Impact of COVID-19

12 Months Ended

Jan. 30, 2021

Extraordinary And Unusual Items [Abstract]

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.

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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.

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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 The Company's Board of Directors also rescinded its authorization of any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. See Note 7, "Financing," for further discussion on these activities.

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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.

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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.

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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.

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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.

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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.