other brand risks include an active shooter incident at a store or injury or death at a parade or other branded event.
Other brand risks include an active shooter incident at a location or injury or death at a parade or other branded event.
This negative impact may affect our revenue streams derived from the credit cards receivables portfolio and our financial results. In February 2023 the Consumer Financial Protection Bureau proposed to amend Regulation Z to lower the safe harbor dollar amount credit card companies can charge for late fees from up to $41 to $8 for a missed payment.
This negative impact may affect our revenue streams derived from the credit cards receivables portfolio and our financial results. In March 2024, the Consumer Financial Protection Bureau finalized a rule to amend Regulation Z to lower the safe harbor dollar amount credit card companies can charge for late fees from up to $41 to $8 for a missed payment.
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.
Our sales and operating results depend on our ability to manage our inventory, merchandise selection and protect against inventory shortage. Our profitability depends on our ability to manage inventory levels and merchandise selection.
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.
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 $619 million, or approximately 2.7% of net sales, for 2023.
Delays in the maintenance, updates, upgrading or patching of these systems, applications or processes could impair, and on occasion have impaired, their effectiveness or expose us to security risks. 12 Table of Contents Our systems and the third-party systems with which we interact are subject to, and on occasion have experienced, damage or interruption from a number of causes, including power and other critical infrastructure outages, computer and telecommunications failures, computer viruses, security breaches, internal or external data theft or misuse, cyberattacks, responsive containment measures by us that may involve voluntarily taking systems off line, natural disasters and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes or other extreme weather events, public health concerns such as pandemics, military conflicts, acts of war, terrorism or civil unrest, other systems outages, inadequate or ineffective redundancy, and design or usage errors or malfeasance by our employees, contractors or third-party service providers.
Our systems and the third-party systems with which we interact are subject to, and on occasion have experienced, damage or interruption from a number of causes, including power and other critical infrastructure outages, computer and telecommunications failures, computer viruses, security breaches, internal or external data theft or misuse, cyberattacks, responsive containment measures by us that may involve voluntarily taking systems off line, natural disasters and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes or other extreme weather events, public health concerns such as pandemics, military conflicts, acts of war, terrorism or civil unrest, other systems outages, inadequate or ineffective redundancy, and design or usage errors or malfeasance by our employees, contractors or third-party service providers.
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.
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 or natural disasters, while also managing appropriate inventory levels in our stores and distribution or fulfillment centers and maintaining an excellent customer experience.
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.
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. 9 Table of Contents We depend on our ability to attract, train, develop and retain quality colleagues.
The burdens imposed by these and other laws and regulations that may be enacted, or new interpretations of existing laws and regulations, may also require us to incur substantial costs to reach compliance or change the manner in which we use data. Our sales and operating results could be adversely affected by product safety concerns.
The burdens imposed by these and other laws and regulations that may be enacted, or new interpretations of existing laws and regulations, may also require us to incur substantial costs to reach compliance or change the manner in which we use data.
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.
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. Underestimating customer demand for merchandise can lead to insufficient inventory to meet demands, missed sales opportunities and negative customer experiences.
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.
Although Macy's, Inc. is one of the nation's largest retailers, we have numerous and varied competitors at the national and local levels and digital competitors at the global level, including department stores, specialty stores, general merchandise stores, manufacturers' outlets and websites, off-price and discount stores, online retailers and catalogs, among others.
Under applicable accounting rules, if annual lump sum distributions exceed an actuarially determined threshold of the total of the annual service and interest costs, we would be required to recognize in the current period of operations a settlement expense of a portion of the unrecognized actuarial loss, which could have a negative impact on our results of operations.
Under applicable accounting rules, if annual lump sum distributions exceed an actuarially determined threshold of the total of the annual service and interest costs, we would be required to recognize in the current period of operations a settlement expense of a portion of the unrecognized actuarial loss, which could have a negative impact on our results of operations. 10 Table of Contents If our Company's reputation and brand image are not maintained at a high level, our operations and financial results may suffer.
If cash flows from our private label and co-branded credit cards decrease, our financial and operational results may be negatively impacted. In 2005, in connection with the sale of most of the Company’s credit card accounts and related receivable balances to Citibank, N.A.
Unfavorable changes in the cost of employee health benefits could negatively affect our financial results and cash flow. If revenue from our private label and co-branded credit cards decline, our financial and operational results may be negatively impacted. In 2005, in connection with the sale of most of the Company's credit card accounts and related receivable balances to Citibank, N.A.
From 2021 to 2022, Macy’s, Inc. experienced a 2% electricity cost increase across its sites located in RGGI states. 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 .
From 2021 to 2022, Macy's, Inc. experienced a 22% electricity cost increase across its sites located in RGGI states. Current environmental and climate-related regulation, both at the state and federal levels, are monitored as part of our enterprise risk management process. New and emerging regulatory initiatives in the U.S. related to climate change and ESG could adversely affect our business.
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.
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.
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.
Data privacy laws enacted in California, Virginia, Colorado, Utah, Connecticut, Iowa, Indiana, Tennessee, Montana, Texas, Oregon, New Jersey, Delaware and New Hampshire (as of February 1, 2024) 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.
Changes in consumer shopping habits, an over-malled/over-retailed environment, financial difficulties at other anchor tenants, significant mall vacancy issues, mall violence and new on- and off-mall developments could each adversely impact the traffic at current retail locations and lead to a decline in our financial condition or performance. We may not be able to successfully execute our real estate strategy.
Changes in consumer shopping habits, a decline in mall shopping environments, financial difficulties at other anchor tenants, significant mall vacancy issues, mall violence and new on- and off-mall developments could each adversely impact the traffic at current retail locations and lead to a decline in our financial condition or performance.
As our business model depends on offering quality and relevant merchandise brands from third-party vendors in addition to our own private label products, any material disruption in our relationship with such vendors, or material disruption in the products or services provided by other third parties, could adversely affect our revenues, expense structure, earnings and operations.
As our business model depends on offering quality and relevant merchandise brands from third-party vendors in addition to our own private label products, any material disruption in our relationship with such vendors, or material disruption in the products or services provided by other third parties, could adversely affect our revenues, expense structure, earnings and operations. 14 Table of Contents Economic, Global, Legal and External Risks The Company's business is subject to discretionary consumer spending, unfavorable economic and political conditions, and other related risks.
The retail industry is continually evolving and expanding, with a significant increase in sales initiated online and via mobile applications. We must effectively respond to new developments and changing customer preferences with respect to a digital and interconnected experience. We continually seek to enhance our online and digital properties to provide an attractive, user-friendly interface for our customers.
We must effectively respond to new developments and changing customer preferences with respect to a digital and interconnected experience. We continually seek to enhance our online and digital properties to provide an attractive, user-friendly interface for our customers.
We have identified certain climate change-related risks that may impact our business over the short-, medium- and long-term. The nature of these risks depends on both the physical aspects of climate change as well as legal, regulatory, and market requirements, pressure to reduce our carbon footprint and our ability to understand and respond to rapidly evolving developments.
The nature of these risks depends on both the physical aspects of climate change as well as legal, regulatory, and market requirements, pressure to reduce our carbon footprint and our ability to understand and respond to rapidly evolving developments.
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.
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.
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.
Insufficient, untimely or misguided investments in these areas could significantly impact our profitability and growth. 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.
Recent medical plan cost increases have been driven by a rise in high-cost claimants, high-cost conditions, high utilization of outpatient facilities, physicians and in-hospital stays, and demographic shifts to an older enrollment population. Unfavorable changes in the cost of employee health benefits could negatively affect our financial results and cash flow.
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. Recent medical plan cost increases have been driven by a rise in high-cost claimants, high-cost conditions, high utilization of outpatient facilities, physicians and in-hospital stays, and demographic shifts to an older enrollment population.
If our Company’s reputation and brand image are not maintained at a high level, our operations and financial results may suffer. We believe our reputation and brand image are partially based on the perception that we act equitably and honestly in dealing with our customers, employees, business partners and shareholders.
We believe our reputation and brand image are partially based on the perception that we act equitably and honestly in dealing with our customers, employees, business partners and shareholders.
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.
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.
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.
Unstable political conditions, civil unrest, terrorist activities, armed conflicts or events of extreme violence, including any escalation of the conflict between Russia and Ukraine and the Israel-Hamas war, may disrupt commerce and could negatively affect our business and results of operations.
We continue to explore opportunities to monetize our real estate portfolio, including sales of stores as well as non-store real estate, such as warehouses, outparcels and parking garages. We also continue to evaluate our real estate portfolio to identify opportunities where the redevelopment value of our real estate exceeds the value of non-strategic operating locations.
We may not be able to successfully execute our real estate strategy. We may continue to explore opportunities to monetize our real estate portfolio, including sales of stores as well as non-store real estate, such as warehouses, outparcels and parking garages.
We use our digital platforms as sales channels for our products and services, as methods of providing inspiration, and as sources of product and other relevant information to our customers to help drive sales. We also have multiple online communities, digital platforms and knowledge centers that allow us to inform, assist and interact with our customers.
We use our digital platforms as sales channels for our products and services, as methods of providing inspiration and advertising through Macy's Media Network, and as sources of product and other relevant information to our customers to help drive sales.
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.
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. 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.
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.
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.
Strategic, Operational and Competitive Risks Our strategic plans and initiatives may not be successful, which could negatively affect our profitability and growth. In 2024 we announced A Bold New Chapter, a strategy designed to enhance the customer experience, deliver sustainable, profitable growth and unlock shareholder value over the next three years.
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.
Our level of indebtedness could have important consequences for the holders of our debt and equity securities.
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.
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. 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.
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.
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, our ability to source product could be adversely impacted which would adversely affect our results of operations.
The FDIC took control and was appointed receiver of Silicon Valley Bank and New York Signature Bank on March 10, 2023 and March 12, 2023, respectively. The Company does not have any direct exposure to Silicon Valley Bank or New York Signature Bank.
The FDIC took control and was appointed receiver of Silicon Valley Bank and New York Signature Bank on March 10, 2023 and March 12, 2023, respectively, and JPMorgan Chase Bank assumed all deposits and substantially all assets of First Republic Bank on May 1, 2023.
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.
We face challenges in executing A Bold New Chapter strategy and initiatives in the current environment of heightened inflation, increased interest rates, economic uncertainty, geopolitical disruption and other macroeconomic conditions that may impact discretionary spending. Our ability to achieve sustainable, profitable growth is subject to the successful implementation of our strategic plans and realization of anticipated benefits and savings.
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.
If we are unable to protect against inventory shortage, our results of operations and financial condition could be adversely affected. 8 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.
This strategy is multi-pronged and may include transactions, strategic alliances or other arrangements with mall developers or other unrelated third-parties.
We also continue to evaluate our real estate portfolio to identify opportunities where the redevelopment value of our real estate exceeds the value of non-strategic operating locations. This strategy is multi-pronged and may include transactions, strategic alliances or other arrangements with mall developers or other unrelated third-parties.
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.
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.
For these information technology systems, applications and processes to operate effectively, we or our service providers must maintain and update them.
For these information technology systems, applications and processes to operate effectively, we or our service providers must maintain and update them. Delays in the maintenance, updates, upgrading or patching of these systems, applications or processes could impair, and on occasion have impaired, their effectiveness or expose us to security risks.
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 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.
Reputational damage caused by real or perceived product safety concerns could negatively affect our business and results of operations. Climate Change-Related Risks Climate change, or legal, regulatory, or market measures to address climate change, could adversely affect our business and results of operations.
Climate Change-Related Risks Climate change, or legal, regulatory, or market measures to address climate change, could adversely affect our business and results of operations. We have identified certain climate change-related risks that may impact our business over the short-, medium- and long-term.
If adopted as proposed the rule would reduce the amount of late fees that can be charged, which could have a negative impact on Macy's Inc. credit card revenues. 11 Table of Contents Our defined benefit plan funding requirements or plan settlement expense could impact our financial results and cash flow.
A decrease in late fees assessed would reduce credit card revenue. The Company is closely monitoring developments on this matter. Our defined benefit plan funding requirements or plan settlement expense could impact our financial results and cash flow.
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.
Our ability to grow depends in part on our stores remaining relevant and attractive to customers. 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.
Economic, Global, Legal and External Risks The Company’s business is subject to discretionary consumer spending, unfavorable economic and political conditions, and other related risks. Our sales are significantly affected by changes in discretionary spending by consumers.
Our sales are significantly affected by changes in discretionary spending by consumers.
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.
These initiatives have required and will continue to require our management, colleagues, and contractors to make changes in our business operations and to improve productivity and profitability, and are subject to the ability to attract and retain skilled personnel to support the initiatives.
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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.
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The strategy builds on the five growth factors and focuses on three strategic priorities: • Strengthen Macy's through revitalizing merchandise assortment, modernizing the shopping environment and closing approximately 150 underperforming stores and prioritizing investment in approximately 350 go-forward stores and continued expansion of small format stores; • Accelerate luxury growth by expanding Bloomingdale's and Bluemercury within the Macy's, Inc. nameplate portfolio; and • Simplify and modernize end-to-end operations through rationalizing and monetizing the supply chain asset portfolio, streamlining fulfillment, improving inventory planning and allocation, and delivering a modern, scalable technology platform.
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Our ability to achieve sustainable, profitable growth is subject to the successful implementation of our strategic plans, including the Polaris strategy, and realization of anticipated benefits and savings.
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We plan to make value-enhancing investments to support these initiatives primarily focused on digital and technology, data and analytics, supply chain modernization and omni-channel capabilities.
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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.
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We conduct our retail merchandising business under highly competitive conditions.
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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. Increases in labor costs and the cost of employee benefits could impact our financial results and cash flow.
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Macy's launched On 34th and State of Day, new private brands, in 2023 and February 2024, respectively, and expects to refresh or replace all existing brands in its private brands portfolio through 2025. Macy's digital marketplace offers over 2,300 brands from third party sellers and the Company launched a Bloomingdale's marketplace in 2023 to introduce customers to new merchandise options.
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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.
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We have opened new off-mall smaller store formats – Macy's small format and Bloomie's – in selected markets to act as fill-in locations in existing markets to gain foot traffic and a new customer base, replacement locations in markets where an underperforming full-line location closure would result in a market exit, and to enter new markets.
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The proposed rule is subject to a notice and comment period.
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We also have multiple online communities, digital platforms and knowledge centers that allow us to inform, assist and interact with our customers. The retail industry is continually evolving and expanding, with a significant increase in sales initiated online and via mobile applications.
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In addition, while we may be able to shift our sourcing options, executing such a shift would be time consuming and would be difficult or impracticable for many products and may result in an increase in our manufacturing costs.
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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.
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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.
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We regularly maintain cash balances at third-party financial institutions in excess of the Federal Deposit Insurance Corporation (the “FDIC”) insurance limit.
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The Company implemented safety measures and health and wellness precautions across its stores and facilities which resulted in additional selling, general and administrative expenses. The Company experienced delays in inventory receipts and disruptions in its supply chain. Liquidity was negatively impacted by the store closures and the Company incurred additional debt to improve its cash position.
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The Company did not have any direct exposure to Silicon Valley Bank, New York Signature Bank or First Republic Bank.

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Item 2. Properties

Properties — owned and leased real estate

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The 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
The Company's operations were conducted through the following branded store locations as of February 3, 2024: Macy's 502 Bloomingdale's 57 Bluemercury 159 718 Store count activity for the 53 weeks ended February 3, 2024 was as follows: Store count at beginning of fiscal year 722 Stores opened 9 Stores closed, consolidated into or relocated from existing centers (13) Store count at end of fiscal year 718 19 Table of Contents Additional information about the Company's store locations as of February 3, 2024 is as follows: By Brand Total Owned Leased Subject to a Ground Lease Partly Owned and Partly Leased Macy's 502 273 142 84 3 Bloomingdale's 57 13 38 6 — Bluemercury 159 — 159 — — 718 286 339 90 3 Additional information about the Company's logistics network as of February 3, 2024 is as follows: Location Primary Function Owned or Leased Square Footage (thousands) Bridgeton, MO Stores Leased 43 Cheshire, CT Direct to customer Leased 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 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 Tomball, TX Stores Leased 902 Tukwila, WA Stores Leased 500 Tulsa, OK Direct to customer Owned 2,195 Union City, CA Stores Leased 165 Youngstown, OH Direct to customer Owned 610
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 February 3, 2024, the operations of the Company included 718 store locations in 43 states, the District of Columbia, Puerto Rico and Guam, comprising a total of approximately 110 million square feet.
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.
These locations consisted of 286 owned locations, 339 leased locations, 90 locations operated under arrangements where the Company owned the building and leased the land and three locations of partly owned and partly leased buildings. All owned properties are held free and clear of mortgages.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings. The Company and its subsidiaries are involved in various proceedings that are incidental to the normal course of their businesses. As of the date of this report, the Company does not expect that any of such proceedings will have a material adverse effect on the Company’s financial position or results of operations. Retail Hazardous Waste Matter.
Item 3. Legal Proceedings. The Company and its subsidiaries are involved in various proceedings that are incidental to the normal course of their businesses. As of the date of this report, the Company does not expect that any of such proceedings will have a material adverse effect on the Company's financial position or results of operations. Item 4.
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As previously reported, the District Attorneys for ten counties in California and the City of Los Angeles are investigating alleged non-compliance with laws and regulations enacted or adopted regulating the storage, transportation and disposal of hazardous waste in California at Macy’s stores and distribution centers.
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The Company is cooperating with the offices and agencies involved, which are focused on disposal and return of cosmetic products, and is committed to adopting policies and procedures as may be appropriate depending on the outcome of the investigation into this matter. No administrative or judicial proceedings have been initiated.
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In October 2020, the District Attorneys made an initial settlement demand to the Company that included a monetary penalty, reimbursement of investigation costs and injunctive relief. The Company expects to pay $1,925,000 to resolve this matter and is in the process of finalizing settlement documentation.
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The 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

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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.
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 February 3, 2024, $1.4 billion remained available for repurchase under this authorization.
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 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.
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 groups for the period from February 2, 2019 through February 3, 2024, assuming an initial investment of $100 and the reinvestment of all dividends, if any.
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.
The companies included in the peer group are Best Buy Co., Inc., Burlington Stores Inc., Dicks Sporting Goods, Inc., Dillard's, Inc., Dollar Tree, Inc., Foot Locker, Inc., Gap Inc., Kohl's Corporation, Lowes Companies, Inc., Nordstrom, Inc., Ross Stores, Inc., Target Corporation, TJX Companies, Inc., Ulta Beauty, Inc., and Williams-Sonoma, Inc.
The declaration and payment of future dividends will be at the discretion of the Company’s Board of Directors, are subject to restrictions under the Company’s debt instruments and may be affected by various other factors, including the Company’s earnings, financial condition and legal or contractual restrictions.
The Company's common stock is listed on the New York Stock Exchange under the trading symbol “M.” As of February 3, 2024, the Company had approximately 12,000 stockholders of record. 20 Table of Contents The declaration and payment of future dividends will be at the discretion of the Company's Board of Directors, are subject to restrictions under the Company's debt instruments and may be affected by various other factors, including the Company's earnings, financial condition and legal or contractual restrictions.
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.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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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.
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In 2023, Bed, Bath & Beyond Inc. was removed from the peer group because it was no longer publicly traded. 21 Table of Contents PART II Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

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

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The retail inventory method inherently requires management judgments and estimates, such as the amount and timing of permanent markdowns to clear unproductive or slow-moving inventory, which may impact the ending inventory valuation as well as gross margins. Permanent markdowns designated for clearance activity are recorded when the utility of the inventory has diminished.
The retail inventory method inherently requires operational management judgments and estimates, such as the amount and timing of permanent markdowns to clear unproductive or slow-moving inventory, which may impact the ending inventory valuation as well as gross margins. Permanent markdowns designated for clearance activity are recorded when the utility of the inventory has diminished.
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.
Earnings 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.
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 Company does not, however, include any amounts in respect of licensed department or Marketplace sales (or any commissions earned on such sales) in its comparable sales in accordance with GAAP (i.e., on an owned basis).
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.
For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results. 30 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.
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.
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 2023 compared to 2022 and 2021.
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.
No funding contributions were required, and the Company made no funding contributions to the Pension Plan in 2023 and 2022. As of the date of this report, the Company does not anticipate making funding contributions to the Pension Plan in 2024. The calculation of pension expense and pension liabilities requires the use of a number of assumptions.
In addition, management believes that excluding certain items that are not associated with the Company's core operations and that may vary substantially in frequency and magnitude period-to-period from net income (loss), diluted earnings (loss) per share attributable to Macy's, Inc. shareholders and EBITDA provide useful supplemental measures that assist in evaluating the Company's ability to generate earnings and leverage sales, respectively, and to more readily compare these metrics between past and future periods.
In addition, management believes that excluding certain items that are not associated with the Company's core operations and that may vary substantially in frequency and magnitude period-to-period from net income, diluted earnings per share and EBITDA provide useful supplemental measures that assist in evaluating the Company's ability to generate earnings and leverage sales, respectively, and to more readily compare these metrics between past and future periods.
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.
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 $181 million in 2023 and $173 million in 2022.
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.
See Notes 4, 6 and 9 to the consolidated financial statements included in Item 8 of this Report for amounts outstanding on February 3, 2024, 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.
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.
As of February 3, 2024 , $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.
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.
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 dividends and share repurchases.
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.
Note 4 and Note 14 to the Financial Statements provide additional information on operating leases and other obligations, respectively. Investing Activities The Company's 2023 capital expenditures were $993 million, mainly driven by digital and technology investments, data and analytics, supply chain modernization and enhanced omni-channel capabilities.
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.
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 2024 pension expense by approximately $5 million.
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 a full discussion of changes from the fiscal year ended January 28, 2023 to the fiscal year ended January 29, 2022, 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 28, 2023 (filed March 24, 2023).
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.
Net income adjusted for impairment, restructuring and other costs, settlement charges, and losses on early retirement of debt (Adjusted net income) declined from $1,259 million to adjusted net income of $973 million. • Earnings before interest, taxes, depreciation and amortization excluding restructuring, impairment, store closings and other costs and settlement charges (Adjusted EBITDA) were $2,317 million, a decline from $2,648 million. • Diluted earnings per share were $0.38, compared to diluted earnings per share of $4.19.
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 Company's assumed annual long-term rate of return for the Pension Plan's assets was 5.30% for 2023, 4.60% for 2022 and 5.75% for 2021 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 28, 2023 to January 29, 2022 and January 30, 2021.
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the fiscal years ended February 3, 2024 to January 28, 2023 and January 29, 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 28, 2023, 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 February 3, 2024, and 98% of the Company's goodwill is allocated to the Macy's reporting unit.
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.
The Company's future material contractual obligations and commitments as it relates to operating activities as of February 3, 2024 are approximately $6.5 billion of operating lease obligations primarily due after 2027 and $2.8 billion of other obligations, the majority consisting of merchandise purchase obligations due in less than one year.
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.
Macy's, Inc. 53 Weeks Ended February 3, 2024 vs. 52 Weeks Ended January 28, 2023 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 Increase (decrease) in comparable sales on an owned basis (Note 1) (6.9) % 0.3 % 43.0 % Impact of growth in comparable sales of departments licensed to third parties (Note 2) 0.9 % 0.3 % (0.1) % Increase (decrease) in comparable sales on an owned plus licensed basis (6.0) % 0.6 % 42.9 % (1) Represents the period-to-period percentage change in net sales from stores in operation throughout the year presented and the immediately preceding year, adjusting for the 53rd week in fiscal 2023.
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.
The Company discounted its future pension obligations using a weighted-average rate of 5.06% at February 3, 2024 and 4.73% at January 28, 2023 for the Pension Plan and 5.08% at February 3, 2024 and 4.74% at January 28, 2023 for the SERP.
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.
The amounts of commissions earned on sales of departments licensed to third parties and from the digital Marketplace are not material to its net sales for the periods presented. 31 Table of Contents Adjusted Net Income and Adjusted Diluted Earnings Per Share The following is a tabular reconciliation of the non-GAAP financial measures adjusted net income to GAAP net income and adjusted diluted earnings per share to GAAP diluted earnings per share, which the Company believes to be the most directly comparable GAAP measures. 2023 2022 2021 Net Income Diluted Earnings Per Share Net Income Diluted Earnings Per Share Net Income Diluted Earnings Per Share (millions, except per share data) As reported $ 105 $ 0.38 $ 1,177 $ 4.19 $ 1,430 $ 4.55 Impairment, restructuring and other costs 1,027 3.69 41 0.15 30 0.10 Settlement charges 134 0.48 39 0.14 96 0.31 Losses on early retirement of debt — — 31 0.11 199 0.63 Income tax impact of certain items identified above (293) (1.05) (29) (0.11) (87) (0.28) As adjusted $ 973 $ 3.50 $ 1,259 $ 4.48 $ 1,668 $ 5.31 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. 2023 2022 2021 (millions) Net income $ 105 $ 1,177 $ 1,430 Interest expense - net 135 162 255 Losses on early retirement of debt — 31 199 Federal, state and local income tax expense 19 341 436 Depreciation and amortization 897 857 874 EBITDA $ 1,156 $ 2,568 $ 3,194 Impairment, restructuring and other costs 1,027 41 30 Settlement charges 134 39 96 Adjusted EBITDA $ 2,317 $ 2,648 $ 3,320 Critical Accounting Estimates The preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles (U.S.
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.
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, including Marketplace sales, adjusting for the 53rd week in fiscal 2023 in the calculation of comparable sales.
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.
As of February 3, 2024, the Company's credit rating and outlook were as described in the table below: 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 February 3, 2024, with maturities ranging from 2025 to 2043.
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 Company ended the year with a cash and cash equivalents balance of $1,034 million, an increase from $862 million in 2022. Also, the Company is party to the ABL Credit Facility with certain financial institutions providing for a $3,000 million Revolving ABL Facility.
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.
Increasing the discount rates by 0.25% would decrease the projected benefit obligations at February 3, 2024 by approximately $36 million and would increase estimated 2024 pension expense by approximately $2 million. 34 Table of Contents The Company estimates the service and interest cost components of net periodic benefit costs for the Pension Plan and SERP.
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.
The following tables include combined financial information of the Obligor Group. Investments in subsidiaries of $9,423 million as of February 3, 2024 have been excluded from the Summarized Balance Sheets. Equity in the earnings of non-Guarantor subsidiaries of $2,291 million have been excluded from the Summarized Statement of Operations.
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.
The Company's future contractual obligations and commitments as it relates to financing activities as of February 3, 2024 are $3.0 billion of long-term debt obligations and $1.6 billion of related interest, $148 million of standby letters of credit and $21 million of finance lease obligations.
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.
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.
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.
Lowering the discount rates by 0.25% would increase the projected benefit obligations at February 3, 2024 by approximately $37 million and would decrease estimated 2024 pension expense by approximately $2 million.
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.
The Company also opened nine new stores in 2023 across nameplates and formats, and continued to invest in its current stores. The Company expects capital expenditures to be approximately $875 million during 2024.
Long-Lived Asset Impairment and Restructuring Charges The carrying values of long-lived assets, inclusive of right of use (ROU) assets, are periodically reviewed by the Company whenever events or changes in circumstances indicate that the carrying value may not be recoverable, such as historical operating losses or plans to close stores before the end of their previously estimated useful lives.
When a decision is made to permanently mark down merchandise, the resulting gross margin reduction is recognized in the period the markdown is recorded. 32 Table of Contents Long-Lived Asset Impairment and Restructuring Charges The carrying values of long-lived assets, inclusive of right of use (ROU) assets, are periodically reviewed by the Company whenever events or changes in circumstances indicate that the carrying value may not be recoverable, such as historical operating losses or plans to close stores before the end of their previously estimated useful lives.
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.
Debt Transactions The Company borrowed and repaid $961 million under the ABL Credit Facility in 2023. The Company had no outstanding borrowings under the ABL Credit Facility as of February 3, 2024. At February 3, 2024, no notes or debentures contained provisions requiring acceleration of payment upon a debt rating downgrade.
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.
The Board of Directors declared regular quarterly dividends of 16.54 cents per share on the Company's common stock, paid on April 3, 2023, July 3, 2023, October 2, 2023 and January 2, 2024, to Macy's, Inc. shareholders of record at the close of business on March 15, 2023, June 15, 2023, September 15, 2023 and December 15, 2023, respectively. 28 Table of Contents On February 23, 2024, the Company's Board of Directors declared a regular quarterly dividend of 17.37 cents per share on its common stock, payable April 1, 2024, to shareholders of record at the close of business on March 15, 2024.
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.
As of February 3, 2024, borrowing capacity of the ABL Credit Facility was $2,852 million, which considers a $148 million reduction due to standby letters of credit outstanding and borrowing availability was $2,582 million, which considers a further $270 million reduction due to inventory levels and its impact on the ABL borrowing base. 2023 2022 2021 Net cash provided by operating activities $ 1,305 $ 1,615 $ 2,712 Net cash used by investing activities (913) (1,169) (370) Net cash used by financing activities (220) (1,296) (2,381) Operating Activities Net cash provided by operating activities was $1,305 million in 2023 compared to $1,615 million in 2022.
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.
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.
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.
For the Company's annual impairment assessment as of the end of fiscal May 2023 and 2022, 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. 33 Table of Contents During the third quarter of fiscal 2023, the Company observed a general decline in the market valuation of the Company’s common shares and performed an interim qualitative impairment test on its reporting units.
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.
Certain financial highlights are as follows: • Comparable sales, on a 52-week basis, decreased 6.9% on an owned basis and 6.0% on an owned-plus-licensed basis. • Other revenue, consisting of net credit card revenue and Macy's Media Network revenue, decreased $233 million to $774 million. • The gross margin rate was 38.8%, an increase of 140 basis points from 37.4%. • Selling, general & administrative (SG&A) expenses decreased $86 million to $8,375 million, or 35.1% of net sales, an increase of 190 basis points. • Net income was $105 million, a decrease from net income of $1,177 million.
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.
The combined financial information of the Obligor Group is presented on a combined basis with intercompany balances and transactions within the Obligor Group eliminated. 29 Table of Contents Summarized Balance Sheet February 3, 2024 (in millions) ASSETS Current Assets $ 1,028 Noncurrent Assets 6,145 LIABILITIES Current Liabilities $ 1,800 Noncurrent Liabilities (a) 10,654 a) Includes net amounts due to non-Guarantor subsidiaries of $5,645 million Summarized Statement of Operations 2023 (in millions) Net Sales $ 962 Consignment commission income (a) 3,584 Other revenue 159 Cost of sales (457) Operating loss (1,837) Loss before income taxes (b) (1,325) Net loss (1,313) a) Income pertains to transactions with ABL Borrower, a non-Guarantor subsidiary b) Includes $874 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.
The Company licenses third parties to operate certain departments in its stores and online and receives commissions from these third parties based on a percentage of their net sales. In its financial statements prepared in conformity with GAAP, the Company includes these commissions (rather than sales of the departments licensed to third parties) in its net sales.
In its financial statements prepared in conformity with GAAP, the Company includes these commissions (rather than sales of the departments licensed to third parties) in its net sales.
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.
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 its cost value is derived from the current retail selling value.
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.
As of February 3, 2024, the Company held flat the assumed annual long-term rate of return for the Pension Plan's assets at 5.30% based on expected future returns on the portfolio of assets.
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.
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.
Analysis 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.
The Company considers fiscal 2024 a transition and investment year as it implements A Bold New Chapter. 24 Table of Contents Analysis of Results of Operations 2023 2022 2021 Amount % to Net Sales % to Total Revenue Amount % to Net Sales % to Total Revenue Amount % to Net Sales % to Total Revenue (dollars in millions, except per share figures) Net sales $ 23,092 $ 24,442 $ 24,460 Other revenue 774 3.4 % 1,007 4.1 % 939 3.8 % Total revenue 23,866 25,449 25,399 Cost of sales (14,143) (61.2) % (15,306) (62.6) % (14,956) (61.1) % Selling, general and administrative expenses (8,375) (35.1) % (8,461) (33.2) % (8,154) (32.1) % Gains on sale of real estate 61 0.3 % 89 0.3 % 91 0.4 % Impairment, restructuring and other costs (1,027) (4.3) % (41) (0.2) % (30) (0.1) % Operating income $ 382 1.6 % $ 1,730 6.8 % $ 2,350 9.3 % Diluted earnings per share $ 0.38 $ 4.19 $ 4.55 Supplemental Financial Measure Gross margin $ 8,949 38.8 % $ 9,136 37.4 % $ 9,504 38.9 % Digital sales as a percent of net sales 33 % 33 % 35 % Increase (decrease) in comparable sales (6.9) % 0.3 % 43.0 % Supplemental Non-GAAP Financial Measures Increase (decrease) in comparable sales on an owned plus licensed basis (6.0) % 0.6 % 42.9 % Adjusted diluted earnings per share $ 3.50 $ 4.48 $ 5.31 EBITDA $ 1,156 $ 2,568 $ 3,194 Adjusted EBITDA $ 2,317 $ 2,648 $ 3,320 See pages 31 to 33 for reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measure and for other important information. 25 Table of Contents Comparison of 2023 and 2022 2023 2022 Net sales $ 23,092 $ 24,442 Change in comparable sales (6.9) % 0.3 % Change in comparable sales on an owned plus licensed basis (6.0) % 0.6 % Digital sales as a percent of net sales 33 % 33 % Net sales for the Company in 2023, which included $252 million of net sales recognized in the 53rd week, were down 5.5% from 2022.
The Company's spend will be primarily focused on initiatives that will accelerate our profitable growth, including digital and technology investments, data and analytics, supply chain modernization and omni-channel capabilities, including our growth vectors. These expenditures are expected to be financed with cash from operations and existing cash and cash equivalents.
The Company's spend will be primarily focused on initiatives that will support A Bold New Chapter, including digital and technology investments, investments in our remaining go-forward locations, small format store openings and omni-channel capabilities. These expenditures are expected to be financed with cash from operations and existing cash and cash equivalents.
If the Company commits to a plan to dispose of a long-lived asset before the end of its previously estimated useful life or changes its use of corporate assets, estimated cash flows are revised accordingly, and the Company may be required to record an asset impairment charge.
During fiscal 2023, the Company recognized impairment charges of $957 million primarily related to the approximately 150 locations planned for closure over the next three years as part of A Bold New Chapter strategy, and the remaining associated with corporate and other assets If the Company commits to a plan to dispose of a long-lived asset before the end of its previously estimated useful life or changes its use of corporate assets, estimated cash flows are revised accordingly, and the Company may be required to record an asset impairment charge.
Income Taxes Income taxes are estimated based on the tax statutes, regulations and case law of the various jurisdictions in which the Company operates.
A decline in market capitalization or future declines in macroeconomic factors or business conditions may result in additional impairment charges in future periods. Income Taxes Income taxes are estimated based on the tax statutes, regulations and case law of the various jurisdictions in which the Company operates.
Stores impacted by a natural disaster or undergoing significant expansion or shrinkage remain in the comparable sales calculation unless the store, or a material portion of the store, is closed for a significant period of time. No stores have been excluded as a result of the COVID-19 pandemic.
Such calculation includes all digital sales and excludes commissions from departments licensed to third parties or Marketplace. Stores impacted by a natural disaster or undergoing significant expansion or shrinkage remain in the comparable sales calculation unless the store, or a material portion of the store, is closed for a significant period of time.
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.
Subsequent dividends will be subject to approval of the Board of Directors, which will depend on market and other conditions. Stock Repurchases 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.
Factors considered in the determination of permanent markdowns include current and anticipated demand, customer preferences, age of the merchandise and fashion trends. When a decision is made to permanently mark down merchandise, the resulting gross margin reduction is recognized in the period the markdown is recorded.
Operational factors considered in determining to permanently markdown inventory include current and anticipated demand, customer preferences, age of the merchandise and fashion trends.
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.
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 2023 Overview Over the past several years, the Company has taken proactive actions to fortify its operations, including strengthening our balance sheet, managing expenses and improving inventory productivity.
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.
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.
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.
Note 6 and Note 4 to the Financial Statements provide additional information on debt and finance leases, respectively.
The decrease in benefit plan income from 2021 to 2022 was mainly driven by a decrease in the plan asset returns and higher discount rates as a result of market conditions. 2022 2021 Settlement charges $ (39) $ (96) The settlement charges in 2022 were primarily 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.
The decrease in benefit plan income from 2022 to 2023 was mainly driven by a decrease in the plan asset returns and higher discount rates as a result of market conditions. 2023 2022 Settlement charges $ (134) $ (39) Settlement charges in 2023 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 .
In 2021, income tax expense of $436 million, or 23.4% of pretax income, reflects a different effective tax rate as compared to the company's federal income tax statutory rate of 21% primarily by the impact of state and local taxes.
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% due to the impact of state and local taxes, partially offset by the benefit of state tax settlements. 27 Table of Contents 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.
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.
On an adjusted basis, diluted earnings per share were $3.50, compared to adjusted diluted earnings per share of $4.48. • Merchandise inventories were up 2% and inventory turnover decreased 2%.
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.
The settlement charges in 2022 were primarily 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. 2023 2022 Net interest expense $ (135) $ (162) The 17% decrease in net interest expense, excluding losses on early retirement of debt, was driven by an increase in interest income and interest savings associated with the financing activities completed in the first quarter of 2022 as well as lower Asset Based Lending (ABL) Credit Facility borrowings in 2023 compared to 2022. 2023 2022 Losses on early retirement of debt $ — $ (31) 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 March 2022. 2023 2022 Effective tax rate 15.3 % 22.5 % Federal income statutory rate 21 % 21 % In 2023, income tax expense of $19 million, or 15.3% of pretax income reflects a different effective tax rate as compared to the Company's federal income tax statutory rate of 21% due to reduced pretax income as a result of the aforementioned impairment charges, which amplified the impact of net tax credits on the effective rate.
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.
During 2023 , the Company repurchased approximately 1.4 million shares of its common stock at an average cost of $17.57 per share for $25 million. During 2022, the Company repurchased 24.0 million shares of its common stock at an average cost of $24.98 per share for $600 million .
Removed
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.
Added
The dedicated work of our teams delivered a solid close to 2023 and provides a strong foundation for the Company to execute its new strategy, A Bold New Chapter, detailed further below. In evaluating 2023 performance, the Company considered its results against 2022.
Removed
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.
Added
See pages 31 to 33 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. 22 Table of Contents Company Strategy During 2023, the Company focused on its five growth vectors, introduced at the start of the fiscal year and representing strategic investments designed to target future long-term profitable sales growth.
Removed
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.
Added
Items actioned under each growth vector in 2023 include, but are not limited to, the following: • Macy's private brand reimagination: In August 2023, Macy's launched On 34th, its first new private brand under the reimagination, with a strong customer response.
Removed
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 .
Added
Throughout 2023, Macy's refreshed I.N.C. in phases to further elevate the design strategy and fashion offering, and exited several heritage women's brands, including Alfani and Karen Scott. • Macy's and Bloomie's small formats: In 2023, the Company opened four additional Macy's small format locations and one additional Bloomie's location. • Digital marketplace: The Company launched Bloomingdale's marketplace in the second quarter of 2023 and continued to grow Macy's marketplace, ending the year with 120 brands and over 2,300 brands, respectively, at each nameplate. • Luxury: In 2023, Bloomingdale's celebrated 50 years of its iconic Big Brown Bag, added several exciting brands and launched key collaborations with engaging in-store and digital activations, including Barbie- and Wonka-themed takeovers of The Carousel @ Bloomingdale's.
Removed
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.
Added
The fourth quarter of 2023 marked Bluemercury's 12th consecutive quarter of comparable sales growth.
Removed
With these actions, the Company is strategically taking markdowns and reducing broad-based promotions to improve the productivity of sell-throughs.
Added
It also unveiled two remodeled luxury stores in 2023 with elevated spa offerings and high-touch customer service, which serve as the foundation for future locations. • Personalized offers and communication: The digital and technology teams tested and learned throughout 2023, including the recent launch of several multi-touch communications. The Company anticipates moving from testing in 2023 to scaling in 2024.
Removed
These collective activities have contributed to nine consecutive quarters of higher average unit retail. • Excel in Digital Shopping: While the Company experienced deceleration in the growth of its digital channel during 2022 as consumers shifted back to in-store shopping, the Company continued to make digital investments to serve customers' lifestyle needs through several initiatives.
Added
On February 27, 2024, the Company announced its new strategy, A Bold New Chapter, which is designed to return the Company to enterprise growth, unlock shareholder value, and better serve its customers. This new strategy builds on the five growth vectors, adds newly identified and stress-tested areas of opportunities, and is supported by the Company's financial disciplines.
Removed
These included continued enhancements in personalized offers and communication with customers; enhancements to its mobile app to allow customers to shop their personal style, price check in-store, manage their Star Rewards and track orders; and, further develop its live shopping in-app experience.
Added
Over the next three years, the Company plans to: •.
Removed
Macy's digital Marketplace launched in late September 2022, which features a collection of new brands, products and categories from third-party sellers, representing a pathway to introduce customers to new merchandise options while limiting inventory risk. Bloomingdale's is expected to launch a similar digital marketplace in the second half of 2023.
Added
Strengthen the Macy's nameplate ◦ Rationalize store base: The Company identified approximately 150 underproductive Macy's locations for closure over the next three years (collectively, the "non-go-forward" locations), which will allow for monetization of assets at the non-go-forward locations and prioritization of investments in the approximately 350 remaining Macy's locations (collectively, the "go-forward" locations) where the Company believes it has the most opportunity to improve square footage productivity.
Removed
Also, Macy's Media Network (MMN), an in-house media platform that enables business-to-business monetization of advertising partnerships, generated approximately $144 million of net income in 2022, an increase of 34% from 2021. • Enhance Store Experience: The Company continues to invest in physical stores to support its omni-channel ecosystem and build new capabilities to help make the shopping experience convenient and compelling.
Added
In 2023, the 150 non-go-forward locations represented approximately 25% of the Company's gross square footage but less than 10% of net sales. ◦ Rollout small format: The Company operated 12 Macy's small format stores at the end of the year and plans to add up to 30 locations in the next two years. ◦ Revitalize assortment: The Company recently shifted its merchant colleague responsibilities to a full category approach rather than separate teams for owned and licensed business.
Removed
The Company made strides in repositioning its store fleet through strategic expansion of off-mall, smaller format stores which now includes eight Market by Macy's and two Bloomies locations. The Company is currently evaluating the right number and mix of on and off-mall locations.
Added
This new approach allows the merchant organization to better focus on the nuances that make each category thrive, provides higher visibility and awareness across entire categories, strengthens relationships with partners, allows for diversification of product across price points, and better positions the Company to grow market share.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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At 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
At February 3, 2024, 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 February 3, 2024, 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.
The Company is exposed to interest rate risk through its borrowing activities, which are described in Note 6, Financing, to the Consolidated Financial Statements. All of the Company's borrowings are under fixed rate instruments.
The Company is exposed to interest rate risk through its borrowing activities, which are described in Note 6, Financing, to the Consolidated Financial Statements and funding activities of its credit card portfolio, which are described in Note 2, Revenue, to the Consolidated Financial Statements. All of the Company's borrowings are under fixed rate instruments.

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