This is a summary of the third quarter fiscal 2007 earnings conference call conducted by Macy''s, Inc. (M: chart) on November 14, 2007.

Management:
CEO, Executive VP: Karen M. Hoguet

Key Investor Issues:

- Net income was $33 million, or 8 cents a share compared with a loss of $3 million, or 1 cent a share, a year earlier.
- Total sales at the department store operator increased 0.3% to $5.91 billion, while same-store sales declined 0.8%.
- Gross margin decreased to 39.3% in the quarter, compared with 40.3% a year ago.
- The company forecast fourth-quarter profit of $1.70 to $1.80 a share excluding merger costs on sales of $8.7 to $8.9 billion, down from an earlier guidance of $8.8 to $9 billion.
- Macy''s now expects sales for the year of $26.4 billion to $26.6 billion, down from the range of $26.5 billion to $26.8 billion issued in August.

Third Quarter Highlights

The company produced earnings at the high-end of expectations or 10 cents a share versus the guidance of 5 to 10 cents, with sales at the low-end of expectations, $5.9 billion versus the guidance of $5.9 billion to $6 billion.

The reasons for the change in the trend in home are the Martha Stewart launch, the introduction of the big ticket business on macys.com, improved localization of assortments, and improved marketing, including Internet advertising.

During the quarter, the center core categories of business also performed well, particularly sleepwear, watches, handbags and fragrances, all of which are important fourth quarter gift categories. The men’s business did okay in the quarter, although sales of basic seasonal commodities were slow, probably largely due to weather.

The most concerning trend was in women’s apparel.

Some of this is weather related but there does not appear to be enough in the fashion offering that is compelling. There was some strength during the quarter in items where the company made investments -- fashion sweaters, jackets, and outerwear, but basics did not sell as well as expected. However, with the colder weather, this business has improved.

Gross margin on a recurring basis in the quarter was 39.3%, down one point from last year.

The company expected a lower gross margin rate than last year during the third quarter, although this was lower than expected. The company took lots of markdowns in the quarter, particularly on ready to wear, to keep the inventories appropriately current.

SG&A in the quarter before May related integration costs was $2.121 billion, 1.3% above a year ago in dollars and 0.3 points higher as a percent of sales.

- Depreciation expense in the quarter was $321 million, up $6 million versus last year but a little lower than we had expected.
- Operating income excluding inventory valuation adjustments and integration costs was $200 million this year versus $279 million a year ago.

There were no May company related inventory valuation adjustments this year in the quarter, and last year there were $28 million, and the integration costs associated with the May acquisition were $17 million this year versus $117 million a year ago.

Interest expense in the quarter was $145 million, which was a little below the expected $150 million.

Book taxes in the quarter benefited by approximately $10 million of tax benefits related to the adjustment or settlement of tax issues. With the adoption of FIN-48, the effective tax rate will vary more by quarter than it has in the past.

Share count on a diluted basis was 438 million shares in the quarter, down 20% from last year’s 550 million shares due to the stock repurchase activity.

Earnings per share excluding integration costs on a diluted basis was 10 cents in the quarter, again versus our guidance of 5 to 10 cents and last year’s 20 cents per share.

Net cash provided by continuing operating activities was $285 million in the first nine months of the year, vs. $1.971 billion in the first nine months of last year.