Karen M. Hoguet - Chief Financial Officer, Executive Vice President Terry J. Lundgren - Chairman of the Board, President, Chief Executive Officer

Michelle Clark - Morgan Stanley Charles Grom - J.P. Morgan Steve Kernkraut - Berman Capital Liz Dunn - Thomas Weisel Partners Robert Drbul - Barclays Capital Lorraine Hutchinson - Banc of America Securities Bernard Sosnick - Gilford Securities Mike Schrekis - Wallmaker Lance Vitanza – Knighthead Capital Adrianne Shapira - Goldman Sachs Deborah Weinswig - Citigroup Michael Exstein - Credit Suisse David Glick - Buckingham Research Group Jeff Stein - Soleil Securities Dana Telsey - Telsey Advisory Group David Schwartzman - Columbia Management

Good day and welcome to Macy’s Incorporated first quarter earnings release conference call. Today’s conference is being recorded. I would now like to turn the call over to your host, Karen Hoguet. Please go ahead. Karen M. Hoguet: Thank you and good morning. Let me begin by remind you that any transcription or other reproduction of the statements made in this call without our consent is prohibited. A replay of the call will be available on our website, www.macysinc.com, beginning approximately two hours after the call concludes. Please refer to the investor relations section of our website for a discussion and reconciliations of any non-GAAP financial measures discussed this morning. Keep in mind that all forward-looking statements are subject to risks and uncertainties that could cause the company’s actual results to differ materially from the expectations and assumptions mentioned today due to a variety of factors that affect the company, including the risks specified in the company’s most recently filed Form 10-K and Form 10-Q. Let me start this morning by giving you a brief update on the My Macy’s rollout and the creation of our new unified structure. The short answer is that most of the actual transition is now behind us. Over 95% of the new positions have been filled and almost all of those people are now in their new position. We were able to attract the talent that we wanted -- in fact, approximately 96% of our internal offers were accepted and we are very excited about the new team. Last weekend, most of the systems were converted without any major glitches. A comprehensive training schedule has now begun for both the new My Macy’s district and regions and the new central organization. We feel great about what we have accomplished, although we all know the hard work is still ahead of us. I have to also say that we were helped a great deal in the transition by people in the divisions that are being consolidated and not going forward with the company. So now the financial results -- in summary, the sales in the first quarter were as expected for the company with Macy's being a bit stronger and Bloomingdales weaker. It does feel good to be able to better forecast sales again after experiencing the sharp declines of last fall. And we were pleased that our earnings and cash flow were both better than expected. In the quarter, our sales were just short of $5.2 billion, and on a comp store basis, sales were down 9%. Our average unit retail was roughly flat for the quarter, meaning that our sales decline was due to fewer units being sold, which presumably is related to reduced traffic, although it could also be shoppers buying fewer items as they make a trip to the stores as well. Our performance in the pilot My Macy’s stores continued to outpace the other stores and in fact the gap widened. In the fourth quarter, sales in those My Macy’s pilot stores performed 1.5 points better than the other stores, and in the first quarter, that gap widened to 2.1 points. We remain very confident that our My Macy's structure, with the added people to the field organization, the greater localization of our offering, the reduced span of control, and the greater empowerment of our stores, are all together going to help us accelerate our comp store sales growth over time. Another bright spot in our business is the Internet -- our Internet businesses for both Macy's and Bloomingdales were up over 16% in the quarter. We remain very excited by the possibilities for our direct-to-customer strategy and how it is becoming increasingly integrated with our stores. We know that our best customers at Macy's and at Bloomingdales shop both in the stores and online. And in fact, customers who shop online actually buy more in the stores than our customers who buy only in-store. Geographically our sales were strongest in the Midwest and Texas in the first quarter, and by family of business, our strongest businesses in the quarter were moderate apparel, dresses, suits, cosmetics, young men’s, and housewares. Private brand was very strong in the quarter across categories, demonstrating the importance of affordable fashion. The weaker businesses in the quarter included better apparel, handbags, luggage, and furniture. The gross margin rate in the first quarter was 38.1%, down 50 basis points from last year. We anticipated this as a result of the weak apparel business and the need to keep our inventories fresh. We ended the quarter with comp store inventory down approximately 4.2%. While this is higher than you might have expected, it was below our plan. We purposefully accelerated the receipt of some name merchandise into April, given the system’s conversion last weekend. We brought in big set-ups of some merchandise like everyday value programs, pre-Mother’s Day, that would then sell into the second quarter, and we also brought in key Mother’s Day gift items. Also, last year at this time, our replenishment stock levels were too low. We expect inventory at the end of July, however, to be more in line with anticipated sales. SG&A in the quarter, excluding the division consolidation costs, was $1.956 billion, down $147 million from last year. As a percent of sales, it was 37.6%, or up 100 basis points over a year ago. In addition to the savings expected from last year’s consolidations, we achieved savings from this year’s division elimination earlier than anticipated. Operating income or EBIT excluding the division consolidations cost was $24 million, and interest expense in the quarter was $141 million. The tax benefit excluding one-time costs was $49 million, or 42%. In a year like this with lower-than-normal income, there will be some unusual tax rates by quarter. We still expect our effective tax rate for the year to be approximately 37% but it will vary greatly quarter to quarter and in fact, it will be higher than the annual effective rate in the fourth quarter. EPS on a diluted basis, excluding consolidation costs for the first quarter, was a loss of $0.16. This is better than our estimate of last week of a loss of $0.19 to $0.21 per share. Including one-time costs, EPS on a diluted basis was a loss of $0.21. Cash flow in the first quarter was also better than anticipated. Net cash flow used by operating activities was $35 million versus the $21 million provided last year, or a negative spread of $56 million. Net cash used by investing activities was $31 million favorable this year due to the reduction in our capital budget. We reduced debt in the quarter by $837 million, and expect to reduce debt by an additional $119 million in July when that tranche matures. As we look to the second quarter, we are anticipating a similar sales trend as seen in the first quarter. We are assuming less pressure on gross margin rates than in the first quarter, and a drop in SG&A dollars compared to last year, but an increase in SG&A as a percent of sales versus 2008. For the full year, we are still expecting comp store sales to decline by 6% to 8% and EPS on a diluted basis of $0.40 to $0.55 per share, excluding division consolidation costs. Should the economy improve in the back half of the year, there upside potential to this number. We have had a very busy quarter and accomplished a great deal and we were pleased with our performance in light of the environment. And with that, I will now stop and take any questions you may have.

(Operator Instructions) We will go first to Michelle Clark with Morgan Stanley. Michelle Clark - Morgan Stanley: Good morning, Karen. The first question is you had mentioned that you had realized more than you expected in the first quarter from those announced expense saves of $290 million -- can you give us a sense of specifically what the dollar amount was in Q1 and what should we expect in terms of quarterly breakout go forward? Karen M. Hoguet: I can’t give you that level of precision in terms of the first quarter but we would now expect to save more than the 250 plus the 40 than we had anticipated earlier. Michelle Clark - Morgan Stanley: Okay, so it’s going to be something north than of the 290, then? Karen M. Hoguet: Correct. Michelle Clark - Morgan Stanley: On the full year? Okay, and then secondly, I had a question in terms of you mentioned 2Q comps looking similar to 1Q. Can you give us a sense of how much you benefited from stimulus in second quarter of last year? Karen M. Hoguet: We didn’t think we benefited much at all last year. Michelle Clark - Morgan Stanley: Okay. All right, great. Thanks, Karen.

We’ll go next to Charles Grom with J.P. Morgan. Charles Grom - J.P. Morgan: Thanks. Good morning, Karen. Could you just clarify your comments on gross profit margins for the second quarter? Do you expect them to be up year over year or better than what they were in the first quarter? Karen M. Hoguet: You know, we’re not being that precise in terms of guidance. It should not decline by as much as the first quarter. Whether it’s down a little, flat -- I don’t know, up a little. But I don’t expect it to be down as much as in the first quarter. Charles Grom - J.P. Morgan: Okay, and just to that point, your compare against a couple hundred basis points harder sequentially, is there something that’s different in 2Q than in 1Q that would help that out? I’m just trying to understand why it would be a little bit better. Karen M. Hoguet: You know, I can’t think of anything off-hand, Chuck, but I’ll look at it later and let you know. Charles Grom - J.P. Morgan: Okay, and then just the second question, just trends on -- in the New York City area with Bloomingdales and Harold Square, any sort of improvement as the quarter progressed relative to the fourth quarter? Karen M. Hoguet: There actually was some improvement in New York City as we got through April but it remains a challenged market. Charles Grom - J.P. Morgan: Okay. All right, thanks, Karen.

We’ll go next to Steve Kernkraut with Berman Capital Management. Steve Kernkraut - Berman Capital: Hi, Karen -- I just wanted to know if you could kind of elaborate with the My Macy's program being the lynch pin to the success in the future, what should we be looking at as the biggest near-term challenges over these next six, 12 months, for success or if you could just kind of elaborate on that? Karen M. Hoguet: Honestly, I don’t see challenges in the My Macy's rollout. The truth is what’s the upside -- I mean, there is nothing we are doing in these regions that should cause disruption or any sort of negative impact. The real question is how fast will we see the potential, again from the added people, the reduced span of control, and the ability to have input into the assortments in the stores. As you know, that takes time to happen and that’s why we did not expect the My Macy's pilot to see benefits until first quarter of ’09 and as you’ll recall, we saw it earlier. But frankly, Steve, I think the question is how much upside is there as opposed to what risks. Steve Kernkraut - Berman Capital: So you are seeing on the pilot that you are seeing the comp store sales differential accelerate, so you would be expecting that to keep on accelerating as we go through the year? Karen M. Hoguet: Well remember, those are the pilot stores. Now we are going to have My Macy's everywhere, so I’m not sure that the differential will accelerate but we do hope that -- and again, the economy has a big role in what happens this year but from what we are doing internally, we do expect to start to see benefits from the My Macy's districts in the fourth quarter like we did last year. Steve Kernkraut - Berman Capital: And in the ensuing quarters, you will give us data on those pilot My Macy's locations so we will be able to monitor how they are doing? Karen M. Hoguet: Yes. Steve Kernkraut - Berman Capital: Okay. Karen M. Hoguet: The other thing, Steve, that’s been encouraging is the smaller doors, which as you will recall when we started with My Macy's, the improvement in the smaller doors is actually even greater, so that’s another encouraging part of the My Macy's pilot. Steve Kernkraut - Berman Capital: Right, I mean, those doors have been neglected and ignored for a long time, so that’s probably where there’s the greatest potential. Karen M. Hoguet: They are doing better -- I’m not sure I would say they were neglected but nonetheless, I think that both putting more people in the field so that these smaller doors get more attention and having the district planning function out there, understanding what customers who shop in those stores want is making a huge difference. You know, people have said why don’t you just do all of this with systems and the problem is systems never can tell you what would have sold had you had it -- it only tells you what you sold from what you had. And so it’s these people that are really providing input that we have not had for a long time since our divisions were significantly smaller. Steve Kernkraut - Berman Capital: Okay. Thanks very much.

We’ll go next to Liz Dunn with Thomas Weisel. Liz Dunn - Thomas Weisel Partners: Thank you. I just wanted to ask a follow-up question on the SG&A -- so if it’s going to be greater than the $290 million that was originally contemplated, does that mean that it’s a pull-forward of the $400 million, because you are realizing some of the costs earlier? Or is the total amount that you are realizing greater than you had originally anticipated? Karen M. Hoguet: At this point I would say it’s a pull-forward, getting some of the savings earlier. Liz Dunn - Thomas Weisel Partners: Okay. And is there any help you can provide on how that should flow, Q2 versus the balance of the year? Karen M. Hoguet: No, sorry, Liz. Liz Dunn - Thomas Weisel Partners: Okay. Thank you.

We’ll go next to Robert Drbul with Barclays Capital. Robert Drbul - Barclays Capital: Good morning, Karen. A couple of questions -- can you talk a little bit -- any trend improvement in Florida that you are seeing and I guess on the private label brands, you said your private brands are doing better -- can you give us that penetration rate in the first quarter versus last year? Karen M. Hoguet: I don’t have that penetration rate for the quarter. It was up a bit from a year ago but I will try to get that for you, Bob. But you know, again last year was about 19% and including exclusives and limited distribution, a little bit north of 40%. My suspicion is the first quarter is similar. And in terms of Florida, you know, doing a little better. Robert Drbul - Barclays Capital: Okay, and then the other question is, can you elaborate a little bit more on the home trend in terms of how that’s performing for you and anything that you are seeing really right now happening there? Karen M. Hoguet: Yeah, in what we call soft home, the non-big ticket areas, we have seen some strength, as I said particularly in housewares. I think with the economy as it is, I suspect people are staying home more and therefore things like cookware and tableware and things like that are doing better. I also think our offering is very strong -- Martha Stewart is doing very well, again remember it’s exclusive, well-priced, great value. So I think our offering has also improved, which is helping. I don’t think it’s all external. In the big ticket arena, mattresses continues to not be great but much stronger than furniture, and furniture is a tough business right now, as is luggage. As we all know, people are traveling less and obviously that is an impact on the luggage business. Robert Drbul - Barclays Capital: One final question, Karen, is on the overall business, when you look at the promotions and the events, how is the consumer responding to the friends and family from recently your -- what type of value searching are you seeing from the consumer’s perspective in your business today? Karen M. Hoguet: We’re finding consumers are reacting very well to our big sale event, as you would expect in this environment. Robert Drbul - Barclays Capital: Okay. Thank you very much, Karen.

We’ll go next to Lorraine Hutchinson with Banc of America Securities. Lorraine Hutchinson - Banc of America Securities: Thank you. Good morning, Karen. We’ve seen a number of your competitors go bankrupt and I was just curious about any early learnings you are finding from performance in those specific malls or what businesses you think you could go after and try to gain market share? Karen M. Hoguet: Well, as you might imagine, when a store closes in a mall or in a market, whether it be a bankrupt competitor or not, we strategize as to what product categories should do well as that competitor goes out, whether it be a [inaudible] store, Linens n' Things, et cetera. And interestingly, the district planning function allows us to do that even better mall by mall. Lorraine Hutchinson - Banc of America Securities: Thank you.

We’ll go next to Bernard Sosnick with Gilford Securities. Bernard Sosnick - Gilford Securities: Good morning. With regard to the good will write-down, mention was made, if I’m correct, that it would be finalized in the first quarter. Was there anything that showed up in the quarter with regard to the write-down in the fourth quarter? Karen M. Hoguet: No -- KPMG is still working on that. If there is an adjustment, it will be very small. We are far enough along in our work, or KPMG is far enough along in their work, to say that but at this point, nothing else has been booked either way. Bernard Sosnick - Gilford Securities: Okay, but with respect to your internal cash flow projections on the stores that are affected, would you say that they were appropriate, correct, and still apply but the factor with good will relates exclusively to the decline in market cap? Karen M. Hoguet: I’m sorry, you’re talking about the good will calculation? Bernard Sosnick - Gilford Securities: Yes. Karen M. Hoguet: Yeah, I think the -- I mean, step one is purely based on the market cap differential. You know, when you get into step two, there’s so many details, Bernie, it’s a harder question to answer. But the initial test was based on the change in market cap. Bernard Sosnick - Gilford Securities: Now with regard to marketing and dunnhumby, are you beginning to see some of the recommendations come into play? Could you give us any example of that? And if not, when might you begin to see the benefits? Karen M. Hoguet: No, we are still working with dunnhumby on just mining all of the data and we don’t even expect to be testing anything until fall of this year, so we are all trying to be very patient. We remain extremely excited as we’ve talked to them about some of the things that they are thinking about testing but it’s premature to talk about those, and obviously we haven’t started the test to give you any sense of results. Bernard Sosnick - Gilford Securities: Okay. With respect to the gross margin in the first quarter, the inventories were down in line with sales expectations and you said at the beginning of the quarter that the gross might depend on whether or not additional promotional emphasis was needed to drive sales. What you said this morning relates more to clearances of slow-moving apparel. Could you clarify that a little bit? Karen M. Hoguet: I mean, the margin is relating to the clearance activity on slow-moving apparel. Bernard Sosnick - Gilford Securities: Okay. And finally, are you seeing any change in California where you have the cluster of stores? Karen M. Hoguet: Store to store, market to market we are beginning to see some improvement but obviously in the context of a minus 9 overall, you know, it’s still tough. Bernard Sosnick - Gilford Securities: Okay. Thank you very much, Karen.

We’ll go next to Mike [Schrekis] with [Wallmaker]. Mike Schrekis - Wallmaker: I was just wondering -- you guys had laid out about $400 million of cash restructuring costs and roughly $30 million of pension contributions per quarter for the year. I was just wondering, when I look at the release, it seems like the restructuring charges you took of 138 were added back, so I assume that those are in the cash flow statement, so I assume that’s non-cash. So I was just wondering for the year, are you still on track to do about $30 million of pension contributions and $100 million of [inaudible] and $400 million of restructuring charges for the year, cash restructuring? Karen M. Hoguet: Let me start with, from an accounting perspective, the one-time costs do get added back but then it also gets adjusted in accounts payable liabilities, so some of it is cash and we are on track for the $400 million of one-time cash costs this year. In terms of pension contribution, we are doing the $30 million a quarter but in addition, we are forecasting a contribution in September in the neighborhood of 175 to 250. Mike Schrekis - Wallmaker: Right. Now, where does that -- is that $30 million on a quarterly basis, is that in SG&A? Karen M. Hoguet: No, because that’s a contribution as opposed to pension expense. Mike Schrekis - Wallmaker: Okay. Karen M. Hoguet: So that doesn’t flow through the P&L. Mike Schrekis - Wallmaker: Okay, so where does it show up in the cash flow statement? Karen M. Hoguet: I don’t know exactly but I will get you the answer. Mike Schrekis - Wallmaker: Okay. Thank you.

We’ll go next to Lance Vitanza with Knighthead Capital. Lance Vitanza – Knighthead Capital: Thanks for taking the call. On the SG&A side, a couple of questions there -- the $290 million, which sounds like now is actually going to be more than 290, but that’s relative to the SG&A level in fiscal 2008, is that right? Karen M. Hoguet: No, the 290 was what it would have been had we not unified the division. Lance Vitanza – Knighthead Capital: Okay, so -- okay. Well, putting that aside then, can we talk -- what’s going on with the rest of your SG&A expenses? Are you seeing pricing pressure there or are prices coming down, or is it flat? Karen M. Hoguet: Well in SG&A, I guess I’m trying to think what prices you are talking about -- are you talking about like store payroll? Lance Vitanza – Knighthead Capital: Everything just generally speaking from utilities to payrolls and -- Karen M. Hoguet: We aren’t seeing a lot of major changes one way or the other. Lance Vitanza – Knighthead Capital: Okay, great. And then you mentioned earlier that you expect in Q2 higher in absolute dollars but lower as a percentage of -- I’m sorry, lower -- Karen M. Hoguet: No, you’ve got that backwards. Lance Vitanza – Knighthead Capital: Yeah, lower in absolute dollars and higher as a percentage of revenues -- were you speaking sequentially or is that year over year? Karen M. Hoguet: No, versus 2008, we are expecting SG&A dollars to be below 2008 in the second quarter. Lance Vitanza – Knighthead Capital: And in terms of the increase in the percent of revenues, would you think that the delta is going to be roughly in line with what we saw in Q1? Karen M. Hoguet: Well, you will have to project the dollars yourself and see that. Lance Vitanza – Knighthead Capital: Okay. Thank you.

We’ll go next to Adrianne Shapira with Goldman Sachs. Adrianne Shapira - Goldman Sachs: Thanks. Karen, just on the inventories, could you give us a sense of just what the inventory decline would have been to adjust for that pull forward? Karen M. Hoguet: Adrianne, I don’t know specifically. It obviously would have been a bigger decline than the minus 4.2 comp. Adrianne Shapira - Goldman Sachs: Right, so perhaps closer to inline with sales? Karen M. Hoguet: Yeah, except that we did bring in more of the replenishment goods because when we looked at our inventory a year ago, they were light. Adrianne Shapira - Goldman Sachs: Okay. Karen M. Hoguet: But as I said, by the end of July, we do expect inventories to be more in line with what we are expecting for the fall season. Adrianne Shapira - Goldman Sachs: Okay. Karen M. Hoguet: And again, the inventories were below plans. Adrianne Shapira - Goldman Sachs: Great. Karen M. Hoguet: Adrianne, wait a minute -- Terry just walked in. I think he wants to -- Terry J. Lundgren: I just heard this question and I just -- I mean, I hope I am not repeating something that was asked earlier but I just wanted to say that what was important to us, and we are really trying to make sure that we are being responsive, particularly to the initial 20 district stores, is that we are not cutting off anything that’s being requested by the initial pilots that have the talent there and are close to the customer, and that’s a little part of it. And as Karen said, a bigger part of it is bringing in the replenishment product because we had a gigantic systems conversion, of course, going from four divisions to one, which went extremely smoothly, big sigh of relief on Sunday of last weekend, that all systems were a go with this big conversion. So we did do some of that but where we really were focused on is the currency of our inventory and the level of our inventory being at the planned rate and both of those were accomplished. Adrianne Shapira - Goldman Sachs: Great, that’s helpful. And then just clearance inventory within that number, down year over year meaningfully? Karen M. Hoguet: Yes. Adrianne Shapira - Goldman Sachs: Okay. And then shifting gears to gross margin, I mean, following on those comments, I hear Karen, you expected the decline in gross margin to be less in the second quarter versus the first quarter, but I think the last comment you had said the fourth quarter was you don’t expect much improvement for gross margin for the year, but as we think about it in the back half, in light of inventory obviously under control and with the My Macy's rolling out, talk to us about opportunities on the gross margin in the back half? Karen M. Hoguet: Well, particularly as you get to the fourth quarter, Adrianne, where last year it was so depressed, given the ability to project sales so much better now than we had six months ago, will really make a difference as we get to the fourth quarter of ’09. Adrianne Shapira - Goldman Sachs: Okay, so should we -- for the year, would you still expect gross margin to be down or could there be an opportunity? Karen M. Hoguet: You know, we’ll have to see. Terry J. Lundgren: Yeah, it’s hard to predict, Adrianne. Of course we’d all like to say we are not going to have a promotional environment and inventories are going to be in line everywhere in the country and so we won’t have the same challenges that we had last year, and that should help margins. But I’m just not prepared to count on that yet. You know, we are going to do what we have to do to be competitive and with the way that the consumer has reacted for the last several months, we’re just not ready to say mission accomplished and she’s back in the stores and ready to buy yet. So that’s why I think we are being cautious and prudently so about our expectations on the margin subject. Obviously we are going to do everything we can do to get every nickel that we can but our big mission here is to make sure that we are being responsive to what the stores are asking for and competitively priced against all sets of competitors. Adrianne Shapira - Goldman Sachs: Great, and then just Terry, following on that, what you’ve seen in the first quarter relative to your expectations, how deep do you have to go in terms of how hard do the sale events have to be to stimulate that demand? Is it kind of in line with what you would have expected and perhaps a little bit better earlier? And perhaps differentiate between Macy's and Bloomingdales? Terry J. Lundgren: Well, for the most part we were similar in terms of the depth of reductions for events, with the exception of one, which was simply a competitive response. And that was the friends and family -- everybody from the high-end guys to the more moderate guys went with a little deeper discount, and we simply matched it at Macy's and in fact, we did not match it at Bloomingdales and Macy's did much, much better than Bloomingdales on those events. So I think you’ve got to make sure you are looking at the competitive landscape. Certainly the consumer is judging where the best value is at and we are finding that we are able to do just fine on the big events. The more challenging period, of course, is the day in, day out in-between event activity where the consumer just doesn’t have a natural urgency to respond and to be in the stores. And I suspect that’s going to be the case for most retailers, or at least non-food retailers, for the next two quarters certainly. Adrianne Shapira - Goldman Sachs: Great. Thank you. Best of luck.

We’ll go next to Deborah Weinswig with Citigroup. Deborah Weinswig - Citigroup: Great, and Terry, perfect timing -- we’re hearing a lot of positive things in the marketplace on your speed-to-market technology, and Terry, we hear you’ve been a big proponent. Can you please update us where you are in terms of cycle time reduction, and also what we should expect to hear from you on this technology? Terry J. Lundgren: I think we should probably set up a call on this eventually, Karen, and talk more specifically when we are ready to get into the details. But we are very encouraged by the work. I mean, a lot of people talk about this subject without a lot of detail about all the activities that are required to call yourself a leader in speed-to-market technology and it requires many things -- cycle time reduction is one, but just starting from the concept meetings until the product is in the stores requires a great deal more thought and technology and we’ve gone to outside services to help us get there. And we are not at this point ready to reveal all the progress that we’ve made but I can tell you we are just thinking very differently about it. In some cases, we are going to be making the decision to fly goods in. Obviously we have to put that into the margin and make sure that we can get the full margin response for fast turn time. But we’ve seen some of the specialty stores do this and do this very successfully and we’ve begun to do it with our own Inc. brand, both in men’s and with women’s, with great response and great margin results. So we need to come back to you and tell you all of the things that we are doing on this subject because it’s very important to us and it will first happen in our private brand world but as we get knowledge and experience and success stories under our belt, it will definitely expand with our vendor collaboration partners. Deborah Weinswig - Citigroup: Very helpful -- and then, why do you think the sales gap in the My Macy's stores widened from the 1.5 to the 2.1? Terry J. Lundgren: I don’t want to claim victory here yet. I just wanted to keep the margin -- you know, if we keep talking about them -- you can’t get too excited about the progress here yet. I am not -- look it, I am just not satisfied at all with our minus 9 results. As happy as I am with the pilots and I brought my new senior team out to the Pittsburgh market last week and we spent a couple of days out there going through stores and listening to one of our early pilot districts, who has performed so well in what would otherwise be considered a tough market and completely taking market share in that marketplace and just doing fantastic things with localized adjustments to their inventory, not just in product that they carry but in size and in color and in weight of fabric and all the things that we’ve talked about, just doing it and living the experience and talking about how they’ve accomplished that and how responsive the central organization has been. And I tell you, just come away saying that this is what it’s intended to be and the excitement of our organization as of last week, we no longer have 20 districts. We have 69 districts as of last week up and running with 1,600 people, 1,200 new out into the organization and learning now their new roles and responsibilities about being locally responsive. And when this gets done, Deborah, I am -- you know, we haven’t really effectively communicated this yet. There was a little tiny story in the Wall Street Journal that began on that today but they didn’t capture it, in my opinion, either. When this gets done, there just isn’t going to be any competitor who is going to be able to have this ability to be locally responsive the way that we are and it will not be copied, it cannot be copied, A, because they will not have the 1,600 job availability that they will be able to fund and secondly, even if they did magically have the courage to step up and add 1,600 jobs to their organizations in the stores, they wouldn’t have the talent. And we would not have the talent had we not been able to source it from our own divisions that we were consolidating out of San Francisco, Miami, and Atlanta. And so it was for us a very unique situation that we’ve been able to take complete advantage of and I owe you all results. That’s when we’ll be able to look back at this and say hallelujah, this was the right subject but it sure feels good to me and to my team who have witnessed the early responses from the pilot 20 districts. Deborah Weinswig - Citigroup: Okay and then [earnings in the quarter] versus your internal expectations, how should we think about kind of ’09 guidance as a beat? I think you had stated on the April sales release that the down 19 to down 21 was ahead of internal expectations, so obviously down 16 was ahead of that. So are you being conservative or has something changed with your thoughts for the rest of the year? Karen M. Hoguet: You know, it’s really hard to predict a retailer based on the first quarter, Deb. I think that’s really the answer. Terry J. Lundgren: That is more of the issue. I think -- you know, this year is just barely underway. It’s first inning in a nine-inning game, so obviously we count so much on the fourth quarter and if things do gradually improve, we’ll certainly improve. Deborah Weinswig - Citigroup: And then last question -- Terry, can I ask you what may be a tough question -- I mean, if you look at your sales performance in the quarter and you think about your exposure to New York and your exposure to Bloomingdales, and you look at other competitors -- I mean, it seems like your sales performance kind of lines up where you think it might, based on household income, et cetera. I mean, where are you really -- what’s really kind of driving the disappointment in the sales number? Terry J. Lundgren: Well, on a two-year basis, if you look, we look better. We were better than just about all of our competitors for several quarters and on a two-year basis, we continue to be better than most that you are probably referring to. But it’s not good enough for me. I am definitely not satisfied here, so we have to do better and to me, it’s going to be the My Macy's initiative based on the results of our pilot test that’s going to drive that and take us to that extra level. But looking at it on a year-over-year basis, which I’m not going to focus on deeply but we clearly have a two-year trend better than most all of our competitors. Deborah Weinswig - Citigroup: Absolutely. Well, congratulations and best of luck.

We’ll go next to Michael Exstein with Credit Suisse. Michael Exstein - Credit Suisse: Good morning, everyone. Two quick questions for you -- Terry, can you give us an update on how the unified buying organization is progressing, where you are right now in putting that together? Terry J. Lundgren: Yes, it’s done. We feel that the talent from -- starting with the East organization at the lower levels, the buying and assisted buyer levels, but brought in the top, highest potential buyers as well to supplement the organization. And then we recruited with an open playing field for the divisional merchandise manager and general merchandise manager and divisional planning and the general planning management, as well as the full senior team from all of the divisions. And we ended up with a very diverse group of leadership, representing all of our divisions, from San Francisco, the head of merchandising is Jeff Gannett. He was CEO of our San Francisco division. The head of merchandise planning, Julie [Griner] -- she was the CEO of our Florida division. The head of planning in two categories are from the Atlanta division. So we’ve got -- and Ron Kline was the CEO of Macy's East and he is head of all of the stores. So we really have a diverse background group of executives in the leadership role and a super strong group at the buyer and planner level. But that is basically accomplished already, Michael. Michael Exstein - Credit Suisse: And how are they dealing with the commitments for the fourth quarter? Terry J. Lundgren: That -- we kept our three divisions that I just referred to, Atlanta, San Francisco, and Miami, on until the first of May. And they were beginning to work through the order process through third quarter complete and the beginning of fourth quarter and the categories that require that lead time. But that hand-off has now been made. The system conversion occurred this past weekend, so all of that is lined up now for our buyers to review with their planners. We’ve aligned a planning organization directly with the buying organization, which we never had before. We never had a one-to-one relationship in the four divisions. We now do have a one planner to one buyer in the new organization, so all of that detail work and follow-up has been handed off and is occurring today. But so far, we feel very good about both the people and the process that’s in place to ensure that the fourth quarter purchases are lined up and lined up properly. Michael Exstein - Credit Suisse: That’s terrific. And finally, as the Internet keeps growing and the retail total business doesn’t grow as fast or declines a little bit faster, how are you dealing with capital allocation going forward between the two? Terry J. Lundgren: Well first of all, as you know, we just took a significant reduction in capital versus our prior year’s spending and we haven’t declare what we will do in the out years, but it’s just a subject that we will stay very close to and make sure that we are keeping it certainly below historic levels and above what we will spend this year. Having said that, the mix may change and one of the things I have been very proud of is our investment in technology, in our systems, which have been particularly focused in the last two years on merchandising and marketing initiatives, technology initiatives, and our investment in the dot.com infrastructure. And so building of the fulfillments facilities over the last two years, as well as the technology attached to those facilities and to the website itself has been an important investment and we’ll continue. I think the base, Michael, has been accomplished now and at this point, even with our projected growth in dot.com, which is fairly significant, we do not need an immediate addition to our fulfillment capabilities. But in the future, as we project out, more of the capital resources will go in that direction and we’ll continue to upgrade our stores and take advantage of the best return possibilities in the stores as well, but I do think over time the new store sites, new mall construction sites, are going to take longer to become a reality. Michael Exstein - Credit Suisse: Well, it’s great hearing from both of you and I appreciate the opportunity.

We’ll go next to David Glick with Buckingham Research Group. David Glick - Buckingham Research Group: Good morning. Terry, just a follow-up on women’s apparel -- it sounds like the women’s apparel business could be one of the keys for you guys to improve your overall sales and gross margin trends, and I know you all have commented that moderate is outperforming better but how does total women’s apparel compare to the total store trend? And are there any signs of life or prospects for that, for the better business to start turning around here anytime soon? Terry J. Lundgren: We are a fashion retailer, so that’s what we offer -- we offer brands, we offer fashion retail, which is different from our primary and more moderate competitor, so that is the reality of our business and we are not going to change that. That’s why customers come to us, particularly for the brands. And so the brands themselves have to perform well for the women’s apparel business in the better category to work well for us. And there are brands that are working, so it’s not like the customers aren’t coming in and finding products that that’s new and that’s fresh and that’s got the right value equation attached to it. And our best performing brands have been our private brands. I do think that there’s a value equation there, so that’s certainly an important part of it. But Tommy Hilfiger continues to perform well in women’s apparel, and so there are certain brands out there that consumers are responding to and it’s really a matter of us working very closely with our vendors, particularly now that all of our merchants are in New York City, or 95% of our merchants are in New York City. We’ve kept a couple in regional areas that’s appropriate for the merchandise they buy. But all of our buyers are where the market is, and so there is an absolute advantage for us being in the market, whether it be the seventh avenue market or the contemporary market where we have buyers in L.A. The buyers are there in the market and will be working directly with our manufacturers to give them insights about what our consumers are saying and feedback from our district merchants about what we need in our various stores. And so -- but ultimately that’s what has to happen, the brands have to find strength and trend right merchandise with the right value equation for the overall better sportswear business to improve. David Glick - Buckingham Research Group: And just to clarify, is the overall women’s, when you combine moderate and better, is it kind of in line with the store, a little below? Terry J. Lundgren: It’s a little below. David Glick - Buckingham Research Group: Okay. Thank you. And Karen, just a follow-up on the pension; you were very helpful in terms of laying out 2009 and I know there are a lot of uncertainties as we look forward, but obviously in 2010, you don’t have those one-time consolidation costs pressuring the free cash flow. But as we kind of model out the pension funding and contributions, how do we think about 2010? Should we just continue to think about $30 million a quarter, plus some supplementary contribution? How do you see that flowing over the next -- Karen M. Hoguet: David, unfortunately it’s really hard to predict because given the consolidations from this year, that will have an impact on the participants going forward, so I am reluctant to actually help you with that question. David Glick - Buckingham Research Group: Okay. I appreciate it. Thank you.

We’ll go next to Jeff Stein with Soleil Securities. Jeff Stein - Soleil Securities: Karen, no comments yet on credit -- can you talk a little bit about one, how with credit deteriorating relative to the fourth quarter? And then secondly, in terms of looking at your -- some of your competitors that have gone out of business, have you studied the possibility of acquiring some of the credit card files of those competitors, such as [inaudible] or even a Mervyn’s? Karen M. Hoguet: Actually we have not done that. We had done that in prior times but we just did not think that was a good strategy for now. But in terms of our proprietary credit, the penetration actually continues to increase and was for the first quarter a little over 47% of our sales came from proprietary penetration as compared to 46% a year ago. And there does continue to be pressure, although sequentially less pressure than what we had been seeing in the past. But at some point you would expect that as we year-round on the tougher credit conditions. Jeff Stein - Soleil Securities: Got it. Terry J. Lundgren: I will just say I think that’s actually a good suggestion because we are obviously looking at the product opportunities for all of these businesses, and I don’t know if it’s going to be a good idea or not but we will at least look at the idea of buying their credit file for some of these similar businesses, where we had some similar customers. By the way, everybody, I have to run. I’m actually on my way to make a big presentation to the dunnhumby organization in Cincinnati right now, but I’m going to run. I’ll Karen answer the rest of these questions. Thank you all for your support.

(Operator Instructions) We’ll go next to Dana Telsey with Telsey Advisory Group. Dana Telsey - Telsey Advisory Group: Good morning, Karen. Can you talk a little bit about, as you think about exclusive brands go forward, the opportunities by category, where do you think the opportunities are and is there more ability to add to margin? And then just on the balancing the costs of awareness through marketing in the current retail sales environment, how are you feeling about that going forward? Thank you. Karen M. Hoguet: I wish Terry had stayed for one more minute for the exclusive question. I know that we are looking at opportunities throughout the store. Obviously with Rachel Ray launching this fall, which we are very excited about, but there are other things we are looking as well in other parts of the store. In terms of your second question on marketing, Dana, I’m not sure I really understand it. Dana Telsey - Telsey Advisory Group: What are you thinking about the investment in marketing this year and how is the marketing going to be different this year compared to last year? Karen M. Hoguet: Well, I think the key is that we continue to focus on value offerings. We are also focused more on marketing the everyday value programs that we have but we will also continue to do the brand advertising also because we think even in this environment, it’s very important to driving our business over the long-term. Dana Telsey - Telsey Advisory Group: Thank you.

We’ll go next to David Schwartzman with Columbia Management. David Schwartzman - Columbia Management: Good morning. I was thinking about the sales forecast in line with the weaker retail numbers that were out today, and I am trying to understand maybe if we can get a little bit granular into that minus 6 to 8, how you are considering some of the macro factors -- unemployment, GDP? Karen M. Hoguet: Yeah, I can’t be more granular with that. I mean, that is -- as we look at all of the factors that you all are looking at, we believe that that’s the realistic expectation. David Schwartzman - Columbia Management: So there’s nothing that if it’s much different than expected, that would sort of drive you to change your forecast, at least nothing you want to share? Karen M. Hoguet: I think it’s really going to be how the sales trends are changing, you know, once we begin to see improvement, we’ll feel differently. David Schwartzman - Columbia Management: Okay. Thank you.

And there are no other questions at this time. I would like to turn the conference back to Ms. Hoguet for any closing remarks. Karen M. Hoguet: Well, thank you all very much for your support and we look forward to talking to you as we go forward.

Thank you, everyone. That does conclude today’s conference. We thank you for your participation.