Macys Inc

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 February 3, 2024 and January 28, 2023, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended February 3, 2024, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of February 3, 2024, 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 February 3, 2024 and January 28, 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended February 3, 2024, 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 February 3, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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 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 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 do not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating these critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Fair value of certain long-lived assets

As discussed in Note 1 to the consolidated financial statements, the carrying value of long-lived assets, inclusive of right-of-use assets, is periodically reviewed by the Company whenever events or changes in circumstances indicate that a potential impairment has occurred. When a potential impairment has occurred, an impairment write-down is recorded if the carrying value of the asset exceeds its fair value. As discussed in Note 3, the Company recognized a $957 million of pre-tax impairment charge primarily related to locations planned for closure over the next three years, which is inclusive of both leased and owned locations, and the remaining amount is associated with corporate and other assets.

We identified the evaluation of fair value of certain long-lived assets, specifically properties and right-of-use assets, as a critical audit matter. Subjective and challenging auditor judgment was required to assess certain key assumptions, specifically identification of comparable transactions and adjustments to the comparable market data based on the specific characteristics of the property. Changes in these key assumptions could have a significant impact on the fair value of certain properties and right-of-use assets. Additionally, the evaluation of the key assumptions required specialized skills and knowledge.

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 long-lived assets. This included a control related to the determination of the key assumptions used to estimate the fair value of properties and right-of-use assets. We involved valuation professionals with specialized skills and knowledge, who assisted in assessing the reasonableness of the fair value for a sample of long-lived assets by:

•evaluating management’s assumptions and methodology for the sampled right-of-use assets with a zero fair value

•developing independent fair value ranges for the sampled properties and right-of-use assets using the market approach or income approach based on the operations and specific characteristics of each asset

•comparing the independent fair value estimate ranges for the sampled properties and right-of-use assets to the Company’s fair value estimates that were ultimately used to identify and record impairment, if applicable.

Merchandise inventories

As discussed in Note 1, merchandise inventories are valued at the lower of cost or market using the last-in, first-out retail inventory method. Under the retail inventory method, inventory is segregated into departments of merchandise having similar characteristics. Inventory retail values are converted to cost basis by applying specific average cost factors for each merchandise department. The calculation includes a number of inputs including the retail value of inventory and adjustments to inventory costs such as mark down allowances, shrinkage and permanent markdowns. The Company’s merchandise inventories were $4,361 million as of February 3, 2024.

We identified the sufficiency of audit evidence over the information technology (IT) elements of merchandise inventories as a critical audit matter. Complex auditor judgment was required to evaluate the sufficiency of audit evidence obtained due to the highly automated nature of the process to record merchandise inventories that involves interfacing significant volumes of data across multiple IT systems. IT professionals with specialized skills and knowledge were required to assess the Company’s IT systems used in the merchandise inventories process.

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 merchandise inventories process. This included IT dependent controls, application controls, general IT controls, and interface controls over the data transfers between systems. We involved IT professionals with specialized skills and knowledge, who assisted in the identification and testing of certain IT systems used by the Company for calculating merchandise inventories and reconciling information produced by various systems to the Company’s general ledger. On a sample basis, we tested certain inputs used in the calculation of merchandise inventories, including comparing to vendor invoices, cash receipts, and vendor confirmations, and observed inventory, including comparing prices to the inventory records. We assessed the sufficiency of audit evidence obtained related to merchandise inventories by evaluating the cumulative results of the audit procedures.

/s/ KPMG LLP

We have served as the Company's auditor since 1988.

Cincinnati, Ohio

March 22, 2024