Item 1A. Risk Factors.

Except as set forth below, there have been no material changes to the Risk Factors described in Part I, Item 1A."Risk Factors" in the Company's 2024 Form 10-K. The risk factor below is revised to read as follows:

Supply Chain and Third-Party Risks

We depend on vendors and other sources of merchandise, goods and services outside the U.S. Our business has been and could in the future continue to be affected by disruptions in, or other legal, regulatory, political, economic or public health issues associated with, our supply network.

We depend on vendors for timely and efficient access to products we sell. We source the majority of our merchandise from manufacturers located outside the U.S., primarily Asia. In the normal course of business, we provide credit enhancement to our vendors to support accounts receivable factoring and financing with third parties. 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, or we may be required to increase cash collateral levels or provide guarantees to support our vendors' financing arrangements. 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.

We have experienced delays in merchandise inventory receipts and product delivery due to a shortage of vessels and air freight, port congestion, worker shortage impacting shipping and ports, truck driver shortages, rail congestion at major freight hubs and increased demand for consumer goods. Although these delays have not materially impacted our operations to date, they could potentially have a material adverse impact on future product availability, product mix and sales if the delays escalate. We have also experienced increases in shipping rates from Trans-Pacific ocean carriers due to increases in spot market rates and shortage of shipping capacity from China and other parts of Asia and increases in trucking costs due to truck driver shortages and fuel costs.

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. Our procurement of goods and services from outside the U.S. is subject to risks associated with political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs, health pandemics, armed conflicts and other factors relating to foreign trade. All of these factors may affect our ability to access suitable merchandise on acceptable terms, are beyond our control and could negatively affect our business and results of operations.

We source certain of our private label products from factories in China, Vietnam, India, Indonesia, Cambodia and other countries. Since 2017, the U.S. and China have been engaged in a trade dispute that has involved a number of actions against China including the imposition of tariffs on Chinese imports; sanctions on Chinese military-industrial complex companies; stricter reviews of direct investments in the U.S. by Chinese companies; and detention by U.S. Customs of products made in Xinjiang involving alleged human rights violations, which have or may prompt countersanctions or other retaliatory actions from the Chinese government. In addition, differing policies on China-Taiwan and the Russia-Ukraine war have further strained relations between the countries. These geopolitical, trade and investment tensions have created additional uncertainty and increased risk in doing business in China, including potential supply disruptions and higher costs of our products sourced or imported from China.

MACY'S, INC.

On February 1, 2025, President Trump issued executive orders imposing a 25% tariff on products imported from Canada and Mexico, effective March 4, 2025, and a 10% tariff on products imported from China, effective February 4, 2025. An additional 10% increase in the China tariffs became effective March 4, 2025. Since then, the Trump Administration has taken a number of additional actions on tariffs and trade policy, including, among others, imposing a 10% reciprocal tariff on all imports effective April 5, 2025 and further increasing tariffs on Chinese imported goods to as high as 125% (145% with previous 20% China-specific tariff) effective April 10, 2025. Following reciprocal tariff increases from China to 125% on U.S. imported goods, on May 12, 2025 it was announced the U.S. and China agreed to reduce U.S. tariffs on Chinese goods to 30% and Chinese tariffs on U.S. goods to 10%, for 90 days. Selective price increases are expected across our product categories as a result of these tariffs and tariffs imposed on other countries from which we source. While we have included assumptions on gross margin impact and other assumptions in our earnings guidance that we believe are reasonable, the amount and timing of any price increases and the extent to which the increases will be absorbed by or shared with vendors or can be passed on to consumers is not fully known. In addition, volatility in tariff rates and trade policy is creating uncertainty among businesses and consumers that to a certain extent has already and may continue to negatively impact demand for consumer discretionary products and contribute to a heightened competitive promotional landscape. Increased prices and reduced demand for the products we sell could have a material adverse impact on our business, results of operations and profitability.

We continue to evaluate the impact of currently 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 working through strategies to mitigate such impact, including reviewing sourcing options and working with our vendors and merchants. The mitigation strategies we have taken or may take in the future, may not be effective or be able to be effectuated in a timely manner, or at all. At this time, it is unknown how long U.S. tariffs on Chinese goods will remain in effect or whether additional tariffs between the U.S. and China and other countries 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 and other countries, as well as general uncertainty in the tariff environment, 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.

If our vendors, or any raw material vendors on which our vendors or our private label business relies, suffer prolonged manufacturing or transportation disruptions due to public health conditions or other unforeseen events, our ability to source product could be adversely impacted which would adversely affect our results of operations.