Table of Contents

MACY'S, INC.

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

For purposes of the following discussion, all references to "first quarter of 2025" and "first quarter of 2024" are to the Company's 13-week fiscal periods ended May 3, 2025 and May 4, 2024, respectively.

The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes included elsewhere in this report, as well as the financial and other information included in the 2024 10-K. The following discussion contains forward-looking statements that reflect the Company's plans, estimates and beliefs. The Company's actual results could materially differ from those discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this report (particularly in "Risk Factors" and in "Forward-Looking Statements") and in the 2024 10-K (particularly in "Risk Factors" and in "Forward-Looking Statements"). This discussion includes Non-GAAP financial measures. For information about these measures, see the disclosure under the caption "Important Information Regarding Non-GAAP Financial Measures".

Quarterly Overview and Company Strategy

The Company started its second year in the implementation of its strategy, A Bold New Chapter, which firmly places energy and focus on the needs of our customer and is centered on an enhanced omni-channel shopping experience across all three of our nameplates. This strategy prioritizes improving the shopping environment and elevating the customer experience, while closing underproductive Macy's stores to focus resources and investments on its go-forward enterprise. During the first quarter of 2025, the Company continued to make progress on the three pillars within the Bold New Chapter strategy, as follows:

•.Strengthen and Reimagine the Macy's nameplate

◦Macy's net promoter scores continued to improve year-over-year.

◦Reimagine 125 Locations: In early February 2025, we overlaid successful initiatives from the First 50 locations to an additional 75 stores for a total 125 reimagined Macy's locations. The additional 75 stores have continued emphasis on customer experience, and build on learnings from the first year of our Bold New Chapter strategy. The Reimagine 125 locations outperformed the rest of the Macy's fleet in the first quarter of 2025. Customers are responding well to our redefined product and experience.

◦Revitalize assortment: Our assortment matrix evolution continues to gain traction. Recently introduced contemporary apparel brands Good American, Theory and Nic+Zoe have been well-received, and Coach and Donna Karan continue to resonate with our customers. Our off-price concept, Backstage, and Macy's Marketplace remained strong. In the first quarter of 2025, Backstage outperformed the full-line stores in which it operates by several hundred basis points while Marketplace achieved approximately 40% gross merchandise value growth. Backstage and Marketplace fill white space in our assortments and help us maintain loyal customers seeking more price and brand variety.

•.Accelerate luxury growth

◦Bloomingdale's: Bloomingdale's positive comparable sales in the first quarter of 2025 benefited from brand launches such as Prada shoes and handbags online, Reformation ready-to-wear and Burberry, and also benefited from improvements in availability and pricing. Bloomingdale's continues to emphasize exclusive partnerships and collaborations that align and reinforce its core identity, positioning and strategy.

◦Bluemercury: Bluemercury achieved its 17th consecutive quarter of comparable sales growth driven by the 24 new and remodeled doors opened in 2024, ongoing strength in dermatological skincare, recent brand launches, and a more targeted approach to loyalty communications and offers.

•.Simplify and modernize end-to-end operations

◦Efforts to drive meaningful change for our customers, and operational and financial performance, continues to move forward. We are simplifying our business model, containing the cost to serve across the value chain, streamlining its asset portfolio to deliver profitable sales growth, and reinvesting the benefits captured to self-fund an improved Macy's customer shopping experience.

Comparable sales highlights for the first quarter of 2025 versus the first quarter of 2024 related to components of A Bold New Chapter strategy are as follows:

•Macy's, Inc. comparable sales declined 2.0% on an owned basis and declined 1.2% on an owned-plus-licensed-plus-marketplace basis.

◦Macy's, Inc. go-forward business comparable sales, inclusive of go-forward locations and digital across nameplates, declined 1.8% on an owned basis and declined 0.9% on an owned-plus-licensed-plus-marketplace basis.

MACY'S, INC.

•Company's nameplate highlights include:

◦Macy's comparable sales declined 2.9% on an owned basis and declined 2.1% on an owned-plus-licensed-plus-marketplace basis. Macy's go-forward business comparable sales, inclusive of Macy's go-forward locations and digital, declined 2.7% on an owned basis and declined 1.9% on an owned-plus-licensed-plus-marketplace basis.

•Reimagine 125 locations comparable sales, included within Macy's go-forward business comparable sales, declined 1.3% on an owned basis and declined 0.8% on an owned-plus-licensed basis.

◦Bloomingdale's comparable sales increased 3.0% on an owned basis and increased 3.8% on an owned-plus-licensed-plus-marketplace basis.

◦Bluemercury comparable sales increased 1.5% on an owned basis.

Results of Operations

Comparison of the First Quarter of 2025 and the First Quarter of 2024

First Quarter of 2025First Quarter of 2024

Amount% to Net Sales% to Total RevenueAmount% to Net Sales% to Total Revenue

(dollars in millions, except per share figures)

Net sales$4,599 $4,846

Other revenue194 4.2 %154 3.2 %

Total revenue4,793 5,000

Cost of sales(2,795)(60.8)%(2,946)(60.8)%

Selling, general and administrative expenses(1,913)(39.9)%(1,911)(38.2)%

Gains on sale of real estate16 0.3 %1 - %

Impairment, restructuring and other costs(7)(0.1)%(19)(0.4)%

Operating income$94 2.0 %$125 2.5 %

Net income$38 $62

Diluted earnings per share$0.13 $0.22

Supplemental Financial Measures

Gross margin

$1,804 39.2 %$1,900 39.2 %

Decrease in comparable sales on an owned basis(2.0)%(1.2)%

Supplemental Non-GAAP Financial Measures

Decrease in comparable sales on an owned-plus-licensed-plus-marketplace basis(1.2)%(0.3)%

Adjusted diluted earnings per share$0.16 $0.27

Adjusted EBITDA$324 $364

Core adjusted EBITDA$308 $363

See pages 22 to 24 for reconciliations of the supplemental non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.

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MACY'S, INC.

First Quarter of 2025First Quarter of 2024

Net sales$4,599 $4,846

Decrease in comparable sales on an owned basis(2.0)%(1.2)%

Decrease in comparable sales on an owned-plus-licensed-plus-marketplace basis(1.2)%(0.3)%

Net sales for the first quarter of 2025 decreased $247 million, or 5.1%, compared to the first quarter of 2024. The decline was mainly due to the closing of the 64 non-go-forward locations last year, which contributed to approximately $170 million of the decline in net sales. Sales growth during the first quarter of 2025 at Bloomingdale's and Bluemercury was offset primarily by weakness in Macy's due to weaker than expected international tourism.

First Quarter of 2025First Quarter of 2024

$% to Net Sales$% to Net Sales

Credit card revenues, net$154 3.3 %$117 2.4 %

Macy's Media Network, net40 0.9 %37 0.8 %

Other revenue$194 4.2 %$154 3.2 %

The increase in other revenues included a $37 million increase in credit card revenues primarily due to higher profit share, reflecting both a strong credit portfolio and continued active management of net credit card losses. Macy's Media Network grew $3 million, or 8% from the first quarter of 2024, driven by growth in advertiser spend.

First Quarter of 2025First Quarter of 2024

Cost of sales$(2,795)(2,946)

As a percent to net sales60.8 %60.8 %

Gross margin$1,804 $1,900

As a percent to net sales39.2 %39.2 %

Gross margin rate was flat and merchandise margin rate1 improved 40 basis points in the first quarter of 2025 compared to the first quarter of 2024. The increase in merchandise margin rate is primarily due to favorable shortage and lower liquidations, offset by higher delivery expense as a percent of net sales.

First Quarter of 2025First Quarter of 2024

SG&A expenses$(1,913)$(1,911)

As a percent to total revenue39.9 %38.2 %

SG&A expenses increased $2 million, or 0.1%, in the first quarter of 2025 compared to the first quarter of 2024. During the first quarter of 2025, the Company continued to invest in customer-facing go-forward business initiatives through its end-to-end operations work and savings from closed locations. The increase in SG&A expenses as a percent to total revenue in the first quarter of 2025 was due to a decline in net sales compared to the first quarter of 2024.

First Quarter of 2025First Quarter of 2024

Gains on sale of real estate$16 $1

Asset sale gains in the first quarter of 2025 reflected the monetization of store locations and right-sizing of the Company's supply chain network.

1 Merchandise margin is defined as net sales less cost of sales less net delivery expense.

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MACY'S, INC.

First Quarter of 2025First Quarter of 2024

Net interest expense$(27)$(31)

The decrease in net interest expense in the first quarter of 2025 compared to the first quarter of 2024 was primarily driven by reduction in interest expense as a result of the tender offer completed in the third quarter of 2024, in which $221 million aggregate principal amount of certain senior notes and debentures were tendered for early settlement.

First Quarter of 2025First Quarter of 2024

Effective tax rate44.1 %36.7 %

Federal income statutory rate21 %21 %

The income tax expense of $30 million, or 44.1% of pretax income, for the first quarter of 2025 and $36 million, or 36.7% of pretax income, for the first quarter of 2024, reflect a different effective tax rate as compared to the Company's federal income tax statutory rate of 21%. The income tax effective rates for the first quarter of 2025 and the first quarter of 2024 were impacted primarily by the effect of state and local taxes and the vesting and cancellation of certain stock-based compensation awards.

Liquidity and Capital Resources

The Company's principal sources of liquidity are cash from operations, cash on hand and the Amended & Extended ABL Credit Facility. Material contractual obligations arising in the normal course of business primarily consist of long-term debt and related interest payments, lease obligations, merchandise purchase obligations, retirement plan benefits, and self-insurance reserves. Merchandise purchase obligations represent future merchandise payables for inventory purchased from various suppliers through contractual arrangements and are expected to be funded through cash from operations.

The Company believes that, assuming no change in its current business plan, its available cash, together with expected future cash generated from operations, the amount available under the Amended & Extended ABL Credit Facility, and credit available in the market, will be sufficient to satisfy its anticipated needs for working capital, capital expenditures, and cash dividends for at least the next twelve months and the foreseeable future thereafter.

Capital Allocation

The Company's capital allocation goals include maintaining a healthy balance sheet and investment-grade credit metrics to be best-positioned for access to bank and capital market funding under all economic scenarios, followed by investing in the business through initiatives to drive long-term profitable growth and returning capital to shareholders through dividends and share repurchases.

The Company ended the first quarter of 2025 with a cash and cash equivalents balance of $932 million, an increase of $56 million from $876 million at the end of the first quarter of 2024. The Company is party to an ABL Credit Facility with certain financial institutions providing for a $2,100 million asset-based credit facility. As of May 3, 2025, borrowing availability was $1,956 million, which reflects a $144 million reduction due to standby letters of credit outstanding.

20252024

Net cash (used) provided by operating activities$(64)$129

Net cash used by investing activities(133)(217)

Net cash used by financing activities(178)(70)

Operating Activities

The net cash used by operating activities in the current year versus net cash provided by operating activities in the prior year was primarily driven by increased working capital requirements and lower earnings after excluding non-cash adjustments.

Investing Activities

The Company's capital expenditures were $177 million in 2025 compared to $229 million in 2024. Capital expenditures in the current year are primarily focused on digital and technology investments as well as omni-channel capabilities.

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MACY'S, INC.

Financing Activities

Dividends

The Company paid dividends totaling $51 million and $48 million in 2025 and 2024, respectively.

On May 16, 2025, the Company announced that its Board of Directors declared a regular quarterly dividend of 18.24 cents per share on its common stock, which will be paid on July 1, 2025, to shareholders of record at the close of business on June 13, 2025. Subsequent dividends will be subject to approval of the Board of Directors, which will depend on market and other conditions.

Stock Repurchases

On February 22, 2022, the Board of Directors authorized a new $2,000 million share repurchase program, which does not have an expiration date. During the first quarter of 2025, the Company repurchased approximately 8.7 million shares of its common stock at an average cost of $11.66 per share on the open market under its share repurchase program. The Company did not repurchase any shares of its common stock during the first quarter of 2024. As of May 3, 2025, $1,274 million remained available under the authorization. Repurchases may be made from time to time in the open market or through privately negotiated transactions in accordance with applicable securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, on terms determined by the Company.

Debt Transactions

On April 9, 2025, Macy's Inventory Funding LLC (the "ABL Borrower"), an indirect subsidiary of Macy's, Inc. ("Macy's"), and Macy's Inventory Holdings LLC (the "ABL Parent"), a direct subsidiary of Macy's and the direct parent of the ABL Borrower, entered into an amendment (the "Amendment") to the credit agreement governing the existing $3,000 million asset-based credit facility (the "Existing ABL Credit Facility"), which was set to expire in March 2027. The Amendment reduced the asset-based credit facility to $2,100 million (the "Amended & Extended ABL Credit Facility") and extended the maturity date to April 2030. The Amendment therefore provides Macy's with access to $2,100 million of committed liquidity for the next five years. The ABL Borrower may request increases in the size of the Amended & Extended ABL Credit Facility up to an additional aggregate principal amount of $1,750 million. The Amended & Extended ABL Credit Facility replaces the Existing ABL Credit Facility, with similar collateral support, but reduced commercial letter of credit fees and unused facility fees.

The Amended & Extended 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 guarantees the ABL Borrower's obligations under the Amended & Extended ABL Credit Facility.

The Amended & Extended ABL Credit Facility contains customary borrowing conditions including a borrowing base equal to the sum of (i) 90% of the net orderly liquidation percentage of eligible inventory, minus (ii) customary reserves. Amounts borrowed under the Amended & Extended ABL Credit Facility are subject to interest at a rate per annum equal to, at the ABL Borrower's option, either (i) adjusted SOFR (calculated to include a 0.10% credit adjustment spread) plus a margin of 1.25% to 1.50% or (ii) a base rate plus a margin of 0.25% to 0.50%, in each case depending on revolving line utilization. The Amended & Extended ABL Credit Facility also contains customary covenants that provide for, among other things, limitations on indebtedness, liens, fundamental changes, restricted payments, and prepayment of certain indebtedness as well as customary representations and warranties and events of default typical for credit facilities of this type.

The Amended & Extended ABL Credit Facility also requires Macy's, Inc. 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 if Availability plus Suppressed Availability (each as defined in the Amended & Extended ABL Credit Facility) is less than the greater of (a) 10% of the Loan Cap (as defined in the Amended & Extended ABL Credit Facility) and (b) $175 million, in each case, as of the end of such fiscal quarter.

The Company had no outstanding borrowings under the ABL Credit Facility as of May 3, 2025 and May 4, 2024.

Contractual Obligations

As of May 3, 2025, other than the financing transactions discussed in Note 4 to the accompanying Consolidated Financial Statements, there were no material changes to the Company's contractual obligations and commitments outside the ordinary course of business since February 1, 2025, as reported in the Company's 2024 Form 10-K.

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MACY'S, INC.

Guarantor Summarized Financial Information

The Company had $2,785 million aggregate principal amount of senior unsecured notes and senior unsecured debentures (collectively the "Unsecured Notes") outstanding as of both May 3, 2025 and February 1, 2025 with maturities ranging from 2025 to 2043. The Unsecured Notes constitute debt obligations of Macy's Retail Holdings, LLC ("MRH" or "Subsidiary Issuer"), a 100%-owned subsidiary of Macy's, Inc. ("Parent" and together with the "Subsidiary Issuer," the "Obligor Group"), and are fully and unconditionally guaranteed on a senior unsecured basis by Parent. The Unsecured Notes rank equally in right of payment with all of the Company's existing and future senior unsecured obligations, senior to any of the Company's future subordinated indebtedness, and are structurally subordinated to all existing and future obligations of each of the Company's subsidiaries that do not guarantee the Unsecured Notes. Holders of the Company's secured indebtedness, including 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 guarantees are effectively subordinated to all of the Subsidiary Issuer's and Parent and their subsidiaries' existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness.

The following tables include combined financial information of the Obligor Group. Investments in subsidiaries of $9,914 million and $9,905 million as of May 3, 2025 and February 1, 2025, respectively, have been excluded from the Summarized Balance Sheets. Equity in earnings of non-Guarantor subsidiaries of $359 million for the 13 weeks ended May 3, 2025 has been excluded from the Summarized Statement of Operations. The combined financial information of the Obligor Group is presented on a combined basis with intercompany balances and transactions within the Obligor Group eliminated.

Summarized Balance Sheets

May 3, 2025February 1, 2025

(in millions)

ASSETS

Current Assets$1,023 $1,160

Noncurrent Assets5,673 5,727

LIABILITIES

Current Liabilities$1,479 $1,744

Noncurrent Liabilities (a)6,789 6,493

(a)Includes net amounts due to non-Guarantor subsidiaries of $1 million and $1 million as of May 3, 2025 and February 1, 2025, respectively.

Summarized Statement of Operations

13 Weeks Ended May 3, 2025

(in millions)

Net sales$171

Consignment commission income (a)701

Other revenue33

Cost of sales(87)

Operating loss(361)

Loss before income taxes (b)(51)

Net loss48

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

(b)Includes $370 million of dividend income from non-Guarantor subsidiaries for the 13 weeks ended May 3, 2025.

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MACY'S, INC.

Important Information Regarding Non-GAAP Financial Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures provide users of the Company's financial information with additional useful information in evaluating operating performance. Management believes that providing supplemental changes in comparable sales on an owned-plus-licensed basis and an owned-plus-licensed-plus-marketplace basis, which includes the impact of growth in comparable sales of departments licensed to third parties and marketplace sales, as applicable, assists in evaluating the Company's ability to generate sales growth, whether through owned businesses, departments licensed to third parties or marketplace sales, on a comparable basis, and in evaluating the impact of changes in the manner in which certain departments are operated. Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure which the Company believes provides meaningful information about its operational efficiency by excluding the impact of changes in tax law and structure, debt levels and capital investment. 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 from period-to-period from net income (loss), diluted earnings (loss) per share and EBITDA provide useful supplemental measures that assist in evaluating the Company's ability to generate earnings and leverage sales, respectively, and to more readily compare these metrics between past and future periods. Management also believes that EBITDA and Adjusted EBITDA are frequently used by investors and securities analysts in their evaluations of companies, and that such supplemental measures facilitate comparisons between companies that have different capital and financing structures and/or tax rates. The Company uses certain non-GAAP financial measures as performance measures for components of executive compensation.

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 and marketplace sales 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-plus-marketplace basis, to GAAP comparable sales (i.e., on an owned basis), which the Company believes to be the most directly comparable GAAP financial measure.

13 Weeks Ended May 3, 2025

Macy's, Inc.Macy's

Decrease in comparable sales on an owned basis (Note 1)(2.0 %)(2.9 %)

Impact of departments licensed to third parties and marketplace sales (Note 2)0.8 %0.8 %

Decrease in comparable sales on an owned-plus-licensed-plus-marketplace basis(1.2 %)(2.1 %)

13 Weeks Ended May 3, 2025

Macy's, Inc. go-forward businessMacy's go-forward businessBloomingdale'sBluemercury

Increase (decrease) in comparable sales on an owned basis (Note 1)(1.8)%(2.7)%3.0 %1.5 %

Impact of departments licensed to third parties and marketplace sales (Note 2)0.9 %0.8 %0.8 %- %

Increase (decrease) in comparable sales on an owned-plus-licensed-plus-marketplace basis(0.9 %)(1.9 %)3.8 %1.5 %

13 Weeks Ended May 3, 2025

Macy's Reimagine 125 locations

Decrease in comparable sales on an owned basis (Note 1)(1.3 %)

Impact of departments licensed to third parties (Note 2)0.5 %

Decrease in comparable sales on an owned-plus-licensed basis(0.8 %)

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MACY'S, INC.

13 Weeks Ended May 4, 2024

Macy's, Inc.

Decrease in comparable sales on an owned basis (Note 1)(1.2 %)

Impact of departments licensed to third parties and marketplace sales (Note 2)0.9 %

Decrease in comparable sales on an owned-plus-licensed-plus-marketplace basis(0.3 %)

Notes:

(1)Represents the period-to-period percentage change in net sales from stores in operation for one full fiscal year for the 13 weeks ended May 3, 2025 and May 4, 2024. Such calculation includes all digital sales and excludes commissions from departments licensed to third parties and marketplace. Stores impacted by a natural disaster or undergoing significant expansion or shrinkage remain in the comparable sales calculation unless the store, or material portion of the store, is closed for a significant period of time. Definitions and calculations of comparable sales may differ among companies in the retail industry.

(2)Represents the impact of including the sales of departments licensed to third parties occurring in stores in operation throughout the year presented and the immediately preceding year and all online sales, including marketplace sales, in the calculation of comparable sales. Macy's and Bloomingdale's license third parties to operate certain departments in their stores and online, including Macy's and Bloomingdale's digital Marketplace, and receive commissions from these third parties based on a percentage of their net sales, while Bluemercury does not participate in licensed or marketplace businesses. In its financial statements prepared in conformity with GAAP, the Company includes these commissions (rather than sales of the departments licensed to third parties and marketplace) in its net sales. The Company does not, however, include any amounts in respect of licensed department or marketplace sales (or any commissions earned on such sales) in its comparable sales in accordance with GAAP (i.e., on an owned basis). The amounts of commissions earned on sales of departments licensed to third parties and from the digital marketplace are not material to its net sales for the periods presented.

EBITDA, Adjusted EBITDA and Core Adjusted EBITDA

The following is a tabular reconciliation of the non-GAAP financial measure EBITDA, adjusted EBITDA and core adjusted EBITDA to GAAP net income, which the Company believes to be the most directly comparable GAAP measure.

13 Weeks Ended May 3, 202513 Weeks Ended May 4, 2024

(millions)

Net income$38 $62

Interest expense - net27 31

Losses on early retirement of debt3 -

Federal, state and local income tax expense30 36

Depreciation and amortization219 216

EBITDA317 345

Impairment, restructuring and other costs7 19

Adjusted EBITDA324 364

Gains on sale of real estate(16)(1)

Core adjusted EBITDA$308 $363

Adjusted Net Income and Adjusted Diluted Earnings Per Share

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MACY'S, INC.

The following is a tabular reconciliation of the non-GAAP financial measures adjusted net income to GAAP net income and adjusted diluted earnings per share to GAAP diluted earnings per share, which the Company believes to be the most directly comparable GAAP measures.

13 Weeks Ended May 3, 202513 Weeks Ended May 4, 2024

Net Income DilutedEarningsPer ShareNet IncomeDilutedEarningsPer Share

(millions, except per share figures)

As reported$38 $0.13 $62 $0.22

Impairment, restructuring and other costs7 0.03 19 0.07

Losses on early retirement of debt3 - - -

Income tax impact of certain items noted above(2)(0.01)(4)(0.02)

As adjusted to exclude certain items above$46 $0.16 $77 $0.27