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MACY’S, INC. IS ONE OF THE NATION’S PREMIER OMNI-CHANNEL RETAILERS.
Headquartered in New York City, the company comprises three retail brands: Macy’s,
Bloomingdale’s and Bluemercury. With a robust e-commerce business, rich mobile
experience and a national stores footprint, our customers can shop the way they
live — anytime and through any channel. For more information, visit macysinc.com.
JEFF GENNETTE
CHAIRMAN & CHIEF EXECUTIVE OFFICER
Following an unprecedented year that delivered a series of challenges that once seemed unimaginable, Macy’s, Inc.
today is well positioned to compete and grow as a digitally led omnichannel retailer. Last year as stores were shut down,
we pivoted quickly, focusing on our digital properties to absorb the additional demand online and drive digital sales.
When we reopened our stores, we capitalized on our digital momentum by quickly developing new fulfillment options,
including curbside pickup, and expanding our merchandise offerings within many of our “pandemic” categories.
We also tested new and innovative ways to serve our customers in the new normal. While we would never want
to repeat this past year, we learned a lot about our strengths and identified new opportunities.
Our Polaris strategy that we introduced in February 2020 is designed to return our company to growth. By spring of
last year, it was tested profoundly and proved durable. The acceleration of digital, coupled with structural changes
guided by Polaris, enabled us to adapt and innovate with agility as consumer trends shifted quickly. The cost controls
that we put in place were critical to successfully weathering the pandemic. And when we needed to make difficult
choices about the priority of our investments, we leveraged Polaris to provide a roadmap. We accelerated our shift
to digital shopping, strengthened the relationship between online and off-line with our omnichannel experience,
expanded our assortment, improved our product mix and further employed data and analytics tools and processes
to simplify our customer value equation.
The actions we took last year proved that our business is resilient and able to adapt to changing customer
needs and new forces in the marketplace. We delivered positive adjusted EBITDA for the full year and generated
consistent, sequential top line improvement from the lows of the first quarter. We also delivered positive free cash
flow in 2020, and we expect to see this grow through the continued successful execution of our Polaris strategy.
As a result, we ended the year with healthy liquidity, approximately $1.7 billion in cash and approximately $3 billion
of untapped capacity in our revolving asset-based facility that we closed in June. We repaid approximately $530
million of debt in January 2021 at maturity.
We saw standout performance on both ends of the value spectrum – from off-price to luxury. During the fourth
quarter, Backstage locations outperformed Macy’s stores by more than three times. We plan to open approximately
35 new Backstage stores within stores in 2021. Bloomingdale’s capitalized on the shift in consumer spending from
experiences to luxury products, while Bluemercury benefited from the increase in demand for beauty and skincare.
Both brands experienced a strong recovery in the fourth quarter of 2020 when compared to the first quarter.
MACY’S, INC.2020 ANNUAL REPORTTO OUR SHAREHOLDERS REFINED POLARIS STRATEGY
Our experience in 2020 gives us increased confidence to take bolder actions as a digitally led omnichannel retailer.
The refined Polaris strategy includes a deep understanding of the Macy’s, Inc. customer and how their shopping
habits have evolved during the past year. There are six pillars that underpin the Polaris strategy:
1
W I N W I T H F A S H I O N A N D S T Y L E b y
delivering products that meet core and new
customer needs across all occasions and
transforming our assortment architecture, fashion
curation, inventory productivity and vendor relationships.
In 2020, we rapidly expanded our assortment, adding
new categories and more than 1,000 brands to meet
emerging demand. Looking ahead, we will continue to
improve our assortment, especially for the under-40
customer, with the right mix of categories.
2
D E L I V E R C L E A R V A L U E T H R O U G H
S I M P L E , E A S Y - T O - U N D E R S T A N D
P R I C I N G A N D P R O M O T I O N S , deepening
core and new customer engagement through hyper-
personalized loyalty ecosystem, communication and
personalized experiences. We made significant strides
in improving our customer value proposition in 2020 and
saw both sequential and year-over-year improvement in
regular price sell-through in the fourth quarter of 2020.
We plan to continue to simplify promotions, optimize
our markdowns and improve and localize our pricing
to create better value clarity for our shoppers, all while
improving merchandise margins. Additionally, we
continue to build on our customer value ecosystem:
loyalty, monetization and personalization, enabled by
our Star Rewards loyalty program.
3
E X C E L I N D I G I T A L S H O P P I N G b y
providing a modern, frictionless digital shopping
journey, supported by a seamless user interface,
immersive category-level experiences and a convenient
delivery and returns experience that is fully connected
to stores. We have already improved our customers’
digital journey, and we will continue to make fundamental
investments while delivering new, immersive, content-
driven experiences for customers. We anticipate these
improvements will help us realize our goal of growing
digital sales to $10 billion within the next three years.
4
R E P O S I T I O N O U R S T O R E F L E E T A N D
E N H A N C E O M N I E X P E R I E N C E S to
create a tech-enabled, connected omni-
ecosystem that supports a reimagined store experience
through a streamlined stores portfolio and new off-mall
formats. We are enhancing our omnichannel shopping
experience by focusing on scaling store fulfillment, buy
online pick-up in store, curbside pickup and same-day
delivery services. To more closely connect online and
offline and deliver a seamless customer experience, we
will continue to invest in technology that enhances the
way we engage our customers. The repositioning and
resizing of our fleet through the monetization of our real
estate assets will continue to play an important role in
funding our growth initiatives.
5
M O D E R N I Z E O U R S U P P L Y C H A I N
I N F R A S T R U C T U R E by moving toward
a faster and more efficient customer fulfillment
infrastructure while profitably improving convenience and
the delivery experience. We are also better managing
and placing our inventory to meet customer demand
and to minimize markdowns. We expect these changes
will deliver higher productivity in our customer fulfillment
centers and stores, lower delivery expenses and
improved customer service across our network.
6
And last, ENABLING TRANSFORMATION
THROUGH DATA ANALYTICS, TECHNOLOGY
AND A PERFORMANCE-DRIVEN OPERATING
MODEL, ensuring we have the right infrastructure and
technology to execute and sustain our plans. This
includes, first, a modernized technology platform
to support a friction-free customer and colleague
experience. Second, we are revamping our data and
analytics foundation to drive growth and profitability
through all our decisions. And third, the most critical
to our success, a performance-driven operating model
enabled by clear incentives for our colleagues.
MACY’S, INC.2020 ANNUAL REPORTTO OUR SHAREHOLDERS CREATING A MORE SUSTAINABLE FUTURE
At Macy’s, Inc., we have a deep sense of stewardship for managing our resources and maximizing our positive
social impact. We proactively engage on issues that span the breadth of our operations – this includes transparency,
product responsibility and supply chain management, energy management, diversity and inclusion and building
resilient communities. We believe operating by these principles will enable us to create value for our shareholders
while addressing the shared needs of society. We believe that what we do, what we stand for, and how we get
the work done are each equally important. Across the entire colleague lifecycle, we have a cohesive strategy
that focuses on our culture and providing our people with the programs and support that matter the most to
their professional growth and development. I am pleased to share our story with the recent publication of our
Human Capital Report that highlights our culture and engagement, diversity and inclusion, future of work, healthy
and safety, people analytics and total rewards.
LOOKING AHEAD FOR MACY’S, INC.
We understand there is much work ahead to capitalize on the opportunities now available to Macy’s, Inc. We have
the aspiration, the fortitude and the agility to successfully transform our business.
As we look towards a healthier economy in the coming months and years, I am optimistic about the way we are
reimagining and repositioning our business in line with our Polaris strategy. Macy’s, Inc. has a clear path to sustainable
growth, driven by the expansion of our digital channel and by the refocusing of our store fleet on better-quality malls
and more convenient and productive off-mall formats that are closer to our customers. Our plan is underpinned
by a capital allocation strategy that enhances our long-term financial stability and returns for our shareholders,
our commitment to investing in growth initiatives that generate high returns and our goal of achieving a healthier
capital structure and progressing towards investment-grade metrics.
I am also encouraged by the talent and focus of our teams across Macy’s, Inc. who persevered through 2020 and
who are committed to our future growth. We have a diverse leadership team that includes a blend of new talent
with outside perspectives along with our tenured and best developed leaders. I am confident that, together, we
will succeed as we build toward a sustainable, profitable future.
Jeff Gennette
Chairman & Chief Executive Officer
MACY’S, INC.2020 ANNUAL REPORTTO OUR SHAREHOLDERS UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended January 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission file number: 1-13536
Macy's, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
151 West 34th Street, New York, New York 10001
(Address of Principal Executive Offices, including Zip Code)
13-3324058
(I.R.S. Employer Identification No.)
(513) 579-7780
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $.01 par value per share
Trading Symbol(s)
M
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company,” in Rule
12b-2 of the Exchange Act.
Large Accelerated Filer
Non-Accelerated Filer
☒
☐
Emerging Growth Company
☐
Smaller Reporting Company
Accelerated Filer
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently
completed second fiscal quarter (August 1, 2020) was approximately $1,880,068,605.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value per share
Class
Outstanding at February 27, 2021
310,567,431 shares
DOCUMENTS INCORPORATED BY REFERENCE
Document
Proxy Statement for the Annual Meeting of Stockholders to be held May 21, 2021
Parts Into Which Incorporated
Part III
Unless the context requires otherwise, references to “Macy’s” or the “Company” are references to Macy’s and its subsidiaries
and references to “2020,” “2019,” “2018,” “2017” and “2016” are references to the Company’s fiscal years ended January 30, 2021,
February 1, 2020, February 2, 2019, February 3, 2018 and January 28, 2017, respectively. Fiscal year 2017 included 53 weeks; fiscal
years 2020, 2019, 2018 and 2016 included 52 weeks.
Forward-Looking Statements
This report and other reports, statements and information previously or subsequently filed by the Company with the
Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements. Such statements
are based upon the beliefs and assumptions of, and on information available to, the management of the Company at the
time such statements are made. The following are or may constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995: (i) statements preceded by, followed by or that include the words
“may,” “will,” “could,” “should,” “believe,” “expect,” “future,” “potential,” “anticipate,” “intend,” “plan,” “think,”
“estimate” or “continue” or the negative or other variations thereof, and (ii) statements regarding matters that are not
historical facts. Such forward-looking statements are subject to various risks and uncertainties, including risks and
uncertainties relating to:
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the effects of the weather, natural disasters, and health pandemics, including the coronavirus (COVID-
19) pandemic, on the Company’s business, including the ability to open stores, customer demand and its
supply chain, as well as our consolidated results of operations, financial position and cash flows;
the possible invalidity of the underlying beliefs and assumptions;
the Company's ability to successfully execute against its Polaris strategy, including the ability to realize
the anticipated benefits associated with the strategy;
the success of the Company’s operational decisions, such as product sourcing, merchandise mix and
pricing, and marketing and strategic initiatives, such as growing its digital channels, expanding off-mall
and modernizing its technology and supply chain infrastructures;
general consumer shopping behaviors and spending levels, including the shift of consumer spending to
digital channels, the impact of changes in general economic conditions, consumer disposable income
levels, consumer confidence levels, the availability, cost and level of consumer debt, and the costs of
basic necessities and other goods;
competitive pressures from department stores, specialty stores, general merchandise stores,
manufacturers’ outlets, off-price and discount stores, and all other retail channels, including digitally-
native retailers, social media and catalogs;
the Company’s ability to remain competitive and relevant as consumers’ shopping behaviors continue to
migrate to online and other shopping channels and to maintain its brand and reputation;
possible systems failures and/or security breaches, including any security breach that results in the
theft, transfer or unauthorized disclosure of customer, employee or company information, or the failure
to comply with various laws applicable to the Company in the event of such a breach;
the cost of employee benefits as well as attracting and retaining quality employees;
transactions and strategy involving the Company's real estate portfolio;
the seasonal nature of the Company’s business;
conditions to, or changes in the timing of, proposed transactions, and changes in expected synergies,
cost savings and non-recurring charges;
the potential for the incurrence of charges in connection with the impairment of intangible assets,
including goodwill;
possible changes or developments in social, economic, business, industry, market, legal and regulatory
circumstances and conditions;
possible actions taken or omitted to be taken by third parties, including customers, suppliers, business
partners, competitors and legislative, regulatory, judicial and other governmental authorities and
officials;
changes in relationships with vendors and other product and service providers;
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our substantial level of indebtedness;
currency, interest and exchange rates and other capital market, economic and geo-political conditions;
unstable political conditions, civil unrest, terrorist activities and armed conflicts;
the possible inability of the Company’s manufacturers or transporters to deliver products in a timely
manner or meet the Company’s quality standards;
the Company’s reliance on foreign sources of production, including risks related to the disruption of
imports by labor disputes, regional and global health pandemics, and regional political and economic
conditions; and
duties, taxes, other charges and quotas on imports.
In addition to any risks and uncertainties specifically identified in the text surrounding such forward-looking
statements, the statements in the immediately preceding sentence and the statements under captions such as “Risk
Factors” in reports, statements and information filed by the Company with the SEC from time to time constitute
cautionary statements identifying important factors that could cause actual amounts, results, events and circumstances to
differ materially from those expressed in or implied by such forward-looking statements.
3
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. The Company operates 727 store locations in 43 states,
the District of Columbia, Puerto Rico and Guam. As of January 30, 2021, the Company's operations were conducted
through Macy's, Macy’s Backstage, Market by Macy’s, Bloomingdale's, Bloomingdale’s The Outlet, 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 sells a wide range of merchandise, including apparel and accessories (men’s, women’s and kids'),
cosmetics, home furnishings and other consumer goods. The specific assortments vary by size of store, merchandising
assortments and character of customers in the trade areas. Most stores are located at urban or suburban sites, principally in
densely populated areas across the United States.
Disaggregation of the Company's net sales by family of business for 2020, 2019 and 2018 were as follows:
Women’s Accessories, Intimate Apparel, Shoes, Cosmetics and
Fragrances
Women’s Apparel
Men’s and Kids’
Home/Other (a)
Total
2020
2019
2018
$
$
7,206 $
2,909
3,486
3,745
17,346 $
9,454 $
5,411
5,628
4,067
24,560 $
9,457
5,642
5,699
4,173
24,971
(a)
Other primarily includes restaurant sales, allowance for merchandise returns adjustments, certain loyalty
program income and breakage income from unredeemed gift cards.
In 2020, the Company’s subsidiaries provided various support functions to the Company’s retail operations on an
integrated, company-wide basis.
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The Company’s wholly-owned bank subsidiary, FDS Bank, provides certain collections, customer
service and credit marketing services in respect of all credit card accounts that are owned either by
Department Stores National Bank (“DSNB”), a subsidiary of Citibank, N.A., or FDS Bank and that
constitute a part of the credit programs of the Company’s retail operations.
Macy’s Systems and Technology, Inc. (“MST”), 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. (“MMG”), a wholly-owned direct subsidiary of the Company, and
its subsidiary Macy's Merchandising Group International, LLC, are responsible for the design,
development and marketing of Macy’s private label brands and certain licensed brands. Bloomingdale’s
uses MMG for a small portion of its private label merchandise. The Company believes that its private
label merchandise differentiates its merchandise assortments from those of its competitors. MMG also
offers its services, either directly or indirectly, to unrelated third parties.
Macy’s Logistics and Operations (“Macy’s Logistics”), a division of a wholly-owned indirect
subsidiary of the Company, provides warehousing and merchandise distribution services for the
Company’s operations and digital customer fulfillment.
The Company’s principal executive office is located at 151 West 34th Street, New York, New York 10001, telephone
number: (513) 579-7780.
Seasonality
The retail business is seasonal in nature with a high proportion of sales and operating income generated in the
months of November and December. Working capital requirements fluctuate during the year, increasing in mid-summer in
anticipation of the fall merchandising season and increasing substantially prior to the months of November and December
when the Company carries significantly higher inventory levels.
4
Purchasing
The Company purchases merchandise from many suppliers, none of which accounted for more than 5% of the
Company’s purchases during 2020. 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.
Private Label Brands and Related Trademarks
The principal private label brands currently offered by the Company include Alfani, Aqua, Bar III, Belgique,
Charter Club, Club Room, Epic Threads, 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, Thalia Sodi, The Cellar, Tools of the Trade
and Wild Pair.
The trademarks associated with the Company's private label brands, other than Martha Stewart Collection and
Thalia Sodi, are owned by the Company. The Martha Stewart Collection and Thalia Sodi brands are owned by third
parties, which license the trademarks associated with the brands to Company pursuant to agreements. The agreement for
Thalia Sodi expired in January 2021, but the Company has a 180-day sell-off period, while the Martha Stewart agreement
extends through 2022.
Competition
The retail industry is highly competitive. The Company’s operations compete with many retail formats on the
national and local level, including department stores, specialty stores, general merchandise stores, manufacturers' outlets,
off-price and discount stores, online retailers and catalogs, among others. The Company seeks to attract customers by
offering compelling, high-quality products, great prices and trusted service across all channels, including its digital
platforms. The Company’s stores are located in premier locations and the Company provides a superior omnichannel
product experience at a variety of price points. Other retailers may compete for customers on some or all of these bases,
or on other bases, and may be perceived by some potential customers as being better aligned with their particular
preferences.
Available Information
The Company makes its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act") available free of charge through its internet website at https://www.macysinc.com as soon as
reasonably practicable after it electronically files such material with, or furnishes it to, the SEC. The SEC also maintains
an internet site that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC; the address of that site is https://www.sec.gov. In addition, the Company has made the
following available free of charge through its website at https://www.macysinc.com:
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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.
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.
5
Human Capital
Culture & Engagement
At Macy’s culture is about relationships—how the Company serves and supports its customers, communities and
employees (called colleagues). The Company’s workplace is rooted in equity and guided by its values of acceptance,
respect, integrity and giving back.
The Company gathers colleague feedback at key times throughout the colleague lifecycle from onboarding to
offboarding, providing regular venues for colleagues to ask questions and share their opinions, such as Ask Me Anything
sessions, town halls and employee resource groups. The Company formally solicits feedback from all colleagues twice a
year through an enterprise-wide Culture Pulse Survey. The results are shared across the organization to provide visibility
to both managers (called people leaders) and colleagues and help create an opportunity for open and constructive
discussions among teams.
Diversity & Inclusion
Macy’s commitment to diversity and inclusion is guided by its values and starts from within by building a
workforce that accurately represents the communities it serves at all levels and by cultivating 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.
The Company actively promotes an inclusive and welcoming environment for all customers and is focused on
diversity and inclusion beyond the organization—working to support and develop diverse suppliers; investing in
economic and workforce development; contributing to organizations fighting for social justice; and awarding
scholarships to cultivate future leaders.
One of the Company’s measures to advance the diversity of its leadership at the senior director level and above is
the MOSAIC program, a one-year professional development program launched in 2019 for its top talent at the manager
and director levels who self-identify as ethnically diverse. From 2019 to 2020, approximately 61% of program
participants were promoted or moved into a new role, with approximately 18% promoted to senior director level. The
Company is currently at 24% ethnic diversity at the senior director level and above, with a goal to reach 25% in 2021
and 30% by 2025.
Macy’s believes people leaders play an important role in driving performance and an inclusive culture. In 2020,
the Company incorporated People Leader Commitments (which were launched in 2019) and diversity and inclusion
(D&I) into the performance review process. In 2021, the Company has included standardized D&I goals into annual
reviews at the director level and above.
Company-sponsored, employee-led resource groups (ERGs) provide an opportunity for colleagues to experience
connection, achieve belonging and build community. ERGs expanded from 51 to 94 chapters across Macy’s and
Bloomingdale’s in 2020 and continue to be a resource for attracting and retaining talent.
Macy’s D&I focus areas extend beyond its colleagues and include community, customers, marketing and suppliers.
For example:
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In 2020, the Company allocated $1 million to organizations promoting social justice, sourced new
partners, and committed two colleagues to the work of CEO Action for Racial Equity Taskforce—the
mission of the taskforce is to identify, develop and promote scalable and sustainable public policies
and corporate engagement strategies that will address systemic racism, social justice and improve
societal well-being.
In 2019, the Company launched a Customer Bill of Rights across all Macy’s and Bloomingdale’s
stores as a new standard of how the Company will treat everyone who engages with its brands.
The Company is advancing representation in its advertising to reflect its customers by gender, gender
identity, ethnicity, age, size and people with disabilities.
In 2020, the Company increased brand assortment by adding 100 new, diverse-owned businesses
online and in stores. Overall, minority and diverse suppliers (retail and non-retail) accounted for 3.5%
of the Company’s total spend in 2020, with a goal to increase to 4% in 2021.
6
Future of Work
The workplace is evolving and so is Macy’s. The Company believes the future of work is about allowing
colleagues to do their best work safely, flexibly and in an environment that inspires collaboration and connection and
reflects their core values. Through investments in technology, new and updated policies and procedures, and listening to
the needs of its colleagues, Macy’s is evolving with them. Because no matter where colleagues work, behind a desk or
behind a screen, in stores or in distribution centers, the Company believes they are guided by their strong sense of culture
and what it means to be part of the Macy’s family.
The Company has taken enhanced safety measures to help mitigate the spread of COVID-19 to colleagues and
customers including requiring all customers to wear face masks in stores, enforcing social distancing guidelines,
increasing safety equipment in stores, offering contactless shopping opportunities, providing company-supplied personal
protection equipment and wellness checks for colleagues, and performing enhanced cleaning.
Learning & Development
Macy’s believes that learning goes hand in hand with career growth, personal satisfaction and outstanding results.
The Company aspires to create a learning culture where colleagues actively learn, apply what they have learned to
address business challenges and share their knowledge, including their mistakes, to help others grow. Learning 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.
The Company makes investments in its people leaders and future leaders. Macy’s and Bloomingdale’s Executive
Development Programs offer immersive, hands-on learning experiences for recent college graduates from top
universities across the U.S. to jump start a career in retail, with specialization in technology, digital, stores,
merchandising, planning, human resources and credit and customer service. Macy’s and Bloomingdale’s offer
internships for college students and Bloomindale’s offers an early immersion program focused on providing experiential
learning and career exposure to those who identify with underrepresented groups. 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 2019, Macy’s partnered with Parsons
School of Design to launch Macy’s Fashion Academy - a custom executive education program designed to offer best-in-
class development across all disciplines of its merchant talent.
Approximately 81% of colleagues completed unconscious bias training in 2019 and approximately 96% of
professional colleagues have utilized Ignite for personal and professional development. People leaders invest a
minimum of 40 hours of leadership development each year. Professional colleagues participate in a 90-day onboarding
experience with performance milestones, support resources and role-specific training.
Data Analytics
Macy’s is embedding data and analytics into its human capital management. Below are examples of how the
Company leverages data-driven insights to support key business decisions.
•
•
•
•
•
•
Career development: Allow colleagues to access their data and share their skills/career aspirations
with the enterprise
Culture: Consistently assess the health of its culture, its team’s performance and its talent pipelines
Human resources: Standardized its employment and compensation practices across all business groups
Leadership development: Leading technology solutions support people leaders with workforce
management, including immediate access to performance, talent and compensation information for
their total teams
Talent recruitment and retention: Plan, recruit and retain talent, allowing it to co-locate teams critical
to company growth and staff them with highly engaged top talent
Workplace structure: Create multi-year strategies and prioritize workplace changes that align with
customer and colleagues’ need
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Talent
Macy’s employs approximately 90,000 full-time, part-time and seasonal colleagues nationwide across a variety of
functions and roles. The Company is committed to having the best talent in retail – encouraging the continuous
upskilling of its colleagues and empowering them to chart their own career paths, while staying focused on acquiring the
best and brightest to inject fresh thinking.
Total Rewards
Macy’s offers comprehensive benefits and an awards strategy that recognizes performance and talent development.
Eligible colleagues have varied medical plan options to meet individual needs. The Company’s commitment to
colleagues’ well-being expanded during the pandemic in 2020, as it covered 100% of insurance premiums for colleagues
while on furlough, including coverage for dependents. The Company provides paid time-off, parental leave and holiday
pay as well as a company 401(k) plan and match, dependent care flexible spending account, colleague merchandise
discount and tuition reimbursement for eligible colleagues.
The Company believes that pay equity is fundamental to its culture and D&I strategy. Compensation is based on
job position, responsibilities, experience and performance with incentive opportunities that allow all colleagues to share
in the Company’s success.
In 2021, the Company expects to achieve greater than 99% pay equity across gender and race. In terms of both
base pay and total compensation, the Company expects to pay female colleagues at greater than 99% of what it pays
male colleagues, and it expects that minorities will be paid at greater than 99% of what it pays non-minorities in the U.S.
The Company informs its compensation approach through market surveys and pay ranges to ensure pay is
competitive and fair and has a robust process to assess internal pay levels for consistency and fairness. The Company’s
incentive programs reward colleagues across all levels and functions for achievements in driving business results and
upholding its shared culture and values, including annual cash incentives for corporate colleagues based on performance,
Path to Growth quarterly incentive program for frontline colleagues, spot bonuses and commissions for store colleagues,
and annual equity grants to eligible senior management.
Number of Employees
As of January 30, 2021, excluding seasonal employees, Macy’s had 75,711 full-time and part-time employees.
Because of the seasonal nature of the retail business, the number of employees peaks in the holiday season.
Approximately 7% of employees are represented by unions.
Macy’s, Inc.’s Human Capital Report was released in March 2021 and is available at
https://macys.learn.taleo.net/files/upload/hcr/index_ORIG.html#/lessons/MQA5eF65af1i3n8XU_BME3xQTsmGcmHE.
The contents of the Human Capital Report are not incorporated by reference into this Annual Report on Form 10-K.
Information about our Executive Officers
The following table sets forth certain information as of March 25, 2021 regarding the Executive Officers of the
Company:
Name
Jeff Gennette
Adrian V. Mitchell
Elisa D. Garcia
John T. Harper
Danielle L. Kirgan
Age
59
47
63
61
45
Position with the Company
Chief Executive Officer, Chairman of the Board and Director
Executive Vice President and Chief Financial Officer
Executive Vice President, Chief Legal Officer and Secretary
Executive Vice President and Chief Operations Officer
Executive Vice President and Chief Transformation and Human
Resources Officer
Paul Griscom
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Senior Vice President and Controller
Executive Officer Biographies
Jeff Gennette has been Chief Executive Officer of the Company since March 2017 and Chairman of the Board since
January 2018; prior thereto he was President from March 2014 to August 2017, Chief Merchandising Officer from
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February 2009 to March 2014, Chairman and Chief Executive Officer of Macy’s West in San Francisco from February
2008 to February 2009 and Chairman and Chief Executive Officer of Seattle-based Macy’s Northwest from February
2006 through February 2008.
Adrian V. Mitchell has been Executive Vice President and Chief Financial Officer of the Company since
November 2020; prior thereto he served as a Managing Director and Partner in the DigitalBCG and Consumer Practices
of Boston Consulting Group from 2017 to 2020, Chief Executive Officer of Arhaus LLC from 2016 to 2017, 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 management positions at Target Corporation from 2007 to 2010
including Director of Strategy & Interactive Design for target.com and Director of Innovation & Productivity leading
enterprise-wide projects for Target Corporation.
Elisa D. Garcia has been Executive Vice President, Chief Legal Officer and Secretary of the Company since
September 2016; prior thereto she served as Chief Legal Officer of Office Depot, Inc. from December 2013 to September
2016, Executive Vice President and Secretary from July 2007 to September 2016 and General Counsel from July 2007 to
December 2013.
John T. Harper has been Executive Vice President and Chief Operations Officer of the Company since January
2020; prior thereto he served as Chief Stores Officer from September 2017 to January 2020, President of Store
Operations from May 2009 to September 2017, President of Macy’s Home Store from 2007 to 2009, Vice Chairman of
Macy’s Midwest from 2006 to 2007 and Chairman of Hecht’s department stores from 2004 to 2006.
Danielle L. Kirgan has been Executive Vice President and Chief Transformation and Human Resources Officer of the
Company since February 2020 and Chief Human Resources Officer since October 2017; prior thereto she served as
Senior Vice President, People at American Airlines Group, Inc. from October 2016 to October 2017, Chief Human
Resources Officer at Darden Restaurants, Inc. from January 2015 to October 2016 and Senior Vice President from May
2010, Vice President, Global Human Resources at ACI Worldwide, Inc. from January 2009 to December 2009, and Vice
President, Human Resources at Conagra Foods, Inc. from 2004 to 2008.
Paul Griscom has been Senior Vice President and Controller of the Company since August 2020; prior thereto he
served as Vice President and interim Principal Accounting Officer from June to August 2020, Vice President, Financial
Reporting and Accounting Services from May 2019 to August 2020, Vice President, Financial Reporting from June 2017
to April 2019, Director of Financial Reporting from July 2016 to May 2017, Director, Training & Products, GAAP
Dynamics from 2012 to 2016 and held various positions at KPMG LLP from 2000 to 2012.
Recent Developments
On March 1, 2021, the Company issued a press release announcing that John T. Harper will depart the Company
effective August 1, 2021. Subsequently, the role of chief operations officer will be eliminated.
Item 1A. Risk Factors.
In evaluating the Company, the risks described below and the matters described in “Forward-Looking Statements”
should be considered carefully. Such risks and matters are numerous and diverse, may be experienced continuously or
intermittently, and may vary in intensity and effect. Although the risks are organized by heading, and each risk is
described separately, many of the risks are interrelated. Any of such risks and matters, individually or in combination,
could have a material adverse effect on our business, prospects, financial condition, results of operations and cash
flows, as well as on the attractiveness and value of an investment in the Company’s securities.
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The recent outbreak of COVID-19 has had and will continue to have a significant negative impact on the Company’s
business and financial results.
In December 2019, there was an outbreak of COVID-19 in China that has since spread to the other regions of the
world. The outbreak was subsequently labeled as a global pandemic by the World Health Organization in March 2020.
As the pandemic continues to spread throughout the United States, businesses as well as federal, state and local
governments have implemented significant actions to attempt to mitigate this public health crisis. Although the ultimate
severity of the COVID-19 outbreak is uncertain at this time, the pandemic has had and will continue to have adverse
impacts on the Company’s financial condition and results of operations, including, but not limited to:
•
•
•
•
•
•
On March 18, 2020, the Company temporarily closed all of its stores and subsequently furloughed the
majority of its workforce. As different states and localities began to ease the regulations imposed to slow the
spread of COVID-19, the Company began to reopen its stores and by the end of the second quarter of 2020,
substantially all of the Company’s stores had reopened. As a result of the COVID-19 pandemic, and
particularly with the reopening of stores, the Company implemented safety measures and health and wellness
precautions across its stores and facilities to mitigate risk to its customers and colleagues. These efforts to
protect the health and well-being of customers and Company colleagues have resulted in, and will continue to
result in, additional selling, general and administrative (“SG&A”) expenses. Recently, pockets of resurgence
and variant strains of COVID-19 have emerged in parts of the world and the U.S., which may negatively
impact store performance, as consumer shopping behaviors are impacted or government officials reinstate or
prolong restrictions that may include occupancy limits, curfews and closures of non-essential businesses.
Outbreaks and variant strains of the COVID-19 virus may continue to emerge or grow, which could require
the Company to close its stores or further limit their operations. As a result, there can be no assurance as to
whether stores can remain open or whether further store closures may be required.
During the first and second quarters of 2020, the Company experienced significant reductions and volatility in
demand for its retail products as customers were not able to purchase merchandise in stores due to quarantine
or government or self-imposed restrictions placed on the Company’s stores’ operations. Despite continued
store recovery in the third and fourth quarters of 2020, store sales declined significantly compared to the same
periods last year. Additionally, social distancing measures or changes in consumer spending behaviors due to
COVID-19 have impacted and may continue to impact traffic in stores and could result in a loss of sales and
profit.
COVID-19 has had a significant impact on the economic conditions in North America as well as a significant
impact on discretionary consumer spending and consumer shopping behaviors. In response to the disruption
caused by the COVID-19 pandemic, the Company reconfigured its cost base through colleague reductions
and reduced discretionary spending and has made investments to adapt to the changes in consumer behavior.
While it is premature to accurately predict the ultimate impact of these developments, the Company expects
its results of operations will be adversely impacted in a significant manner and such impacts could continue
for an undetermined amount of time.
The Company has experienced and may continue to experience temporary or long-term disruptions in its
supply chain, as the outbreak has resulted in travel disruptions and has impacted manufacturing and
distribution throughout the world. The receipt of products or raw material sourced from impacted areas has
been and may continue to be slowed or disrupted, which could impact the Company’s private brands or the
fulfillment of merchandise orders from the Company’s brand partners. Furthermore, transportation delays and
cost increases, more extensive travel restrictions, closures or disruptions of businesses and facilities and
social, economic, political or labor instability in the affected areas have impacted and may continue to impact
the Company, its suppliers’ operations and its customers.
The Company has been and may continue to be required to change its plan for inventory receipts, which
could place financial pressure on its brand partners. Such actions may negatively impact relationships with
brand partners or adversely impact their financial performance and position. If this occurs, current brand
partners’ ability to meet their obligations to the Company may be impacted or the Company may also be
required to identify new brand partner relationships.
The Company’s liquidity was negatively impacted by the store closures. While the Company has obtained
additional financing, further actions may be required to improve the Company’s cash position, including but
not limited to, monetizing Company assets, reinstituting colleague furloughs, and foregoing capital
expenditures and other discretionary expenses. Failure to obtain any necessary additional financing or
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enhance the Company’s liquidity could lead to default on its current financing arrangements and impact the
Company’s ability to meet its obligations as they come due.
The Company cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can it predict
the severity and duration of its impact, how variant strains of the COVID-19 virus will impact the pandemic, or the
availability and distribution of effective medical treatments or vaccines. As such, the Company will continue to assess
the highly uncertain financial impacts of COVID-19. The disruption to the global economy and to the Company’s
business may lead to triggering events that may indicate that the carrying value of certain assets, including inventories,
long-lived assets, intangibles, and goodwill, may not be recoverable.
The impact of COVID-19 may also exacerbate other risks included in in this section, any of which could be
material. The situation is changing rapidly, and future impacts may materialize that are not yet known. Even if the
COVID-19 pandemic subsides, the Company may continue to experience materially adverse impacts to the Company's
business as a result of the virus' long-term economic impact, including adverse impacts on the business operations,
liquidity and impacts of any recession that may occur in the future.
Strategic, Operational and Competitive Risks
Our strategic initiatives may not be successful, which could negatively affect our profitability and growth.
In February 2020, we announced the Polaris strategy, a multi-year plan designed to stabilize profitability and
position the Company for sustainable, profitable growth. Over the course of the COVID-19 pandemic, we have refined
the components of the Polaris strategy to focus where we believe we can drive competitive advantage and differentiation
to first recover business and then drive growth, 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 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. If these investments or initiatives do
not perform as expected or create implementation or operational challenges, our profitability and growth could suffer.
Our sales and operating results depend on our ability to anticipate and respond to consumer preferences and manage
our inventory and merchandise selection.
The fashion and retail industries are subject to sudden shifts in consumer trends and consumer spending. Our sales
and operating results depend in part on our ability to predict or respond to changes in fashion trends and consumer
preferences in a timely manner. We develop new retail concepts and continuously adjust our inventory position in certain
major and private-label brands and product categories in an effort to attract and retain customers. Any sustained failure
to anticipate, identify and respond to emerging trends in lifestyle and consumer preferences could negatively affect our
business and results of operations.
Our profitability depends on our ability to manage inventory levels and merchandise selection. Overestimating
customer demand for merchandise will likely result in the need to record 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 inventory shortages, missed sales opportunities and negative customer experiences.
The Company faces significant competition and challenges as consumers continue to migrate to online shopping and
depends on its ability to differentiate itself in retail's ever-changing environment.
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, off-price and discount stores,
online retailers and catalogs, among others. Competition is characterized by many factors, including assortment,
advertising, price, quality, service, location, reputation and credit availability. Any failure by us to compete effectively
could negatively affect our business and results of operations.
As consumers continue to migrate online, a trend that has accelerated with the COVID-19 pandemic, we face
pressures to not only compete from a price perspective with our competitors, some of whom sell the same products, but
also to differentiate Macy's, Inc. merchandise offerings, service and shopping experience to stay relevant in retail's ever-
changing environment. We continue to significantly invest in our omnichannel capabilities to provide our customers with
a seamless shopping experience between our store locations and our online and mobile environments and a favorable
fashion experience. Insufficient, untimely or misguided investments in this area could significantly impact our
profitability and growth and affect our ability to attract new customers, as well as maintain our existing ones.
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In addition, a continued decline of customer store traffic and migration of sales from brick and mortar stores to
digital platforms could lead to additional store closures, restructuring and other costs that could adversely impact our
results of operations and cash flows.
Our ability to grow depends in part on our stores remaining relevant 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. While these investments are intended to
improve the customer experience in our stores and drive traffic, realization of these benefits may not occur.
Because we rely on the ability of our physical retail locations to remain relevant to customers, providing desirable
and sought-out shopping experiences is important to our financial success. 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.
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. This strategy is multi-pronged and may include transactions, strategic alliances or other
arrangements with mall developers or other unrelated third-parties. Due to the cyclical nature of real estate markets, the
performance of our real estate strategy is inherently volatile and could have a significant impact on our results of
operations or financial condition.
Our revenues and cash requirements are affected by the seasonal nature of our business.
Our business is seasonal, with a high proportion of revenues and operating cash flows generated during the second
half of the year, which includes the fall and the months of November and December. A disproportionate amount of our
revenues is in the fourth quarter due to this seasonality. Should sales during this period fall below our expectations, a
disproportionately negative impact on our annual results of operations could occur.
We 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.
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.
We depend on our ability to attract, train, develop and retain quality employees.
Our business is dependent upon attracting, training, developing and retaining quality employees. Macy's, Inc. has a
large number of employees, many of whom are in entry level or part-time positions with historically high rates of
turnover. Our ability to meet labor needs while controlling costs associated with hiring and training new employees is
subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation and changing
demographics. Low unemployment and a competitive wage environment have impacted our ability to attract and recruit
talent, particularly for science, technology, engineering and math positions. The Company operates in a highly
competitive and challenging business environment and is highly dependent upon management personnel to develop and
effectively execute successful business strategies and tactics. Restructurings and organizational changes can have near-
term impacts on knowledge transfer and result in the loss of key subject matter experts and leaders. Any circumstances
that adversely impact our ability to attract, train, develop and retain quality employees could negatively affect our
business and results of operations.
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. These increased costs pressure our margins and could have a
negative impact on our financial results, particularly if future increases are instituted by state legislatures or the federal
government.
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Our expenses relating to employee health benefits are significant. Unfavorable changes in the cost of such benefits
could negatively affect our financial results and cash flow. Healthcare costs have risen significantly in recent years, and
recent 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 will have on our company-sponsored medical plans.
If cash flows from our private label credit card decrease, our financial and operational results may be negatively
impacted.
We previously sold most of our credit accounts and related receivables to Citibank (in its role as the issuer of our
credit card). Following the sale, we share in the economic performance of the credit card program with Citibank.
Deterioration in economic or political conditions could adversely affect the volume of new credit accounts, the amount
of credit card program balances and the ability of credit card holders to pay their balances. These conditions could result
in the Company receiving lower payments under the credit card program.
Under the terms of the credit card program, Citibank has the right to terminate the agreement prior to the end of
the current term if sales decrease by more than 34% over a twelve-month period as compared to the fiscal twelve-month
period from July 2006 to June 2007 (the “Benchmark Year”). Based on the results of the Company’s February 2021
fiscal period, sales for the most recent twelve-month period then ended have decreased by more than 34% as compared
to the Benchmark Year. We are in on-going discussions with Citibank concerning the credit card program. We cannot
assure that Citibank will not terminate the credit card program or require more favorable terms to continue the credit card
program. If Citibank does terminate the credit card program, any new credit card program may be on terms less
favorable to us than the current credit card program.
Credit card operations are subject to many federal and state laws that may impose certain requirements and
limitations on credit card providers. Citibank and our subsidiary bank, FDS Bank, may be required to comply with
regulations that may negatively impact the operation of our private label credit card. This negative impact may affect our
revenue streams derived from the sale of such credit card accounts and our financial results.
Our defined benefit plan funding requirements or plan settlement expense could impact our financial results and
cash flow.
Significant changes in interest rates, decreases in the fair value of plan assets and timing and amount of benefit
payments could affect the funded status of our plans and could increase future funding requirements of the plans. A
significant increase in future funding requirements could have a negative impact on our cash flows, financial condition or
results of operations.
These plans allow eligible retiring employees to receive lump sum distributions of benefits earned. 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 and could have a negative impact on our results of operations.
If our company’s reputation and brand are not maintained at a high level, our operations and financial results may
suffer.
We believe our reputation and brand are partially based on the perception that we act equitably and honestly in
dealing with our customers, employees, business partners and shareholders. Our reputation and brand may be
deteriorated by any incident that erodes the trust or confidence of our customers or the general public, particularly if the
incident results in significant adverse publicity or governmental inquiry. Information about us, whether or not true, may
be instantly and easily posted on social media platforms at any time and may be adverse to our reputation or brand. The
harm could be immediate without affording us an opportunity for redress or correction. If our reputation or brand is
damaged, our customers may refuse to continue shopping with us, potential employees may be unwilling to work for us,
business partners may be discouraged from seeking future business dealings with us and, as a result, our operations and
financial results may suffer.
If we are unable to protect our intellectual property, our brands and business could be damaged.
We believe that our copyrights, trademarks, trade dress, trade secrets and similar intellectual property are
important assets and key elements of our strategy, including those related to our private brand merchandise. We rely on
copyright and trademark law, trade secret protection and confidentiality agreements with our employees, consultants,
vendors and others to protect our proprietary rights. If the steps we take to protect our proprietary rights are inadequate,
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or if we are unable to protect or preserve the value of our copyrights, trademarks, trade secrets and other proprietary
rights for any reason, our merchandise brands and business could be negatively affected.
Infrastructure Risks
Unforeseen disruptions in our distribution and fulfillment centers could have an adverse impact on our business and
operations.
Our business depends on the orderly receipt and distribution of merchandise and effective management of our
distribution and fulfillment centers. Unforeseen disruptions in operations due to fire, severe weather conditions, natural
disasters, health pandemics or other catastrophic events, labor disagreements, or other shipping problems may result in
the loss or unavailability of inventory and/or delays in the delivery of merchandise to our stores and customers.
A material disruption in our information technology systems could adversely affect our business or results of
operations.
We rely extensively on our information technology systems to process transactions, summarize results and manage
our business. Our information technology systems are subject to damage or interruption from power outages, computer
and telecommunications failures, computer viruses, cyber-attack or other security breaches, catastrophic events such as
fires, floods, earthquakes, tornadoes, hurricanes, acts of war or terrorism, and usage errors by our employees. If our
information technology systems are damaged or cease to function properly, including a material disruption in our ability
to authorize and process transactions at our stores or on our online systems, we may have to make a significant
investment to fix or replace them, and we may suffer loss of critical data and interruptions or delays in our operations.
Any material interruption in our information technology systems could negatively affect our business and results of
operations.
In addition, COVID-19 may have an adverse impact on our information technology systems, including
telecommuting issues associated with our employee population working remotely or an increase in online orders due to
disruptions or closures of our retail store operations.
If our technology-based e-commerce systems do not function properly, our operating results could be negatively
affected.
Customers are increasingly using computers, tablets and smart phones to shop online and to do price and
comparison shopping. We strive to anticipate and meet our customers’ changing expectations and are focused on
building a seamless shopping experience across our omnichannel business. Any failure to provide user-friendly, secure
e-commerce platforms that offer merchandise and delivery options that resonate with customers’ could place us at a
competitive disadvantage, result in the loss of online and other sales, harm our reputation with customers and have a
material adverse impact on the growth of our business and our operating results.
Information Security, Cybersecurity, Privacy and Data Management Risks
A breach of information technology systems could adversely affect our reputation, business partner and customer
relationships and operations, and result in high costs.
Through our sales, marketing activities, and use of third-party information, we collect and store certain non-public
personal information that customers provide to purchase products or services, enroll in promotional programs, register on
websites, or otherwise communicate to us. This may include phone numbers, driver license numbers, contact
preferences, personal information stored on electronic devices, and payment information, including credit and debit card
data. We gather and retain information about employees in the normal course of business. We may share information
about such persons with vendors that assist with certain aspects of our business. In addition, our online operations
depend upon the transmission of confidential information over the Internet, such as information permitting cashless
payments.
We employ safeguards for the protection of this information and have made significant investments to secure
access to our information technology network. For instance, we have implemented authentication protocols, installed
firewalls and anti-virus/anti-malware software, conducted continuous risk assessments, and established data security
breach preparedness and response plans. We also employ encryption and other methods to protect our data, promote
security awareness with our associates and work with business partners in an effort to create secure and compliant
systems.
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However, these protections may be compromised as a result of third-party security breaches, burglaries,
cyberattacks, errors by employees or employees of third-party vendors, or contractors, misappropriation of data by
employees, vendors or unaffiliated third-parties, or other irregularities that may result in persons obtaining unauthorized
access to company data.
Retail data frequently targeted by cybercriminals includes consumer credit card data, personally identifiable
information, including social security numbers, and health care information. For retailers, point of sale and e-commerce
websites are often attacked through compromised credentials, including those obtained through phishing, vishing and
credential stuffing. Other methods of attack include advanced malware, the exploitation of software and operating
vulnerabilities, and physical device tampering/skimming at card reader units. We believe these attack methods will
continue to evolve.
Despite instituting controls for the protection of such information, no commercial or government entity can be
entirely free of vulnerability to attack or compromise given that the techniques used to obtain unauthorized access,
disable or degrade service change frequently. During the normal course of business, we have experienced and expect to
continue to experience attempts to compromise our information systems. Unauthorized parties may attempt to gain
access to our systems or facilities, or those of third parties with whom we do business, through fraud, trickery, or other
forms of deception to employees, contractors, vendors and temporary staff. We may be unable to protect the integrity of
our systems or company data. An alleged or actual unauthorized access or unauthorized disclosure of non-public
personal information could:
• materially damage our reputation and brand, negatively affect customer satisfaction and loyalty, expose us to
individual claims or consumer class actions, administrative, civil or criminal investigations or actions, and
infringe on proprietary information; and
• cause us to incur substantial costs, including costs associated with remediation of information technology
systems, customer protection costs and incentive payments for the maintenance of business relationships,
litigation costs, lost revenues resulting from negative changes in consumer shopping patterns, unauthorized use
of proprietary information or the failure to retain or attract customers following an attack. While we maintain
insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber risks, such
insurance coverage may be unavailable or insufficient to cover all losses or all types of claims that may arise in
the continually evolving area of cyber risk.
Supply Chain and Third-Party Risks
We depend on vendors and other sources of merchandise, goods and services outside the U.S. Our business could be
affected by disruptions in, or other legal, regulatory, political, economic or public health issues associated with, our
supply network.
We depend on vendors for timely and efficient access to products we sell. We source the majority of our
merchandise from manufacturers located outside the U.S., primarily Asia. Current economic conditions may adversely
impact our vendors and they may be unable to access financing or become insolvent and unable to supply us with
products. Any major changes in tax policy, such as the disallowance of tax deductions for imported merchandise could
have a material adverse effect on our business, results of operations and liquidity.
The procurement of all our goods and services is subject to the effects of price increases, which we may or may
not be able to pass through to our customers. 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. 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.
The U.S. has been engaged in extended trade negotiations with China, which has resulted in the implementation of
tariffs on a significant number of products manufactured in China and imported into the U.S. On May 10, 2019, the
Trump Administration imposed a 25% tariff on approximately $200 billion worth of imports from China into the U.S.
(the “Stage 3 Tariffs”), which imports include merchandise for both private-label and national brands sold in our stores.
On August 1, 2019, the Trump Administration announced its intent to impose a 10% tariff on all remaining imports from
China, valued at approximately $300 billion (the “Stage 4 Tariffs”), which imports also include merchandise sold in our
stores. The proposed Stage 4 Tariffs were increased to 15% in August 2019 following retaliatory tariffs from China, and
a portion of such 15% tariffs went into effect on September 1, 2019 (the “Stage 4A Tariffs”). Subsequently, in October
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2019, the Trump Administration announced the suspension of the remaining new 15% tariffs (the “Stage 4B Tariffs”)
following positive negotiations with China. On January 15, 2020, the U.S. and China signed an agreement known as the
“Phase One” trade deal, pursuant to which, among other things, the Stage 3 Tariffs remained unchanged, the Stage 4A
Tariffs were reduced from 15% to 7.5%, and the Stage 4B Tariffs were indefinitely suspended.
We continue to evaluate the impact of the effective tariffs, including potential future retaliatory tariffs, as well as
other recent changes in foreign trade policy and the U.S. Administration on our supply chain, costs, sales and
profitability, and are actively working through strategies to mitigate such impact, including reviewing sourcing options
and working with our vendors and merchants. At this time, it is unknown how long U.S. tariffs on Chinese goods will
remain in effect or whether additional tariffs will be imposed. Depending upon their duration and implementation, as
well as our ability to mitigate their impact, these changes in foreign trade policy and any recently enacted, proposed and
future tariffs on products imported by us from China could negatively impact our business, results of operations and
liquidity if they seriously disrupt the movement of products through our supply chain or increase their cost. 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. The adoption and
expansion of trade restrictions, retaliatory tariffs, or other governmental action related to tariffs or international trade
agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our
suppliers, and/or the U.S. economy, which in turn could adversely impact our results of operations and business.
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.
Disruption of global sourcing activities and quality and other concerns over our own brands could negatively impact
brand reputation and earnings.
Economic and civil unrest in areas of the world where we source products, as well as shipping and dockage issues,
could adversely impact the availability or cost of our products, or both. Most of the Company’s goods imported to the
U.S. arrive from Asia through ports located on the U.S. west coast and are subject to potential disruption due to labor
unrest, security issues or natural disasters affecting any or all of these ports. In addition, in recent years, we have
substantially increased the number and types of merchandise that are sold under the Company’s proprietary brands.
While we have focused on the quality of our proprietary branded products, we rely on third-parties to manufacture these
products. Such third-party manufacturers may prove to be unreliable, the quality of our globally sourced products may
vary from expectations and standards, the products may not meet applicable regulatory requirements which may require
us to recall these products, or the products may infringe upon the intellectual property rights of third-parties. We face
challenges in seeking indemnities from manufacturers of these products, including the uncertainty of recovering on such
indemnity and the lack of understanding by manufacturers of U.S. product liability laws in certain foreign jurisdictions.
We also face concerns relating to human rights, working conditions and other labor rights and conditions and
environmental impact in factories or countries where merchandise that we sell is produced and concerns about
transparent sourcing and supply chains. We require all vendors for both private and national brands to comply with our
vendor and supplier code of conduct, which outlines minimum standards to help ensure our merchandise is produced in
workplaces free of abusive, exploitative or unsafe working conditions, and to comply with applicable laws and
regulations of the United States and the country of manufacture or exportation. Although we have implemented policies
and procedures designed to facilitate compliance with laws and regulations relating to production of merchandise, doing
business in foreign countries and importing merchandise, and to screen, train and monitor our private label vendors to
ensure safe and ethical treatment of workers in our supply chain, there can be no assurance that our vendors and other
third parties with whom we do business will not violate such laws and regulations or our policies, which could subject us
to liability and could adversely impact our reputation, results of operations and business.
Material disruptions in relationships with third-parties with whom the Company does business could adversely affect
its operations.
The Company is a party to contracts, transactions and business relationships with various third parties, including
suppliers, service providers, lenders and participants in joint ventures, strategic alliances and other commercial
relationships. In some cases, we depend upon such third parties to provide products, services, advertising, technology
infrastructure, development and support, data analytics, logistics, other goods and services to operate our business in the
ordinary course, extensions of credit, credit card accounts and related receivables, and other matters. Furthermore, third-
16
party vendors may sell products directly to consumers in addition to, or in some cases in lieu of, traditional wholesale
channels. 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.
Economic, Global, Legal and External Risks
The Company’s business is subject to discretionary consumer spending, unfavorable economic and political
conditions, extreme violence and other related risks.
Our sales are significantly affected by discretionary spending by consumers. Consumer spending may be affected
by many factors outside of our control, including general economic conditions, consumer disposable income levels,
consumer confidence levels, the availability, cost and level of consumer debt, consumer behaviors towards incurring and
paying debt, the cost of basic necessities and other goods, the strength of the U.S. Dollar relative to foreign currencies
and the effects of the weather, natural disasters or health pandemics. These factors can have psychological or economic
impacts on consumers that affect their discretionary spending habits. Any decline in discretionary spending by
consumers could negatively affect our business and results of operations.
Unfavorable global, domestic or regional economic or political conditions and other developments and risks could
negatively affect our business and results of operations. For example, unfavorable changes related to interest rates, rates
of economic growth, fiscal and monetary policies of governments, inflation, deflation, tax rates and policy,
unemployment trends, energy prices, and other matters that influence the availability and cost of merchandise, consumer
confidence, spending and tourism could negatively affect our business and results of operations. Unstable political
conditions, civil unrest, terrorist activities, armed conflicts or events of extreme violence may disrupt commerce and
could negatively affect our business and results of operations.
Our business could be affected by extreme weather conditions, natural disasters or regional or global health
pandemics.
Extreme weather conditions in the areas in which our stores are located could negatively affect our business and
results of operations. For example, frequent or unusually heavy snowfall, ice storms, rainstorms or other extreme weather
conditions over a prolonged period could make it difficult for our customers to travel to our stores and thereby reduce
our sales and profitability. Our business is also susceptible to unseasonable weather conditions. For example, extended
periods of unseasonably warm temperatures during the winter season or cool weather during the summer season could
reduce demand for a portion of our inventory and thereby reduce our sales and profitability. In addition, extreme weather
conditions could result in disruption or delay of production and delivery of materials and products in our supply chain
and cause staffing shortages in our stores.
Natural disasters such as hurricanes, tornadoes and earthquakes, or a combination of these or other factors, could
damage or destroy our facilities or make it difficult for customers to travel to our stores, thereby negatively affecting our
business and results of operations.
Litigation, legislation, regulatory developments or non-compliance could adversely affect our business and results of
operations.
We are subject to various federal, state and local laws, rules, regulations, inquiries and initiatives in connection
with both our core business operations and our credit card and other ancillary operations (including the Credit Card Act
of 2009 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010). Recent and future
developments relating to such matters could increase our compliance costs and adversely affect the profitability of our
credit card and other operations. Our effective tax rate is impacted by a number of factors, including changes in federal
or state tax law, interpretation of existing laws and the ability to defend and support the tax positions taken on historical
tax returns. Certain changes in any of these factors could materially impact the effective tax rate and net income.
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. Although we
undertake to monitor changes in these laws, if these laws change without our knowledge, or are violated by importers,
designers, manufacturers, distributors or agents, we could experience delays in shipments and receipt of goods or be
subject to fines or other penalties under the controlling regulations, any of which could negatively affect our business
17
and results of operations. In addition, we are regularly involved in various litigation matters that arise in the ordinary
course of our business. Adverse outcomes in current or future litigation could negatively affect our financial condition,
results of operations and cash flows.
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.
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. 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 California Consumer Privacy Act (CCPA), California Privacy Rights Act (CPRA) and other applicable U.S. privacy
laws or new state or federal laws may limit our ability to collect and use data, require us to modify our data processing
practices or result in the possibility of fines, litigation or orders which may have an adverse effect on our business and
results of operations. 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.
If the Company’s merchandise offerings do not meet applicable safety standards or consumers' expectations
regarding safety, we could experience decreased sales, increased costs and/or be exposed to legal and reputational risk.
Events that give rise to actual, potential or perceived product safety concerns could expose the Company to government
enforcement action and/or private litigation. Reputational damage caused by real or perceived product safety concerns
could negatively affect our business and results of operations.
Financial Risks
Inability to access capital markets could adversely affect our business or financial condition.
Changes in the credit and capital markets, including market disruptions, limited liquidity and interest rate
fluctuations, may increase the cost of financing or restrict our access to this potential source of future liquidity. A
downgrade in the ratings that rating agencies assign to the Company’s short- and long-term debt has and may continue to
negatively impact our access to the debt capital markets and increase our cost of borrowing. In addition, our asset-based
credit agreement requires us to maintain a specified fixed charge coverage ratio. Our ability to comply with the ratio may
be affected by events beyond our control, including prevailing economic, financial and industry conditions. If our results
of operations deteriorate to a point where we are not in compliance with our debt covenants, and we are unable to obtain
a waiver, much of our debt would be in default and could become due and payable immediately. Our assets may not be
sufficient to repay in full this indebtedness, resulting in a need for an alternate source of funding. 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.
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 have a significant amount of indebtedness. As of January 30, 2021, the aggregate principal amount of our total
outstanding indebtedness was $4,906 million.
Our high level of indebtedness could have important consequences for the holders of our debt and equity
securities. For example, it could:
• make it more difficult for us to satisfy our debt obligations;
•
•
increase our vulnerability to general adverse economic and external conditions, including the COVID-19
pandemic;
impair our ability to obtain additional debt or equity financing in the future for working capital, capital
expenditures, acquisitions or general corporate or other purposes;
18
•
•
•
•
•
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
agreement, which bear 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.
Any of these risks could materially impact our ability to fund our operations or limit our ability to expand our
business, which could have a material adverse effect on our business, financial condition and results of operations.
Factors beyond our control could affect the Company’s stock price.
The Company’s stock price, like those of other retail companies, is subject to significant volatility because of
many factors, including factors beyond our control. These factors may include:
•
•
•
•
•
•
•
general economic, stock, credit and real estate market conditions;
risks relating to the Company’s business and industry, including those discussed above;
strategic actions by us or our competitors;
adverse business announcements by our competitors;
variations in our quarterly results of operations;
future sales or purchases of the Company’s common stock; and
investor perceptions of the investment opportunity associated with the Company’s common stock relative to
other investment alternatives.
We may fail to meet the expectations of our stockholders or of analysts at some time in the future. If the analysts
who regularly follow the Company’s stock lower their rating or lower their projections for future growth and financial
performance, the Company’s stock price could decline. Also, sales of a substantial number of shares of the Company’s
common stock in the public market or the appearance that these shares are available for sale could adversely affect the
market price of the Company’s common stock.
Item 1B. Unresolved Staff Comments.
None.
Item 2.
Properties.
The properties of the Company consist primarily of stores and related facilities, including a logistics network. The
Company also owns or leases other properties, including corporate office space in New York and other facilities at which
centralized operational support functions are conducted.
As of January 30, 2021, the operations of the Company included 727 store locations in 43 states, the District of
Columbia, Puerto Rico and Guam, comprising a total of approximately 113 million square feet. At these locations, store
boxes consisted of 328 owned boxes, 353 leased boxes, 105 boxes operated under arrangements where the Company
owned the building and leased the land and three boxes of partly owned and partly leased buildings. All owned properties
are held free and clear of mortgages. Certain properties secure the senior notes issued by the Company on June 8, 2020,
as disclosed further in Item 7. Pursuant to various shopping center agreements, the Company is obligated to operate
certain stores for periods of up to 15 years. Some of these agreements require that the stores be operated under a particular
name. Most leases require the Company to pay real estate taxes, maintenance and other costs; some also require additional
payments based on percentages of sales and some contain purchase options. Certain of the Company’s real estate leases
have terms that extend for a significant number of years and provide for rental rates that increase or decrease over time.
19
The Company's operations were conducted through the following branded store locations:
Macy's
Bloomingdale's
bluemercury
Store count activity was as follows:
Store count at beginning of fiscal year
Stores opened
Stores closed, consolidated into or relocated from existing centers
Store count at end of fiscal year
2020
Boxes
Locations
572
55
162
789
2020
Boxes
Locations
839
6
(56)
789
512
53
162
727
775
6
(54)
727
Additional information about the Company’s store boxes as of January 30, 2021 is as follows:
By Brand
Macy's
Bloomingdale's
bluemercury
Total
Owned
Leased
Subject to
a Ground
Lease
Partly
Owned
and Partly
Leased
572
55
162
789
314
14
—
328
157
34
162
353
98
7
—
105
3
—
—
3
As of January 30, 2021, the store box and location information presented above for Macy’s and the total Company
includes two stores converted to fulfillment centers during 2020.
20
Additional information about the Company’s logistics network as of January 30, 2021 is as follows:
Location
Cheshire, CT
Chicago, IL
Columbus, OH
Dayton, OH
Denver, CO
Goodyear, AZ
Hayward, CA
Houston, TX
Joppa, MD
Kapolei, HI
Los Angeles, CA
Martinsburg, WV
Miami, FL
Portland, TN
Raritan, NJ
Sacramento, CA
Secaucus, NJ
South Windsor, CT
Stone Mountain, GA
Tampa, FL
Tulsa, OK
Tukwila, WA
Union City, CA
Youngstown, OH
Primary
Function
Direct to customer
Stores
Stores
Stores
Stores
Direct to customer
Stores
Stores
Stores
Stores
Stores
Direct to customer
Stores
Direct to customer
Stores
Direct to customer
Stores
Stores
Stores
Stores
Direct to customer
Stores
Stores
Stores
Owned or
Leased
Square
Footage
(thousands)
Owned
Owned
Leased
Leased
Leased
Owned
Owned
Leased
Owned
Leased
Owned
Owned
Leased
Owned
Owned
Leased
Leased
Owned
Owned
Leased
Owned
Leased
Leased
Owned
725
861
673
107
20
1,560
310
992
850
260
1,529
2,200
535
1,455
980
385
675
595
920
585
2,195
500
165
645
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. As previously reported, the District Attorneys for ten counties in California and
the City of Los Angeles are investigating alleged non-compliance with laws and regulations enacted or adopted
regulating the storage, transportation and disposal of hazardous waste in California at Macy’s stores and distribution
centers. The Company is cooperating with the offices and agencies involved, which are focused on disposal and return
of cosmetic products, and is committed to adopting policies and procedures as may be appropriate depending on the
outcome of the investigation into this matter. No administrative or judicial proceedings have been initiated. In October
2020, the District Attorneys made an initial settlement demand to the Company that included a monetary penalty,
reimbursement of investigation costs and injunctive relief. Settlement discussions are on-going. It is possible that we
will pay penalties in excess of $1,000,000 in connection with this matter and have adjusted our reserve against potential
loss to reflect the settlement demand. Although we are currently unable to predict the outcome of this matter or the
amount or range of any possible loss, we do not believe the resolution of this matter will have a material adverse impact
on our consolidated results of operations, financial condition or cash flows.
Item 4. Mine Safety Disclosures.
Not applicable.
21
PART II
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 30, 2021, the Company had approximately 13,596 stockholders of record.
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.
Beginning in January 2000, the Company’s Board of Directors approved various authorizations to purchase, in the
aggregate, up to $18 billion of common stock. On March 26, 2020, the Company's Board of Directors rescinded its
authorization of the remaining unused amount.
The following graph compares the cumulative total stockholder return on the Company's common stock with the
Standard & Poor's 500 Composite Index and the Company's peer group for the period from January 30, 2016 through
January 30, 2021, assuming an initial investment of $100 and the reinvestment of all dividends, if any.
The companies included in the old peer group are Bed, Bath & Beyond, Best Buy, Dillard’s, Dollar Tree, Gap,
Kohl’s, L Brands, Lowe’s, Nordstrom, Ross Stores, Target, and TJX Companies. The new peer group is comprised of
companies within the S&P Retail Select Index.
The change in peer group was made to be consistent with the peer group that the Compensation and Management
Development Committee of the Board of Directors uses in benchmarking and assessing compensation for the Company's
executive officers.
22
Item 6. Selected Financial Data.
The selected financial data set forth below should be read in conjunction with the Consolidated Financial
Statements and the notes thereto and the other information contained elsewhere in this report. The Company adopted the
Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic
842), on February 3, 2019, using a modified retrospective approach that allowed for transition in the period of adoption.
Therefore, results prior to 2019 have not been recast for the adoption of this standard. Additionally, the Company adopted
the ASU No. 2014-09, Revenue from Contracts with Customers, on February 4, 2018 using the full retrospective
transition method and recast results from 2017 and 2016.
2020
2019
2018
(millions, except per share)
2017*
2016
Consolidated Statement of Operations Data:
Net sales
Gross margin (a)
Operating income (loss)
Net income (loss)
Net income (loss) attributable to Macy's, Inc.
shareholders
Basic earnings (loss) per share attributable to Macy's,
Inc. shareholders
Diluted earnings (loss) per share attributable to
Macy's, Inc. shareholders
Average number of shares outstanding
Cash dividends paid per share
Depreciation and amortization
Capital expenditures
Balance Sheet Data (at year end):
Cash and cash equivalents
Property and equipment - net
Total assets
Short-term debt
Long-term debt
Total Shareholders’ equity
$
$
$
$
$
$
$
*
(a)
53 weeks
Gross margin is defined as net sales less cost of sales.
17,346 $
5,060
(4,475)
(3,944)
$
24,560
9,389
970
564
24,971 $
9,756
1,738
1,098
24,939 $
9,758
1,864
1,555
25,908
10,242
1,371
619
(3,944)
564
1,108
1,566
627
(12.68) $
1.82
$
3.60 $
5.13 $
2.03
(12.68) $
311.1
0.3775 $
959 $
466 $
1,679 $
5,940
17,706
452
4,407
2,553
$
$
$
$
$
1.81
309.7
1.51
981
1,157
685
6,633
21,172
539
3,621
6,377
3.56 $
307.7
1.51 $
962 $
932 $
5.10 $
305.4
1.51 $
991 $
760 $
1,162 $
6,637
19,194
43
4,708
6,436
1,455 $
6,672
19,583
22
5,861
5,733
2.02
308.5
1.49
1,058
912
1,297
7,017
20,082
309
6,562
4,375
23
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The discussion in this Item 7 should be read in conjunction with the Consolidated Financial Statements and the
related notes included elsewhere in this report. The discussion in this Item 7 contains forward-looking statements that
reflect the Company's plans, estimates and beliefs. The Company's actual results could materially differ from those
discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are
not limited to, those discussed below and elsewhere in this report, particularly in “Risk Factors” and “Forward-Looking
Statements.”
Company Overview
The Company is an omnichannel retail organization operating stores, websites and mobile applications under three
brands (Macy's, Bloomingdale's and bluemercury) that sell a wide range of merchandise, including apparel and
accessories (men's, women's and kids'), cosmetics, home furnishings and other consumer goods. As of January 30, 2021,
the Company's operations were conducted through Macy's, Market by Macy’s, Macy’s Backstage, Bloomingdale’s,
Bloomingdale’s The Outlet and bluemercury, which are aggregated into one reporting segment in accordance with the
FASB Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting.
Bloomingdale's in Dubai, United Arab Emirates and Al Zahra, Kuwait are operated under a license agreement with
Al Tayer Insignia, a company of the Al Tayer Group, LLC.
COVID-19 Impact
In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which
continues to spread throughout the United States. The COVID-19 pandemic had a negative impact on the Company's
2020 operations and financial results, and the full financial impact of the pandemic cannot be reasonably estimated at
this time due to uncertainty as to the severity and duration of the pandemic. The COVID-19 pandemic continues to cause
significant disruption to organizations and communities across the globe. The Company is navigating through the
pandemic with a focus on prudent cash management, strengthening liquidity and executing its strategic initiatives. In
addition, as its stores began to reopen in the second quarter of 2020, the Company prioritized the implementation of
significant health and safety measures to allow its customers and colleagues to feel safe in the Company's stores and
facilities. In response to the operational and financial challenges caused by the COVID-19 pandemic, the specific steps
taken by the Company to manage its business through this uncertain period, include, but are not limited to, the following.
•
•
•
•
The Company temporarily closed all stores on March 18, 2020, which included all Macy’s, Bloomingdale’s,
bluemercury, Macy’s Backstage, Bloomingdales the Outlet and Market by Macy’s stores. Stores began
reopening on May 4, 2020 and substantially all of the Company's stores were open by the end of the second
quarter of 2020.
In an effort to increase liquidity, the Company fully drew on its $1,500 million credit facility, announced the
suspension of quarterly cash dividends beginning in the second quarter of 2020 and took additional steps to
reduce discretionary spending. The Company's Board of Directors also rescinded its authorization of any
unused amounts under the Company's share repurchase program. In June 2020, the Company completed
financing activities totaling nearly $4.5 billion and used a portion of the proceeds from these activities, as well
as cash on hand, to repay its credit facility. To create greater flexibility for future liquidity needs, the Company
executed an exchange offer and consent solicitation in July 2020 for $465 million of previously issued
unsecured notes.
To improve the Company's cash position and reduce its cash expenditures, the Company's Board of Directors
and Chief Executive Officer did not receive compensation from April 1, 2020 through June 30, 2020. In
addition, the Company deferred cash expenditures where possible and temporarily implemented a furlough for
the majority of its colleague population which ended for most colleagues at the beginning of July 2020. Certain
executives at the director level and above not impacted by the furlough took a temporary reduction of their pay
through June 30, 2020.
In June 2020, the Company announced a restructuring to align its cost base with anticipated near-term sales as
the business recovers from the impact of the COVID-19 pandemic. The Company reduced corporate and
management headcount by approximately 3,900. Additionally, the Company reduced staffing across its stores
portfolio, supply chain and customer support network, which it expects to adjust as sales recover. During the
second quarter of 2020, the Company recognized $154 million of expense for severance related to this reduction
in force, of which substantially all has been paid as of January 30, 2021.
24
• During 2020, the Company deferred occupancy payments for a significant number of its stores. Such pandemic
related deferrals were included in accounts payable and accrued liabilities and the Company continued to
recognize expense during the deferral periods based on the contractual terms of the lease agreements. As of
January 30, 2021, substantially all occupancy payment deferrals have been paid.
• During 2020, the Company incurred approximately $200 million of non-cash impairment charges primarily
related to long-lived tangible and right of use assets to adjust the carrying value of certain store locations to
their estimated fair value. The Company also incurred $3,080 million of non-cash impairment charges during
2020 on goodwill as a result of the sustained decline in the Company's market capitalization and decrease in
projected cash flows primarily as a result of the COVID-19 pandemic.
• As a result of the COVID-19 pandemic, the Company implemented work-from-home policies for its colleagues
except those involved in business critical activities and functions. Such policies are expected to remain in place
for the duration of the pandemic. Post-pandemic, the Company may modify work environment policies which
could impact the use of certain corporate assets. Such changes could lead to additional long-lived tangible and
right of use corporate asset impairment.
• On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("the CARES Act") was signed
into law, which included payroll tax credits for employee retention, deferral of payroll taxes, and several
income tax provisions, including modifications to the net interest deduction limitation, changes to certain
property depreciation and carryback of certain operating losses.
The CARES Act impacted the Company's annual effective tax rate and the income tax benefit recognized during
2020. Specifically, the Company recognized an annual net operating loss that is available for carryback at a 35% federal
income tax rate rather than the current 21% federal income tax rate. During 2020, the resultant benefit of this rate
differential was offset by the impact of the non-tax deductible component of the goodwill impairment charge. The net
impact of these items is the primary driver of the effective tax rate decrease when compared to 2019. As of January 30,
2021, the Company recognized a $520 million income tax receivable, which is included within Other Assets on the
Consolidated Balance Sheets.
Under the terms of the Amended and Restated Credit Card Program Agreement (the “Program Agreement”)
between the Company and Citibank, if sales decrease by more than 34% over a twelve-month period as compared to the
Benchmark Year, defined as the twelve-month period from July 2006 to June 2007 in the Program Agreement, Citibank
has the ability to provide written notice to terminate the agreement prior to the end of its current term. Based on the
results for the Company’s February 2021 fiscal period, sales for the most recent twelve-month period ended February 27,
2021, have decreased by more than 34% as compared to the Benchmark Year. We are in on-going discussions with
Citibank concerning the Program Agreement and as of the date of this filing, the Company has not received a notice to
terminate the agreement. The Company is currently unable to estimate any impact this event might have on the Program
Agreement or on the Company’s future financial results.
The COVID-19 pandemic has had and continues to have a material adverse impact on the Company's operational
performance, financial results and cash flows, although the full impact will depend on future developments, including the
continued spread and duration of the outbreak, variant strains of COVID-19, the availability and distribution of effective
medical treatments or vaccines as well as any related federal, state or local governmental orders or restrictions, all of
which are highly uncertain and cannot be predicted.
Management Overview
2020 was a year of unprecedented challenges and required the Company to adapt its business to address the
disruption caused by the COVID-19 pandemic. Faced with the temporary closure of stores and changes in consumer
shopping behaviors, the Company had to right-size its cost base and operating model, offer new fulfillment options to
customers, focus on product categories with higher consumer demand, and accelerate its focus on digital shopping and
underlying investments to support these trends. Financial results in the first and second quarter of 2020 were
significantly impacted by the COVID-19 pandemic but the Company saw sequential improvement in its operating results
during the third and fourth quarters of 2020. Although uncertainty surrounds the continued impact of the COVID-19
pandemic, the Company has positioned itself to focus on the recovery of its business in 2021 and execute on its corporate
strategy for profitable growth in the future.
25
2020 Financial Highlights
Specific 2020 Macy's, Inc. financial performance included:
• Net sales were significantly impacted by the COVID-19 pandemic and were $17,346 million in 2020, as
compared to $24,560 million in 2019, a decrease of 29.4%.
•
Comparable sales on an owned basis and on an owned plus licensed basis decreased 27.9%.
• Driven by changes in consumer shopping behaviors due to the COVID-19 pandemic, digital sales increased to
44.3% of net sales, compared to 25.3% in 2019.
•
•
•
•
The gross margin rate for 2020 was 29.2%, a decrease of 900 basis points compared to 2019.
SG&A expenses decreased approximately 24.8% from 2019 and SG&A as a percent of sales was higher in
2020 by approximately 240 basis points, illustrating efficient expense management and improved colleague
productivity in stores.
Cash and non-cash restructuring, impairment, store closings and other costs were $3,579 million, driven by
the recognition of non-cash impairment charges and implementation of restructuring activities to respond to
the COVID-19 pandemic.
Earnings before interest, taxes, depreciation and amortization excluding restructuring, impairment, store
closings and other costs and settlement charges ("Adjusted EBITDA") was $117 million in 2020, as
compared to $2,336 million in 2019.
• Diluted loss per share was $12.68 compared to diluted earnings per share of $1.81 in 2019. Excluding
restructuring, impairment, store closings and other costs, settlement charges, financing costs and losses on
early retirement of debt, adjusted diluted loss per share attributable to Macy's, Inc. shareholders was $2.21
compared to diluted earnings per share attributable to Macy’s, Inc. shareholders of $2.91 in 2019.
•
The Company ended 2020 in a strong liquidity position with approximately $1.7 billion in cash and cash
equivalents and approximately $3.0 billion of untapped capacity in the Company’s asset-based credit facility.
• Merchandise inventories were down 27.3% at the end of 2020 compared to the end of 2019. The Company
exited 2020 in a clean inventory position.
See pages 36 to 39 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.
Polaris Strategy
On February 4, 2020, Macy’s, Inc. announced its Polaris strategy, a multi-year plan designed to stabilize
profitability and position the Company for sustainable, profitable growth. Over the course of the COVID-19 pandemic,
the Company has refined the components of the Polaris strategy to focus where the Company can drive competitive
advantage and differentiation to first recover the business and then drive both top- and bottom-line growth. The Polaris
strategy was designed for flexibility and this was greatly tested in 2020. Although the Company’s operations were
significantly impacted by the COVID-19 pandemic in 2020, the Polaris strategy proved durable and allowed for a
number of accomplishments in 2020, notably:
•
•
Increasing relevance by introducing new customers to the Macy’s brand. During 2020, Macy’s saw a 45%
increase in active bronze memberships in its Star Rewards loyalty program. This increase partially offset the
overall drop in active Star Rewards members, which was caused by declines in Macy’s upper loyalty program
tiers. In addition, the Company launched Macy’s Media Network in 2020, a new fashion and beauty
advertising platform providing a new income stream.
In response to the pandemic and consumer behavior, the Company expanded merchandise assortments in
categories such as home, outdoor furniture, loungewear and active. In addition, new categories were added to
meet emerging demand, including baby gear and skin care devices, home fragrances, outdoor recreation and
26
gourmet food. In total, the Company added more than 1,000 new brands to meet the demands of customers in
this ever-changing environment.
• Given the significant shift to digital shopping in 2020 that is expected to be permanent in nature, the
Company accelerated its focus on and investments in digital shopping. During 2020, the Company quickly
launched a curb-side pick-up fulfillment option and improved the integration of its digital and physical assets
as well as the design of its digital platforms to improve customers’ shopping experiences. This focus on
optimizing customers’ omnichannel experience will continue and the Company has and will continue to
utilize its entire network of stores, distribution centers and vendor-direct programs to fill customer orders.
•
Through the initial Polaris restructuring efforts in February 2020 and those executed in July 2020 in response
to the COVID-19 pandemic, the Company exited 2020 with an annualized run-rate cost savings of
approximately $900 million that is expected to be permanent in nature. Through focus on rigorous expense
reduction, prudent cash management and execution of its 2020 financing activities, the Company ended 2020
with significant liquidity to help fund the recovery of its business and the necessary investments to execute on
the Polaris strategy.
While the underlying components of the Polaris strategy are unchanged from those presented in February 2020,
the components were refined during 2020 to align with customer demands in the COVID-19 pandemic environment as
well as expected consumer behavior post-pandemic. The following are the key pillars of the Polaris strategy:
• Win With Fashion and Style: Delivering fashion and style that meets core and new customer needs for all
occasions through existing and new retail platforms. The Company is focusing on the transformation of its
assortment architecture, fashion curation, inventory productivity, and vendor relationships to support these
changes.
• Deliver Clear Value: Build trust and deliver value to customers through simple, easy-to-understand pricing
and promotions driven by advanced analytics. The Company intends to deepen core and new customer
engagement through a personalized loyalty program as well as personalized communication and customer
experiences across all touchpoints.
•
•
Excel in Digital Shopping: Deliver profitable omnichannel growth by investing in a modern, frictionless
digital shopping journey, supported by a seamless user experience, immersive category-level experiences and
a convenient delivery and returns experience that is fully connected to stores. To support these efforts, the
Company will focus on enhancements to product discovery, the checkout process and launch of new digital
business models.
Enhance Store Experience: Create a tech-enabled, connected omni-ecosystem that supports reimagined store
experiences focused on discovery, convenience, service and engagement; delivered through a streamlined
stores portfolio and new off-mall formats. The Company will enhance the connection between its store and
digital channels by elevating customer experience standards across the organization, enhancing fulfillment
options and providing convenience no matter where the customer shops.
• Modernize Supply Chain: The Company is moving towards a faster and more efficient customer fulfillment
infrastructure by optimizing its network to profitably support the expected continued growth in digital and
provide enhanced customer delivery options to create a convenient, fast and efficient customer experience for
delivery and returns.
•
Enable Transformation: Enabling and accelerating the Company’s core priorities through foundational
improvements by modernizing technology platforms to support and enable growth, embedding data and
analytics into every aspect of the Company’s business and defining and creating a performance-driven
operation model that sets the tone, pace and expectations across the business to execute against the Polaris
strategy.
Presentation of Information
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources
for the fiscal years ended January 30, 2021 and February 1, 2020. For a discussion of changes from the fiscal year ended
February 1, 2020 to February 2, 2019, refer to Management's Discussion and Analysis of Financial Condition and Results
27
of Operations in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2020
(filed March 30, 2020).
Results of Operations
Net sales
Increase (decrease) in comparable sales
Credit card revenues, net
Cost of sales
Selling, general and administrative
expenses
Gains on sale of real estate
Restructuring, impairment, store closing
and other costs
Operating income (loss)
Benefit plan income, net
Settlement charges
Interest expense - net
Financing costs
Losses on early retirement of debt
Income (loss) before income taxes
Federal, state and local income tax
benefit (expense)
Net income (loss)
Net loss attributable to noncontrolling
interest
Net income (loss) attributable to
Macy's, Inc. shareholders
Diluted earnings (loss) per share
attributable to Macy's, Inc. shareholders
Supplemental Financial Measure
Gross margin
Digital sales as a percent of net sales
Supplemental Non-GAAP Financial
Measures
Increase (decrease) in comparable sales on
an owned plus licensed basis
Adjusted diluted earnings (loss) per share
attributable to Macy's, Inc. shareholders
Adjusted EBITDA
ROIC
2020
2019
2018
Amount
% to
Sales
Amount
% to
Sales
Amount
% to
Sales
3.1%
(60.9)%
(36.2)%
1.5%
(0.5)%
7.0%
(dollars in millions, except per share figures)
$ 17,346
(27.9)%
751
(12,286)
$ 24,560
$ 24,971
(0.8)%
771
(70.8)% (15,171)
4.3%
1.7%
768
(61.8)% (15,215)
3.1%
(6,767)
60
(3,579)
(4,475)
54
(84)
(280)
(5)
—
(4,790)
846
(3,944)
—
(39.0)%
0.3%
(8,998)
162
(36.6)%
0.6%
(9,039)
389
(20.6)%
(25.8)%
(354)
970
31
(58)
(185)
—
(30)
728
(164)
564
—
(1.4)%
3.9%
(136)
1,738
39
(88)
(236)
—
(33)
1,420
(322)
1,098
10
$ (3,944)
(22.7)% $
564
2.3% $ 1,108
4.4%
$ (12.68)
$
1.81
$
3.56
$ 5,060
29.2% $ 9,389
38.2%
$ 9,756
39.1%
44.3%
25.3%
23.1%
(27.9)%
(0.7)%
2.0%
$
$
(2.21)
117
3.0%
$
2.91
$ 2,336
17.1%
$
4.18
$ 2,877
19.9%
See pages 36 to 39 for a reconciliation of these non-GAAP financial measures to their most comparable GAAP
financial measure and for other important information.
Comparison of 2020 and 2019
Net Sales and Comparable Sales
Net sales for 2020 were significantly impacted by the pandemic and the temporary closure of stores during the first
28
and second quarters. For 2020, net sales were $17,346 million, a decrease of $7,214 million, or 29.4%, from 2019. The
decrease in comparable sales on an owned basis and on an owned plus licensed basis for 2020 was 27.9% compared to
2019. Driven by changes in consumer shopping behavior and the COVID-19 pandemic, digital sales grew significantly in
2020, with digital sales as a percent of net sales increasing to 44.3% from 25.3% in 2019. By family of business, home,
fine jewelry and watches, fragrances, activewear and sleepwear performed well during 2020 as customers began to work,
cook, dine and learn from home due to the pandemic. Driven by these changes to consumer behaviors, sales in 2020 were
weaker in apparel categories such as dresses, women's and men’s sportswear and men’s tailored.
Credit Card Revenues, Net
Net credit card revenues were $751 million for 2020, a decrease of $20 million compared to $771 million
recognized in 2019. Credit card penetration declined in 2020 to approximately 43% from approximately 47% in 2019.
Combined with a decline in new accounts driven by temporary store closures, this decrease in credit sales drove the
decrease in net credit card revenues. This was offset by an increase in profit share revenues associated with the underlying
credit card portfolio performance, which was driven by improved bad debt activity and delinquencies.
Cost of Sales and Gross Margin
Cost of sales for 2020 decreased $2,885 million from 2019. The cost of sales rate as a percent to net sales of 70.8%
in 2020 increased 900 basis points compared to 2019. The gross margin rate in 2020 was 29.2% compared to 38.2% in
2019. The increase in the cost of sales rate as a percent to net sales and the decrease in the gross margin rate were
primarily due to increased markdowns in the first and second quarters of 2020. Higher delivery expenses associated with
the increase in digital sales as well as carrier surcharges that the Company incurred in the fourth quarter of 2020 also
contributed to these results.
SG&A Expenses
SG&A expenses for 2020 decreased $2,231 million and the SG&A rate as a percent to net sales increased 240 basis
points, to 39.0%, from to 2019. The decrease in SG&A expenses is a reflection of lower sales as well as the
implementation of various expense management strategies undertaken in response to the COVID-19 pandemic. These
strategies include the July 2020 restructuring, a significant reduction in discretionary spending and the colleague
furlough implemented in 2020.
Gains on Sale of Real Estate
The Company recognized gains of $60 million in 2020 associated with real estate sales, as compared to $162
million in 2019. 2019 included a gain of $52 million associated with the sale of the Macy's Downtown Seattle location.
Restructuring, Impairment, Store Closing and Other Costs
Restructuring, impairment, store closing and other costs for 2020 of $3,579 million included goodwill and asset
impairment charges, severance and other human resource-related costs, and other costs associated with organizational
changes and store closings, driven by the impacts of the COVID-19 pandemic. 2019 costs of $354 million included costs
primarily associated with the Polaris strategy, including $161 million of non-cash impairment charges associated with
store closures and campus consolidations and $157 million related to severance and other human resource-related costs.
Benefit Plan Income, Net
2020 and 2019 included $54 million and $31 million, respectively, of non-cash net benefit plan income relating to
the Company's defined benefit plans. This income includes the net of: interest cost, expected return on plan assets and
amortization of prior service costs or credits and actuarial gains and losses.
Settlement Charges
$84 million and $58 million of non-cash settlement charges were recognized in 2020 and 2019, respectively. These
charges relate to the pro-rata recognition of net actuarial losses associated with the Company’s defined benefit retirement
plans and are the result of lump sum distributions associated with retiree distribution elections and restructuring activity.
29
Net Interest Expense
Net interest expense, excluding financing costs and losses on early retirement of debt, for 2020 increased $95 million
from 2019 to $280 million. This increase was primarily driven by the financing activities executed by the Company in
June 2020 in response to the COVID-19 pandemic.
Losses on Early Retirement of Debt
In 2019, the Company completed a tender offer debt repurchase of $525 million of senior notes and debentures. As
a result of these transactions, the Company recognized $30 million in expenses and fees.
Effective Tax Rate
The Company's effective tax rate was 17.7% for 2020 and 22.5% for 2019 compared to the federal income tax
statutory rate of 21%. The effective tax rate in 2020 was impacted by the non-tax deductible component of the
Company’s goodwill impairment charge, which was largely offset by the benefit associated with the carryback of net
operating losses permitted under the CARES Act . The effective tax rate in 2019 was impacted by the settlement of
certain state and local tax matters.
Net Income (Loss) Attributable to Macy's, Inc. Shareholders
Net loss attributable to Macy's, Inc. shareholders for 2020 decreased $4,508 million to $3,944 million, compared to
2019, driven by lower operating results resulting from the impact of the COVID-19 pandemic and goodwill impairment
charges.
Guidance
The Company expects the COVID-19 pandemic to have a material impact on its financial condition, results of
operations and cash flows from operations in future periods. The extent of the impact of the COVID-19 pandemic on the
Company's operational and financial performance depends on future developments outside of the Company's control,
including the duration and spread of the pandemic and related actions taken by federal, state and local government
officials, and international governments to prevent disease spread. On February 23, 2021, the Company disclosed in its
release of preliminary earnings its performance expectations for 2021, while acknowledging the significant uncertainty
surrounding consumer behavior and economic conditions in the current environment. The Company’s annual guidance
contemplates continued pandemic-related challenges in the spring season with momentum building in the back half of
2021.For a more complete discussion of the COVID-19 pandemic related risks facing the Company's business, refer to
Item 1A, “Risk Factors.”
• Net sales between $19.75 billion to $20.75 billion, an increase between approximately 14% and 20%
compared to 2020. Digital sales are expected to approximate 35% of net sales.
Credit card revenues, net, approximately 3% of net sales
•
• Gross margin rate to increase by high-single digit percentage points, up to 37%
•
SG&A expenses as a percentage of net sales to increase approximately 75 to 100 basis points compared to
2019 levels
Benefit plan income of approximately $60 million
• Gains on sale of real estate between $60 million and $90 million
•
• Depreciation and amortization expense of approximately $900 million
• Adjusted EBITDA between 7% and 7.5% of net sales
• Net interest expense of approximately $325 million
• An adjusted tax rate of approximately 23.25%
• Diluted shares outstanding of approximately 318 million
• Adjusted diluted earnings per share between $0.40 and $0.90
•
Capital expenditures of approximately $650 million
30
Cash Flow, Liquidity and Capital Resources
The Company's principal sources of liquidity are cash from operations, cash on hand and the asset based credit
facility described below.
Because of the COVID-19 outbreak, there is significant uncertainty surrounding the potential impact on the
Company's results of operations and cash flows. The Company’s liquidity was negatively impacted by store closures.
The Company proactively took steps to increase available cash on hand including, but not limited to, targeted reductions
in discretionary operating expenses and capital expenditures, suspension of the Company's quarterly dividend and
executing additional financing transactions during the second quarter of 2020 as discussed in more detail below. While
the Company has obtained additional financing, due the uncertainty of the COVID-19 pandemic, further actions may be
required to improve the Company’s cash position, including but not limited to, monetizing Company assets, reinstituting
colleague furloughs, and foregoing capital expenditures and other discretionary expenses.
Operating Activities
Net cash provided by operating activities was $649 million in 2020 compared to $1,608 million in 2019. The
decline was driven by lower EBITDA, which was partially offset by lower tax payments and a net improvement in
merchandise inventory and payables.
Investing Activities
Net cash used by investing activities for 2020 was $325 million, compared to $1,002 million for 2019. Investing
activities for 2020 included purchases of property and equipment totaling $338 million and capitalized software of $128
million, compared to purchases of property and equipment totaling $902 million and capitalized software of $255 million
for 2019. In addition, property and equipment sales, primarily related to real estate, generated cash proceeds of $113
million in 2020 compared to $185 million in 2019.
Financing Activities
Net cash provided by the Company for financing activities was $699 million for 2020, including debt issued of
$2,780 million related to a $1,500 million draw on its revolving credit agreement and issuance of $1,300 million 8.375%
senior secured notes, partially offset by repayment of the $1,500 million revolving credit facility draw and the approximate
$530 million repayment of debt at maturity. 2020 also included $117 million of cash dividends paid.
Net cash used by the Company for financing activities was $1,123 million for 2019, including the repayment of
$597 million of debt and the payment of $466 million of cash dividends. 2019 debt repayments included the repayment at
maturity of $36 million of 8.5% senior debentures.
Secured Debt Issuance
On June 8, 2020, the Company issued $1,300 million aggregate principal amount of 8.375% senior secured notes
due 2025 (the "Notes"). The Notes bear interest at a rate of 8.375% per annum, which accrues from June 8, 2020 and is
payable in arrears on June 15 and December 15 of each year. The Notes mature on June 15, 2025, unless earlier
redeemed or repurchased, and are subject to the terms and conditions set forth in the related indenture. The Notes were
issued by Macy’s, Inc. and are secured on a first-priority basis by (i) a first mortgage/deed of trust in certain real property
of subsidiaries of Macy’s, Inc. that was transferred to subsidiaries of Macy’s Propco Holdings, LLC, a newly created
direct, wholly owned subsidiary of Macy’s, Inc. (“Propco”), and (ii) a pledge by Propco of the equity interests in its
subsidiaries that own such transferred real property. The Notes are, jointly and severally, unconditionally guaranteed on
a secured basis by Propco and its subsidiaries and unconditionally guaranteed on an unsecured basis by Macy’s Retail
Holdings, LLC (f/k/a Macy’s Retail Holdings, Inc.) (“MRH”), a direct, wholly owned subsidiary of Macy’s, Inc. The
Company used the proceeds of the Notes offering, along with cash on hand, to repay the outstanding borrowings under
the existing $1,500 million unsecured credit agreement.
Entry into Asset-Based Credit Facility
On June 8, 2020, Macy’s Inventory Funding LLC (the “ABL Borrower”), an indirect wholly owned subsidiary of
the Company, and its parent, Macy’s Inventory Holdings LLC (the “ABL Parent”), entered into an asset-based credit
agreement (“the ABL Credit Facility”) with Bank of America, N.A., as administrative agent and collateral agent, and the
lenders party thereto. As of January 30, 2021, the ABL Credit Facility provides the ABL Borrower with a $2,941 million
revolving credit facility (the “Revolving ABL Facility”), including a swingline sub-facility and a letter of credit sub-
31
facility. The ABL Borrower may request increases in the size of the Revolving ABL Facility up to an additional
aggregate principal amount of $750 million. As of January 30, 2021, the Company had $142 million of standby letters
of credit outstanding under the ABL Credit Facility, which reduces the available borrowing capacity. The Company had
no borrowings outstanding under the ABL Credit Facility as of January 30, 2021.
Additionally on June 8, 2020 and concurrently with closing the ABL Credit Facility, the ABL Borrower purchased
all presently existing inventory, and assumed the liabilities in respect of all presently existing and outstanding trade
payables owed to vendors in respect of such inventory, from MRH and certain wholly owned subsidiaries of MRH. The
ABL Credit Facility is secured on a first priority basis (subject to customary exceptions) by (i) all assets of the ABL
Borrower including all such inventory and the proceeds thereof and (ii) the equity of the ABL Borrower. The ABL
Parent guaranteed the ABL Borrower’s obligations under the ABL Credit Facility. The Revolving ABL Facility matures
on May 9, 2024.
The ABL Credit Facility contains customary borrowing conditions including a borrowing base equal to the sum of
(a) 80% (which shall automatically increase to 90% upon the satisfaction of certain conditions, including the delivery of
an initial appraisal of the inventory) of the net orderly liquidation percentage of eligible inventory, minus (b) customary
reserves. Amounts borrowed under the ABL Credit Facility are subject to interest at a rate per annum equal to (i) prior to
the Step Down Date (as defined in the ABL Credit Facility), at the ABL Borrower’s option, either (a) adjusted LIBOR
plus a margin of 2.75% to 3.00% or (b) a base rate plus a margin of 1.75% to 2.00%, in each case depending on
revolving line utilization and (ii) after the Step Down Date, at the ABL Borrower’s option, either (a) adjusted LIBOR
plus a margin of 2.25% to 2.50% or (b) a base rate plus a margin of 1.25% to 1.50%, in each case depending on
revolving line utilization. The ABL Credit Facility also contains customary covenants that provide for, among other
things, limitations on indebtedness, liens, fundamental changes, restricted payments, cash hoarding, and prepayment of
certain indebtedness as well as customary representations and warranties and events of default typical for credit facilities
of this type.
The ABL Credit Facility also requires (1) the Company and its restricted subsidiaries to maintain a fixed charge
coverage ratio of at least 1.00 to 1.00 as of the end of any fiscal quarter on or after April 30, 2021 if (a) certain events of
default have occurred and are continuing or (b) Availability plus Suppressed Availability (each as defined in the ABL
Credit Facility) is less than the greater of (x) 10% of the Loan Cap (as defined in the ABL Credit Facility) and (y) $250
million, in each case, as of the end of such fiscal quarter and (2) prior to April 30, 2021, that the ABL Borrower not
permit Availability plus Suppressed Availability to be lower than the greater of (x) 10% of the Loan Cap and (y) $250
million.
Amendment to Existing Credit Agreement
On June 8, 2020, the Company substantially reduced the credit commitments of its existing $1,500 million
unsecured credit agreement, which as of January 30, 2021, provides the Company with unsecured revolving credit of up
to $1 million. The unsecured revolving credit facility contains covenants that provide for, among other things, limitations
on fundamental changes, use of proceeds, and maintenance of property, as well as customary representations and
warranties and events of default. In conjunction with this amendment, the interest coverage ratio and leverage ratio were
eliminated as covenant requirements. As of January 30, 2021, the Company had no borrowings outstanding under the
credit agreement.
Exchange Offers and Consent Solicitations for Certain Outstanding Debt Securities of MRH
During the second quarter of 2020, MRH completed exchange offers (each, an “Exchange Offer” and, collectively,
the “Exchange Offers”) with eligible holders and received related consents in consent solicitations for each series of
notes as follows:
(i) $81 million aggregate principal amount of 6.65% Senior Secured Debentures due 2024 (“New 2024 Notes”)
issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.65% Senior Debentures due 2024
issued by MRH (“Old 2024 Notes”);
(ii) $74 million aggregate principal amount of 6.7% Senior Secured Debentures due 2028 (“New 2028 Notes”)
issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.7% Senior Debentures due 2028
issued by MRH (“Old 2028 Notes”);
(iii) $13 million aggregate principal amount of 8.75% Senior Secured Debentures due 2029 (“New 2029 Notes”)
issued by MRH for validly tendered (and not validly withdrawn) outstanding 8.75% Senior Debentures due 2029
issued by MRH (“Old 2029 Notes”);
32
(iv) $5 million aggregate principal amount of 7.875% Senior Secured Debentures due 2030 (“New 2030 Notes”)
issued by MRH for validly tendered (and not validly withdrawn) outstanding 7.875% Senior Debentures due 2030
issued by MRH (“Old 2030 Notes”);
(v) $5 million aggregate principal amount of 6.9% Senior Secured Debentures due 2032 (“New 2032 Notes”)
issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.9% Senior Debentures due 2032
issued by MRH (“Old 2032 Notes”); and
(vi) $183 million aggregate principal amount of 6.7% Senior Secured Debentures due 2034 (“New 2034 Notes”
and, together with the New 2024 Notes, New 2028 Notes, New 2029 Notes, New 2030 Notes and New 2032
Notes, the “New Notes” and each series, a “series of New Notes”) issued by MRH for validly tendered (and not
validly withdrawn) outstanding 6.7% Senior Debentures due 2034 issued by MRH (“Old 2034 Notes” and,
together with the Old 2024 Notes, Old 2028 Notes, Old 2029 Notes, Old 2030 Notes and Old 2032 Notes, the
“Old Notes” and each series, a “series of Old Notes”).
Each New Note issued in the Exchange Offers for a validly tendered Old Note has an interest rate and maturity
date that is identical to the interest rate and maturity date of the tendered Old Note, as well as identical interest payment
dates and optional redemption prices. The New Notes are MRH’s and Macy’s general, senior obligations and are secured
by a second-priority lien on the same collateral securing the Notes. Following the settlement, the aggregate principal
amounts of each series of Old Notes outstanding are: (i) $41 million Old 2024 Notes, (ii) $29 million Old 2028 Notes,
(iii) $5 million Old 2030 Notes, (iv) $12 million Old 2032 Notes and (v) $18 million Old 2034 Notes.
In addition, MRH solicited and received consents from holders of each series of Old Notes (each, a “Consent
Solicitation” and, collectively, the “Consent Solicitations”) pursuant to a separate Consent Solicitation Statement to
adopt certain proposed amendments to the indenture governing the Old Notes (the “Existing Indenture”) to conform
certain provisions in the negative pledge covenant in the Existing Indenture to the provisions of the negative pledge
covenant in MRH’s most recent indenture (the “Proposed Amendments”). MRH received consents from holders of (i)
$85 million aggregate principal amount of outstanding Old 2024 Notes, (ii) $77 million aggregate principal amount of
outstanding Old 2028 Notes, (iii) $13 million aggregate principal amount of outstanding Old 2029 Notes, (iv) $5 million
aggregate principal amount of outstanding Old 2030 Notes, (v) $6 million aggregate principal amount of outstanding Old
2032 Notes and (vi) $185 million aggregate principal amount of outstanding Old 2034 Notes.
At January 30, 2021, no notes or debentures contained provisions requiring acceleration of payment upon a debt
rating downgrade. However, the terms of approximately $4,159 million in aggregate principal amount of the Company's
senior notes outstanding at that date require the Company to offer to purchase such notes at a price equal to 101% of their
principal amount plus accrued and unpaid interest if there is both a change of control (as defined in the applicable
indenture) of the Company and the notes are rated by specified rating agencies at a level below investment grade.
As of January 30, 2021, the Company's credit rating and outlook were as described in the table below.
Long-term debt
Outlook
March 2021 Financing Activities
Moody's
Ba3
Negative
Standard &
Poor's
B+
Negative
Fitch
BB
Negative
On March 17, 2021, MRH completed an offering of $500 million in aggregate principal amount of 5.875% senior
notes due 2029 (the “2029 Notes”) in a private offering (the “Notes Offering”). The 2029 Notes mature on April 1, 2029.
The 2029 Notes are senior unsecured obligations of MRH and are unconditionally guaranteed on a senior unsecured
basis by Macy’s, Inc. MRH used the net proceeds from the Notes Offering, together with cash on hand, to fund a
separately announced tender offer in which $500 million of senior notes and debentures were tendered for early
settlement and purchased by MRH on March 17, 2021.
Dividends
On February 28, 2020, the Company's board of directors declared a quarterly dividend of 37.75 cents per share on
its common stock, payable April 1, 2020, to shareholders of record at the close of business on March 13, 2020. The
Company announced the suspension of quarterly cash dividends beginning in the second quarter of 2020.
33
Contractual Obligations and Commitments
At January 30, 2021, the Company had contractual obligations (within the scope of Item 303(a)(5) of Regulation S-
K) as follows:
Total
Less than
1 Year
Obligations Due, by Period
1 – 3
Years
(millions)
3 – 5
Years
More than
5 Years
Short-term debt
Long-term debt
Interest on debt
Finance lease obligations
Operating leases (a and b)
Letters of credit
Other obligations
$
$
452 $
4,454
2,025
31
7,039
142
3,876
18,019 $
452
—
275
3
239
142
2,538
3,649
$
$
— $
850
507
6
694
—
459
2,516 $
— $
1,946
366
6
663
—
190
3,171 $
—
1,658
877
16
5,443
—
689
8,683
(a)
(b)
Operating lease payments include $3,060 million related to options to extend lease terms that are reasonably certain of being exercised and
exclude $2 million of legally binding minimum lease payments for leases signed but not yet commenced.
Operating lease payments include $1,151 million related to non-lease component payments, with $840 million related to options to extend
lease terms that are reasonably certain of being exercised.
“Other obligations” in the foregoing table includes post employment and postretirement benefits, self-insurance
reserves, group medical/dental/life insurance programs, merchandise purchase obligations and obligations under
outsourcing arrangements, construction contracts, energy and other supply agreements identified by the Company and
liabilities for unrecognized tax benefits that the Company expects to settle in cash in the next year excluding interest and
penalties. The Company's merchandise purchase obligations fluctuate on a seasonal basis, typically being higher in the
summer and early fall and being lower in the late winter and early spring. The Company purchases a substantial portion of
its merchandise inventories and other goods and services otherwise than through binding contracts. Consequently, the
amounts shown as “Other obligations” in the foregoing table do not reflect the total amounts that the Company would
need to spend on goods and services in order to operate its businesses in the ordinary course.
Of the Company's $113 million of unrecognized tax benefits at January 30, 2021, within "other obligations" in the
foregoing table, the Company has excluded $3 million of deferred tax assets and $104 million of long-term liabilities for
unrecognized tax benefits for various tax positions taken. The table also excludes federal, state and local interest and
penalties related to unrecognized tax benefits of $60 million. These liabilities may increase or decrease over time as a
result of tax examinations, and given the status of examinations, the Company cannot reliably estimate the period of any
cash settlement with the respective taxing authorities.
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 $3,246 million outstanding as of January 30, 2021, with maturities
ranging from 2022 to 2043. The Unsecured Notes constitute debt obligations of MRH ("Subsidiary Issuer"), a 100%-
owned subsidiary of Macy's, Inc. ("Parent" together with the "Subsidiary Issuer" are the "Obligor Group"), and are fully
and unconditionally guaranteed on a senior unsecured basis by Parent. The Unsecured Notes rank equally in right of
payment with all of the Company’s existing and future senior unsecured obligations, senior to any of the Company’s
future subordinated indebtedness, and are structurally subordinated to all existing and future obligations of each of the
Company’s subsidiaries that do not guarantee the Unsecured Notes. Holders of the Company’s secured indebtedness,
including the Notes and any borrowings under the ABL Credit Facility, will have a priority claim on the assets that
secure such secured indebtedness; therefore, the Unsecured Notes and the related guarantee are effectively subordinated
to all of the Subsidiary Issuer’s and Parent and their subsidiaries’ existing and future secured indebtedness to the extent
of the value of the collateral securing such indebtedness.
34
The following tables include combined financial information of the Obligor Group. Investments in and equity in
the earnings of non-Guarantor subsidiaries of $6,126 million have been excluded. The combined financial information of
the Obligor Group is presented on a combined basis with intercompany balances and transactions within the Obligor
Group eliminated.
Summarized Balance Sheet
Current Assets
Noncurrent Assets
Current Liabilities
Noncurrent Liabilities (a)
ASSETS
LIABILITIES
January 30, 2021
(in millions)
$
$
1,297
7,491
2,216
10,145
a)
Includes net amounts due to non-Guarantor subsidiaries of $2,702 million
Summarized Statement of Operations
Net Sales
Consignment commission income (a)
Cost of sales
Operating loss
Loss before income taxes (b)
Net loss
$
2020
(in millions)
1,303
1,167
(905)
(3,771)
(2,838)
(2,376)
a)
b)
Income pertains to transactions with ABL Borrower, a non-Guarantor subsidiary
Includes $1,268 million of dividend income from non-Guarantor subsidiaries
35
Important Information Regarding Non-GAAP Financial Measures
The Company reports its financial results in accordance with GAAP. However, management believes that certain
non-GAAP financial measures provide users of the Company's financial information with additional useful information in
evaluating operating performance. Management believes that providing supplemental changes in comparable sales on an
owned plus licensed basis, which includes the impact of growth in comparable sales of departments licensed to third
parties, assists in evaluating the Company's ability to generate sales growth, whether through owned businesses or
departments licensed to third parties, on a comparable basis, and in evaluating the impact of changes in the manner in
which certain departments are operated. 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 diluted earnings per share attributable to Macy's, Inc. shareholders, EBIT and EBITDA, including as a
percent to sales, 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. Management
also believes that EBIT, EBITDA, Adjusted EBIT and Adjusted EBITDA are frequently used by investors and securities
analysts in their evaluations of companies, and that such supplemental measures facilitate comparisons between
companies that have different capital and financing structures and/or tax rates. In addition, management believes that
ROIC is a useful supplemental measure in evaluating how efficiently the Company employs its capital. The Company
uses some of these non-GAAP financial measures as performance measures for components of executive compensation.
The company does not provide the most directly comparable forward-looking GAAP measure of EBITDA, earnings
(loss) per share and the effective tax rate, excluding certain items, because the timing and amount of excluded items are
unreasonably difficult to fully and accurately estimate.
Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the
Company's financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in
non-GAAP financial measures may be significant items that could impact the Company's financial position, results of
operations or cash flows and should therefore be considered in assessing the Company's actual and future financial
condition and performance. Additionally, the amounts received by the Company on account of sales of departments
licensed to third parties are limited to commissions received on such sales. The methods used by the Company to
calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute
similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar
measures provided by other companies.
Changes in Comparable Sales
The following is a tabular reconciliation of the non-GAAP financial measure of changes in comparable sales on an
owned plus licensed basis, to GAAP comparable sales (i.e., on an owned basis), which the Company believes to be the
most directly comparable GAAP financial measure.
Increase (decrease) in comparable sales on an
owned basis (note 1)
Change in comparable sales of departments licensed
to third parties (note 2)
Increase (decrease) in comparable sales on an
owned plus licensed basis
2020
2019
2018
(27.9)%
(0.8)%
—
0.1%
(27.9)%
(0.7)%
1.7%
0.3%
2.0%
(1)
(2)
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. 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. Definitions and
calculations of comparable sales differ among companies in the retail industry.
Represents the impact of including the sales of departments licensed to third parties occurring in stores in
operation throughout the year presented and the immediately preceding year and all online sales in the
calculation of comparable sales. The Company licenses third parties to operate certain departments in its stores
and online and receives commissions from these third parties based on a percentage of their net sales. In its
financial statements prepared in conformity with GAAP, the Company includes these commissions (rather than
sales of the departments licensed to third parties) in its net sales. The Company does not, however, include any
amounts in respect of licensed department sales (or any commissions earned on such sales) in its comparable
36
sales in accordance with GAAP (i.e., on an owned basis). The amounts of commissions earned on sales of
departments licensed to third parties are not material to its net sales for the periods presented.
Adjusted Diluted Earnings (Loss) Per Share Attributable to Macy's, Inc. Shareholders
The following is a tabular reconciliation of the non-GAAP financial measure diluted earnings (loss) per share
attributable to Macy's, Inc. shareholders, excluding certain items, to GAAP diluted earnings (loss) per share attributable to
Macy's, Inc. shareholders, which the Company believes to be the most directly comparable GAAP measure.
As reported
Restructuring, impairment, store closing and other costs (a)
Settlement charges
Losses on early retirement of debt
Financing costs
Income tax impact of certain items identified above
As adjusted
2020
2019
2018
$
$
(12.68)
11.50
0.27
—
0.02
(1.32)
(2.21)
$
$
1.81
1.13
0.19
0.10
—
(0.32)
2.91
$
$
3.56
0.41
0.28
0.11
—
(0.18)
4.18
(a)
2018 excludes impairment, restructuring, and other costs attributable to the noncontrollling interest shareholder of $8 million.
Adjusted EBIT and EBITDA as a Percent to Net Sales
The following is a tabular reconciliation of the non-GAAP financial measures EBIT and EBITDA, as adjusted to
exclude certain items ("Adjusted EBIT and Adjusted EBITDA"), as a percent to net sales to GAAP net income
attributable to Macy's, Inc. shareholders as a percent to net sales, which the Company believes to be the most directly
comparable GAAP financial measure.
Net sales
Net income (loss) attributable to Macy's, Inc. shareholders
Net income (loss) attributable to Macy's, Inc. shareholders
as a percent to net sales
Net income (loss) attributable to Macy's, Inc. shareholders
Restructuring, impairment, store closing and other costs (a)
Settlement charges
Interest expense - net
Losses on early retirement of debt
Financing costs
Federal, state and local income tax expense (benefit)
Adjusted EBIT
Adjusted EBIT as a percent to net sales
Add back depreciation and amortization
Adjusted EBITDA
Adjusted EBITDA as a percent to net sales
$
$
$
$
$
2020
2019
(millions, except percentages)
$
24,560
$
17,346
2018
24,971
(3,944)
$
564
$
1,108
(22.7)%
2.3%
4.4%
$
(3,944)
3,579
84
280
—
5
(846)
$
(842)
(4.9)%
$
564
354
58
185
30
—
164
1,355
$
5.5%
959
$
117
0.7%
981
2,336
$
9.5%
1,108
128
88
236
33
—
322
1,915
7.7%
962
2,877
11.5%
(a)
2018 excludes impairment, restructuring, and other costs attributable to the noncontrollling interest shareholder of $8 million.
37
ROIC
Historically, the Company defined ROIC as adjusted EBITDA, excluding net lease expense, as a percent to average
invested capital. Average invested capital is comprised of an annual two-point (i.e., end of the year presented and the
immediately preceding year) average of gross property and equipment, a capitalized value of non-capitalized leases equal
to periodic annual reported net rent expense multiplied by a factor of eight and a four-point (i.e., end of each quarter
within the period presented) average of other selected assets and liabilities. The calculation of the capitalized value of
non-capitalized leases is consistent with industry and credit rating agency practice and the specified assets are subject to a
four-point average to compensate for seasonal fluctuations.
In conjunction with the Company's adoption of ASU No. 2016-02 on February 3, 2019, the Company recognized
lease liabilities and related right of use ("ROU") assets on the balance sheet for its operating leases. In the calculation of
the Company's ROIC as of January 30, 2021 and February 1, 2020, the Company utilized the total lease ROU assets in
lieu of the capitalized value of non-capitalized leases, excluding variable rent which is still multiplied by a factor of eight,
as a result of the adoption of ASU 2016-02. In the Company's ROIC calculation as of February 2, 2019, a capitalized
value of non-capitalized leases equal to periodic annual reported net rent expense multiplied by a factor of eight was
utilized. Rent expense in 2020 and 2019 reflects lease expense related to the Company's operating leases in accordance
with ASU 2016-02 and excludes non-lease component expenses. See Note 5, Properties and Leases, to the Consolidated
Financial Statements for information on leases, including non-lease components.
In 2020 and 2019, the calculation of ROIC reflected certain refinements to better reflect the company's adjusted
EBITDA, excluding lease expense, and invested capital which are summarized below (4-point average of balance, as
applicable):
•
•
•
•
•
•
Exclude non-lease components of $87 million and $83 million for 2020 and 2019, respectively, from
lease expense.
Exclude benefit plan income, net of $54 million and $31 million for 2020 and 2019, respectively, from
Adjusted EBITDA, excluding lease expense.
Exclude rabbi trust investments related to company's deferred compensation plan from prepaid
expenses and other current assets ($32 million for both 2020 and 2019).
Exclude deferred financing costs ($38 million for 2020 and $4 million for 2019) and net pension asset
($168 million for 2020 and $46 million for 2019) from other assets.
Exclude dividend payable ($29 million for 2019), current liabilities for other postretirement health care
and life insurance benefits and the supplementary retirement plan ($64 million for 2020 and $76 million
for 2019), and the current lease liability ($287 million for 2020 and $306 million for 2019) from
accounts payable and accrued liabilities.
Include long-term workers' compensation and general liability ($348 million for 2020 and $371 million
for 2019).
38
The following is a tabular reconciliation of the non-GAAP financial measure of ROIC to net income as a percent
to property and equipment - net, which the Company believes to be the most directly comparable GAAP financial
measure.
Net income (loss)
Property and equipment - net
Net income (loss) as a percent to property and
equipment - net
Net income (loss)
Add back interest expense, net
Add back financing cost
Add back losses on early retirement of debt
Add back (deduct) federal, state and local tax expense (benefit)
Add back restructuring, impairment, store closing and other costs
Add back settlement charges
Add back depreciation and amortization
Deduct benefit plan income, net
Add back rent expense
Real estate
Personal property
Deferred rent amortization
Adjusted EBITDA, excluding benefit plan income, net and lease
expense
Property and equipment - net
Add back accumulated depreciation and amortization
Add capitalized value of non-capitalized leases
Add back capitalized value of variable rent
Add back lease right of use assets
Add (deduct) other selected assets and liabilities:
Receivables
Merchandise inventories
Prepaid expenses and other current assets
Other assets
Merchandise accounts payable
Accounts payable and accrued liabilities
Other long-term liabilities
Total average invested capital
$
$
$
$
$
$
2020
2019
(millions, except percentages)
$
564
$
(3,944)
2018
1,098
5,940
$
6,633
$
6,637
(66.4)%
8.5%
16.5%
(3,944)
280
5
—
(846)
3,579
84
959
(54)
334
7
—
404
6,092
4,590
—
16
2,378
204
4,356
442
589
(2,213)
(2,508)
(348)
13,598
$
$
$
$
$
564
185
—
30
164
354
58
981
(31)
335
8
—
1,098
236
—
33
322
136
88
962
—
327
9
14
2,648
$
3,225
$
6,628
4,438
—
114
2,241
265
5,743
551
675
(2,183)
(2,609)
(371)
$
15,492
6,655
4,553
2,800
—
—
273
5,664
608
803
(2,219)
(2,917)
—
16,220
ROIC
3.0%
17.1%
19.9%
39
Critical Accounting Policies
Merchandise Inventories
Merchandise inventories are valued at the lower of cost or market using the last-in, first-out ("LIFO") retail
inventory method. Under the retail inventory method, inventory is segregated into departments of merchandise having
similar characteristics and is stated at its current retail selling value. 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. 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.
Long-Lived Asset Impairment and Restructuring Charges
The carrying values of long-lived assets, inclusive of 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. Additionally, on an
annual basis, the recoverability of the carrying values of individual stores is evaluated. A potential impairment has
occurred if projected future undiscounted cash flows are less than the carrying value of the assets. The estimate of cash
flows includes management's assumptions of cash inflows and outflows directly resulting from the use of those assets in
operations. When a potential impairment has occurred, an impairment write-down is recorded if the carrying value of the
long-lived asset exceeds its fair value. The Company believes its estimated cash flows are sufficient to support the
carrying value of its long-lived assets. If estimated cash flows significantly differ in the future, the Company may be
required to record asset impairment write-downs.
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. Additionally, related liabilities arise such as severance, contractual
obligations and other accruals associated with store closings from decisions to dispose of assets. The Company estimates
these liabilities based on the facts and circumstances in existence for each restructuring decision. The amounts the
Company will ultimately realize or disburse could differ from the amounts assumed in arriving at the asset impairment
and restructuring charge recorded.
Goodwill and Intangible Assets
The Company reviews the carrying value of its goodwill and other intangible assets with indefinite lives at least
annually, as of the end of fiscal May, or more frequently if an event occurs or circumstances change, for possible
impairment in accordance with ASC Topic 350, Intangibles - Goodwill and Other. For impairment testing, goodwill has
been assigned to reporting units which consist of the Company's retail operating divisions. Macy's and bluemercury are
the only reporting units with goodwill as of January 30, 2021, and 98% of the Company's goodwill is allocated to the
Macy's reporting unit.
The Company may elect to evaluate qualitative factors to determine if it is more likely than not that the fair value of
a reporting unit or fair value of indefinite lived intangible assets is less than its carrying value. If the qualitative evaluation
indicates that it is more likely than not that the fair value of a reporting unit or indefinite lived intangible asset is less than
its carrying amount, a quantitative impairment test is required. Alternatively, the Company may bypass the qualitative
assessment for a reporting unit or indefinite lived intangible asset and directly perform the quantitative assessment. This
determination can be made on an individual reporting unit or asset basis, and performance of the qualitative assessment
may resume in a subsequent period.
The quantitative impairment test involves estimating the fair value of each reporting unit and indefinite lived
intangible asset and comparing these estimated fair values with the respective reporting unit or indefinite lived intangible
asset carrying value. If the carrying value of a reporting unit exceeds its fair value, an impairment loss will be recognized
in an amount equal to such excess, limited to the total amount of goodwill allocated to the reporting unit. If the carrying
value of an individual indefinite lived intangible asset exceeds its fair value, such individual indefinite lived intangible
asset is written down by an amount equal to such excess.
40
Estimating the fair values of reporting units and indefinite lived intangible assets involves the use of significant
assumptions, estimates and judgments with respect to a variety of factors, including sales, gross margin and SG&A
expense rates, capital expenditures, cash flows and the selection and use of an appropriate discount rate and market
values and multiples of earnings and revenues of similar public companies. Projected sales, gross margin and SG&A
expense rate assumptions and capital expenditures are based on the Company's annual business plan or other forecasted
results. Discount rates reflect market-based estimates of the risks associated with the projected cash flows of the reporting
unit or indefinite lived intangible asset.
The use of different assumptions, estimates or judgments in the goodwill impairment testing process, including with
respect to the estimated future cash flows of the Company's reporting units, the discount rate used to discount such
estimated cash flows to their net present value, and the reasonableness of the resultant implied control premium relative to
the Company's market capitalization, could materially increase or decrease the fair value of the reporting unit and/or its
net assets and, accordingly, could materially increase or decrease any related impairment charge.
During the first quarter of 2020, as a result of the sustained decline in the Company's market capitalization and
changes in the Company's long-term projections driven largely by the impacts of the COVID-19 pandemic, the Company
determined a triggering event had occurred that required an interim impairment assessment for all of its reporting units
and indefinite lived intangible assets. The Company determined the fair value of each of its reporting units using a
market approach or a combination of a market approach and income approach, as appropriate. Relative to the prior
assessment, as part of this interim 2020 assessment, it was determined that an increase in the discount rate applied in the
valuation was required to align with market-based assumptions and company-specific risk. The revised long-term
projections, in conjunction with this higher discount rate, resulted in lower fair values of the reporting units. As a result,
the Company recognized $2,982 million and $98 million of goodwill impairment for the Macy's and bluemercury
reporting units, respectively, during 2020, the majority of which was recognized during the first quarter of 2020.
As of May 2, 2020, the Company elected to perform a qualitative impairment test on its intangible assets with
indefinite lives and concluded that it is more likely than not that the fair values exceeded the carrying values and the
intangible assets with indefinite lives were not impaired.
For the Company's annual impairment assessment as of the end of fiscal May, the Company elected to perform a
qualitative impairment test on its goodwill and intangible assets with indefinite lives and concluded that it is more likely
than not that the fair values exceeded the carrying values and goodwill and intangible assets with indefinite lives were
not impaired.
The Company continues to monitor the key inputs to the fair values of its reporting units. A decline in market
capitalization or future declines in macroeconomic factors or business conditions may result in additional impairment
charges in future periods.
Income Taxes
Income taxes are estimated based on the tax statutes, regulations and case law of the various jurisdictions in which
the Company operates. Deferred income tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases, and net operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Deferred income tax assets are evaluated for recoverability based on all available
evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning
strategies. Deferred income tax assets are reduced by a valuation allowance when it is more likely than not that some
portion of the deferred income tax assets will not be realized.
Uncertain tax positions are recognized if the weight of available evidence indicates that it is more likely than not
that the tax position will be sustained on examination, including resolution of any related appeals or litigation processes,
based on the technical merits of the position. Uncertain tax positions meeting the more-likely-than-not recognition
threshold are then measured to determine the amount of benefit eligible for recognition in the financial statements. Each
uncertain tax position is measured at the largest amount of benefit that is more likely than not to be realized upon ultimate
settlement.
41
Uncertain tax positions are evaluated and adjusted as appropriate, while taking into account the progress of audits
of various taxing jurisdictions. Resolution of these matters could have a material impact on the Company's consolidated
financial position, results of operations or cash flows.
Significant judgment is required in evaluating the Company's uncertain tax positions, provision for income taxes,
and any valuation allowance recorded against deferred tax assets. Although the Company believes that its judgments are
reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is
reflected in the Company's historical income provisions and accruals.
Pension and Supplementary Retirement Plans
The Company has a funded defined benefit pension plan (the “Pension Plan”) and an unfunded defined benefit
supplementary retirement plan (the “SERP”). The Company accounts for these plans in accordance with ASC Topic 715,
Compensation - Retirement Benefits. Under ASC Topic 715, an employer recognizes the funded status of a defined
benefit postretirement plan as an asset or liability on the balance sheet and recognizes changes in that funded status in the
year in which the changes occur through comprehensive income (loss). 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. No funding contributions were required, and
the Company made no funding contributions to the Pension Plan in 2020 and 2019. As of the date of this report, the
Company does not anticipate making funding contributions to the Pension Plan in 2021.
The calculation of pension expense and pension liabilities requires the use of a number of assumptions. Changes in
these assumptions can result in different expense and liability amounts, and future actual experience may differ
significantly from current expectations. The Company believes that the most critical assumptions relate to the long-term
rate of return on plan assets (in the case of the Pension Plan) and the discount rate used to determine the present value of
projected benefit obligations.
The Company's assumed annual long-term rate of return for the Pension Plan's assets was 6.25% for 2020, 6.50%
for 2019 and 6.75% for 2018 based on expected future returns on the portfolio of assets. As of January 30, 2021, the
Company lowered the assumed annual long-term rate of return for the Pension Plan's assets from 6.25% to 5.75% based
on expected future returns on the portfolio of assets. The Company develops its expected long-term rate of return
assumption by evaluating input from several professional advisors taking into account the asset allocation of the portfolio
and long-term asset class return expectations, as well as long-term inflation assumptions. Pension expense increases or
decreases as the expected rate of return on the assets of the Pension Plan decreases or increases, respectively. 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 2021 pension expense by approximately $7 million.
The Company discounted its future pension obligations using a weighted-average rate of 2.43% at January 30, 2021
and 2.83% at February 1, 2020, for the Pension Plan and 2.51% at January 30, 2021 and 2.89% at February 1, 2020 for
the SERP. The discount rate used to determine the present value of the Company's Pension Plan and SERP obligations is
based on a yield curve constructed from a portfolio of high quality corporate debt securities with various maturities. Each
year's expected future benefit payments are discounted to their present value at the appropriate yield curve rate, thereby
generating the overall discount rate for Pension Plan and SERP obligations. As the discount rate is reduced or increased,
the pension liability would increase or decrease, respectively, and future pension expense would decrease or increase,
respectively. Lowering the discount rates by 0.25% would increase the projected benefit obligations at January 30, 2021
by approximately $86 million and would decrease estimated 2021 pension expense by approximately $4 million.
Increasing the discount rates by 0.25% would decrease the projected benefit obligations at January 30, 2021 by
approximately $82 million and would increase estimated 2021 pension expense by approximately $3 million.
The Company estimates the service and interest cost components of net periodic benefit costs for the Pension Plan
and SERP. This method uses a full yield curve approach in the estimation of these components of net periodic benefit
costs. Under this approach, the Company applies discounting using individual spot rates from the yield curve composed
of the rates of return from a portfolio of high quality corporate debt securities available at the measurement date. These
spot rates align to each of the projected benefit obligation and service cost cash flows.
42
New Pronouncements
See Note 1, Organization and Summary of Significant Accounting Policies, to the Consolidated Financial
Statements for discussion on new accounting pronouncements.
43
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risk from changes in interest rates that may adversely affect its financial
position, results of operations and cash flows. In seeking to minimize the risks from interest rate fluctuations, the
Company manages exposures through its regular operating and financing activities and, when deemed appropriate,
through the use of derivative financial instruments. The Company does not use financial instruments for trading or other
speculative purposes and is not a party to any leveraged financial instruments.
The Company is exposed to interest rate risk through its borrowing activities, which are described in Note 7,
Financing, to the Consolidated Financial Statements. All of the Company’s borrowings are under fixed rate instruments.
However, the Company, from time to time, may use interest rate swap and interest rate cap agreements to help manage its
exposure to interest rate movements and reduce borrowing costs. At January 30, 2021, the Company was not a party to
any material derivative financial instruments and based on the Company’s lack of market risk sensitive instruments
outstanding at January 30, 2021, 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.
44
Item 8.
Financial Statements and Supplementary Data.
Information called for by this item is set forth in the Company’s Consolidated Financial Statements and
supplementary data contained in this report and is incorporated herein by this reference. Specific financial statements and
supplementary data can be found at the pages listed in the following index:
INDEX
Report of Management
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the fiscal years ended January 30, 2021, February 1, 2020 and
February 2, 2019
Consolidated Statements of Comprehensive Income (Loss) for the fiscal years ended January 30, 2021, February
1, 2020 and February 2, 2019
Consolidated Balance Sheets as of January 30, 2021 and February 1, 2020
Consolidated Statements of Changes in Shareholders’ Equity for the fiscal years ended January 30, 2021,
February 1, 2020 and February 2, 2019
Consolidated Statements of Cash Flows for the fiscal years ended January 30, 2021, February 1, 2020 and
February 2, 2019
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-6
F-7
F-8
F-9
F-10
F-11
45
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
a.
Disclosure Controls and Procedures
The Company’s Chief Executive Officer and Chief Financial Officer have carried out, as of January 30, 2021, with
the participation of the Company’s management, an evaluation of the effectiveness of the Company’s disclosure controls
and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based upon this evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that as of January 30, 2021, the Company’s disclosure controls and
procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in
reports the Company files under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the SEC rules and forms, and that information required to be disclosed by the Company in the reports
the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management,
including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
b. Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Exchange Act Rule 13a-15(f). The Company’s management conducted an assessment of the
Company’s internal control over financial reporting based on the framework established by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on this
assessment, the Company’s management has concluded that, as of January 30, 2021, the Company’s internal control over
financial reporting was effective.
The Company’s independent registered public accounting firm, KPMG LLP, has audited the Company’s
Consolidated Financial Statements included in this Annual Report on Form 10-K and the effectiveness of the Company’s
internal control over financial reporting as of January 30, 2021, and has issued an attestation report expressing an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting, as stated in their
report located on page F-3.
c.
Changes in Internal Control over Financial Reporting
From time to time adoption of new accounting pronouncements, major organizational restructuring and realignment
occurs for which the Company reviews its internal control over financial reporting. As a result of this review, there were
no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recently
completed quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
Item 9B. Other Information.
None.
46
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information required by this item for executive officers is set forth under “Item 1. Business - Information about
our Executive Officers” in this report. The other information called for by this item is set forth under “Item 1. Election of
Directors” and “Further Information Concerning the Board of Directors - Committees of the Board” in the Proxy
Statement to be delivered to stockholders in connection with the 2021 Annual Meeting of Shareholders (the “Proxy
Statement”), and incorporated herein by reference.
The Company’s Code of Conduct is in compliance with the applicable rules of the SEC that apply to the principal
executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar
functions. A copy of the Code of Conduct is available, free of charge, through the Company’s website at
https://www.macysinc.com. We intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an
amendment to, or waiver from, a provision of the Code of Conduct by posting such information to the Company’s website
at the address and location specified above.
Set forth below are the names, ages and principal occupations of the Company's non-employee directors as of
March 25, 2021.
Name
David P. Abney
Francis S. Blake
Torrence N. Boone
John A. Bryant
Deirdre P. Connelly
Leslie D. Hale
William H. Lenehan
Sara Levinson
Joyce M. Roché
Paul C. Varga
Marna C. Whittington
Age
65
Director
Since
2018
71
51
55
60
48
44
70
74
57
73
2015
2019
2015
2008
2015
2016
1997
2006
2012
1993
Principal Occupation
Former Chairman and Chief Executive Officer of UPS, Inc., a
multinational package delivery and supply chain management
company.
Former Chairman and Chief Executive Officer of The Home
Depot, Inc., a multinational home improvement retailer.
Vice President, Global Client Partnerships, Alphabet Inc. since
2010.
Former Chairman, President and Chief Executive Officer of
Kellogg Company, a multinational cereal and snack food
producer.
Former President, North American Pharmaceuticals of
GlaxoSmithKline, a global pharmaceutical company.
President and Chief Executive Officer of RLJ Lodging Trust, a
publicly-traded lodging real estate investment trust, since 2018.
President and Chief Executive Officer of Four Corners Property
Trust, Inc., a real estate investment trust, since 2015.
Co-Founder and Director of Katapult, a digital entertainment
company making products for today's creative generation, since
2013.
Former President and Chief Executive Officer of Girls
Incorporated, a national non-profit research, education and
advocacy organization.
Former Chairman and Chief Executive Officer of Brown-
Forman Corporation, a spirits and wine company.
Former Chief Executive Officer of Allianz Global Investors
Capital, a diversified global investment firm.
Item 11. Executive Compensation.
Information called for by this item is set forth under “Compensation Discussion & Analysis,” “Compensation of the
Named Executives for 2020,” “Compensation Committee Report,” “Compensation Committee Interlocks and Insider
Participation” and "Further Information Concerning the Board of Directors – Risk Oversight" in the Proxy Statement and
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information called for by this item is set forth under “Stock Ownership – Certain Beneficial Owners,” “Stock
Ownership – Securities Authorized for Issuance Under Equity Compensation Plans,” and “Stock Ownership – Stock
Ownership of Directors and Executive Officers” in the Proxy Statement and incorporated herein by reference.
47
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information called for by this item is set forth under “Further Information Concerning the Board of Directors –
Director Independence” and “Policy on Related Person Transactions” in the Proxy Statement and incorporated herein by
reference.
Item 14. Principal Accountant Fees and Services.
Information called for by this item is set forth under “Item 2. Ratification of the Appointment of Independent
Registered Public Accounting Firm” in the Proxy Statement and incorporated herein by reference.
48
PART IV
Item 15.
Exhibit and Financial Statement Schedules.
(a)
1.
The following documents are filed as part of this report:
Financial Statements:
The list of financial statements required by this item is set forth in Item 8 “Financial Statements and Supplementary
Data” and is incorporated herein by reference.
2.
Financial Statement Schedules:
All schedules are omitted because they are inapplicable, not required, or the information is included elsewhere in
the Consolidated Financial Statements or the notes thereto.
3.
Exhibits:
Exhibit
Number Description
3.1
Amended and Restated Certificate of Incorporation
3.1.1
Certificate of Designations of Series A Junior Participating
Preferred Stock
Document if Incorporated by Reference
Exhibit 3.1 to the Company's Current Report on
Form 8-K filed May 18, 2010
Exhibit 3.1.1 to the Company's Annual Report on
Form 10-K (File No. 1-13536) for the fiscal year
ended January 28, 1995
3.1.2
Article Seventh of the Amended and Restated Certificate of
Incorporation
Exhibit 3.1 to the Company's Current Report on
Form 8-K filed May 24, 2011
3.2
4.1
Amended and Restated By-Laws
Indenture, dated as of January 15, 1991, among the
Company (as successor to The May Department Stores
Company (“May Delaware”)), Macy's Retail Holdings, Inc.
(“Macy's Retail”) (f/k/a The May Department Stores
Company (NY) or “May New York”) and The Bank of New
York Mellon Trust Company, N.A. (“BNY Mellon”,
successor to J.P. Morgan Trust Company and as successor
to The First National Bank of Chicago), as Trustee (“1991
Indenture”)
4.1.1
Guarantee of Securities, dated as of August 30, 2005, by the
Company relating to 1991 Indenture
4.1.2
4.1.3
First Supplemental Indenture to 1991 Indenture dated as of
May 28, 2020 among Macy’s Retail Holdings, Inc., a
Delaware corporation (as successor to Macy’s Retail
Holdings, Inc., a New York corporation), Macy’s, Inc. and
The Bank of New York Mellon Trust Company, N.A., as
Trustee
Second Supplemental Indenture to 1991 Indenture dated as
of June 3, 2020 among Macy’s Retail Holdings, LLC, a
Delaware limited liability company (as successor to Macy’s
Retail Holdings, Inc., a Delaware corporation), Macy’s,
Inc. and The Bank of New York Mellon Trust Company,
N.A., as Trustee
Exhibit 3.1 to the Company's Current Report on
Form 8-K filed March 25, 2021
Exhibit 4(2) to May New York’s Current Report
on Form 8-K filed January 15, 1991
Exhibit 10.13 to the Company's Current Report
on Form 8-K filed August 30, 2005 (“August 30,
2005 Form 8-K”)
Exhibit 4.3 to the Company’s Quarterly Report
on Form 10-Q (File No. 1-13536) for the quarter
ended May 2, 2020 (“May 2, 2020 Form 10-Q”)
Exhibit 4.4 to May 2, 2020 Form 10-Q
4.1.4
Third Supplemental Indenture to 1991 Indenture dated as
Exhibit 4.15 to May 2, 2020 Form 10-Q
49
Exhibit
Number Description
Document if Incorporated by Reference
of June 26, 2020 among Macy’s Retail Holdings, LLC, an
Ohio limited liability company (as successor to Macy’s
Retail Holdings, LLC, a Delaware limited liability
company), Macy’s, Inc. and The Bank of New York
Mellon Trust Company, N.A., as Trustee
Indenture, dated as of December 15, 1994, between the
Company and U.S. Bank National Association (successor to
State Street Bank and Trust Company and The First
National Bank of Boston), as Trustee (“1994 Indenture”)
Ninth Supplemental Indenture to 1994 Indenture, dated as
of July 14, 1997, between the Company and U.S. Bank
National Association (successor to State Street Bank and
Trust Company and The First National Bank of Boston), as
Trustee
Tenth Supplemental Indenture to 1994 Indenture, dated as
of August 30, 2005, among the Company, Macy's Retail
and U.S. Bank National Association (as successor to State
Street Bank and Trust Company and as successor to The
First National Bank of Boston), as Trustee
Exhibit 4.1 to the Company's Registration
Statement on Form S-3 (Registration No. 33-
88328) filed January 9, 1995
Exhibit 3 to the Company's Current Report on
Form 8-K filed July 15, 1997
Exhibit 10.14 to August 30, 2005 Form 8-K
Guarantee of Securities, dated as of August 30, 2005, by the
Company relating to 1994 Indenture
Exhibit 10.16 to August 30, 2005 Form 8-K
Eleventh Supplemental Indenture to 1994 Indenture dated
as of May 28, 2020 among Macy’s Retail Holdings, Inc., a
Delaware corporation (as successor to Macy’s Retail
Holdings, Inc., a New York corporation), Macy’s, Inc. and
U.S. Bank National Association, as Trustee
Twelfth Supplemental Indenture to 1994 Indenture dated as
of June 3, 2020 among Macy’s Retail Holdings, LLC, a
Delaware limited liability company (as successor to Macy’s
Retail Holdings, Inc., a Delaware corporation), Macy’s,
Inc. and U.S. Bank National Association, as Trustee
Thirteenth Supplemental Indenture to 1994 Indenture dated
as of June 24, 2020 among Macy’s Retail Holdings, LLC,
an Ohio limited liability company (as successor to Macy’s
Retail Holdings, LLC, a Delaware limited liability
company), Macy’s, Inc. and U.S. Bank National
Association, as Trustee
Indenture, dated as of June 17, 1996, among the Company
(as successor to May Delaware), Macy's Retail (f/k/a May
New York) and The Bank of New York Mellon Trust
Company, N.A. (“BNY Mellon”, successor to J.P. Morgan
Trust Company), as Trustee (“1996 Indenture”)
First Supplemental Indenture to 1996 Indenture, dated as of
August 30, 2005, by and among the Company (as successor
to May Delaware), Macy's Retail (f/k/a May New York)
and BNY Mellon (successor to J.P. Morgan Trust
Company, National Association), as Trustee
Exhibit 4.5 to May 2, 2020 Form 10-Q
Exhibit 4.6 to May 2, 2020 Form 10-Q
Exhibit 4.16 to May 2, 2020 Form 10-Q
Exhibit 4.1 to the Registration Statement on Form
S-3 (Registration No. 333-06171) filed June 18,
1996 by May Delaware
Exhibit 10.9 to August 30, 2005 Form 8-K
4.2
4.2.1
4.2.2
4.2.3
4.2.4
4.2.5
4.2.6
4.3
4.3.1
4.3.2
Second Supplemental Indenture to 1996 Indenture dated as
of May 28, 2020 among Macy’s Retail Holdings, Inc., a
Exhibit 4.7 to May 2, 2020 Form 10-Q
50
Exhibit
Number Description
Document if Incorporated by Reference
4.3.3
4.3.4
4.4
4.4.1
4.4.2
4.4.3
4.4.4
4.4.5
4.4.6
4.4.7
Delaware corporation (as successor to Macy’s Retail
Holdings, Inc., a New York corporation), Macy’s, Inc. and
The Bank of New York Mellon Trust Company, N.A., as
Trustee
Third Supplemental Indenture to 1996 Indenture dated as
of June 3, 2020 among Macy’s Retail Holdings, LLC, a
Delaware limited liability company (as successor to Macy’s
Retail Holdings, Inc., a Delaware corporation), Macy’s,
Inc. and The Bank of New York Mellon Trust Company,
N.A., as Trustee
Fourth Supplemental Indenture to 1996 Indenture dated as
of June 26, 2020 among Macy’s Retail Holdings, LLC, an
Ohio limited liability company (as successor to Macy’s
Retail Holdings, LLC, a Delaware limited liability
company), Macy’s, Inc. and The Bank of New York
Mellon Trust Company, N.A., as Trustee
Exhibit 4.8 to May 2, 2020 Form 10-Q
Exhibit 4.17 to May 2, 2020 Form 10-Q
Indenture, dated as of September 10, 1997, between the
Company and U.S. Bank National Association (successor to
Citibank, N.A.), as Trustee (“1997 Indenture”)
Exhibit 4.4 to the Company's Amendment No. 1
to Form S-3 (Registration No. 333-34321) filed
September 11, 1997
First Supplemental Indenture to 1997 Indenture, dated as of
February 6, 1998, between the Company and U.S. Bank
National Association (successor to Citibank, N.A.), as
Trustee
Third Supplemental Indenture to 1997 Indenture, dated as
of March 24, 1999, between the Company and U.S. Bank
National Association (successor to Citibank, N.A.), as
Trustee
Seventh Supplemental Indenture to 1997 Indenture, dated as
of August 30, 2005 among the Company, Macy's Retail and
U.S. Bank National Association (successor to Citibank,
N.A.), as Trustee
Guarantee of Securities, dated as of August 30, 2005, by the
Company relating to 1997 Indenture
Eighth Supplemental Indenture to 1997 Indenture dated as
of May 28, 2020 among Macy’s Retail Holdings, Inc., a
Delaware corporation (as successor to Macy’s Retail
Holdings, Inc., a New York corporation), Macy’s, Inc. and
U.S. Bank National Association, as Trustee
Ninth Supplemental Indenture to 1997 Indenture dated as
of June 3, 2020 among Macy’s Retail Holdings, LLC, a
Delaware limited liability company (as successor to Macy’s
Retail Holdings, Inc., a Delaware corporation), Macy’s,
Inc. and U.S. Bank National Association, as Trustee
Tenth Supplemental Indenture to 1997 Indenture dated as
of June 24, 2020 among Macy’s Retail Holdings, LLC, an
Ohio limited liability company (as successor to Macy’s
Retail Holdings, LLC, a Delaware limited liability
company), Macy’s, Inc. and U.S. Bank National
Association, as Trustee
51
Exhibit 2 to the Company's Current Report on
Form 8-K filed February 6, 1998
Exhibit 4.2 to the Company's Registration
Statement on Form S-4 (Registration No. 333-
76795) filed April 22, 1999
Exhibit 10.15 to August 30, 2005 Form 8-K
Exhibit 10.17 to August 30, 2005 Form 8-K
Exhibit 4.9 to May 2, 2020 Form 10-Q
Exhibit 4.10 to May 2, 2020 Form 10-Q
Exhibit 4.18 to May 2, 2020 Form 10-Q
Exhibit
Number Description
4.5
Indenture, dated as of July 20, 2004, among the Company
(as successor to May Delaware), Macy's Retail (f/k/a May
New York) and BNY Mellon, as Trustee (“2004
Indenture”)
First Supplemental Indenture to 2004 Indenture, dated as of
August 30, 2005 among the Company (as successor to May
Delaware), Macy's Retail and BNY Mellon (successor to
J.P. Morgan Trust Company, National Association), as
Trustee
Document if Incorporated by Reference
Exhibit 4.1 to Current Report on Form 8-K (File
No. 001-00079) filed July 22, 2004 by May
Delaware
Exhibit 10.10 to August 30, 2005 Form 8-K
Indenture, dated as of November 2, 2006, by and among
Macy's Retail, the Company and U.S. Bank National
Association, as Trustee (“2006 Indenture”)
Exhibit 4.6 to the Company's Registration
Statement on Form S-3ASR (Registration No.
333-138376) filed November 2, 2006
Third Supplemental Indenture to 2006 Indenture, dated
March 12, 2007, among Macy's Retail, the Company and
U.S. Bank National Association, as Trustee
Sixth Supplemental Indenture to 2006 Indenture, dated
December 10, 2015, among Macy's Retail, the Company
and U.S. Bank National Association, as Trustee
Seventh Supplement Indenture to 2006 Indenture dated as
of May 28, 2020 among Macy's Retail Holdings, Inc., a
Delaware corporation (as successor to Macy's Retail
Holdings, Inc., a New York corporation), Macy's, Inc. and
U.S. Bank National Association, as Trustee
Eighth Supplemental Indenture to 2006 Indenture dated as
of June 3, 2020 among Macy’s Retail Holdings, LLC, a
Delaware limited liability company (as successor to Macy’s
Retail Holdings, Inc., a Delaware corporation), Macy’s,
Inc. and U.S. Bank National Association, as Trustee
Ninth Supplemental Indenture to 2006 Indenture dated as
of June 24, 2020 among Macy’s Retail Holdings, LLC, an
Ohio limited liability company (as successor to Macy’s
Retail Holdings, LLC, a Delaware limited liability
company), Macy’s, Inc. and U.S. Bank National
Association, as Trustee
Exhibit 4.2 to the Company's Current Report on
Form 8-K filed March 12, 2007
Exhibit 4.2 to the Company's Current Report on
Form 8-K filed December 10, 2015
Exhibit 4.11 to May 2, 2020 Form 10-Q
Exhibit 4.12 to May 2, 2020 Form 10-Q
Exhibit 4.19 to May 2, 2020 Form 10-Q
Indenture, dated as of January 13, 2012, among Macy's
Retail, the Company and BNY Mellon, as Trustee ("2012
Indenture")
Exhibit 4.1 to the Company's Current Report on
Form 8-K filed January 13, 2012 (“January 13,
2012 Form 8-K”)
First Supplemental Trust Indenture to 2012 Indenture, dated
as of January 13, 2012, among Macy's Retail, as issuer, the
Company, as guarantor, and BNY Mellon, as trustee
Second Supplemental Trust Indenture to 2012 Indenture,
dated as of January 13, 2012, among Macy's Retail, as
issuer, the Company, as guarantor, and BNY Mellon, as
trustee
Exhibit 4.2 to January 13, 2012 Form 8-K
Exhibit 4.3 to January 13, 2012 Form 8-K
Third Supplemental Trust Indenture, dated as of November
20, 2012, among Macy's Retail, as issuer, the Company, as
guarantor, and BNY Mellon, as trustee
Exhibit 4.2 to the Company's Current Report on
Form 8-K filed November 20, 2012 (“November
20, 2012 Form 8-K”)
4.5.1
4.6
4.6.1
4.6.2
4.6.3
4.6.4
4.6.5
4.7
4.7.1
4.7.2
4.7.3
4.7.4
Fourth Supplemental Trust Indenture, dated as of November Exhibit 4.3 to November 20, 2012 Form 8-K
52
Exhibit
Number Description
Document if Incorporated by Reference
4.7.5
4.7.6
4.7.7
4.7.8
4.7.9
20, 2012, among Macy's Retail, as issuer, the Company, as
guarantor, and BNY Mellon, as trustee
Fifth Supplemental Trust Indenture, dated as of September
6, 2013, among Macy's Retail, as issuer, the Company, as
guarantor, and BNY Mellon, as trustee
Sixth Supplemental Trust Indenture, dated as of May 23,
2014, among Macy's Retail, as issuer, the Company, as
guarantor, and BNY Mellon, as trustee
Seventh Supplemental Trust Indenture, dated as of
November 18, 2014, among Macy's Retail, as issuer, the
Company, as guarantor, and BNY Mellon, as trustee
Eighth Supplemental Indenture to 2012 Indenture dated as
of May 28, 2020 among Macy’s Retail Holdings, Inc., a
Delaware corporation (as successor to Macy’s Retail
Holdings, Inc., a New York corporation), Macy’s, Inc. and
The Bank of New York Mellon Trust Company, N.A., as
Trustee
Ninth Supplemental Indenture to 2012 Indenture dated as
of June 3, 2020 among Macy’s Retail Holdings, LLC, a
Delaware limited liability company (as successor to Macy’s
Retail Holdings, Inc., a Delaware corporation), Macy’s,
Inc. and The Bank of New York Mellon Trust Company,
N.A., as Trustee
4.7.10
Tenth Supplemental Indenture to 2012 Indenture dated as
of June 26, 2020 among Macy’s Retail Holdings, LLC, an
Ohio limited liability company (as successor to Macy’s
Retail Holdings, LLC, a Delaware limited liability
company), Macy’s, Inc. and The Bank of New York
Mellon Trust Company, N.A., as Trustee
4.8
Indenture dated as of June 8, 2020, among Macy's, Inc., as
issuer, the guarantors party thereto and U.S. Bank National
Association, as trustee and collateral trustee, relating to the
Company's 8.375% Senior Secured Notes due 2025
4.8.1
Form of 8.375% Senior Secured Note due 2025
4.9
Indenture, dated as of July 28, 2020, among Macy’s Retail
Holdings, LLC, as issuer, Macy’s, Inc., as guarantor, and
U.S. Bank National Association, as trustee and collateral
trustee, relating to Macy’s Retail Holdings, LLC’s 6.65%
Senior Secured Debentures due 2024, 6.7% Senior Secured
Debentures due 2028, 8.75% Senior Secured Debentures
due 2029, 7.875% Senior Secured Debentures due 2030,
6.9% Senior Secured Debentures due 2032 and 6.7%
Senior Secured Debentures due 2034
4.9.1
Form of 6.65% Senior Secured Debentures due 2024, 6.7%
Senior Secured Debentures due 2028, 8.75% Senior
Secured Debentures due 2029, 7.875% Senior Secured
Debentures due 2030, 6.9% Senior Secured Debentures due
2032 and 6.7% Senior Secured Debentures due 2034
53
Exhibit 4.2 to the Company's Current Report on
Form 8-K filed September 6, 2013
Exhibit 4.2 to the Company's Current Report on
Form 8-K filed May 23, 2014
Exhibit 4.2 to the Company's Current Report on
Form 8-K filed November 18, 2014
Exhibit 4.13 to May 2, 2020 Form 10-Q
Exhibit 4.14 to May 2, 2020 Form 10-Q
Exhibit 4.20 to May 2, 2020 Form 10-Q
Exhibit 4.1 to the Company's Current Report on
Form 8-K filed June 9, 2020 (“June 9, 2020 Form
8-K”)
Exhibit A to Exhibit 4.1 to June 9, 2020 Form 8-
K
Exhibit 4.1 to the Company’s Current Report on
Form 8-K filed July 28, 2020 (“July 28, 2020
Form 8-K”)
Exhibit A to Exhibit 4.1 to July 28, 2020 Form 8-
K
Exhibit
Number Description
4.9.2
Fifth Supplemental Trust Indenture to 1996 Indenture,
dated as of July 10, 2020, among Macy’s Retail Holdings,
LLC, as issuer, Macy’s, Inc. as guarantor, and The Bank of
New York Mellon Trust Company, N.A., as trustee,
relating to Macy’s Retail Holdings, LLC’s 6.65% Senior
Debentures due 2024, 6.7% Senior Debentures due 2028,
8.75% Senior Debentures due 2029, 7.875% Senior
Debentures due 2030, 6.9% Senior Debentures due 2032
and 6.7% Senior Debentures due 2034
4.10
Description of the Company's Securities Registered under
Section 12 of the Securities Exchange Act of 1934
Document if Incorporated by Reference
Exhibit 4.3 to July 28, 2020 Form 8-K
Exhibit 4.8 to the Company’s Annual Report on
Form 10-K (File No. 1-135360) for the fiscal
year ended February 1, 2020 (“2019 Form 10-
K”)
Exhibit 10.1 to June 9, 2020 Form 8-K
Credit Agreement, dated as of June 8, 2020, among Macy’s
Inventory Funding LLC, as the Borrower, Macy’s
Inventory Holdings LLC, as Parent, Bank of America,
N.A., as Agent, L/C Issuer and Swing Line Lender, the
other lenders party thereto, BofA Securities, Inc., Credit
Suisse Loan Funding LLC, JPMorgan Chase Bank, N.A.,
Fifth Third Bank, National Association, MUFG Union
Bank, N.A., PNC Capital Markets LLC and Wells Fargo
Bank, National Association, as Joint Lead Arrangers and
Joint Bookrunners, Credit Suisse Loan Funding LLC and
JPMorgan Chase Bank, N.A., as Co-Syndication Agents
and Fifth Third Bank, National Association, MUFG Union
Bank, N.A., as Co-Syndication Agents and Fifth Third
Bank, National Association, MUFG Union Bank, N.A.,
PNC Bank, National Association and Wells Fargo Bank,
National Association, as Co-Documentation Agents
10.1
10.2
10.3
10.4
Credit Agreement, dated as of May 9, 2019, among the
Company, Macy's Retail and Bank of America, N.A., as
administrative agent
Exhibit 10.1 to the Company's Current Report on
Form 8-K filed May 15, 2019 (“May 15, 2019
Form 8-K”)
Guarantee Agreement, dated as of May 9, 2019, among the
Company, Macy's Retail and Bank of America, N.A., as
administrative agent
Amendment No. 1 to Credit Agreement dated as of June 8,
2020 among Macy’s Retail Holdings, LLC, a Delaware
limited liability company (f/k/a Macy’s Retail Holdings,
Inc.), as Borrower, Macy’s, Inc., a Delaware corporation,
as Parent, the Lenders party thereto, and Bank of America,
N.A., as Administrative Agent
Exhibit 10.2 to May 15, 2019 Form 8-K
Exhibit 10.2 to June 9, 2020 Form 8-K
10.5
Tax Sharing Agreement, dated as of October 31, 2014,
among Macy's, Inc. and members of the Affiliated Group
10.6+ Amended and Restated Credit Card Program Agreement,
dated November 10, 2014, among the Company, FDS Bank,
Macy's Credit and Customer Services, Inc. (“MCCS”),
Macy's West Stores, Inc., Bloomingdales, Inc., Department
Stores National Bank ("DSNB") and Citibank, N.A.
Exhibit 10.7 to the Company's Annual Report on
Form 10-K (File No. 1-13536) for the fiscal year
ended January 31, 2015 (“2014 Form 10-K”)
Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q filed December 8, 2014
10.7
Senior Executive Incentive Compensation Plan, as
amended March 26, 2020 *
Exhibit 10.3 to May 2, 2020 Form 10-Q
54
Exhibit
Number Description
10.8
Form of Indemnification Agreement *
10.9
Executive Severance Plan, effective November 1, 2009, as
revised and restated January 1, 2014 *
10.9.1
Senior Executive Severance Plan effective as of April 1,
2018 *
Document if Incorporated by Reference
Exhibit 10.14 to the Registration Statement on
Form 10 (File No. 1-10951), filed November 27,
1991
Exhibit 10.14 to the Company’s Annual Report
on Form 10-K (File No. 1-13536) for the fiscal
year ended February 1, 2014 (“2013 Form 10-K”)
Exhibit 10.9.1 to the Company's Annual Report
on Form 10-K (File No. 1-13536) for the fiscal
year ended February 3, 2018 ("2017 Form 10-K")
10.10
Form of Nonqualified Stock Option Agreement under the
2009 Omnibus Incentive Compensation Plan (for
Executives and Key Employees) *
Exhibit 10.15.3 to the Company's Annual Report
on Form 10-K (File No. 1-13536) for the fiscal
year ended February 2, 2013 ("2012 Form 10-K")
10.10.1 Form of Nonqualified Stock Option Agreement under the
Amended and Restated 2009 Omnibus Incentive
Compensation Plan (for Executives and Key Employees) *
10.10.2 Form of Nonqualified Stock Option Agreement under the
Amended and Restated 2009 Omnibus Incentive
Compensation Plan (for Executives and Key Employees), as
amended *
10.10.3 Form of Stock Option Terms and Conditions under the
2018 Equity and Incentive Compensation Plan *
Exhibit 10.14.4 to 2014 Form 10-K
Exhibit 10.10.5 to 2017 Form 10-K
Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q (File No. 1-13536) for the quarter
ended May 4, 2019
10.11
10.12
Form of Time-Based Restricted Stock Agreement under the
2009 Omnibus Incentive Compensation Plan *
Exhibit 10.3 to the Company's Current Report on
Form 8-K filed March 25, 2010
2019-2021 Performance-Based Restricted Stock Unit Terms
and Conditions under the 2018 Equity and Incentive
Compensation Plan *
Exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q (File No. 1-13536) for the quarter
ended May 4, 2019
10.12.1 2020-2022 Performance-Based Restricted Stock Unit
Terms and Conditions under the 2018 Equity and Incentive
Compensation Plan*
Exhibit 10.3 to the Company’s Quarterly Report
on Form 10-Q (File No. 1-13536) for the quarter
ended August 1, 2020
10.13
Form of Time-Based Restricted Stock Unit Agreement
under the 2009 Omnibus Incentive Compensation Plan*
Exhibit 10.19 to 2012 Form 10-K
10.13.1 Form of Time-Based Restricted Stock Unit Agreement
Exhibit 10.18.1 to 2014 Form 10-K
under the Amended and Restated 2009 Omnibus Incentive
Compensation Plan *
10.13.2 Form of Time-Based Restricted Stock Unit Agreement
Exhibit 10.13.2 to 2017 Form 10-K
under the Amended and Restated 2009 Omnibus Incentive
Compensation Plan (with dividend equivalents) *
10.13.3 Form of Time-Based Restricted Stock Unit Agreement
Exhibit 10.13.3 to 2017 Form 10-K
under the Amended and Restated 2009 Omnibus Incentive
Compensation Plan, as amended *
10.13.4 Form of Time-Based Restricted Stock Unit Terms and
Conditions under the 2018 Equity and Incentive
Compensation Plan *
Exhibit 10.3 to the Company's Quarterly Report
on Form 10-Q (File No. 1-13536) for the quarter
ended May 4, 2019
10.14
Supplementary Executive Retirement Plan *
Exhibit 10.29 to the Company’s Annual Report
on Form 10-K (File No. 1-13536) for the fiscal
55
Exhibit
Number Description
10.14.1 First Amendment to the Supplementary Executive
Retirement Plan effective January 1, 2012 *
Document if Incorporated by Reference
year ended January 31, 2009 (“2008 Form 10-K”)
Exhibit 10.21.1 to the Company's Annual Report
on Form 10-K (File No. 1-13536) for the fiscal
year ended January 28, 2012
10.14.2 Second Amendment to Supplementary Executive
Exhibit 10.20.2 to 2012 Form 10-K
Retirement Plan effective January 1, 2012 *
10.14.3 Third Amendment to Supplementary Executive Retirement
Exhibit 10.20.3 to 2013 Form 10-K
Plan effective December 31, 2013 *
10.15
Executive Deferred Compensation Plan *
Exhibit 10.30 to 2008 Form 10-K
10.15.1 First Amendment to Executive Deferred Compensation Plan
Exhibit 10.21.1 to 2013 Form 10-K
effective December 31, 2013 *
10.16 Macy's, Inc. 401(k) Retirement Investment Plan (the
Exhibit 10.22 to 2013 Form 10-K
"Plan") (amending and restating the Macy's, Inc. 401(k)
Retirement Investment Plan) effective as of January 1,
2014 *
10.16.1 First Amendment to the Plan regarding matching
contributions with respect to the Plan’s plan years
beginning on and after January 1, 2014, effective January 1,
2014 *
Exhibit 10.21.1 to 2014 Form 10-K
10.16.2 Second Amendment to the Plan regarding marriage status,
Exhibit 10.21.2 to 2014 Form 10-K
effective January 1, 2014 *
10.16.3 Third Amendment to the Plan regarding matching
contributions with respect to the Plan’s plan years
beginning on and after January 1, 2014 *
Exhibit 10.21.3 to 2014 Form 10-K
10.16.4 Fourth Amendment to the Plan regarding rules applicable to
Puerto Rico participants effective January 1, 2011 (and for
the Plan's plan years beginning on and after that date)*
Exhibit 10.17.4 to the Company's Annual Report
on Form 10-K (File No. 1-13536) for the fiscal
year ended January 30, 2016 ("2015 Form 10-K")
10.16.5 Fifth Amendment to the Plan regarding eligible associates
to participate (pre-tax deferrals only, no match)
immediately upon hire effective as of January 1, 2014*
Exhibit 10.17.5 to 2015 Form 10-K
10.17
Director Deferred Compensation Plan *
Exhibit 10.33 to 2008 Form 10-K
10.18 Macy's, Inc. Amended and Restated 2009 Omnibus
Incentive Compensation Plan *
Appendix B to the Company's Proxy Statement
dated April 2, 2014
10.19 Macy's, Inc. 2018 Equity and Incentive Compensation Plan
*
Appendix B to the Company's Proxy Statement
dated April 4, 2018
10.20 Macy's, Inc. Deferred Compensation Plan (Amended and
Exhibit 10.18 to 2019 Form 10-K
10.21
10.22
10.23
restated effective as of August 1, 2018) *
Change in Control Plan, effective November 1, 2009, as
revised and restated effective April 1, 2018 *
Time Sharing Agreement between Macy's, Inc. and Jeff
Gennette, dated June 14, 2017 *
Exhibit 10.20 to 2017 Form 10-K
Exhibit 10.21.1 to 2017 Form 10-K
Advisory Agreement dated as of April 6, 2020 by and
between Macy’s, Inc. and Paula A. Price*
Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed April 7, 2020
21
Subsidiaries
56
Exhibit
Number Description
Document if Incorporated by Reference
22
23
24
31.1
31.2
32.1
32.2
101
List of Subsidiary Guarantors
Consent of KPMG LLP
Powers of Attorney
Certification of Chief Executive Officer pursuant to Rule
13a-14(a)
Certification of Chief Financial Officer pursuant to Rule
13a-14(a)
Certification by Chief Executive Officer under Section 906
of the Sarbanes-Oxley Act
Certification by Chief Financial Officer under Section 906
of the Sarbanes-Oxley Act
The following financial statements from Macy's, Inc.’s
Annual Report on Form 10-K for the year ended January
30, 2021, filed March 29, 2021, formatted in iXBRL (Inline
eXtensible Business Reporting Language): (i) Consolidated
Statements of Operations, (ii) Consolidated Statements of
Comprehensive Income (Loss), (iii) Consolidated Balance
Sheets, (iv) Consolidated Statements of Changes in
Shareholders’ Equity, (v) Consolidated Statements of Cash
Flows, and (vi) the Notes to Consolidated Financial
Statements, tagged as block of text and in detail.
104
Cover Page Interactive Data File (formatted as iXBRL and
contained in Exhibit 101)
+
*
Portions of the exhibit have been omitted pursuant to a request for confidential treatment. The confidential
portions have been provided to the SEC.
Constitutes a compensatory plan or arrangement.
57
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
MACY’S, INC.
By:
/s/ ELISA D. GARCIA
Elisa D. Garcia
Executive Vice President, Chief Legal Officer and Secretary
Date: March 29, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities indicated on March 29, 2021.
*
Jeff Gennette
*
Adrian V. Mitchell
*
Paul Griscom
Chief Executive Officer (principal
executive officer), Chairman of the
Board and Director
Executive Vice President and Chief
Financial Officer (principal financial
officer)
Senior Vice President and Controller
(principal accounting officer)
*
David P. Abney
*
Francis S. Blake
*
Torrence N. Boone
Director
Director
Director
*
John A. Bryant
*
Deirdre P. Connelly
*
Leslie D. Hale
Director
Director
Director
*
William H. Lenehan
*
Sara Levinson
*
Joyce M. Roché
Director
Director
Director
*
Paul C. Varga
*
Marna C. Whittington
Director
Director
*
The undersigned, by signing her name hereto, does sign and execute this Annual Report on Form 10-K pursuant
to the Powers of Attorney executed by the above-named officers and directors and filed herewith.
By:
/s/ ELISA D. GARCIA
Elisa D. Garcia
Attorney-in-Fact
58
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Management
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the fiscal years ended January 30, 2021, February 1, 2020 and February 2,
2019
Consolidated Statements of Comprehensive Income (Loss) for the fiscal years ended January 30, 2021, February 1,
2020 and February 2, 2019
Consolidated Balance Sheets as of January 30, 2021 and February 1, 2020
Consolidated Statements of Changes in Shareholders’ Equity for the fiscal years ended January 30, 2021, February 1,
2020 and February 2, 2019
Consolidated Statements of Cash Flows for the fiscal years ended January 30, 2021, February 1, 2020 and February
2, 2019
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-6
F-7
F-8
F-9
F-10
F-11
F-1
To the Shareholders of Macy’s, Inc.:
REPORT OF MANAGEMENT
The integrity and consistency of the Consolidated Financial Statements of Macy’s, Inc. and subsidiaries, which were
prepared in accordance with accounting principles generally accepted in the United States of America, are the responsibility of
management and properly include some amounts that are based upon estimates and judgments.
The Company maintains a system of internal accounting controls, which is supported by a program of internal audits
with appropriate management follow-up action, to provide reasonable assurance, at appropriate cost, that the Company’s
assets are protected and transactions are properly recorded. Additionally, the integrity of the financial accounting system is
based on careful selection and training of qualified personnel, organizational arrangements which provide for appropriate
division of responsibilities and communication of established written policies and procedures.
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Exchange Act Rule 13a-15(f) and has issued Management’s Report on Internal Control over Financial
Reporting.
The Consolidated Financial Statements of the Company have been audited by KPMG LLP. Their report expresses their
opinion as to the fair presentation, in all material respects, of the financial statements and is based upon their independent
audits.
The Audit Committee, composed solely of outside directors, meets periodically with KPMG LLP, the internal auditors
and representatives of management to discuss auditing and financial reporting matters. In addition, KPMG LLP and the
Company’s internal auditors meet periodically with the Audit Committee without management representatives present and
have free access to the Audit Committee at any time. The Audit Committee is responsible for recommending to the Board of
Directors the engagement of the independent registered public accounting firm and the general oversight review of
management’s discharge of its responsibilities with respect to the matters referred to above.
Jeff Gennette
Chief Executive Officer, Chairman of the Board and Director
Adrian V. Mitchell
Executive Vice President and Chief Financial Officer
Paul Griscom
Senior Vice President, Controller
F-2
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Macy’s, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Macy’s, Inc. and subsidiaries (the Company) as of January
30, 2021 and February 1, 2020, the related consolidated statements of operations, comprehensive income (loss), changes in
shareholders’ equity, and cash flows for each of the years in the three-year period ended January 30, 2021 and the related
notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over
financial reporting as of January 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of January 30, 2021 and February 1, 2020, and the results of its operations and its cash flows for
each of the years in the three-year period ended January 30, 2021, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of January 30, 2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases as
of February 3, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying 9A(b), “Management’s Annual Report on Internal Control over Financial Reporting.” Our
responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s
internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in
all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
F-3
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Assessment of the liability for unrecognized tax benefits
As discussed in Note 9 to the consolidated financial statements, the Company has recorded gross unrecognized tax
benefits, including interest and penalties, of $173 million as of January 30, 2021. The Company recognizes tax
positions when it is more likely than not that the tax position will be sustained on examination based on the technical
merits of the position. Uncertain tax positions meeting the recognition threshold are then measured at the largest
amount of benefit that is more likely than not to be realized upon ultimate settlement.
We identified the assessment of the liability for unrecognized tax benefits as a critical audit matter. Complex auditor
judgment was required in evaluating the Company’s interpretation of tax law and its estimate of the ultimate resolution
of the tax positions.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of certain internal controls related to the Company’s unrecognized tax benefits
process, including a control related to the interpretation of tax law and the estimate of the ultimate resolution of the tax
positions. Since tax law is complex and often subject to interpretation, we involved tax professionals with specialized
skills and knowledge. They assisted us in evaluating the estimate of the ultimate resolution of the tax positions taken by
the Company and the impact on unrecognized tax benefits by assessing tax examination activity and evaluating the tax
positions based on tax law, regulations, and other authoritative guidance with respect to statute expirations and reserve
additions.
Assessment of the carrying value of certain property and equipment
As discussed in Note 1 to the consolidated financial statements, the Company evaluates the carrying value of property
and equipment whenever events or changes in circumstances indicate that a potential impairment has occurred. As of
January 30, 2021, net property and equipment was $5,940 million. When a potential impairment has occurred, an
impairment write-down is recorded if the carrying value of the long-lived asset exceeds its fair value. As discussed in
Note 4 to the consolidated financial statements, the Company recognized $200 million of impairments primarily related
to long-lived tangible and right of use assets in the year ended January 30, 2021.
We identified the assessment of the carrying value of certain property and equipment as a critical audit matter.
Subjective and challenging auditor judgment was required to assess the fair value estimates made related to certain
properties, specifically identifying comparable sales transactions and market rent assumptions, as well as assessing
adjustments to the comparable market data based on the specific characteristics of the property.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of certain internal controls related to the Company’s impairment assessment
process for property and equipment, including controls related to fair value estimates made related to the underlying
properties. We involved valuation professionals with specialized skills and knowledge who assisted in:
•
•
Developing independent fair value estimates for certain properties by selecting comparable sales transactions and
market rent assumptions based on publicly available market data for comparable assets, and making certain
adjustments considering the location, quality of the property and real estate market conditions
Comparing the independent fair value estimates for certain properties to the Company’s fair value estimates that
were ultimately used to identify and record, if applicable, impairment.
F-4
Assessment of the carrying value of goodwill in the Macy’s reporting unit
As discussed in Notes 4 and 6 to the consolidated financial statements, during 2020 the Company recognized $2,982
million of goodwill impairment for the Macy’s reporting unit. The goodwill impairment resulted from a sustained
decline in the Company's market capitalization and changes in the Company’s long-term projections driven largely by
the impacts of the COVID-19 pandemic. The Company reviews goodwill for impairment annually and whenever
events or changes in circumstances indicate that the carrying value of a reporting unit likely exceeds its fair value. This
involves estimating the fair value of reporting units using a market approach or a combination of a market approach
and income approach, as appropriate.
We identified the assessment of the carrying value of goodwill in the Macy’s reporting unit as a critical audit matter.
Specialized skills and knowledge were required to evaluate the company-specific risk premium applied in discounting
management’s financial projections. Subjective and challenging auditor judgment was required to evaluate comparable
market-based information, including assessing the control premium implied by a comparison of management’s
discounted financial projections to the Company’s market capitalization.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of certain internal controls related to the assessment of the carrying value of
goodwill in the Macy’s reporting unit, including a control related to management's review of the company-specific risk
premium. We involved valuation professionals with specialized skills and knowledge who assisted in evaluating the
company-specific risk premium by:
•
•
Considering how management’s financial projections compared to publicly-available forecasts of comparable
companies
Evaluating the implied control premium calculated as part of a market capitalization reconciliation relative to a
range of control premiums on observed transactions in the industry.
/s/ KPMG LLP
We have served as the Company’s auditor since 1988.
Cincinnati, Ohio
March 29, 2021
F-5
MACY’S, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(millions, except per share data)
Net sales
Credit card revenues, net
Cost of sales
Selling, general and administrative expenses
Gains on sale of real estate
Restructuring, impairment, store closing and other costs
Operating income (loss)
Benefit plan income, net
Settlement charges
Interest expense
Financing costs
Losses on early retirement of debt
Interest income
Income (loss) before income taxes
Federal, state and local income tax benefit (expense)
Net income (loss)
Net loss attributable to noncontrolling interest
Net income (loss) attributable to Macy's, Inc. shareholders
Basic earnings (loss) per share attributable to Macy's, Inc.
shareholders
Diluted earnings (loss) per share attributable to Macy's, Inc.
shareholders
2020
2019
2018
$
$
$
$
17,346 $
751
(12,286)
(6,767)
60
(3,579)
(4,475)
54
(84)
(284)
(5)
—
4
(4,790)
846
(3,944)
—
(3,944) $
24,560 $
771
(15,171)
(8,998)
162
(354)
970
31
(58)
(205)
—
(30)
20
728
(164)
564
—
564 $
(12.68) $
1.82 $
(12.68) $
1.81 $
24,971
768
(15,215)
(9,039)
389
(136)
1,738
39
(88)
(261)
—
(33)
25
1,420
(322)
1,098
10
1,108
3.60
3.56
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-6
MACY’S, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(millions)
Net income (loss)
Other comprehensive income (loss), net of taxes:
Net actuarial gain (loss) and prior service credit on post
employment and postretirement benefit plans, net of
tax effect of $37 million, $36 million and $52 million
Reclassifications to net income (loss):
Net actuarial loss and prior service cost on post employment
and postretirement benefit plans, net of tax effect of $12
million, $8 million and $7 million
Settlement charges, net of tax effect of $22 million, $14
million and $23 million
Total other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive loss attributable to noncontrolling interest
Comprehensive income (loss) attributable to Macy's, Inc. shareholders $
2020
2019
2018
$
(3,944) $
564 $
1,098
107
(107)
(151)
35
62
204
(3,740)
—
(3,740) $
23
44
(40)
524
—
524 $
23
65
(63)
1,035
10
1,045
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-7
MACY’S, INC.
CONSOLIDATED BALANCE SHEETS
(millions)
January 30, 2021
February 1, 2020
ASSETS
Current Assets:
Cash and cash equivalents
Receivables
Merchandise inventories
Prepaid expenses and other current assets
Total Current Assets
Property and Equipment – net
Right of Use Assets
Goodwill
Other Intangible Assets – net
Other Assets
Total Assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt
Merchandise accounts payable
Accounts payable and accrued liabilities
Income taxes
Total Current Liabilities
Long-Term Debt
Long-Term Lease Liabilities
Deferred Income Taxes
Other Liabilities
Shareholders’ Equity:
Common stock (310.5 and 309.0 shares outstanding)
Additional paid-in capital
Accumulated equity
Treasury stock
Accumulated other comprehensive loss
Total Shareholders' Equity
Total Liabilities and Shareholders’ Equity
$
$
$
$
1,679 $
276
3,774
455
6,184
5,940
2,878
828
437
1,439
17,706 $
452 $
1,978
2,927
—
5,357
4,407
3,185
908
1,296
3
571
3,928
(1,161)
(788)
2,553
17,706 $
685
409
5,188
528
6,810
6,633
2,668
3,908
439
714
21,172
539
1,682
3,448
81
5,750
3,621
2,918
1,169
1,337
3
621
7,989
(1,241)
(995)
6,377
21,172
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-8
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(millions)
MACY’S, INC.
Additional
Accumulated
Other
Total
Macy's, Inc. Non-
Total
Common Paid-In Accumulated Treasury Comprehensive Shareholders’ controlling Shareholders'
Stock Capital
3 $
$
Stock Income (Loss)
(724) $
Equity
Interest
676 $
Equity
Equity
7,246 $(1,456) $
1,108
Balance at February 3, 2018
Net income (loss)
Other comprehensive loss
Common stock dividends
($ 1.51 per share)
Stock-based compensation
expense
Stock issued under stock plans
Stranded tax costs (a)
Macy's China Limited
Balance at February 2, 2019
Cumulative-effect adjustment
(b)
Net income
Other comprehensive loss
Common stock dividends
($ 1.51 per share)
Stock repurchases
Stock-based compensation
expense
Stock issued under stock plans
Other
Balance at February 1, 2020
Net loss
Other comprehensive income
Common stock dividends
($ 0.3775 per share)
Stock-based compensation
expense
Stock issued under stock plans
Other
Balance at January 30, 2021
$
(63)
(468)
63
(87)
138
164
(164)
3
652
8,050 (1,318)
(951)
(158)
564
(470)
(1)
78
3
7,989 (1,241)
(3,944)
(117)
38
(69)
3
621
31
(81)
80
—
3 $
571 $
3,928 $(1,161) $
(40)
(4)
(995)
204
3
(788) $
5,745 $
1,108
(63)
(12) $
(10)
5,733
1,098
(63)
(468)
63
51
—
—
6,436
(158)
564
(40)
(470)
(1)
38
9
(1)
6,377
(3,944)
204
(117)
31
(1)
3
2,553 $
(468)
63
51
—
22
6,436
(158)
564
(40)
(470)
(1)
38
9
(1)
6,377
(3,944)
204
(117)
31
(1)
3
2,553
22
—
—
— $
(a)
(b)
Represents the reclassification of stranded tax effects to retained earnings as a result of U.S. federal tax reform.
Represents the cumulative-effect adjustment to retained earnings for the adoption of Accounting Standards Update 2016-02 (ASU-2016-02),
Leases (Topic 842), on February 3, 2019.
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-9
MACY’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
2020
2019
2018
$
(3,944) $
564 $
1,098
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Restructuring, impairment, store closing and other costs
Settlement charges
Depreciation and amortization
Benefit plans
Stock-based compensation expense
Gains on sale of real estate
Deferred income taxes
Amortization of financing costs and premium on
acquired debt
Changes in assets and liabilities:
(Increase) decrease in receivables
(Increase) decrease in merchandise inventories
Decrease in prepaid expenses and other current assets
Increase in merchandise accounts payable
Increase (decrease) in accounts payable and accrued
liabilities
Decrease in current income taxes
Change in other assets and liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property and equipment
Capitalized software
Disposition of property and equipment
Other, net
Net cash used by investing activities
Cash flows from financing activities:
Debt issued
Debt issuance costs
Debt repaid
Dividends paid
Increase (decrease) in outstanding checks
Acquisition of treasury stock
Issuance of common stock
Proceeds from noncontrolling interest
Net cash provided (used) by financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash beginning of period
Cash, cash equivalents and restricted cash end of period
Supplemental cash flow information:
$
Interest paid
Interest received
Income taxes paid (net of refunds received)
Restricted cash, end of period
$
3,579
84
959
47
31
(60)
(327)
18
132
1,406
51
237
(759)
(617)
(188)
649
(338)
(128)
113
28
(325)
2,780
(95)
(2,049)
(117)
181
(1)
—
—
699
1,023
731
1,754 $
257
$
5
98
75
354
58
981
31
38
(162)
(6)
4
(9)
75
89
40
(257)
(60)
(132)
1,608
(902)
(255)
185
(30)
(1,002)
—
(3)
(597)
(466)
(62)
(1)
6
—
(1,123)
(517)
1,248
731 $
242 $
20
229
46
136
88
962
30
63
(389)
112
(15)
(61)
(87)
21
55
14
(136)
(156)
1,735
(657)
(275)
474
2
(456)
—
—
(1,149)
(463)
16
—
45
7
(1,544)
(265)
1,513
1,248
328
25
345
86
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-10
MACY’S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Nature of Operations
Macy’s, Inc., together with its subsidiaries (the “Company”), is an omnichannel retail organization operating stores,
websites and mobile applications under three brands (Macy’s, Bloomingdale’s and bluemercury) that sell a wide range of
merchandise, including apparel and accessories (men's, women's and kids'), cosmetics, home furnishings and other
consumer goods. The Company has stores in 43 states, the District of Columbia, Puerto Rico and Guam. As of January
30, 2021, the Company’s operations and operating segments were conducted through Macy’s, Market by Macy’s, Macy's
Backstage, Bloomingdale’s, Bloomingdale’s The Outlet, and bluemercury, which are aggregated into one reporting
segment in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) Topic 280, Segment Reporting. The metrics used by management to assess the performance of the Company’s
operating divisions include sales trends, gross margin rates, expense rates, and rates of earnings before interest and taxes
(“EBIT”) and earnings before interest, taxes, depreciation and amortization (“EBITDA”). The Company’s operating
divisions have historically had similar economic characteristics and are expected to have similar economic characteristics
and long-term financial performance in future periods.
Fiscal Year
The Company’s fiscal year ends on the Saturday closest to January 31. Fiscal years 2020, 2019 and 2018 ended on
January 30, 2021, February 1, 2020 and February 2, 2019, respectively, and included 52 weeks. References to years in the
Consolidated Financial Statements relate to fiscal years rather than calendar years.
Basis of Presentation
In August 2015, the Company established a joint venture, Macy's China Limited, of which the Company held a
sixty-five percent ownership interest and Hong Kong-based Fung Retailing Limited held the remaining thirty-five percent
ownership interest. Macy's China Limited sold merchandise in China through an e-commerce presence on Alibaba
Group's Tmall Global. In January 2019, the Company ended the joint venture with Fung Retailing Limited after winding
down the operations of Macy's China Limited earlier in 2018. In conjunction with the termination of the joint venture, the
Company acquired the noncontrolling interest in Macy's China Limited from Fung Retailing Limited, resulting in one
hundred percent ownership. For the period of time prior to the acquisition of the noncontrolling interest, Fung Retailing
Limited's thirty-five percent proportionate share of the results of Macy's China Limited was reported as noncontrolling
interest in the Consolidated Financial Statements. All significant intercompany transactions were eliminated.
For 2020, 2019 and 2018, the Consolidated Financial Statements include the accounts of Macy's, Inc. and its 100%-
owned subsidiaries and, for the applicable periods, the majority-owned subsidiary, Macy's China Limited.
Certain reclassifications were made to prior years' amounts to conform with the classifications of such amounts in
the most recent years.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Such estimates and assumptions are subject to inherent
uncertainties, including the ultimate financial impact of the COVID-19 pandemic, which may result in actual amounts
differing from reported amounts.
Net Sales
Revenue is recognized when customers obtain control of goods and services promised by the Company. The amount
of revenue recognized is based on the amount that reflects the consideration that is expected to be received in exchange for
those respective goods and services. See Note 3, Revenue, for further discussion of the Company's accounting policies for
revenue from contracts with customers.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cost of Sales
Cost of sales consists of the cost of merchandise, including inbound freight, shipping and handling costs, and
depreciation. An estimated allowance for future sales returns is recorded and cost of sales is adjusted accordingly.
Cash and Cash Equivalents
Cash and cash equivalents include cash and liquid investments with original maturities of three months or less.
Cash and cash equivalents includes amounts due in respect of credit card sales transactions that are settled early in the
following period in the amount of $92 million at January 30, 2021, and $118 million at February 1, 2020.
Investments
The Company from time to time invests in debt and equity securities, including companies engaged in
complementary businesses. All debt securities held by the Company are accounted for under ASC Topic 320, Investments
– Debt Securities, while all marketable securities held by the Company are accounted for under ASC Topic 321,
Investments – Equity Securities. Unrealized holding gains and losses on trading securities and equity securities with a
readily determinable fair value are recognized in the Consolidated Statements of Operations. Equity securities without a
readily determinable fair value are generally recorded at cost and subsequently adjusted, in net income, for observable
price changes (i.e., prices in orderly transactions for the identical investment or similar investment of the same issuer).
Receivables
Receivables were $276 million at January 30, 2021, compared to $409 million at February 1, 2020.
The Company and Citibank, the owner of most of the Company's credit assets, are party to a long-term marketing
and servicing alliance pursuant to the terms of the Program Agreement. Income earned under the Program Agreement is
treated as credit card revenues, net on the Consolidated Statements of Operations. Under the Program Agreement,
Citibank offers proprietary and non-proprietary credit cards to the Company’s customers.
Merchandise Inventories
Merchandise inventories are valued at lower of cost or market using the last-in, first-out ("LIFO") retail inventory
method. Under the retail inventory method, inventory is segregated into departments of merchandise having similar
characteristics, and is stated at its current retail selling value. Inventory retail values are converted to a cost basis by
applying specific average cost factors for each merchandise department. Cost factors represent the average cost-to-retail
ratio for each merchandise department based on beginning inventory and the annual purchase activity. At January 30,
2021, and February 1, 2020, merchandise inventories valued at LIFO, including adjustments as necessary to record
inventory at the lower of cost or market, approximated the cost of such inventories using the first-in, first-out ("FIFO")
retail inventory method. The application of the LIFO retail inventory method did not result in the recognition of any LIFO
charges or credits affecting cost of sales for 2020, 2019 or 2018. 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. 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 markdown
merchandise, the resulting gross margin reduction is recognized in the period the markdown is recorded.
Physical inventories are generally taken within each merchandise department annually, and inventory records are
adjusted accordingly, resulting in the recording of actual shrinkage. Physical inventories are taken at all store locations for
substantially all merchandise categories approximately three weeks before the end of the year. Shrinkage is estimated as a
percentage of sales at interim periods and for this approximate three-week period, based on historical shrinkage rates.
While it is not possible to quantify the impact from each cause of shrinkage, the Company has loss prevention programs
and policies that are intended to minimize shrinkage, including the use of radio frequency identification cycle counts and
interim inventories to keep the Company's merchandise files accurate.
Vendor Allowances
The Company receives certain allowances as reimbursement for markdowns taken and/or to support the gross
margins earned in connection with the sales of merchandise. These allowances are recognized when earned. The Company
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
also receives advertising allowances from approximately 460 of its merchandise vendors pursuant to cooperative
advertising programs, with some vendors participating in multiple programs. These allowances represent reimbursements
by vendors of costs incurred by the Company to promote the vendors’ merchandise and are netted against advertising and
promotional costs when the related costs are incurred. Advertising allowances in excess of costs incurred are recorded as a
reduction of merchandise costs and, ultimately, through cost of sales when the merchandise is sold.
The arrangements pursuant to which the Company’s vendors provide allowances, while binding, are generally
informal in nature and one year or less in duration. The terms and conditions of these arrangements vary significantly
from vendor to vendor and are influenced by, among other things, the type of merchandise to be supported.
Advertising
Advertising and promotional costs are generally expensed at first showing. Advertising and promotional costs and
cooperative advertising allowances were as follows:
Gross advertising and promotional costs
Cooperative advertising allowances
Advertising and promotional costs, net of cooperative advertising
allowances
Net sales
Advertising and promotional costs, net of cooperative advertising
allowances, as a percent to net sales
$
$
$
Property and Equipment
2020
2019
(millions)
2018
$
907
89
$
1,330
188
818
17,346
$
$
1,142
24,560
$
$
1,358
196
1,162
24,971
4.7%
4.6%
4.7%
Depreciation of owned properties is provided primarily on a straight-line basis over the estimated asset lives, which
range from fifteen to fifty years for buildings and building equipment and three to fifteen years for fixtures and
equipment. Real estate taxes and interest on construction in progress and land under development are capitalized.
Amounts capitalized are amortized over the estimated lives of the related depreciable assets. The Company receives
contributions from developers and merchandise vendors to fund building improvement and the construction of vendor
shops. Such contributions are generally netted against the capital expenditures.
Buildings on leased land and leasehold improvements are amortized over the shorter of their economic lives or the
lease term, beginning on the date the asset is put into use.
The carrying value of long-lived assets, inclusive of ROU assets, is periodically reviewed by the Company
whenever events or changes in circumstances indicate that a potential impairment has occurred. For long-lived assets held
for use, a potential impairment has occurred if projected future undiscounted cash flows are less than the carrying value of
the assets. The estimate of cash flows includes management’s assumptions of cash inflows and outflows directly resulting
from the use of those assets in operations. When a potential impairment has occurred, an impairment write-down is
recorded if the carrying value of the long-lived asset exceeds its fair value. The Company believes its estimated cash
flows are sufficient to support the carrying value of its long-lived assets. If estimated cash flows significantly differ in the
future, the Company may be required to record asset impairment write-downs.
If the Company commits to a plan to dispose of a long-lived asset before the end of its previously estimated useful
life, estimated cash flows are revised accordingly, and the Company may be required to record an asset impairment write-
down. Additionally, related liabilities arise such as severance, contractual obligations and other accruals associated with
store closings from decisions to dispose of assets. The Company estimates these liabilities based on the facts and
circumstances in existence for each restructuring decision. The amounts the Company will ultimately realize or disburse
could differ from the amounts assumed in arriving at the asset impairment and restructuring charge recorded.
The Company classifies certain long-lived assets as held for disposal by sale and ceases depreciation when the
particular criteria for such classification are met, including the probable sale within one year. For long-lived assets to be
disposed of by sale, an impairment charge is recorded if the carrying amount of the asset exceeds its fair value less costs
to sell. Such valuations include estimations of fair values and incremental direct costs to transact a sale.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Leases
Operating lease liabilities are recognized at the lease commencement date based on the present value of the fixed
lease payments using the Company's incremental borrowing rates for its population of leases. Related operating ROU
assets are recognized based on the initial present value of the fixed lease payments, reduced by contributions from
landlords, plus any prepaid rent and direct costs from executing the leases. ROU assets are tested for impairment in the
same manner as long-lived assets. Certain of the Company’s real estate leases have terms that extend for a significant
number of years and provide for rental rates that increase or decrease over time. Lease terms include the noncancellable
portion of the underlying leases along with any reasonably certain lease periods associated with available renewal periods,
termination options and purchase options. Lease agreements with lease and non-lease components are combined as a
single lease component for all classes of underlying assets.
Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes
lease expense for these leases on a straight-line basis over the lease term. Variable lease payments are recognized as lease
expense as they are incurred.
ASU 2016-02, Leases (Topic 842), as amended, was adopted by the Company on February 3, 2019, utilizing a
modified retrospective approach that allowed for transition in the period of adoption. The Company adopted the package
of practical expedients available at transition that retained the lease classification and initial direct costs for any leases that
existed prior to adoption of the standard. Contracts entered into prior to adoption were not reassessed for leases or
embedded leases. Upon adoption, the Company used hindsight in determining lease term and impairment. For lease and
non-lease components, the Company has elected to account for both as a single lease component. Prior to February 3,
2019, leases were accounted for under ASC Subtopic 840, Leases.
Goodwill and Other Intangible Assets
The carrying value of goodwill and other intangible assets with indefinite lives are reviewed at least annually for
possible impairment in accordance with ASC Subtopic 350-20, Goodwill. Goodwill and other intangible assets with
indefinite lives have been assigned to reporting units for purposes of impairment testing. The reporting units are the
Company’s retail operating divisions. Goodwill and other intangible assets with indefinite lives are tested for impairment
annually at the end of the fiscal month of May.
The Company evaluates qualitative factors to determine if it is more likely than not that the fair value of a reporting
unit or other intangible assets with indefinite lives is less than its carrying value and whether it is necessary to perform the
quantitative impairment test. If required, the Company performs a quantitative impairment test which involves a
comparison of each reporting unit's or other intangible assets with indefinite lives’ fair values to its carrying value.
Estimating the fair values of the reporting units or other intangible assets with indefinite lives involves the use of
significant assumptions, estimates and judgments with respect to a variety of factors, including sales, gross margin and
SG&A expense rates, capital expenditures, cash flows and the selection and use of an appropriate discount rate and
market values and multiples of earnings and revenues of similar public companies. The projected sales, gross margin and
SG&A expense rate assumptions and capital expenditures are based on the Company’s annual business plan or other
forecasted results. Discount rates reflect market-based estimates of the risks associated with the projected cash flows of
the reporting unit or indefinite lived intangible asset.
The estimates of fair value of reporting units or other intangible assets with indefinite lives are based on the best
information available as of the date of the assessment. If the carrying value of a reporting unit exceeds its fair value, an
impairment loss will be recognized in an amount equal to such excess, limited to the total amount of goodwill allocated to
the reporting unit. If the carrying value of an individual indefinite-lived intangible asset exceeds its fair value, such
individual indefinite-lived intangible asset is written down by an amount equal to such excess.
Capitalized Software
The Company capitalizes purchased and internally developed software and amortizes such costs to expense on a
straight-line basis generally over four to five years. Capitalized software is included in other assets on the Consolidated
Balance Sheets.
Gift Cards
The Company only offers no-fee, non-expiring gift cards to its customers. At the time gift cards are sold or issued,
no revenue is recognized; rather, the Company records an accrued liability to customers. The liability is relieved and
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
revenue is recognized equal to the amount redeemed for merchandise. The Company records revenue from unredeemed
gift cards (breakage) in net sales on a pro-rata basis over the time period gift cards are actually redeemed. At least three
years of historical data, updated annually, is used to determine actual redemption patterns. The Company records
breakage income within net sales on the Consolidated Statements of Operations.
Loyalty Programs
The Company maintains customer loyalty programs in which customers earn points based on their purchases. Under
the Macy’s Star Rewards loyalty program, points are earned based on customers’ spending on Macy’s private label and
co-branded credit cards as well as non-proprietary cards. Under the Macy’s brand, the Company previously participated
in a coalition program ("Plenti") whereby customers could earn points based on spending levels with bonus opportunities
through various targeted offers and promotions at Macy's and other partners. The Company's participation in Plenti ended
on May 3, 2018. The Company’s Bloomingdale’s Loyallist and bluemercury BlueRewards programs provide tender neutral
points-based programs to their customers. The Company recognizes the estimated net amount of the rewards that will be
earned and redeemed as a reduction to net sales at the time of the initial transaction and as tender when the points are
subsequently redeemed by a customer.
Self-Insurance Reserves
The Company, through its insurance subsidiary, is self-insured for workers compensation and general liability
claims up to certain maximum liability amounts. Although the amounts accrued are actuarially determined based on
analysis of historical trends of losses, settlements, litigation costs and other factors, the amounts the Company will
ultimately disburse could differ from such accrued amounts.
Post Employment and Postretirement Obligations
The Company, through its actuaries, utilizes assumptions when estimating the liabilities for pension and other
employee benefit plans. These assumptions, where applicable, include the discount rates used to determine the actuarial
present value of projected benefit obligations, the rate of increase in future compensation levels, mortality rates, the long-
term rate of return on assets and the growth in health care costs. The Company measures post employment and
postretirement assets and obligations using the month-end that is closest to the Company's fiscal year-end or an interim
period quarter-end if a plan is determined to qualify for a remeasurement. The benefit expense is generally recognized in
the Consolidated Financial Statements on an accrual basis over the average remaining lifetime of participants, and the
accrued benefits are reported in other assets, accounts payable and accrued liabilities and other liabilities on the
Consolidated Balance Sheets, as appropriate.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and net operating loss and tax credit carryforwards. Deferred
income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and
liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes
the enactment date. Deferred income tax assets are reduced by a valuation allowance when it is more likely than not that
some portion of the deferred income tax assets will not be realized.
Stock Based Compensation
The Company records stock-based compensation expense according to the provisions of ASC Topic 718,
Compensation – Stock Compensation. ASC Topic 718 requires all share-based payments to employees, including grants
of employee stock options, to be recognized in the financial statements based on their fair values. Under the provisions of
ASC Topic 718, the Company determines the appropriate fair value model to be used for valuing share-based payments
and the amortization method for compensation cost.
Comprehensive Income (Loss)
Total comprehensive income (loss) represents the change in equity during a period from sources other than
transactions with shareholders and, as such, includes net income (loss). For the Company, the only other components of
total comprehensive income (loss) for 2020, 2019 and 2018 relate to post employment and postretirement plan items.
Settlement charges incurred are included as a separate component of income before income taxes in the Consolidated
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Statements of Operations. Amortization reclassifications out of accumulated other comprehensive loss are included in the
computation of net periodic benefit cost (income) and are included in benefit plan income, net on the Consolidated
Statements of Operations.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments, which amends the financial instrument impairment model to utilize an expected
loss methodology in place an incurred loss methodology. The new guidance applies to financial assets measured at an
amortized cost basis, including receivables that result from revenue transactions and held-to-maturity debt securities.
This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2019, and early adoption was permitted for fiscal years beginning after December 15, 2018. The Company adopted this
guidance in the first quarter of fiscal 2020. The adoption of this guidance did not have a material impact on the
Company’s consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework –
Changes to the Disclosure Requirements for Fair Value Measurement, which amends the fair value disclosure
requirements by removing, modifying and adding certain disclosures. This guidance is effective for fiscal years, and
interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company
adopted this guidance in the first quarter of fiscal 2020. The adoption of this guidance did not have a material impact on
the Company’s consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software
(Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That
Is a Service Contract. This ASU clarifies the accounting treatment for fees paid by a customer in a cloud computing
arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software
license. This guidance is effective for public business entities for fiscal years, and interim periods within those years,
beginning after December 15, 2019, with early adoption permitted. The amendments may be applied either
retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted
this guidance on a prospective basis in the first quarter of fiscal 2020. The adoption of this guidance did not have a
material impact on the Company’s consolidated financial statements and related disclosures.
In March 2020, the SEC issued a final rule, Financial Disclosures About Guarantors and Issuers of Guaranteed
Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities, that simplifies the disclosure
requirements related to registered securities under Rule 3-10 of Regulation S-X. The rule replaces the requirement to
provide condensed consolidating financial information with a requirement to present summarized financial information
of the issuers and guarantors. It also requires qualitative disclosures with respect to information about guarantors, the
terms and conditions of guarantees and the factors that may affect payment. These disclosures may be provided outside
the footnotes to the Company’s consolidated financial statements. In applying this rule, the Company has elected to
provide these disclosures in Item 7. Management’s Discussion & Analysis of Financial Conditions and Results of
Operations.
2.
Impact of COVID-19
In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which
continues to spread throughout the United States. The COVID-19 pandemic had a negative impact on the Company's
2020 operations and financial results, and the full financial impact of the pandemic cannot be reasonably estimated at
this time due to uncertainty as to the severity and duration of the pandemic. The following summarizes the actions taken
and impacts from the COVID-19 pandemic during 2020.
• The Company temporarily closed all stores on March 18, 2020, which included all Macy’s, Bloomingdale’s,
bluemercury, Macy’s Backstage, Bloomingdales the Outlet and Market by Macy’s stores. Stores began
reopening on May 4, 2020 and substantially all of the Company's stores were open by the end of the second
quarter of 2020.
•
In an effort to increase liquidity, the Company fully drew on its $1,500 million credit facility, announced the
suspension of quarterly cash dividends beginning in the second quarter of 2020 and took additional steps to
reduce discretionary spending. The Company's Board of Directors also rescinded its authorization of any
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
unused amounts under the Company's share repurchase program. In June 2020, the Company completed
financing activities totaling nearly $4.5 billion and used a portion of the proceeds from these activities, as well
as cash on hand, to repay its credit facility. To create greater flexibility for future liquidity needs, the
Company executed an exchange offer and consent solicitation in July 2020 for $465 million of previously
issued unsecured notes. See Note 7, "Financing," for further discussion on these activities.
To improve the Company's cash position and reduce its cash expenditures, the Company's Board of Directors
and Chief Executive Officer did not receive compensation from April 1, 2020 through June 30, 2020. In
addition, the Company deferred cash expenditures where possible and temporarily implemented a furlough for
the majority of its colleague population which ended for most colleagues at the beginning of July 2020. Certain
executives not impacted by the furlough took a temporary reduction of their pay through June 30, 2020.
In June 2020, the Company announced a restructuring to align its cost base with anticipated near-term sales as
the business recovers from the impact of the COVID-19 pandemic. The Company reduced corporate and
management headcount by approximately 3,900. Additionally, the Company reduced staffing across its stores
portfolio, supply chain and customer support network, which it expects to adjust as sales recover. During the
second quarter of 2020, the Company recognized $154 million of expense for severance related to this
reduction in force, of which substantially all has been paid as of January 30, 2021.
During 2020, the Company deferred occupancy payments for a significant number of its stores. Such
pandemic related deferrals were included in accounts payable and accrued liabilities and the Company
continued to recognize expense during the deferral periods based on the contractual terms of the lease
agreements. As of January 30, 2021, substantially all occupancy payment deferrals have been paid.
During 2020, the Company incurred non-cash impairment charges primarily related to long-lived tangible and
right of use assets to adjust the carrying value of certain store locations to their estimated fair value. The
Company also incurred non-cash impairment charges during 2020 on goodwill as a result of the sustained
decline in the Company's market capitalization and decline in projected cash flows primarily as a result of the
COVID-19 pandemic. See Note 4, "Restructuring, Impairment, Store Closings and Other Costs" and Note 6,
"Goodwill and Other Intangible Assets," respectively, for further discussion of these charges.
On March 27, 2020, the CARES Act was signed into law, which included payroll tax credits for employee
retention, deferral of payroll taxes, and several income tax provisions, including modifications to the net
interest deduction limitation, changes to certain property depreciation and carryback of certain operating
losses.
•
•
•
•
•
The CARES Act impacted the Company's annual effective tax rate and the income tax benefit recognized during
2020. Specifically, the Company recognized an annual net operating loss that is available for carryback at a 35% federal
income tax rate rather than the current 21% federal income tax rate. During 2020, the resultant benefit of this rate
differential was offset by the impact of the non-tax deductible component of the goodwill impairment charge. The net
impact of these items is the primary driver of the effective tax rate decrease when compared to 2019. As of January 30,
2021, the Company recognized a $520 million income tax receivable, which is included within Other Assets on the
Consolidated Balance Sheets. See Note 9, "Taxes" for further discussion on and disclosure of 2020 income taxes.
During 2020, the Company recognized $60 million in employee retention payroll tax credits and elected to defer
payment of approximately $134 million of the employer portion of social security taxes. The Company expects to pay
the deferred payroll taxes in the third quarter of fiscal 2021.
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3. Revenue
Net sales
Revenue is recognized when customers obtain control of goods and services promised by the Company. The
amount of revenue recognized is based on the amount that reflects the consideration that is expected to be received in
exchange for those respective goods and services. Macy's accounted for approximately 89%, 88%, and 89% of the
Company's net sales for 2020, 2019 and 2018, respectively. In addition, digital sales accounted for approximately 44%,
25% and 23% of net sales in 2020, 2019 and 2018, respectively. Disaggregation of the Company's net sales by family of
business for 2020, 2019 and 2018 were as follows:
Women’s Accessories, Intimate Apparel, Shoes, Cosmetics and
Fragrances
Women’s Apparel
Men’s and Kids’
Home/Other (a)
Total
2020
2019
2018
$
$
7,206 $
2,909
3,486
3,745
17,346 $
9,454 $
5,411
5,628
4,067
24,560 $
9,457
5,642
5,699
4,173
24,971
(a)
Other primarily includes restaurant sales, allowance for merchandise returns adjustments, certain loyalty program income and breakage
income from unredeemed gift cards.
The Company's revenue generating activities include the following:
Retail Sales
Retail sales include merchandise sales, inclusive of delivery income, licensed department income, sales of private
brand goods directly to third party retailers and sales of excess inventory to third parties. Sales of merchandise are
recorded at the time of shipment to the customer and are reported net of estimated merchandise returns and certain
customer incentives. Commissions earned on sales generated by licensed departments are included as a component of
total net sales and are recognized as revenue at the time merchandise is sold to customers. Service revenues (e.g.,
alteration and cosmetic services) are recorded at the time the customer receives the benefit of the service. The Company
has elected to present sales taxes on a net basis and, as such, sales taxes are included in accounts payable and accrued
liabilities until remitted to the taxing authorities.
Merchandise Returns
The Company estimates merchandise returns using historical data and recognizes an allowance that reduces net
sales and cost of sales. The liability for merchandise returns is included in accounts payable and accrued liabilities on the
Company's Consolidated Balance Sheets and was $159 million as of January 30, 2021, and $213 million as of February 1,
2020. Included in prepaid expenses and other current assets is an asset totaling $103 million as of January 30, 2021, and
$147 million as of February 1, 2020, for the recoverable cost of merchandise estimated to be returned by customers.
Gift Cards and Customer Loyalty Programs
The liability for unredeemed gift cards and customer loyalty programs is included in accounts payable and accrued
liabilities on the Company's Consolidated Balance Sheets and was $616 million as of January 30, 2021, and $839 million
as of February 1, 2020. During 2020 and 2018, the Company recognized approximately $30 and $40 million,
respectively, in breakage income related to changes in breakage rate estimates. Changes in the liability for unredeemed
gift cards and customer loyalty programs are as follows:
Balance, beginning of year
Liabilities issued but not redeemed (a)
Revenue recognized from beginning liability
Balance, end of year
(a)
Net of estimated breakage income.
2020
2019
(millions)
2018
$
$
839 $
262
(485)
616 $
856 $
554
(571)
839 $
906
570
(620)
856
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Credit Card Revenues, net
In connection with the sale of most of the Company's credit card accounts and related receivable balances to
Citibank, the Company and Citibank entered into a long-term marketing and servicing alliance pursuant to the terms of an
amended and restated Credit Card Program Agreement ("Credit Card Program"). The Program Agreement expires March
31, 2025, subject to an additional renewal term of three years. The Program Agreement provides for, among other things,
(i) the ownership by Citibank of the accounts purchased by Citibank, (ii) the ownership by Citibank of new accounts
opened by the Company’s customers, (iii) the provision of credit by Citibank to the holders of the credit cards associated
with the foregoing accounts, (iv) the servicing of the foregoing accounts, and (v) the allocation between Citibank and the
Company of the economic benefits and burdens associated with the foregoing and other aspects of the alliance.
As part of the Program Agreement, the Company receives payments for providing a combination of interrelated
services and intellectual property to Citibank in support of the underlying Credit Card Program. Revenue based on the
spending activity of the underlying accounts is recognized as the respective card purchases occur and the Company’s
profit share is recognized based on the performance of the underlying portfolio. Revenue associated with the
establishment of new credit accounts and assisting in the receipt of payments for existing accounts is recognized as such
activities occur. Credit card revenues include finance charges, late fees and other revenue generated by the Company’s
Credit Card Program, net of fraud losses and expenses associated with establishing new accounts.
Pursuant to the Program Agreement, the Company continues to provide certain servicing functions related to the
accounts and related receivables owned by Citibank and receives compensation from Citibank for these services. The
amounts earned under the Program Agreement related to the servicing functions are deemed adequate compensation and,
accordingly, no servicing asset or liability has been recorded on the Consolidated Balance Sheets.
The Company’s credit card revenues, net were $751 million for 2020, $771 million for 2019 and $768 million for
2018. Amounts received under the Program Agreement were $882 million for 2020, $985 million for 2019 and $966
million for 2018, and are included within credit card revenues, net on the Consolidated Statements of Operations.
Under the terms of the Program Agreement, if sales decrease by more than 34% over a twelve-month period as
compared to the Benchmark Year, defined as the twelve-month period from July 2006 to June 2007 in the Program
Agreement, Citibank has the ability to provide written notice to terminate the agreement prior to the end of its current
term. Based on the results for the Company’s February 2021 fiscal period, sales for the most recent twelve-month period
ended February 27, 2021, have decreased by more than 34% as compared to the Benchmark Year. We are in on-going
discussions with Citibank concerning the Program Agreement and as of the date of this filing, the Company has not
received a notice to terminate the agreement. The Company is currently unable to estimate any impact this event might
have on the Program Agreement or on the Company’s future financial results.
4.
Restructuring, Impairment, Store Closing and Other Costs
Restructuring, impairment, store closing and other costs (income) consist of the following:
Asset Impairments
Restructuring
Other
2020
2019
(millions)
2018
$
$
3,280 $
224
75
3,579 $
197 $
123
34
354 $
64
80
(8)
136
During 2020, primarily as a result of the COVID-19 pandemic, the Company incurred non-cash impairment
charges totaling $3,280 million, the majority of which was recognized during the first quarter of 2020 and consisted of:
•
•
$3,080 million of goodwill impairments, with $2,982 million attributable to the Macy’s reporting unit and
$98 million attributable to the bluemercury reporting unit. See discussion at Note 6, “Goodwill and Other
Intangible Assets.”
$200 million of impairments primarily related to long-lived tangible and right of use assets to adjust the
carrying value of certain store locations to their estimated fair value.
As disclosed in Note 2 “Impact of COVID-19”, the Company announced a restructuring plan in the second quarter
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of 2020 that resulted in the recognition $154 million of expense for severance. Substantially all of this severance was
paid as of January 30, 2021.
On February 4, 2020, the Company announced its Polaris strategy, a multi-year plan designed to stabilize
profitability and position the Company for sustainable, profitable growth. The strategy, developed in 2019 and refined in
2020, includes initiatives focused on growing the Company’s digital channels, expanding the Company’s off-mall store
presence and modernizing the Company’s technology and supply chain infrastructures. In conjunction with these
initiatives, the Company announced plans to close approximately 125 of its least productive stores over the next three
years, including 37 store closures that were announced in 2020 and 30 store closures that were announced in 2019. As part
of the reset of its cost base, the Company developed a plan to streamline the organization through reductions in corporate
and support functions, campus consolidations and the consolidation of the Company's sole headquarters to New York,
New York.
A summary of the restructuring and other cash activity for 2020 and 2019 related to the Polaris strategy, which are
included within accounts payable and accrued liabilities, is as follows:
Balance at February 2, 2019
Additions charged to expense
Cash payments
Balance at February 1, 2020
Additions charged to expense
Cash payments
Balance at January 30, 2021
Severance and
other benefits
Professional
fees and
other related
charges
(millions)
Total
$
$
— $
121
(6)
115
55
(156)
14 $
— $
36
(27)
9
17
(24)
2 $
—
157
(33)
124
72
(180)
16
The Company may incur significant additional charges in future periods as it continues the execution of its Polaris
strategy initiatives. Since the scope of such efforts are not fully known at this time, the benefits of such initiatives, and
any related charges or capital expenditures, are not currently quantifiable. Actions associated with the Polaris strategy are
currently expected to continue through 2022.
During 2018, the Company closed or announced the closure of ten Macy's stores. In addition, the Company
introduced a plan in 2018 that reduced the complexity of the upper management structure to increase the speed of
decision making, reduce costs and respond to changing customer expectations. Restructuring, impairment, store closing
and other costs for 2018 included costs and expenses, including severance and other human-resource related costs,
primarily associated with the organizational changes and store closings announced in January 2019. For 2018, the
Company recorded expense of approximately $80 million of severance and other human resource-related costs associated
with these restructuring activities.
The Company expects to pay out the majority of the 2020 accrued severance costs, which are included in accounts
payable and accrued liabilities on the Consolidated Balance Sheets, prior to the end of the second quarter of 2021. The
2019 and 2018 accrued severance costs, which were included in accounts payable and accrued liabilities on the respective
Consolidated Balance Sheets, were paid out in the year subsequent to incurring such severance costs.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
5.
Properties and Leases
Property and Equipment, net
The major classes of property and equipment, net as of January 30, 2021 and February 1, 2020 are as follows:
Land
Buildings on owned land
Buildings on leased land and leasehold improvements
Fixtures and equipment
Less accumulated depreciation and amortization
January 30,
2021
February 1,
2020
(millions)
1,390 $
3,650
1,268
4,032
10,340
4,400
5,940 $
1,436
3,822
1,365
4,402
11,025
4,392
6,633
$
$
In connection with various shopping center agreements, the Company is obligated to operate certain stores within
the centers for periods of up to fifteen years. Some of these agreements require that the stores be operated under a
particular name.
Leases
The Company leases a portion of the real estate and personal property used in its operations. Most leases require the
Company to pay real estate taxes, maintenance, insurance and other similar costs; some also require additional payments
based on percentages of sales and some contain purchase options. Certain of the Company's leases contain covenants that
restrict the ability of the tenant (typically a subsidiary of the Company) to take specified actions (including the payment of
dividends or other amounts on account of its capital stock) unless the tenant satisfies certain financial tests.
ROU assets and lease liabilities consist of:
Assets
Finance lease assets (a)
Operating lease assets (b)
Total lease assets
Liabilities
Current
Finance (a)
Operating (b)
Noncurrent
Finance (a)
Operating (b)
Total lease liabilities
Classification
Right of Use Assets
Right of Use Assets
January 30,
2021
February 1,
2020
(millions)
$
$
12 $
2,866
2,878 $
Accounts payable and accrued liabilities $
Accounts payable and accrued liabilities
Long-Term Lease Liabilities
Long-Term Lease Liabilities
$
2 $
198
19
3,166
3,385 $
13
2,655
2,668
2
331
21
2,897
3,251
(a)
(b)
Finance lease assets are recorded net of accumulated amortization of $13 million and $12 million as of January 30, 2021 and February 1,
2020, respectively. As of January 30, 2021 and February 1, 2020, finance lease assets and noncurrent lease liabilities each included
$2 million of non-lease components.
As of January 30, 2021, operating lease assets included $383 million of non-lease components and current and noncurrent lease liabilities
included $35 million and $384 million, respectively, of non-lease components. As of February 1, 2020, operating lease assets included $403
million of non-lease components and current and noncurrent lease liabilities included $36 million and $397 million, respectively, of non-
lease components.
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The components of net lease expense, recognized primarily within selling, general and administrative expenses are
disclosed below. For 2020 and 2019, lease expense included $87 million and $83 million, respectively, related to non-lease
components.
Real estate
Operating leases (c) –
Minimum rents
Variable rents
Less income from subleases –
Operating leases
Personal property – Operating leases
2020
2019
(millions)
2018
$
$
$
376 $
45
421
(1)
420 $
7 $
364 $
54
418
(2)
416 $
8 $
317
11
328
(1)
327
9
(c)
Certain supply chain operating lease expense amounts are included in cost of sales.
As of January 30, 2021, the maturity of lease liabilities is as follows:
Fiscal year
2021
2022
2023
2024
2025
After 2025
Total undiscounted lease payments
Less amount representing interest
Total lease liabilities
Finance
Leases
Operating
Leases
(d and e)
(millions)
Total
$
$
3 $
3
3
3
3
16
31
10
21 $
239 $
350
344
334
329
5,443
7,039
3,675
3,364 $
242
353
347
337
332
5,459
7,070
3,685
3,385
(d)
(e)
Operating lease payments include $3,063 million related to options to extend lease terms that are reasonably certain of being exercised and
exclude $2 million of legally binding minimum lease payments for leases signed but not yet commenced.
Operating lease payments include $1,151 million related to non-lease component payments, with $840 million of such payments related to
options to extend lease terms that are reasonably certain of being exercised.
Additional supplemental information regarding assumptions and cash flows for operating and finance leases is as
follows:
Lease Term and Discount Rate
Weighted-average remaining lease term (years)
Finance leases
Operating leases
Weighted-average discount rate
Finance leases
Operating leases
January 30,
2021
February 1,
2020
12.1
22.4
6.70%
6.32%
12.7
23.3
6.69%
6.53%
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Information
52 Weeks Ended
January 30, 2021
52 Weeks Ended
February 1, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used from operating leases
Financing cash flows used from financing leases
Leased assets obtained in exchange for new operating lease liabilities
$
(millions)
521 $
4
430
363
2
216
The Company is a guarantor with respect to certain lease obligations associated with The May Department Stores
Company and previously disposed subsidiaries or businesses. The leases, one of which includes potential extensions to
2070, have future minimum lease payments aggregating $211 million and are offset by payments from existing tenants
and subtenants. In addition, the Company is contingently liable for other expenses related to the above leases, such as
property taxes and common area maintenance, which are also payable by existing tenants and subtenants. Potential
liabilities related to these guarantees are subject to certain defenses by the Company. The Company believes that the risk
of significant loss from the guarantees of these lease obligations is remote.
6. Goodwill and Other Intangible Assets
The following summarizes the Company’s goodwill and other intangible assets:
Non-amortizing intangible assets
Goodwill
Accumulated impairment losses
Tradenames
Amortizing intangible assets
Favorable leases and other contractual assets
Tradenames
Accumulated amortization
Favorable leases and other contractual assets
Tradenames
Capitalized software
Gross balance
Accumulated amortization
January 30,
2021
February 1,
2020
(millions)
$
$
$
$
$
$
9,290 $
(8,462)
828
403
1,231 $
5 $
43
48
(1)
(13)
(14)
34 $
1,136 $
(645)
491 $
9,290
(5,382)
3,908
403
4,311
5
43
48
(1)
(11)
(12)
36
1,262
(620)
642
As a result of the sustained decline in the Company's market capitalization and changes in the Company's long-
term projections driven largely by the impacts of the COVID-19 pandemic, the Company determined a triggering event
had occurred that required an interim impairment assessment for all of its reporting units and indefinite lived intangible
assets during the first quarter of 2020. The Company determined the fair value of each of its reporting units using a
market approach or a combination of a market approach and income approach, as appropriate. Relative to the Company’s
2019 assessment, as part of this 2020 assessment, it was determined that an increase in the discount rate applied in the
valuation was required to align with market-based assumptions and company-specific risk. This higher discount rate, in
conjunction with revised long-term projections, resulted in lower fair values of the reporting units. As a result, the
Company recognized $2,982 million and $98 million of goodwill impairment for the Macy's and bluemercury reporting
units, respectively, primarily during the first quarter of 2020.
As of May 2, 2020, the Company elected to perform a qualitative impairment test on its intangible assets with
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
indefinite lives and concluded that it is more likely than not that the fair values exceeded the carrying values and the
intangible assets with indefinite lives were not impaired.
For the Company's annual impairment assessment as of the end of fiscal May, the Company elected to perform a
qualitative impairment test on its goodwill and intangible assets with indefinite lives and concluded that it is more likely
than not that the fair values exceeded the carrying values and goodwill and intangible assets with indefinite lives were
not impaired.
Finite lived tradenames are being amortized over their respective useful lives of 20 years. Favorable lease
intangible assets are being amortized over their respective lease terms.
Other contractual assets and tradenames amortization expense amounted to $2 million for 2020 and $3 million for
2019, while favorable leases, other contractual assets, and tradenames amortization expense amounted to $10 million for
2018. Capitalized software amortization expense amounted to $268 million for 2020, $285 million for 2019 and $296
million for 2018.
Future estimated amortization expense for assets, excluding in-process capitalized software of $65 million not yet
placed in service as of January 30, 2021, is shown below:
Fiscal year
2021
2022
2023
2024
2025
Amortizing
intangible assets
Capitalized
Software
(millions)
$
2 $
2
2
2
2
214
132
63
17
—
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
7.
Financing
The Company’s debt is as follows:
Short-term debt:
3.875% Senior notes due 2022
3.45% Senior notes due 2021
10.25% Senior debentures due 2021
Current portion of other long-term obligations
Long-term debt:
8.375% Senior secured notes due 2025
6.65% Senior secured debentures due 2024
6.7% Senior secured debentures due 2028
8.75% Senior secured debentures due 2029
7.875% Senior secured debentures due 2030
6.9% Senior secured debentures due 2032
6.7% Senior secured debentures due 2034
9.5% amortizing debentures due 2021
9.75% amortizing debentures due 2021
3.875% Senior notes due 2022
2.875% Senior notes due 2023
4.375% Senior notes due 2023
3.625% Senior notes due 2024
4.5% Senior notes due 2034
6.375% Senior notes due 2037
5.125% Senior notes due 2042
4.3% Senior notes due 2043
6.65% Senior debentures due 2024
7.6% Senior debentures due 2025
6.79% Senior debentures due 2027
7.0% Senior debentures due 2028
6.7% Senior debentures due 2028
6.9% Senior debentures due 2029
8.75% Senior debentures due 2029
7.875% Senior debentures due 2030
6.9% Senior debentures due 2032
6.7% Senior debentures due 2034
Unamortized debt issue costs and discount
Premium on acquired debt, using an effective interest yield of 5.760% to
7.144%
January 30,
2021
February 1,
2020
(millions)
450 $
—
—
2
452 $
1,300 $
81
74
13
5
5
183
—
—
—
640
210
500
367
192
250
250
41
24
71
105
29
79
—
5
12
18
(77)
30
4,407 $
—
500
33
6
539
—
—
—
—
—
—
—
2
1
450
640
210
500
367
192
250
250
122
24
71
105
103
79
13
10
17
201
(20)
34
3,621
$
$
$
$
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Interest expense and losses on early retirement of debt are as follows:
Interest on debt
Amortization of debt premium
Amortization of financing costs and debt discount
Interest on capitalized leases
Less interest capitalized on construction
Interest expense
Losses on early retirement of debt
2020 Financing Activities
Secured Debt Issuance
2020
2019
(millions)
2018
$
$
$
273 $
(4)
23
1
293
9
284 $
— $
211 $
(5)
6
2
214
9
205 $
30 $
269
(7)
7
2
271
10
261
33
On June 8, 2020, the Company issued $1,300 million aggregate principal amount of 8.375% senior secured notes
due 2025 (the "Notes"). The Notes bear interest at a rate of 8.375% per annum, which accrues from June 8, 2020 and is
payable in arrears on June 15 and December 15 of each year, commencing on December 15, 2020. The Notes mature on
June 15, 2025, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the related
indenture. The Notes were issued by Macy’s, Inc. and are secured on a first-priority basis by (i) a first mortgage/deed of
trust in certain real property of subsidiaries of Macy’s, Inc. that was transferred to subsidiaries of PropCo, a newly
created direct, wholly owned subsidiary of Macy’s, Inc., and (ii) a pledge by Propco of the equity interests in its
subsidiaries that own such transferred real property. The Notes are, jointly and severally, unconditionally guaranteed on
a secured basis by Propco and its subsidiaries and unconditionally guaranteed on an unsecured basis by MRH, a direct,
wholly owned subsidiary of Macy’s, Inc. The Company used the proceeds of the Notes offering, along with cash on
hand, to repay the outstanding borrowings under the existing $1,500 million unsecured credit agreement.
Entry into Asset-Based Credit Facility
On June 8, 2020, the ABL Borrower, an indirect wholly owned subsidiary of the Company, and its parent, the
ABL Parent, entered into the ABL Credit Facility with Bank of America, N.A., as administrative agent and collateral
agent, and the lenders party thereto. As of January 30, 2021, the ABL Credit Facility provides the ABL Borrower with a
$2,941 million revolving credit facility (the “Revolving ABL Facility”), including a swingline sub-facility and a letter of
credit sub-facility. The ABL Borrower may request increases in the size of the Revolving ABL Facility up to an
additional aggregate principal amount of $750 million. As of January 30, 2021, the Company had $142 million of
standby letters of credit outstanding under the ABL Credit Facility, which reduces the available borrowing capacity. The
Company had no borrowings outstanding under the ABL Credit Facility as of January 30, 2021.
Additionally on June 8, 2020 and concurrently with closing the ABL Credit Facility, the ABL Borrower purchased
all presently existing inventory, and assumed the liabilities in respect of all presently existing and outstanding trade
payables owed to vendors in respect of such inventory, from MRH and certain wholly owned subsidiaries of MRH. The
ABL Credit Facility is secured on a first priority basis (subject to customary exceptions) by (i) all assets of the ABL
Borrower including all such inventory and the proceeds thereof and (ii) the equity of the ABL Borrower. The ABL
Parent guaranteed the ABL Borrower’s obligations under the ABL Credit Facility. The Revolving ABL Facility matures
on May 9, 2024.
The ABL Credit Facility contains customary borrowing conditions including a borrowing base equal to the sum of
(a) 80% (which shall automatically increase to 90% upon the satisfaction of certain conditions, including the delivery of
an initial appraisal of the inventory) of the net orderly liquidation percentage of eligible inventory, minus (b) customary
reserves. Amounts borrowed under the ABL Credit Facility are subject to interest at a rate per annum equal to (i) prior to
the Step Down Date (as defined in the ABL Credit Facility), at the ABL Borrower’s option, either (a) adjusted LIBOR
plus a margin of 2.75% to 3.00% or (b) a base rate plus a margin of 1.75% to 2.00%, in each case depending on
revolving line utilization and (ii) after the Step Down Date, at the ABL Borrower’s option, either (a) adjusted LIBOR
plus a margin of 2.25% to 2.50% or (b) a base rate plus a margin of 1.25% to 1.50%, in each case depending on
revolving line utilization. The ABL Credit Facility also contains customary covenants that provide for, among other
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
things, limitations on indebtedness, liens, fundamental changes, restricted payments, cash hoarding, and prepayment of
certain indebtedness as well as customary representations and warranties and events of default typical for credit facilities
of this type.
The ABL Credit Facility also requires (1) the Company and its restricted subsidiaries to maintain a fixed charge
coverage ratio of at least 1.00 to 1.00 as of the end of any fiscal quarter on or after April 30, 2021, if (a) certain events of
default have occurred and are continuing or (b) Availability plus Suppressed Availability (each as defined in the ABL
Credit Facility) is less than the greater of (x) 10% of the Loan Cap (as defined in the ABL Credit Facility) and (y) $250
million, in each case, as of the end of such fiscal quarter and (2) prior to April 30, 2021, that the ABL Borrower not
permit Availability plus Suppressed Availability to be lower than the greater of (x) 10% of the Loan Cap and (y) $250
million.
Amendment to Existing Credit Agreement
On June 8, 2020, the Company substantially reduced the credit commitments of its existing $1,500 million
unsecured credit agreement, which as of January 30, 2021 provided the Company with unsecured revolving credit of up
to $1 million.
Exchange Offers and Consent Solicitations for Certain Outstanding Debt Securities of MRH
During the second quarter of 2020, MRH completed exchange offers (each, an “Exchange Offer” and, collectively,
the “Exchange Offers”) with eligible holders and received related consents in consent solicitations for each series of
notes as follows:
(i) $81 million aggregate principal amount of 6.65% Senior Secured Debentures due 2024 (“New 2024 Notes”)
issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.65% Senior Debentures due 2024
issued by MRH (“Old 2024 Notes”);
(ii) $74 million aggregate principal amount of 6.7% Senior Secured Debentures due 2028 (“New 2028 Notes”)
issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.7% Senior Debentures due 2028
issued by MRH (“Old 2028 Notes”);
(iii) $13 million aggregate principal amount of 8.75% Senior Secured Debentures due 2029 (“New 2029 Notes”)
issued by MRH for validly tendered (and not validly withdrawn) outstanding 8.75% Senior Debentures due 2029
issued by MRH (“Old 2029 Notes”);
(iv) $5 million aggregate principal amount of 7.875% Senior Secured Debentures due 2030 (“New 2030 Notes”)
issued by MRH for validly tendered (and not validly withdrawn) outstanding 7.875% Senior Debentures due 2030
issued by MRH (“Old 2030 Notes”);
(v) $5 million aggregate principal amount of 6.9% Senior Secured Debentures due 2032 (“New 2032 Notes”)
issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.9% Senior Debentures due 2032
issued by MRH (“Old 2032 Notes”); and
(vi) $183 million aggregate principal amount of 6.7% Senior Secured Debentures due 2034 (“New 2034 Notes”
and, together with the New 2024 Notes, New 2028 Notes, New 2029 Notes, New 2030 Notes and New 2032
Notes, the “New Notes” and each series, a “series of New Notes”) issued by MRH for validly tendered (and not
validly withdrawn) outstanding 6.7% Senior Debentures due 2034 issued by MRH (“Old 2034 Notes” and,
together with the Old 2024 Notes, Old 2028 Notes, Old 2029 Notes, Old 2030 Notes and Old 2032 Notes, the
“Old Notes” and each series, a “series of Old Notes”).
Each New Note issued in the Exchange Offers for a validly tendered Old Note has an interest rate and maturity
date that is identical to the interest rate and maturity date of the tendered Old Note, as well as identical interest payment
dates and optional redemption prices. The New Notes are MRH’s and Macy’s general, senior obligations and are secured
by a second-priority lien on the same collateral securing the Notes. Following the settlement, the aggregate principal
amounts of each series of Old Notes outstanding are: (i) $41 million Old 2024 Notes, (ii) $29 million Old 2028 Notes,
(iii) $5 million Old 2030 Notes, (iv) $12 million Old 2032 Notes and (v) $18 million Old 2034 Notes.
In addition, MRH solicited and received consents from holders of each series of Old Notes (each, a “Consent
Solicitation” and, collectively, the “Consent Solicitations”) pursuant to a separate Consent Solicitation Statement to
adopt certain proposed amendments to the indenture governing the Old Notes (the “Existing Indenture”) to conform
certain provisions in the negative pledge covenant in the Existing Indenture to the provisions of the negative pledge
covenant in MRH’s most recent indenture (the “Proposed Amendments”). MRH received consents from holders of (i)
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
$85 million aggregate principal amount of outstanding Old 2024 Notes, (ii) $77 million aggregate principal amount of
outstanding Old 2028 Notes, (iii) $13 million aggregate principal amount of outstanding Old 2029 Notes, (iv) $5 million
aggregate principal amount of outstanding Old 2030 Notes, (v) $6 million aggregate principal amount of outstanding Old
2032 Notes and (vi) $185 million aggregate principal amount of outstanding Old 2034 Notes.
2019 Financing Activities
During December 2019, the Company completed a tender offer and purchased $525 million in aggregate principal
amount of certain senior unsecured notes and debentures. The purchased senior unsecured notes and debentures included
$190 million of 4.375% senior notes due 2023, $113 million of 6.9% senior debentures due 2029, $110 million of 2.875%
senior notes due 2023, $100 million of 3.875% senior notes due 2022, and $12 million of 7.0% senior debentures due
2028. The total cash cost for the tender offer was $553 million. The Company recognized $30 million of expense related
to the recognition of the tender premium and other costs including deferred debt discount amortization. This expense is
presented as losses on early retirement of debt on the Consolidated Statements of Operations during 2019.
2018 Financing Activities
During 2018, the Company repurchased $344 million face value of senior notes and debentures. The debt
repurchases were made in the open market for a total cost of $354 million, including expenses and other fees related to
the transactions. Such repurchases resulted in the recognition of expense of $5 million during 2018 presented as losses on
early retirement of debt on the Consolidated Statements of Operations.
During December 2018, the Company completed a tender offer and purchased $750 million in aggregate principal
amount of certain senior unsecured notes and debentures. The purchased senior unsecured notes and debentures included
$164 million of 6.65% senior debentures due 2024, $155 million of 7.0% senior debentures due 2028, $114 million of
6.9% senior debentures due 2029, $103 million of 4.5% senior notes due 2034, $94 million of 6.79% senior debentures
due 2027, $35 million of 6.7% senior debentures due 2034, $34 million of 6.375% senior notes due 2037, $34 million of
6.7% senior debentures due 2028, $10 million of 6.9% senior debentures due 2032, $5 million of 8.75% senior
debentures due 2029, and $2 million of 7.875% senior debentures due 2030. The total cash cost for the tender offer was
$789 million. The Company recognized $28 million of expense related to the recognition of the tender premium and
other costs partially offset by the unamortized debt premium associated with this debt. This expense is presented as losses
on early retirement of debt on the Consolidated Statements of Operations during 2018.
Long-Term Debt Maturities
Future maturities of long-term debt are shown below:
Fiscal year
2022
2023
2024
2025
2026
After 2026
(millions)
$
—
850
622
1,324
—
1,658
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Debt Repayments
During 2020 and 2019, the Company repaid $533 million and $36 million, respectively, of indebtedness at maturity.
The following table shows the detail of debt repayments:
3.45% Senior notes due 2021
6.9% Senior debentures due 2029
4.5% Senior notes due 2034
7.0% Senior debentures due 2028
4.375% Senior notes due 2023
3.875% Senior notes due 2022
2.875% Senior notes due 2023
6.65% Senior debentures due 2024
6.7% Senior debentures due 2028
6.79% Senior debentures due 2027
6.375% Senior notes due 2037
6.7% Senior debentures due 2034
6.9% Senior debentures due 2032
8.75% Senior debentures due 2029
7.875% Senior debentures due 2030
8.5% Senior debentures due 2019
9.5% amortizing debentures due 2021
9.75% amortizing debentures due 2021
10.25% Senior debentures due 2021
Revolving credit facility
Other obligations
2020
2019
(millions)
2018
$
$
500 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4
2
33
1,500
—
2,039 $
— $
113
—
12
190
100
110
—
—
—
—
—
—
—
—
36
4
2
—
—
—
567 $
—
204
183
182
—
—
—
175
94
94
77
63
15
5
2
—
4
2
—
—
1
1,101
The following summarizes certain components of the Company’s other debt obligations:
Bank Credit Agreement
On May 9, 2019, the Company entered into a new credit agreement with certain financial institutions that replaced
the previous credit agreement which was set to expire on May 6, 2021. Similar to the previous agreement, the new credit
agreement provided for revolving credit borrowings and letters of credit in an aggregate amount not to exceed $1,500
million (which could increase to $1,750 million at the option of the Company, subject to the willingness of existing or
new lenders to provide commitments for such additional financing). The new credit agreement is scheduled to expire on
May 9, 2024, subject to up to two one-year extensions that could be requested by the Company and agreed to by the
lenders. On March 19, 2020, due to the impacts of the COVID-19 pandemic, the Company elected to draw on the full
$1,500 million available under the agreement. As discussed further above, during the second quarter of 2020, this
amount was repaid and the credit agreement was amended and provides the Company with unsecured revolving credit of
up to $1 million as of January 30, 2021. The unsecured revolving credit facility contains covenants that provide for,
among other things, limitations on fundamental changes, use of proceeds, and maintenance of property, as well as
customary representations and warranties and events of default. As of January 30, 2021 and February 1, 2020, there
were no revolving credit loans outstanding under the credit agreement and there were no borrowings under the
agreement in 2019.
Senior Notes and Debentures
The senior notes and the senior debentures are unsecured obligations of a 100%-owned subsidiary of Macy’s, Inc.
and Parent has fully and unconditionally guaranteed these obligations.
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Financing Arrangements
At February 1, 2020, the Company had $37 million of cash, included in prepaid expenses and other current assets,
which was used to collateralize the Company’s issuances of standby letters of credit. There were $142 million and $34
million, respectively, of other standby letters of credit outstanding at January 30, 2021, and February 1, 2020.
Financing Subsequent Event
On March 17, 2021, MRH completed an offering of $500 million in aggregate principal amount of 5.875% senior
notes due 2029 (the “2029 Notes”) in a private offering (the “Notes Offering”). The 2029 Notes mature on April 1, 2029.
The 2029 Notes are senior unsecured obligations of MRH and are unconditionally guaranteed on a senior unsecured
basis by Macy’s, Inc.. MRH used the net proceeds from the Notes Offering, together with cash on hand, to fund a
separately announced tender offer in which $500 million of senior notes and debentures were tendered for early
settlement and purchased by MRH on March 17, 2021.
8.
Accounts Payable and Accrued Liabilities
Accounts payable
Gift cards and customer rewards
Lease related liabilities
Taxes other than income taxes
Accrued wages and vacation
Allowance for future sales returns
Current portion of post employment and postretirement benefits
Current portion of workers’ compensation and general liability reserves
Accrued interest
Restructuring accruals, including severance
Other
January 30,
2021
February 1,
2020
(millions)
878 $
616
285
265
201
159
142
97
54
27
203
2,927 $
977
839
399
145
194
213
180
105
41
113
242
3,448
$
$
Changes in workers’ compensation and general liability reserves, including the current portion, are as follows:
Balance, beginning of year
Charged to costs and expenses
Payments, net of recoveries
Balance, end of year
2020
2019
(millions)
2018
$
$
462 $
88
(134)
416 $
487 $
120
(145)
462 $
497
130
(140)
487
The non-current portion of workers’ compensation and general liability reserves is included in other liabilities on
the Consolidated Balance Sheets. At January 30, 2021 and February 1, 2020, workers’ compensation and general liability
reserves included $106 million and $110 million, respectively, which are covered by deposits and receivables included in
current assets on the Consolidated Balance Sheets.
9.
Taxes
Income tax expense (benefit) is as follows:
2020
2019
2018
Current Deferred
Total
Current Deferred
Total
Current Deferred
Total
(millions)
Federal
State and local
$
$
(520) $
1
(519) $
(179) $
(148)
(327) $
(699) $
(147)
(846) $
137 $
33
170 $
4 $
(10)
(6) $
141 $
23
164 $
156 $
54
210 $
79 $
33
112 $
235
87
322
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The income tax expense (benefit) reported differs from the expected tax computed by applying the federal income
tax statutory rate of 21% to income before income taxes net of noncontrolling interest. The reasons for this difference and
their tax effects are as follows:
Expected tax
State and local income taxes, net of federal income taxes
CARES Act carryback benefit
Goodwill impact
Federal tax reform deferred tax remeasurement
Tax impact of equity awards
Federal tax credits
Change in valuation allowance
Other
2020
2019
(millions)
2018
$
$
(1,006) $
(140)
(205)
492
—
8
(5)
24
(14)
(846) $
153 $
13
—
—
—
1
(3)
5
(5)
164 $
300
59
—
—
(17)
—
(16)
10
(14)
322
The Company participates in the Internal Revenue Service (“IRS”) Compliance Assurance Program ("CAP"). As
part of the CAP, tax years are audited on a contemporaneous basis so that all or most issues are resolved prior to the filing
of the tax return. The IRS has completed examinations of 2018 and all prior tax years.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred
tax liabilities are as follows:
Deferred tax assets
Post employment and postretirement benefits
Accrued liabilities accounted for on a cash basis for tax purposes
Lease liabilities
Unrecognized state tax benefits and accrued interest
State operating loss and credit carryforwards
Other
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Excess of book basis over tax basis of property and equipment
Right of use assets
Merchandise inventories
Intangible assets
Other
Total deferred tax liabilities
Net deferred tax liability
January 30,
2021
February 1,
2020
(millions)
$
126 $
103
937
39
194
95
(104)
1,390
(937)
(766)
(300)
(115)
(180)
(2,298)
$
(908) $
210
165
864
40
102
110
(80)
1,411
(988)
(707)
(365)
(309)
(211)
(2,580)
(1,169)
The valuation allowance at January 30, 2021 and February 1, 2020 relates to net deferred tax assets for state net
operating loss and credit carryforwards. The net change in the valuation allowance amounted to an increase of $24 million
for 2020. In 2019, the net change in the valuation allowance amounted to an increase of $5 million.
As of January 30, 2021, the Company had no federal net operating loss carryforwards, state net operating loss
carryforwards, net of valuation allowances, of $1,500 million, which will expire between 2021 and 2040, and no state
credit carryforwards, net of valuation allowances.
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Balance, beginning of year
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Statute expirations
Balance, end of year
Amounts recognized in the Consolidated Balance Sheets
Current income taxes
Deferred income taxes
Other liabilities (a)
January 30,
2021
February 1,
2020
(millions)
February 2,
2019
$
$
$
$
133 $
9
—
(13)
(4)
(12)
113 $
6 $
3
104
113 $
149 $
18
11
(20)
(16)
(9)
133 $
12 $
4
117
133 $
140
17
13
(12)
—
(9)
149
28
4
117
149
(a)
Unrecognized tax benefits not expected to be settled within one year are included within other liabilities on the Consolidated Balance Sheets.
Additional information regarding unrecognized benefits and related interest and penalties is as follow:
Amount of unrecognized tax benefits, net of deferred tax assets, that if recognized
Amount of unrecognized tax benefits, net of deferred tax assets, that if
recognized would affect the effective tax rate
Accrued federal, state and local interest and penalties
Amounts recognized in the Consolidated Balance Sheets
$
Current income taxes
Other liabilities
January 30,
2021
February 1,
2020
(millions)
90 $
60
3
57
106
60
4
56
The Company classifies federal, state and local interest and penalties not expected to be settled within one year as
other liabilities on the Consolidated Balance Sheets and follows a policy of recognizing all interest and penalties related to
unrecognized tax benefits in income tax expense. The accrued federal, state and local interest and penalties primarily
relate to state tax issues and the amount of penalties paid in prior periods, and the amounts of penalties accrued at January
30, 2021 and February 1, 2020, are insignificant. Federal, state and local interest and penalties amounted to an expense of
$1 million for 2020, an expense of $6 million for 2019, and an expense of $5 million for 2018.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and
local jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years
before 2017. With respect to state and local jurisdictions, with limited exceptions, the Company and its subsidiaries are no
longer subject to income tax audits for years before 2011. Although the outcome of tax audits is always uncertain, the
Company believes that adequate amounts of tax, interest and penalties have been accrued for any adjustments that are
expected to result from the years still subject to examination.
As of January 30, 2021, the Company believes it is reasonably possible that certain unrecognized tax benefits
ranging from zero to $55 million may be recognized by the end of 2021. It is reasonably possible that there could be other
material changes to the amount of uncertain tax positions due to activities of the taxing authorities, settlement of audit
issues or the reassessment of existing uncertain tax positions; however, the Company is not able to estimate the impact of
these items at this time.
10. Retirement Plans
The Company has defined contribution plans which cover substantially all employees who work 1,000 hours or
more in a year. In addition, the Company has a funded defined benefit plan (“Pension Plan”) and an unfunded defined
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
benefit supplementary retirement plan (“SERP”), which provides benefits, for certain employees, in excess of qualified
plan limitations. Effective January 1, 2012, the Pension Plan was closed to new participants, with limited exceptions, and
effective January 2, 2012, the SERP was closed to new participants.
In February 2013, the Company announced changes to the Pension Plan and SERP whereby eligible employees no
longer earn future pension service credits after December 31, 2013, with limited exceptions. All retirement benefits
attributable to service in subsequent periods are provided through defined contribution plans.
Retirement expenses, excluding settlement charges, included the following components:
401(k) Qualified Defined Contribution Plan
Non-Qualified Defined Contribution Plan
Pension Plan
Supplementary Retirement Plan
2020
2019
(millions)
2018
$
$
68 $
1
(73)
26
22 $
96 $
2
(54)
30
74 $
96
1
(64)
31
64
The Company estimates the service and interest cost components of net periodic benefit costs for the Pension Plan
and SERP. This method uses a full yield curve approach in the estimation of these components of net periodic benefit
costs. Under this approach, the Company applies discounting using individual spot rates from the yield curve composed
of the rates of return from a portfolio of high quality corporate debt securities available at the measurement date. These
spot rates align to each of the projected benefit obligation and service cost cash flows.
Defined Contribution Plans
The Company has a qualified plan that permits participating associates to defer eligible compensation up to the
maximum limits allowable under the Internal Revenue Code. Beginning January 1, 2014, the Company has a non-
qualified plan which permits participating associates to defer eligible compensation above the limits of the qualified plan.
The Company contributes a matching percentage of employee contributions under both the qualified and non-qualified
plans. Effective January 1, 2014, the Company's matching contribution to the qualified plan was enhanced for all
participating employees, with limited exceptions. Prior to January 1, 2014, the matching contribution rate under the
qualified plan was higher for those employees not eligible for the Pension Plan than for employees eligible for the
Pension Plan.
The liability related to the qualified plan matching contribution, which is reflected in accounts payable and accrued
liabilities on the Consolidated Balance Sheets, was $74 million at January 30, 2021 and $104 million at February 1, 2020.
Expense related to matching contributions for the qualified plan amounted to $68 million for 2020 and $96 million for
2019 and 2018.
At January 30, 2021 and February 1, 2020, the liability under the non-qualified plan, which is reflected in other
liabilities on the Consolidated Balance Sheets, was $36 million and $34 million, respectively. The liability related to the
non-qualified plan matching contribution, which is reflected in accounts payable and accrued liabilities on the
Consolidated Balance Sheets, was $1 million at January 30, 2021, and $2 million at February 1, 2020. Expense related to
matching contributions for the non-qualified plan amounted to $1 million for 2020, $2 million for 2019 and $1 million for
2018. In connection with the non- qualified plan, the Company had mutual fund investments at January 30, 2021 and
February 1, 2020 of $36 million and $34 million, respectively, which are included in prepaid expenses and other current
assets on the Consolidated Balance Sheets.
F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Pension Plan
The following provides a reconciliation of benefit obligations, plan assets, and funded status of the Pension Plan as
of January 30, 2021 and February 1, 2020:
$
Change in projected benefit obligation
Projected benefit obligation, beginning of year
Service cost
Interest cost
Actuarial loss
Benefits paid
Projected benefit obligation, end of year
Changes in plan assets
Fair value of plan assets, beginning of year
Actual return on plan assets
Company contributions
Benefits paid
Fair value of plan assets, end of year
Funded status at end of year
Amounts recognized in the Consolidated Balance Sheets at January 30, 2021 and
February 1, 2020
Other assets
$
$
Amounts recognized in accumulated other comprehensive loss at January 30,
2021 and
February 1, 2020
2020
2019
(millions)
3,321 $
4
66
12
(373)
3,030
3,359
373
—
(373)
3,359
329 $
3,011
5
103
463
(261)
3,321
3,018
602
—
(261)
3,359
38
329 $
38
Net actuarial loss
$
794 $
1,086
Net pension costs, settlement charges and other amounts recognized in other comprehensive loss for the Pension
Plan included the following actuarially determined components:
Net Periodic Pension Cost
Service cost
Interest cost
Expected return on assets
Amortization of net actuarial loss
Amortization of prior service credit
Settlement charges
Other Changes in Plan Assets and Projected Benefit Obligation
Recognized in Other Comprehensive Loss
Net actuarial (gain) loss
Amortization of net actuarial loss
Settlement charges
Total recognized
2020
2019
(millions)
2018
$
$
4 $
66
(183)
40
—
(73)
5 $
103
(191)
29
—
(54)
74
45
(178)
(40)
(74)
(292)
(291) $
51
(29)
(45)
(23)
(32) $
5
109
(206)
28
—
(64)
78
223
(28)
(78)
117
131
The estimated net actuarial loss for the Pension Plan that will be amortized from accumulated other comprehensive
loss into net periodic benefit cost during 2021 is $35 million.
F-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following weighted average assumptions were used to determine the projected benefit obligations for the
Pension Plan at January 30, 2021 and February 1, 2020:
Discount rate
Rate of compensation increases
Cash balance plan interest crediting rate
2020
2019
2.43%
3.45%
5.00%
2.83%
3.25%
5.00%
The following weighted average assumptions were used to determine the net periodic pension cost for the Pension
Plan:
Discount rate used to measure service cost
Discount rate used to measure interest cost
Expected long-term return on plan assets
Rate of compensation increases
Cash balance plan interest crediting rate
2020
2.35% - 2.96%
1.65% - 2.46%
6.25%
3.25%
5.00%
2019
2018
4.09% 3.77% - 4.46%
3.67% 3.39% - 4.06%
6.50%
4.00%
5.00%
6.75%
4.00%
5.00%
The Pension Plan’s assumptions are evaluated annually, and at interim re-measurements if required, and updated as
necessary. Due to settlement accounting and re-measurements during 2020 and 2018, the discount rate used to measure
service cost and the discount rate used to measure interest cost varied between periods. The table above shows the range
of rates used to determine net periodic expense for the Pension Plan.
The discount rate used to determine the present value of the projected benefit obligation for the Pension Plan is
based on a yield curve constructed from a portfolio of high quality corporate debt securities with various maturities. Each
year’s expected future benefit payments are discounted to their present value at the appropriate yield curve rate, thereby
generating the overall discount rate for the projected benefit obligation.
The Company develops its expected long-term rate of return on plan asset assumption by evaluating input from
several professional advisors taking into account the asset allocation of the portfolio and long-term asset class return
expectations, as well as long-term inflation assumptions. Expected returns for each major asset class are considered along
with their volatility and the expected correlations among them. These expectations are based upon historical relationships
as well as forecasts of how future returns may vary from historical returns. Returns by asset class and correlations among
asset classes are combined using the target asset allocation to derive an expected return for the portfolio as a whole. Long-
term historical returns of the portfolio are also considered. Portfolio returns are calculated net of all expenses, therefore,
the Company also analyzes expected costs and expenses, including investment management fees, administrative expenses,
Pension Benefit Guaranty Corporation premiums and other costs and expenses. As of January 30, 2021, the Company
lowered the assumed annual long-term rate of return for the Pension Plan's assets from 6.25% to 5.75% based on expected
future returns on the portfolio of assets.
The assets of the Pension Plan are managed by investment specialists with the primary objectives of payment of
benefit obligations to Plan participants and an ultimate realization of investment returns over longer periods in excess of
inflation. The Company employs a total return investment approach whereby a mix of domestic and foreign equity
securities, fixed income securities and other investments is used to maximize the long-term return on the assets of the
Pension Plan for a prudent level of risk. Risks are mitigated through asset diversification and the use of multiple
investment managers. The target allocation for plan assets is currently 21% equity securities, 74% debt securities, 2% real
estate and 3% private equities.
The Company generally employs investment managers to specialize in a specific asset class. These managers are
chosen and monitored with the assistance of professional advisors, using criteria that include organizational structure,
investment philosophy, investment process, performance compared to market benchmarks and peer groups.
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company periodically conducts an analysis of the behavior of the Pension Plan’s assets and liabilities under
various economic and interest rate scenarios to ensure that the long-term target asset allocation is appropriate given the
liabilities.
The fair values of the Pension Plan assets as of January 30, 2021, excluding interest and dividend receivables and
pending investment purchases and sales, by asset category are as follows:
Fair Value
Measurements
Quoted Prices in Significant
Active Markets for Observable Unobservable
Significant
Total
Identical Assets
(Level 1)
(millions)
Inputs
(Level 2)
Inputs
(Level 3)
$
$
3 $
136
356
333
270
63
1,609
11
1
271
31
160
8
(4)
3,248 $
— $
136
356
37
—
—
—
—
—
271
—
—
—
(4)
796 $
3 $
—
—
—
270
63
1,609
11
1
—
—
—
8
—
1,965 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Short term investments
Money market funds
Equity securities:
U.S. pooled funds
International pooled funds (a)
Fixed income securities:
U.S. Treasury bonds
Other Government bonds
Corporate bonds
Mortgage-backed securities
Asset-backed securities
Pooled funds
Other types of investments:
Real estate (a)
Private equity (a)
Derivatives in a positive position
Derivatives in a negative position
Total
(a)
Certain investments that are measured at fair value using the net asset value per share as a practical expedient have not been classified in the
fair value hierarchy. The fair value amounts presented in these tables are intended to permit reconciliation of the fair value hierarchy to the
amounts presented in the fair value of plan assets.
F-36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The fair values of the Pension Plan assets as of February 1, 2020, excluding interest and dividend receivables and
pending investment purchases and sales, by asset category are as follows:
Fair Value Measurements
Quoted Prices in Significant
Active Markets for Observable Unobservable
Significant
Total
Identical Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
$
37 $
122
474
357
58
61
13
615
23
10
1,442
37
167
4
(6)
3,414 $
$
(millions)
37 $
122
474
82
—
—
—
—
—
—
1,442
—
—
—
—
2,157 $
— $
—
—
—
58
61
13
615
23
10
—
—
—
4
(6)
778 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Money market funds
Equity securities:
U.S. stocks
U.S. pooled funds
International pooled funds (a)
Fixed income securities:
U.S. Treasury bonds
Other Government bonds
Agency backed bonds
Corporate bonds
Mortgage-backed securities
Asset-backed securities
Pooled funds
Other types of investments:
Real estate (a)
Private equity (a)
Derivatives in a positive position
Derivatives in a negative position
Total
(a)
Certain investments that are measured at fair value using the net asset value per share as a practical expedient have not been classified in the
fair value hierarchy. The fair value amounts presented in these tables are intended to permit reconciliation of the fair value hierarchy to the
amounts presented in the fair value of plan assets.
Corporate bonds consist primarily of investment grade bonds of U.S. issuers from diverse industries.
The fair value of certain pooled funds including equity securities, real estate and private equity investments
represents the reported net asset value of shares or underlying assets of the investment as a practical expedient to estimate
fair value. International equity pooled funds seek to provide long-term capital growth and income by investing in equity
securities of non-U.S. companies located both in developed and emerging markets. There are generally no redemption
restrictions or unfunded commitments related to these equity securities.
Real estate investments include several funds which seek risk-adjusted return by providing a stable, income-driven
rate of return over the long term with high potential for growth of net investment income and appreciation of value. The
real estate investments are diversified across property types and geographical areas primarily in the United States of
America. Private equity investments have an objective of realizing aggregate long-term returns in excess of those
available from investments in the public equity markets. Private equity investments generally consist of limited
partnerships in the United States of America, Europe and Asia. Private equity and real estate investments are valued using
fair values per the most recent financial reports provided by the investment sponsor, adjusted as appropriate for any lag
between the date of the financial reports and the Company’s reporting date.
Due to the nature of the underlying assets of the real estate and private equity investments, changes in market
conditions and the economic environment may significantly impact the net asset value of these investments and,
consequently, the fair value of the Pension Plan’s investments. These investments are redeemable at net asset value to the
extent provided in the documentation governing the investments. However, these redemption rights may be restricted in
accordance with the governing documents. Redemption of these investments is subject to restrictions including lock-up
periods where no redemptions are allowed, restrictions on redemption frequency and advance notice periods for
redemptions. As January 30, 2021 and February 1, 2020, certain of these investments are generally subject to lock-up
periods, ranging from one to eight years, certain of these investments are subject to restrictions on redemption frequency,
F-37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ranging from daily to weekly, and certain of these investments are subject to advance notice requirements. As of January
30, 2021 and February 1, 2020, the Pension Plan had unfunded commitments related to certain of these investments
totaling $39 million and $43 million, respectively.
The Company does not anticipate making funding contributions to the Pension Plan in 2021.
The following benefit payments are estimated to be paid from the Pension Plan:
Fiscal year
2021
2022
2023
2024
2025
2026-2030
(millions)
$
298
250
236
223
210
896
Supplementary Retirement Plan
The following provides a reconciliation of benefit obligations, plan assets and funded status of the supplementary
retirement plan as of January 30, 2021 and February 1, 2020:
Change in projected benefit obligation
Projected benefit obligation, beginning of year
Service cost
Interest cost
Actuarial loss
Benefits paid
Projected benefit obligation, end of year
Change in plan assets
Fair value of plan assets, beginning of year
Company contributions
Benefits paid
Fair value of plan assets, end of year
Funded status at end of year
Amounts recognized in the Consolidated Balance Sheets at January 30, 2021 and
February 1, 2020
Accounts payable and accrued liabilities
Other liabilities
Amounts recognized in accumulated other comprehensive loss at January 30,
2021 and February 1, 2020
Net actuarial loss
Prior service cost
2020
2019
(millions)
681 $
—
14
42
(64)
673
—
64
(64)
—
(673) $
(49) $
(624)
(673) $
301 $
6
307 $
644
—
21
87
(71)
681
—
71
(71)
—
(681)
(55)
(626)
(681)
283
6
289
$
$
$
$
$
$
The accumulated benefit obligation for the supplementary retirement plan was $673 million as of January 30, 2021
and $681 million as of February 1, 2020.
F-38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net pension costs, settlement charges and other amounts recognized in other comprehensive loss for the
supplementary retirement plan included the following actuarially determined components:
Net Periodic Pension Cost
Service cost
Interest cost
Amortization of net actuarial loss
Amortization of prior service cost
Settlement charges
Other Changes in Plan Assets and Projected Benefit Obligation
Recognized in Other Comprehensive Loss
Net actuarial loss (gain)
Amortization of net actuarial loss
Amortization of prior service cost
Settlement charges
Total recognized
2020
2019
(millions)
2018
$
$
— $
14
12
—
26
10
40
(12)
—
(10)
18
54 $
— $
21
9
—
30
13
87
(9)
—
(13)
65
108 $
—
23
7
1
31
10
(9)
(7)
(1)
(10)
(27)
14
The following weighted average assumption was used to determine the projected benefit obligations for the
supplementary retirement plan at January 30, 2021 and February 1, 2020:
Discount rate
2020
2019
2.51%
2.89%
The following weighted average assumption was used to determine net pension costs for the supplementary
retirement plan:
Discount rate used to measure interest cost
2020
2019
1.65% - 2.44%
2.65% - 3.69%
2018
3.39% - 4.09%
The supplementary retirement plan’s assumptions are evaluated annually, and at interim re-measurements if
required, and updated as necessary. Due to settlement accounting and re-measurements during 2020, 2019 and 2018, the
discount rate used to measure interest cost varied between periods. The table above shows the range of rates used to
determine net periodic expense for the supplementary retirement plan.
The discount rate used to determine the present value of the projected benefit obligation for the supplementary
retirement plan is based on a yield curve constructed from a portfolio of high quality corporate debt securities with
various maturities. Each year’s expected future benefit payments are discounted to their present value at the appropriate
yield curve rate, thereby generating the overall discount rate for the projected benefit obligation.
The following benefit payments are estimated to be funded by the Company and paid from the supplementary
retirement plan:
Fiscal year
2021
2022
2023
2024
2025
2026-2030
(millions)
$
49
49
47
44
44
200
F-39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
11. Postretirement Health Care and Life Insurance Benefits
In addition to pension and other supplemental benefits, certain retired employees currently are provided with
specified health care and life insurance benefits. Eligibility requirements for such benefits vary by division and subsidiary,
but generally state that benefits are available to eligible employees who were hired prior to a certain date and retire after a
certain age with specified years of service. Certain employees are subject to having such benefits modified or terminated.
The following provides a reconciliation of benefit obligations, plan assets, and funded status of the postretirement
obligations as of January 30, 2021 and February 1, 2020:
Change in accumulated postretirement benefit obligation
Accumulated postretirement benefit obligation, beginning of year
Service cost
Interest cost
Actuarial loss (gain)
Medicare Part D subsidy
Benefits paid
Accumulated postretirement benefit obligation, end of year
Change in plan assets
Fair value of plan assets, beginning of year
Company contributions
Benefits paid
Fair value of plan assets, end of year
Funded status at end of year
Amounts recognized in the Consolidated Balance Sheets at January 30, 2021 and
February 1, 2020
Accounts payable and accrued liabilities
Other liabilities
Amounts recognized in accumulated other comprehensive loss at
January 30, 2021 and February 1, 2020
Net actuarial gain
Prior service credit
$
$
$
$
$
$
2020
2019
(millions)
133 $
—
2
(6)
—
(10)
119
—
10
(10)
—
(119) $
(13) $
(106)
(119) $
(32) $
(7)
(39) $
137
—
5
5
—
(14)
133
—
14
(14)
—
(133)
(14)
(119)
(133)
(30)
(8)
(38)
F-40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net postretirement benefit costs and other amounts recognized in other comprehensive loss included the following
actuarially determined components:
Net Periodic Postretirement Benefit Cost
Service cost
Interest cost
Amortization of net actuarial gain
Amortization of prior service credit
Other Changes in Plan Assets and Projected Benefit Obligation
Recognized in Other Comprehensive Loss
Net actuarial loss (gain)
Amortization of net actuarial gain
Amortization of prior service credit
Prior service credit
Total recognized
2020
2019
(millions)
2018
$
$
— $
2
(4)
(1)
(3)
(6)
4
1
—
(1)
(4) $
— $
5
(6)
(1)
(2)
5
6
1
—
12
10 $
—
5
(5)
(1)
(1)
(11)
5
1
—
(5)
(6)
The following weighted average assumption was used to determine the accumulated postretirement benefit
obligations at January 30, 2021 and February 1, 2020:
Discount rate
2020
2019
2.32%
2.81%
The following weighted average assumption was used to determine the net postretirement benefit costs for the
postretirement obligations:
Discount rate used to measure interest cost
2020
2019
2018
2.30%
3.57%
3.28%
The accumulated postretirement benefit obligation assumptions are evaluated annually, and at interim re-
measurements if required, and updated as necessary.
The discount rate used to determine the present value of the Company’s accumulated postretirement benefit
obligations is based on a yield curve constructed from a portfolio of high quality corporate debt securities with various
maturities. Each year’s expected future benefit payments are discounted to their present value at the appropriate yield
curve rate, thereby generating the overall discount rate for the accumulated postretirement benefit obligations.
The Company estimates the interest cost component of net periodic benefit costs using a full yield curve approach
in the estimation of these components of net periodic benefit costs. Under this approach, the Company applies discounting
using individual spot rates from the yield curve composed of the rates of return from a portfolio of high quality corporate
debt securities available at the measurement date. These spot rates align to each of the projected benefit obligation and
service cost cash flows.
The future medical benefits provided by the Company for certain employees are based on a fixed amount per year
of service, and the accumulated postretirement benefit obligation is not affected by increases in health care costs.
However, the future medical benefits provided by the Company for certain other employees are affected by increases in
health care costs.
F-41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following provides the assumed health care cost trend rates related to the Company’s accumulated
postretirement benefit obligations at January 30, 2021 and February 1, 2020:
Health care cost trend rates assumed for next year
Rates to which the cost trend rate is assumed to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
2020
2019
4.9% - 8.0% 5.25% - 8.63%
4.5%
2029
4.5%
2027
The following table reflects the benefit payments estimated to be funded by the Company and paid from the
accumulated postretirement benefit obligations and estimated federal subsidies expected to be received under the
Medicare Prescription Drug Improvement and Modernization Act of 2003:
Fiscal Year
2021
2022
2023
2024
2025
2026-2030
Expected
Benefit
Payments
(millions)
$
13
12
11
10
9
36
The federal subsidies expected to be received for each of the years presented above are estimated to be less than $1
million each year and are estimated to be a total of approximately $1 million for the entire time period presented.
12. Stock-Based Compensation
The following disclosures present the Company’s equity plans on a combined basis. The equity plans are
administered by the Compensation and Management Development Committee of the Board of Directors (the “CMD
Committee”). The CMD Committee is authorized to grant options, stock appreciation rights, restricted stock and restricted
stock units to officers and key employees of the Company and its subsidiaries and to non-employee directors. The equity
plans are intended to help the Company attract and retain directors, officers, other key executives and employees and is
also intended to provide incentives and rewards relating to the Company’s business plans to encourage such persons to
devote themselves to the business of the Company. There have been no grants of stock appreciation rights under the
equity plans.
Stock option grants have an exercise price at least equal to the market value of the underlying common stock on the
date of grant, have ten-year terms and typically vest ratably over four years of continued employment. Restricted stock
and time-based restricted stock unit awards generally vest one to four years from the date of grant. Performance-based
restricted stock units generally are earned based on the attainment of specified goals achieved over the performance
period.
As of January 30, 2021, approximately 7.8 million shares of common stock were available for additional grants
pursuant to the Company’s equity plans. Shares awarded are generally issued from the Company's treasury stock.
Stock-based compensation expense included the following components:
Stock options
Restricted stock units
2020
2019
(millions)
2018
$
$
8 $
23
31 $
15 $
23
38 $
24
39
63
All stock-based compensation expense is recorded in SG&A expense in the Consolidated Statements of Operations.
F-42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Stock Options
There were no grants of stock options during 2020. The fair value of stock options granted during 2019 and 2018
and the weighted average assumptions used to estimate the fair value are as follows:
Weighted average grant date fair value of stock options granted
during the period
Dividend yield
Expected volatility
Risk-free interest rate
Expected life
2019
2018
$
5.11
$
6.3%
40.6%
2.4%
7.43
5.2%
41.1%
2.7%
5.5 years
5.6 years
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing
model. The Company estimates the expected volatility and expected option life assumption consistent with ASC Topic
718, Compensation – Stock Compensation. The expected volatility of the Company’s common stock at the date of grant is
estimated based on a historic volatility rate and the expected option life is calculated based on historical stock option
experience as the best estimate of future exercise patterns. The dividend yield assumption is based on historical and
anticipated dividend payouts. The risk-free interest rate assumption is based on observed interest rates consistent with the
expected life of each stock option grant. The Company uses historical data to estimate pre-vesting option forfeitures and
records stock-based compensation expense only for those awards that are expected to vest. Compensation expense is
recorded for all stock options expected to vest based on the amortization of the fair value at the date of grant on a straight-
line basis primarily over the vesting period of the options.
Activity related to stock options for 2020 is as follows:
Weighted
Average
Remaining
Contractual
Life
(years)
Aggregate
Intrinsic
Value
(millions)
Outstanding, beginning of period
Granted
Canceled or forfeited
Exercised
Outstanding, end of period
Exercisable, end of period
Options expected to vest
Weighted
Average
Exercise Price
Shares
(thousands)
18,499 $
—
(2,154)
—
16,345 $
14,357 $
1,371 $
39.77
—
32.84
—
40.69
42.74
25.84
3.6 $
7.4 $
—
—
27
45
Additional information relating to stock options is as follows:
Intrinsic value of options exercised
Cash received from stock options exercised
2020
2019
(millions)
2018
$
— $
—
10 $
6
As of January 30, 2021, the Company had $5 million of unrecognized compensation costs related to nonvested
stock options, which is expected to be recognized over a weighted average period of approximately 1.7 years.
Restricted Stock Units
The weighted average grant date fair values of performance-based and time-based restricted stock units granted
during 2020, 2019 and 2018 are as follows:
Restricted stock units (performance-based)
Restricted stock units (time-based)
2020
2019
2018
$
6.24 $
6.96
24.28 $
17.81
30.64
25.57
F-43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During 2020, 2019 and 2018, the CMD Committee approved awards of performance-based restricted stock units to
certain senior executives of the Company. Each award reflects a target number of shares (“Target Shares”) that may be
issued to the award recipient. These awards may be earned upon the completion of three-year performance periods ending
January 28, 2023, January 29, 2022 and January 30, 2021, respectively. Whether units are earned at the end of the
performance period will be determined based on the achievement of certain performance objectives over the performance
period. The performance objectives include achieving an EBITDA as a percent to sales ratio, owned plus licensed
comparable sales growth and a return on invested capital ratio. The 2019 and 2018 performance-based restricted stock
units also include a performance objective relating to relative total shareholder return (“TSR”). Relative TSR reflects the
change in the value of the Company’s common stock over the performance period in relation to the change in the value of
the common stock of a peer group over the performance period, assuming the reinvestment of dividends. Depending on
the results achieved during the three-year performance periods, the actual number of shares that a grant recipient receives
at the end of the period may range from 0% to 150% of the Target Shares granted for the 2020 performance-based
restricted stock units and 0% to 200% of the Target Shares granted for the 2019 and 2018 performance-based restricted
stock units.
The fair value of the Target Shares and restricted stock awards are based on the fair value of the underlying shares
on the date of grant. The fair value of the portion of the Target Shares that relate to a relative TSR performance objective
was determined using a Monte Carlo simulation analysis to estimate the total shareholder return ranking of the Company
among a peer group over the remaining performance periods. The expected volatility of the Company’s common stock at
the date of grant was estimated based on a historical average volatility rate for the approximate three-year performance
period. The dividend yield assumption was based on historical and anticipated dividend payouts. The risk-free interest rate
assumption was based on observed interest rates consistent with the approximate three-year performance measurement
period.
The fair value of a restricted stock unit award at the grant date is equal to the market price of the Company's
common stock on the grant date. Compensation expense is recorded for all restricted stock unit awards based on the
amortization of the fair market value at the date of grant over the period the restrictions lapse or over the performance
period of the performance-based restricted stock units. As of January 30, 2021, the Company had $52 million of
unrecognized compensation costs related to nonvested restricted stock units, which is expected to be recognized over a
weighted average period of approximately 2.5 years.
Activity related to restricted stock units for 2020 is as follows:
Nonvested, beginning of period
Granted – performance-based
Performance adjustment
Granted – time-based
Forfeited
Vested
Nonvested, end of period
13. Shareholders’ Equity
Weighted
Average
Grant Date
Fair Value
23.37
6.24
30.48
6.96
21.43
23.54
9.95
Shares
(thousands)
4,747 $
1,553
(508)
6,216
(830)
(1,426)
9,752 $
The authorized shares of the Company consist of 125 million shares of preferred stock (“Preferred Stock”), par
value of $0.01 per share, with no shares issued, and 1,000 million shares of common stock, par value of $0.01 per share,
with 333.6 million shares of common stock issued and 310.5 million shares of common stock outstanding at January 30,
2021, and with 333.6 million shares of common stock issued and 309.0 million shares of common stock outstanding at
February 1, 2020 (with shares held in the Company’s treasury being treated as issued, but not outstanding).
No shares of common stock were retired during 2020, 2019 and 2018.
F-44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Common Stock
The holders of the common stock are entitled to one vote for each share held of record on all matters submitted to a
vote of shareholders. Subject to preferential rights that may be applicable to any Preferred Stock, holders of common
stock are entitled to receive ratably such dividends as may be declared by the Board of Directors in its discretion, out of
funds legally available.
Treasury Stock
Treasury stock contains shares repurchased under the share repurchase program, shares repurchased to cover
employee tax liabilities related to stock plan activity and shares maintained in a trust related to deferred compensation
plans. Under the deferred compensation plans, shares are maintained in a trust to cover the number estimated to be needed
for distribution on account of stock credits currently outstanding.
Changes in the Company’s common stock issued and outstanding, including shares held by the Company’s treasury,
are as follows:
Common
Stock
Issued
Deferred
Compensation
Plans
Treasury Stock
Other
(thousands)
Total
Common
Stock
Outstanding
Balance at February 3, 2018
Stock issued under stock plans
Stock repurchases
Deferred compensation plan distributions
Balance at February 2, 2019
Stock issued under stock plans
Stock repurchases
Deferred compensation plan distributions
Balance at February 1, 2020
Stock issued under stock plans
Stock repurchases
Deferred compensation plan distributions
Balance at January 30, 2021
Accumulated Other Comprehensive Loss
333,606
333,606
333,606
333,606
(946)
(106)
111
(941)
(130)
169
(902)
(127)
98
(931)
(27,895)
2,756
(6)
(25,145)
1,510
(38)
(23,673)
1,577
(79)
(22,175)
2,650
(6)
111
(28,841) 304,765
2,650
(6)
111
(26,086) 307,520
1,380
(38)
169
(24,575) 309,031
1,450
(79)
98
(23,106) 310,500
1,380
(38)
169
1,450
(79)
98
For the Company, the only component of accumulated other comprehensive loss for 2020, 2019 and 2018 relates to
post employment and postretirement plan items. The net actuarial gains and losses and prior service costs and credits
related to post employment and postretirement benefit plans are reclassified out of accumulated other comprehensive loss
and included in the computation of net periodic benefit cost (income) and are included in benefit plan income, net in the
Consolidated Statements of Operations. In addition, the Company incurred the pro-rata recognition of net actuarial losses
associated with an increase in lump sum distributions associated with store closings, organizational restructuring, and
periodic distribution activity as settlement charges in the Consolidated Statements of Operations. See Note 10,
Retirement Plans, and Note 11, Postretirement Health Care and Life Insurance Benefits, for further information.
F-45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
14. Fair Value Measurements and Concentrations of Credit Risk
The following table shows the Company’s financial assets that are required to be measured at fair value on a
recurring basis, by level within the hierarchy as defined by applicable accounting standards:
January 30, 2021
Fair Value Measurements
February 1, 2020
Fair Value Measurements
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
Total
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
(millions)
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Marketable
equity and
debt securities
$
100 $
37 $
63 $
— $
132 $
34 $
98 $
—
Other financial instruments not measured at fair value on a recurring basis include cash and cash equivalents,
receivables, certain-short term investments and other assets, short-term debt, merchandise accounts payable, accounts
payable and accrued liabilities and long-term debt. With the exception of long-term debt, the carrying amount
approximates fair value because of the short maturity of these instruments. The fair values of long-term debt, excluding
capitalized leases, are generally estimated based on quoted market prices for identical or similar instruments, and are
classified as Level 2 measurements within the hierarchy as defined by applicable accounting standards.
The following table shows the estimated fair value of the Company’s long-term debt, excluding capital leases and
other obligations:
Notional
Amount
January 30, 2021
Carrying
Amount
Fair
Value
Notional
Amount
February 1, 2020
Carrying
Amount
Fair
Value
Long-term debt
$
4,454 $
4,407 $
(millions)
4,320 $
3,607 $
3,621
3,702
The following table shows certain of the Company’s long-lived assets, which includes tangible and intangible
assets, that were measured at fair value on a nonrecurring basis during 2020 and 2019:
January 30, 2021
Fair Value Measurements
February 1, 2020
Fair Value Measurements
Quoted
Prices
in Active
Markets
for
Identical
Assets
(Level 1)
Total
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Quoted
Prices
in Active
Markets
for
Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Long-lived assets $
Goodwill
95 $
828
— $
—
— $
—
(millions)
95 $
828
129 $
—
$
—
—
— $
—
129
—
During 2020, long-lived assets with a carrying value of $295 million were written down to their fair value of $95
million, resulting in asset impairment charges of $200 million, and goodwill with a carrying value of $3,908 million was
written down to its fair value of $828 million, resulting in goodwill impairment charges of $3,080 million. During 2019,
long-lived assets with a carrying value of $326 million were written down to their fair value of $129 million, resulting in
asset impairment charges of $197 million. The fair values of these assets were calculated based on the projected cash
flows and an estimated risk-adjusted rate of return that would be used by market participants in valuing these assets or
prices of similar assets.
F-46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of
temporary cash investments. The Company places its temporary cash investments in what it believes to be high credit
quality financial instruments.
15. Earnings (Loss) Per Share Attributable to Macy's, Inc. Shareholders
The following table sets forth the computation of basic and diluted earnings (loss) per share attributable to Macy's,
Inc. shareholders:
2020
2019
2018
Net
Loss
Net
Income
Shares
Shares
(millions, except per share data)
Net
Income
Shares
Net income (loss) attributable to Macy's, Inc.
Shareholders and average number of
shares outstanding
Shares to be issued under deferred
compensation and other plans
Basic earnings (loss) per share attributable
to Macy's,Inc. shareholders
Effect of dilutive securities:
Stock options and restricted stock units
Diluted earnings (loss) per share attributable
to Macy's, Inc. shareholders
$(3,944)
310.2 $
564
308.8 $1,108
306.8
—
$(3,944)
1
311.1 $
—
564
0.9 —
309.7 $1,108
0.9
307.7
$(12.68)
$ 1.82
$3.60
—
$(3,944)
—
311.1 $
—
564
1.7 —
311.4 $1,108
3.7
311.4
$(12.68)
$ 1.81
$3.56
For 2020, as a result of the net loss, all options and restricted stock units have been excluded from the calculation
of diluted earnings per share and, therefore, there was no difference in the weighted average number of common shares
for basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive. Stock
options to purchase 16.3 million shares of common stock and restricted stock units relating to 10.3 million shares of
common stock outstanding at January 30, 2021, were excluded from the computation of diluted earnings per share.
In addition to the stock options and restricted stock units in the foregoing table, stock options to purchase 18.5
million shares of common stock and restricted stock units relating to 1.7 million shares of common stock were
outstanding at February 1, 2020, and stock options to purchase 15.3 million of shares of common stock and restricted
stock units relating to 0.9 million shares of common stock were outstanding at February 2, 2019, but were not included in
the computation of diluted earnings per share attributable to Macy's, Inc. shareholders for 2019 or 2018, respectively,
because their inclusion would have been antidilutive or they were subject to performance conditions that had not been
met.
F-47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
16. Quarterly Results (unaudited)
Unaudited quarterly results for the last two years were as follows:
2020:
$
Net sales
Credit card revenues, net
Cost of sales
Selling, general and administrative expenses
Gains on sale of real estate
Restructuring, impairment, store closing and other costs
Benefit plan income, net
Settlement charges
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
2019:
$
Net sales
Credit card revenues, net
Cost of sales
Selling, general and administrative expenses
Gains on sale of real estate
Restructuring, impairment, store closing and other costs
Benefit plan income, net
Settlement charges
Net income
Basic earnings per share
Diluted earnings per share
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(millions, except per share data)
3,017 $
131
(2,501)
(1,598)
16
(3,184)
9
—
(3,581)
(11.53)
(11.53)
5,504 $
172
(3,403)
(2,112)
43
(1)
7
—
136
0.44
0.44
3,559 $
168
(2,718)
(1,398)
—
(242)
12
(38)
(431)
(1.39)
(1.39)
5,546 $
176
(3,395)
(2,177)
7
(2)
8
—
86
0.28
0.28
3,990 $
195
(2,569)
(1,726)
3
(20)
16
(26)
(91)
(0.29)
(0.29)
5,173 $
183
(3,106)
(2,202)
17
(13)
8
(12)
2
0.01
0.01
6,780
258
(4,498)
(2,045)
40
(134)
17
(19)
160
0.51
0.50
8,337
239
(5,266)
(2,509)
95
(337)
8
(46)
340
1.10
1.09
Note:
Annual results may not equal the sum of the quarterly results for the respective periods due to rounding conventions.
F-48
OUR BRANDS
Macy’s is America’s Department Store. For more than 160 years, Macy’s, the
largest retail brand of Macy’s, Inc., has served generations at every stage of their
lives. Through a digitally led shopping experience powered by macys.com, our
award-winning mobile app and a nationwide portfolio of stores, Macy’s customers
come to us for fashion, value and high-quality products. We are proud of our
heritage and the unique role we play in American culture and tradition. We
celebrate occasions big and small, and have created decades of memorable
experiences through Macy’s 4th of July Fireworks® and Macy’s Thanksgiving Day
Parade®, as well as spectacular fashion shows, culinary events, flower shows
and celebrity appearances. With the collective support of our customers and
colleagues, Macy’s helps make a difference in every market we serve, supporting
local and national charities through funding and volunteer service. With fashion,
value and celebration as our guide, Macy’s makes life shine brighter for our
customers, colleagues and communities.
Bloomingdale’s is America’s only nationwide, full-line, upscale department store,
operating 34 Bloomingdale’s stores, 19 Bloomingdale’s The Outlet locations and
Bloomingdales.com. Known for its originality, innovation and fashion leadership,
Bloomingdale’s provides customers with a seamless shopping experience, both
in store and online.
Bluemercury was founded in 1999 by Barry and Marla Beck and is widely
recognized as the nation’s largest and fastest-growing luxury beauty products
and retail spa chain. Bluemercury was created as a haven for beauty lovers—a
place for them to receive honest, expert advice and to find the best beauty
products in the world, right in their neighborhoods. Bluemercury joined Macy’s,
Inc. through acquisition in March 2015. The high-growth, luxury company now
boasts 162 specialty stores nationwide.
MACY’S, INC.2020 ANNUAL REPORT MANAGEMENT OVERVIEW
BOARD OF DIRECTORS
DAVID ABNEY
Former Chairman and Chief Executive
Officer United Parcel Service, Inc.
DEIRDRE P. CONNELLY
Former President, North American
Pharmaceuticals GlaxoSmithKline
SARA LEVINSON
Co-Founder and Director, Katapult
FRANCIS S. BLAKE
Former Chairman and Chief Executive
Officer, The Home Depot
JEFF GENNETTE
Chairman & Chief Executive Officer
JOYCE M. ROCHÉ
Former President and Chief Executive
Officer, Girls Incorporated
TORRENCE BOONE
Vice President, Global Client
Partnerships, Alphabet Inc.
LESLIE D. HALE
President and Chief Executive Officer,
RLJ Lodging Trust
PAUL C. VARGA
Former Chairman and Chief Executive
Officer, Brown-Forman Corporation
JOHN A. BRYANT
Former Chairman, President,
and Chief Executive Officer,
Kellogg Company
WILLIAM H. LENEHAN
President and Chief Executive Officer,
Four Corners Property Trust, Inc.
MARNA C. WHITTINGTON
Former Chief Executive Officer,
Allianz Global Investors Capital, and
Lead Director of the Board
EXECUTIVE MANAGEMENT TEAM
JEFF GENNETTE
Chairman & Chief Executive Officer
ELISA D. GARCIA
Chief Legal Officer and Secretary
LAURA MILLER
Chief Information Officer
ADRIAN V. MITCHELL
Chief Financial Officer
JOHN HARPER
Chief Operations Officer
DENNIS MULLAHY
Chief Supply Chain Officer
BOBBY AMIRSHAHI
Senior Vice President, Corporate
Communications
DANIELLE KIRGAN
Chief Transformation and Human
Resources Officer
DOUGLAS W. SESLER
Senior Vice President, Real Estate
MATT BAER
Chief Digital Officer
RICHARD A. LENNOX
Chief Customer Officer
NATA DVIR
Chief Merchandising Officer
MARC MASTRONARDI
Chief Stores Officer
TONY SPRING
Chairman and Chief Executive Officer,
Bloomingdale’s
MARLA BECK
Chief Executive Officer, Co-Founder of
Bluemercury, Inc.
MACY’S, INC.2020 ANNUAL REPORT SHAREHOLDER INFORMATION
CONTACT US
MACYSINC.COM/INVESTORS
CALL
Macy’s, Inc. Investor Relations
Department
1-212-494-1621
WRITE
Macy’s, Inc.
Investor Relations Department
151 W. 34th Street, 13th Floor
New York, NY 10001
MACY’S INC. SHARES
COMPUTERSHARE.COM/INVESTOR
Macy’s, Inc.
c/o Computershare Shareowner Services
P.O. Box 505000
Louisville, KY 40233-5000
1-866-337-3311
(Inside the United States and Canada)
1-201-680-6578
(Outside the United States and Canada)
EMAIL
INVESTORS@MACYS.COM
1-800-231-5469 (TDD)
For the hearing impaired
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MACY’S, INC.