MAY DEPARTMENT STORES CO - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 1, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to _______________

Commission File Number 1-79

THE MAY DEPARTMENT STORES COMPANY
(Exact name of registrant as specified in its charter)

Delaware 43-1104396
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

611 Olive Street, St. Louis, Missouri 63101
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (314) 342-6300

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
Common Stock, par value $.50 per share New York Stock Exchange
Preferred stock purchase rights New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No

Aggregate market value of the registrant's common stock held by non-affiliates
as of March 14, 2003: $5,505,826,184

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 287,360,448 shares of common
stock, $.50 par value, as of March 14, 2003.

1

Documents incorporated by reference:
1. Registrant's Proxy Statement for the 2003 Annual Meeting of Shareowners (to
be filed with the commission under Rule 14A within 120 days after the end of
registrant's fiscal year-end and, upon such filing, to be incorporated by
reference into Part III).

PART I

Items 1 and 2. Business and Description of Property

The May Department Stores Company ("May"), a corporation organized under the
laws of the State of Delaware in 1976, became the successor to The May
Department Stores Company, a New York corporation ("May NY") in a
reincorporation from New York to Delaware pursuant to a statutory share
exchange accomplished in 1996. As a result of the share exchange, May NY
became a wholly-owned subsidiary of May. May NY was organized under the laws
of the State of New York in 1910, as the successor to a business founded by
David May, who opened his first store in Leadville, Colorado, in 1877.

Information required by this item is also included in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
which is incorporated herein by reference.

DEPARTMENT STORES

May operates six quality regional department store divisions nationwide under
11 long-standing and widely recognized trade names. Each department store
division holds a leading market position in its region. At fiscal year-end
2002, May operated 443 department stores in 37 states and the District of
Columbia. The department store divisions and the markets served are shown in
the table below.

Store Company Markets Served

Lord & Taylor 34 markets, including New York/New Jersey Metro;
Chicago; Boston Metro; Dallas/Fort Worth;
Philadelphia Metro; Washington, D.C., Metro;
Detroit; Houston; Atlanta; and St. Louis Metro

Filene's and 39 markets, including Boston Metro, Pittsburgh,
Kaufmann's Cleveland, Southern Connecticut, Providence Metro,
Hartford, Buffalo, Rochester, and Columbus

Robinsons-May and 15 markets, including Los Angeles/Orange County,
Meier & Frank Riverside/San Bernardino, Phoenix, San Diego, Las
Vegas, Portland/Vancouver Metro and Salt Lake City

Hecht's and 19 markets, including Washington, D.C., Metro;
Strawbridge's Philadelphia Metro (Strawbridge's); Baltimore;
Norfolk; Nashville; Richmond; Charlotte; Greensboro;
and Raleigh-Durham

Foley's 21 markets, including Houston, Dallas/Fort Worth,
Denver, San Antonio, Austin, and Oklahoma City

Famous-Barr, L.S. 24 markets, including St. Louis Metro, Kansas
Ayres and The City Metro (The Jones Store), and Indianapolis
Jones Store (L.S. Ayres)

2

We plan to open 11 department stores in 2003 in the following cities:

Lord & Taylor Hecht's
Miami, FL Richmond, VA

Filene's Foley's
Brockton, MA Lake Charles, LA
Dallas, TX
Kaufmann's Houston, TX
Columbus, OH (2)
Pittsburgh, PA Famous-Barr
Columbia, MO
Meier & Frank
Ogden, UT

BRIDAL GROUP

David's Bridal Inc. is the nation's largest retailer of bridal gowns and
bridal-related merchandise and offers a variety of special occasion dresses and
accessories. At fiscal year-end 2002, David's Bridal operated 180 stores in 44
states and Puerto Rico.

After Hours Formalwear Inc. is the largest tuxedo rental and sales retailer in
the United States. At fiscal year-end 2002, After Hours operated 235 stores in
19 states.

Priscilla of Boston is one of the most highly recognized upscale bridal
retailers in the United States. At fiscal year-end 2002, Priscilla of Boston
operated 10 stores in nine states.

A. Associates

May employs approximately 55,000 full-time and 61,000 part-time associates in
45 states, the District of Columbia, Puerto Rico and 10 offices overseas.

B. Property Ownership

The following summarizes the property ownership of department stores and the
Bridal Group at February 1, 2003:
% of Gross
Number of Building
Stores* Sq. Footage
Department Department
Stores Bridal Group Stores Bridal Group

Entirely or mostly owned 260 2 62% 1%
Entirely or mostly leased 110 423 24 99
Owned on leased land 73 - 14 0
443 425 100% 100%

* Includes two department stores subject to financing.

C. Credit Sales

Sales at May's stores are made for cash or credit, including May's 30-day
charge accounts and open-end credit plans for department store divisions, which
include revolving charge accounts and revolving installment accounts. During
the fiscal year ended February 1, 2003, 36.9% of net sales were made through
May's credit plans.

3

C. Credit Sales (continued)

May National Bank of Arizona ("MBA") and May National Bank of Ohio ("MBO") are
indirectly wholly-owned and consolidated subsidiaries of May. MBA and MBO
extend credit to customers of May's six department store divisions. In 2002, we
announced the planned merger of MBA into MBO in 2003. The merger is subject to
Office of the Comptroller of the Currency approval.

D. Competition in Retail Merchandising

May conducts its retail merchandising business under highly competitive
conditions. Although May is one of the nation's largest department store
retailers, it has numerous competitors at the national and local level which
compete with May's individual department stores and the Bridal Group.
Competitors include department stores, specialty, off-price, discount,
internet, and mail-order retailers. Competition is characterized by many
factors including location, reputation, assortment, advertising, price,
quality, service, and credit availability. May believes that it is in a strong
competitive position with regard to each of these factors.

E. May Merchandising Company/May Department Stores International, Inc.

May Merchandising Company ("MMC"), an indirectly wholly-owned and consolidated
subsidiary of May, identifies emerging fashion trends in both domestic brands
and our exclusive proprietary brand merchandise. MMC works closely with our
six department store divisions and our merchandise vendors to communicate
emerging fashion trends, to develop meaningful merchandise assortments and
negotiate the best overall terms for delivery of merchandise in a timely manner
to our stores.

May Department Stores International, Inc. ("MDSI"), a wholly-owned and
consolidated subsidiary of May, is primarily a design and sourcing company.
MDSI owns all trade names and marks associated with proprietary brand
merchandise and develops, designs, sources, imports, and distributes the
proprietary brand merchandise bearing those trade names and marks for May.
MDSI has approximately 40-50 private labels in use at the department store
divisions and employs approximately 850 persons worldwide. In addition to its
corporate office in St. Louis, MDSI operates offices in New York City and ten
countries.

F. Executive Officers of May

The names and ages (as of March 28, 2003) of all executive officers of May, and
the positions and offices held with May by each such person are as follows:

Name Age Positions and Offices
Eugene S. Kahn 53 Chairman of the Board and Chief Executive
Officer
John L. Dunham 56 President
William P. McNamara 52 Vice Chairman
Thomas D. Fingleton 55 Executive Vice President and Chief Financial
Officer
Jay A. Levitt 45 Chief Executive Officer and President, May
Merchandising Company and May Department
Stores International
R. Dean Wolfe 58 Executive Vice President
Alan E. Charlson 54 Senior Vice President and General Counsel
Martin M. Doerr 48 Senior Vice President
William D. Edkins 50 Senior Vice President
Lonny J. Jay 61 Senior Vice President
Jan R. Kniffen 54 Senior Vice President
Richard A. Brickson 55 Secretary and Senior Counsel
J. Per Brodin 41 Vice President

4

F. Executive Officers of May (continued)

Each of the above named executive officers shall remain in office until the
annual meeting of directors following the next annual meeting of shareowners of
May and until the officer's successor shall have been elected and shall
qualify. Messrs. Kahn, Dunham, and Wolfe are also directors of May. Ms. Judith
K. Hofer retired as an officer on July 31, 2002. At that time Mr. Levitt
assumed the additional position of chief executive officer of May Merchandising
Company and May Department Stores International.

Each of the executive officers has been an officer of May for at least the last
five years, with the following exceptions:

- - Mr. McNamara served as senior vice president and general merchandise
manager for May Merchandising Company from 1995 to 1997, president and
chief executive officer of Famous-Barr from 1997 to 1998, and president of
May Merchandising Company from 1998 to February 2000 when he became vice
chairman and an executive officer of May.

- - Mr. Fingleton served as chairman of Hecht's from 1991 to May 2000 when he
became executive vice president and an executive officer of May. He
assumed his current position in April 2001.

- - Mr. Levitt served as vice president and general merchandising manager of
Robinsons-May from 1991 to 1999 when he was named president and chief
executive officer. He became president of May Merchandising Company and
May Department Stores International and an executive officer of May in July
2001. He assumed his current position in July 2002.

- - Mr. Charlson served as senior counsel for May from 1988 to 1998 when he
became senior vice president and chief counsel and an executive officer of
May. He assumed his current position in January 2001.

- - Mr. Brodin was associated with a public accounting firm from 1989 to 2002.
He served as director of May's corporate accounting and reporting from
March 2002 to June 2002 when he became vice president and an executive
officer of May.

G. Website Access to Reports

We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports, filed or furnished
pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934
available free of charge on or through our internet website,
www.maycompany.com, as soon as reasonably practicable after we electronically
file such material with, or furnish it to, the SEC.

Item 3. Legal Proceedings

The company is involved in claims, proceedings, and litigation arising from the
operation of its business. The company does not believe any such claim,
proceeding, or litigation, either alone or in the aggregate, will have a
material adverse effect on the company's financial position or results of
operations.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the 13 weeks
ended February 1, 2003.

5

PART II

Item 5. Market for May's Common Equity and Related Shareowner Matters

Common Stock Dividends and Market Prices information included in Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" is incorporated herein by reference.

Item 6. Selected Financial Data

FIVE-YEAR FINANCIAL SUMMARY
(dollars in millions, except per
share and operating statistics) 2002 2001 2000 1999 1998

Operations
Net sales $13,491 $13,883 $14,210 $13,562 $12,792
Total percent increase (decrease) (2.8)% (2.3)% 4.8% 6.0% 6.0%
Store-for-store percent increase (decrease) (5.3) (4.4) 0.0 2.7 3.4
Cost of sales 9,463(3) 9,632 9,798 9,255 8,786
Selling, general, and
administrative expenses 2,863(3) 2,758 2,665 2,497 2,333
Interest expense, net 345 354 345 287 278
Earnings before income taxes 820(3) 1,139 1,402 1,523 1,395
Provision for income taxes 278 436 544 596 546

Net earnings (1) 542(3) 703 858 927 849
Percent of net sales 4.0% 5.1% 6.0% 6.8% 6.6%
LIFO credit $ - $ (30) $ (29) $ (30) $ (28)
________________________________________________
Per share
Basic earnings per share(1) $ 1.82(3) $ 2.31 $ 2.74 $ 2.73 $ 2.43
Diluted earnings per share(1) 1.76(3) 2.21 2.62 2.60 2.30
Dividends paid (2) 0.95 0.94 0.93 0.89 0.85
Book value 14.00 13.37 12.93 12.53 11.46
Market price - high 37.75 41.25 39.50 45.38 47.25
Market price - low 20.08 27.00 19.19 29.19 33.17
Market price - year-end close 20.50 36.07 37.30 31.25 40.25
_______________________________________________
Financial statistics
Return on equity 16.1%(4) 18.2% 21.0% 24.1% 22.2%
Return on net assets 12.9 (4) 15.5 19.5 20.7 19.8
_______________________________________________
Operating statistics
Stores open at year-end:
Department stores 443 439 427 408 393
Bridal Group (5) 425 400 123 - -
Gross retail square footage (in millions):
Department stores 76.5 75.3 72.0 69.1 66.7
Bridal Group (5) 2.2 1.9 1.3 - -
Net sales per square foot (6) $ 174 $ 185 $ 198 $ 201 $ 199
_______________________________________________
Cash flows and financial position
Cash flows from operations $ 1,460 $ 1,644 $ 1,346 $ 1,530 $ 1,505
Depreciation and amortization 557 559 511 469 439
Capital expenditures 798 797 598 703 630
Dividends on common stock 273 278 286 295 290
Working capital 2,056 2,397 3,056 2,700 2,928
Long-term debt and preference stock 4,300 4,689 4,833 3,875 4,152
Shareowners' equity 4,035 3,841 3,855 4,077 3,836
Total assets 11,936 11,920 11,574 10,935 10,533
_______________________________________________
Shares outstanding:
Average basic shares outstanding 288.2 296.0 306.4 332.2 342.6
Average diluted shares
outstanding and equivalents 307.9 317.6 327.7 355.6 367.4
_______________________________________________

All years included 52 weeks, except 2000, which included 53 weeks. Amounts for all years conform to
2002 presentation.
(1) Represents net earnings and earnings per share from continuing operations.
(2) The annual dividend was increased to $0.96 per share effective with the March 15, 2003, dividend
payment.
(3) Earnings include division combination costs of $114 million (pretax)or $0.26 per basic share and
$0.24 per diluted share, which consisted of $23 million as cost of sales and $91 million as
selling, general, and administrative expenses.
(4) Based on earnings before division combination costs.
(5) After Hours and Priscilla of Boston joined the company in 2001. David's Bridal joined the company
in 2000.
(6) Net sales per square foot are calculated from net sales and average gross retail square footage.

6

Item 7. Management's Discussion and Analysis of Financial Condition and Results
Of Operations

OVERVIEW

In 2002, we opened 11 new department stores, which added 1.7 million square
feet of retail space.

Lord & Taylor
Houston, TX Memorial City Mall
Orlando, FL The Florida Mall
St. Louis, MO West County

Filene's
Leominster, MA Searstown Mall

Kaufmann's
Cleveland, OH University Square

Robinsons-May
Irvine, CA Irvine Spectrum Center

Hecht's
Raleigh, NC Triangle Town Center
Greensboro, NC Wendover Place

Foley's
Beaumont, TX Parkdale Mall
El Paso, TX Cielo Vista Mall

The Jones Store
Kansas City, KS Oak Park Mall

Three of the new department stores (Irvine, Leominster, and Greensboro)
represent a new store format featuring a contemporary design, with flexible
merchandise presentations. This format will enable us to open stores in
innovative centers, including mixed-use "lifestyle" projects.

We also remodeled 2.7 million square feet of retail space in 32 department
stores in 2002, including the expansion of 15 stores by 588,000 square feet. At
fiscal year-end, we operated 443 department stores in 37 states and the
District of Columbia.

In August 2002, we combined our Kaufmann's division with our Filene's division
and our Meier & Frank division with our Robinsons-May division. In January
2003, we also announced the closing of our Arizona Credit Center and the
realignment of our data centers. We incurred pretax charges of $114 million
or $0.24 per share to complete these activities. These combinations are
expected to result in annual pretax savings of approximately $65 million or
$0.13 per share.

Our Bridal Group includes David's Bridal, the largest retailer of
bridal-related apparel in the United States; After Hours Formalwear (After
Hours), the largest tuxedo rental and sales retailer in the United States; and
Priscilla of Boston, one of the most highly recognized, upscale bridal gown
retailers in the country. In 2002, we opened 30 David's Bridal stores and one
After Hours store totaling 310,000 square feet of retail space. At fiscal
year-end, our Bridal Group operated 180 David's Bridal stores in 44 states and
Puerto Rico, 235 After Hours stores in 19 states, and 10 Priscilla of Boston
stores in nine states.

7

Our planned capital expenditures for 2003 are approximately $600 million. This
plan includes opening 11 new department stores totaling 1.8 million square
feet; remodeling or expanding 26 stores totaling 2.9 million square feet of
retail space; and the Bridal Group's addition of 30 David's Bridal stores, 15
After Hours stores, and two Priscilla of Boston stores totaling 330,000 square
feet of retail space.

REVIEW OF OPERATIONS

Net sales were $13.5 billion, a 2.8% decrease, compared with 2001 net
sales of $13.9 billion. The decrease was primarily due to a $732 million
decrease in store-for-store sales, offset by $395 million of new-store sales.

Earnings per share, excluding division combination costs, was $2.00 in 2002,
compared with $2.21 in 2001 and $2.62 in 2000. Net earnings, excluding division
combination costs, totaled $618 million in 2002, compared with $703 million in
2001 and $858 million in 2000. Return on net sales was 4.6% in 2002, compared
with 5.1% in 2001 and 6.0% in 2000.

Results, including division combination costs, for the past three years and the
related percent of net sales were:

(dollars in millions,
except per share) 2002 2001 2000
$ % $ % $ %

Net sales $13,491 100.0 % $13,883 100.0 % $14,210 100.0%
Cost of sales:
Recurring 9,440 70.0 9,632 69.4 9,798 68.9
Nonrecurring-division
combination markdowns 23 0.2 - 0.0 - 0.0
Selling, general,
and administrative 2,772 20.5 2,758 19.9 2,665 18.8
Division combination
costs 91 0.7 - 0.0 - 0.0
Interest expense, net 345 2.5 354 2.5 345 2.4

Earnings before
income taxes 820 6.1 1,139 8.2 1,402 9.9
Provision for
income taxes(1) 278 33.9 436 38.3 544 38.8

Net earnings $ 542 4.0 % $ 703 5.1 % $ 858 6.0%

Earnings per share $ 1.76 $ 2.21 $ 2.62

(1) Percent of net sales columns represent effective income tax rates.

Fiscal 2000 included 53 weeks. The additional week did not materially affect
2000 earnings.

8

Division Sales, Sales per Square Foot, and Retail Square Footage

Net Sales
in Millions
of Dollars
Store Company: Headquarters 2002 2001

Lord & Taylor: New York City $ 1,897 $ 1,971
Filene's, Kaufmann's: Boston 3,096 3,250
Robinsons-May, Meier & Frank: Los Angeles 2,466 2,559
Hecht's, Strawbridge's: Washington, D.C. 2,379 2,462
Foley's: Houston 1,995 2,107
Famous-Barr, L.S. Ayres,
The Jones Store: St. Louis 1,150 1,214

Total Department Stores $12,983 $13,563

Bridal Group: Philadelphia(1) 508 320

The May Department Stores Company $13,491 $13,883

Net Sales per
Square Foot
Store Company: Headquarters 2002 2001

Lord & Taylor: New York City $ 171 $ 185
Filene's, Kaufmann's: Boston 190 202
Robinsons-May, Meier & Frank: Los Angeles 181 194
Hecht's, Strawbridge's: Washington, D.C. 171 181
Foley's: Houston 157 171
Famous-Barr, L.S. Ayres,
The Jones Store: St. Louis 144 157

Total Department Stores $ 172 $ 184

Bridal Group: Philadelphia(1) 244 216

The May Department Stores Company $ 174 $ 185

Gross Retail
Square Footage
in Thousands
Store Company: Headquarters 2002 2001

Lord & Taylor: New York City 11,207 10,981
Filene's, Kaufmann's: Boston 16,480 16,259
Robinsons-May, Meier & Frank: Los Angeles 13,767 13,509
Hecht's, Strawbridge's: Washington, D.C 14,134 13,993
Foley's: Houston 12,985 12,623
Famous-Barr, L.S. Ayres,
The Jones Store: St. Louis 7,887 7,920

Total Department Stores 76,460 75,285

Bridal Group: Philadelphia(1) 2,235 1,930

The May Department Stores Company 78,695 77,215

9

Number of Stores
Store Company: Headquarters 2002 New Closed 2001

Lord & Taylor: New York City 85 3 2 84
Filene's, Kaufmann's: Boston 97 2 1 96
Robinsons-May, Meier & Frank: Los Angeles 72 1 - 71
Hecht's, Strawbridge's: Washington, D.C. 80 2 2 80
Foley's: Houston 66 2 1 65
Famous-Barr, L.S. Ayres,
The Jones Store: St. Louis 43 1 1 43

Total Department Stores 443 11 7 439

Bridal Group: Philadelphia(1) 425 31 6 400

The May Department Stores Company 868 42 13 839

(1) Results of After Hours and Priscilla of Boston included since their fourth
quarter 2001 acquisition.

Net sales per square foot are calculated from net sales and average gross
retail square footage.

Gross retail square footage and number of stores represent locations open at
the end of the period presented.

Net Sales
Net sales include merchandise sales and lease department income. Store-for-store
sales compare sales of stores open during both years beginning the first day a
new store has prior-year sales, exclude sales of stores closed during both
years, and are adjusted for the effects of years that have a 53rd week.

Net sales increases (decreases) for 2002 and 2001 were:

2002 2001
Store-for- Store-for-
Quarter Total Store Total Store

First 0.8 % (2.4)% 3.4 % (0.9)%
Second (2.3) (5.0) 1.3 (2.7)
Third (4.6) (7.3) (3.7) (5.8)
Fourth (4.4) (6.0) (7.0) (6.8)

Year (2.8) % (5.3) % (2.3)% (4.4)%

The total net sales decrease for 2002 was primarily due to a $732 million
decrease in store-for-store sales, offset by $395 million of new-store sales.
The total net sales decrease for 2001 was due to a $761 million decrease in
store-for-store sales and $140 million of sales in the 53rd week of 2000,
offset by $499 million of new-store sales, which included David's Bridal.

10

Cost of Sales
Cost of sales includes the cost of merchandise, inbound freight, distribution
expenses, and buying and occupancy costs. Cost of sales and the related percent
of net sales were:

2002 2001 2000
(dollars in millions) $ % $ % $ %

Recurring cost of sales $9,440 70.0% $9,632 69.4% $9,798 68.9%
LIFO credit - 0.0 30 0.2 29 0.2
Recurring cost of sales
before LIFO credit $9,440 70.0% $9,662 69.6% $9,827 69.1%

Nonrecurring cost of
sales $ 23 0.2% $ - 0.0% $ - 0.0%

Recurring cost of sales as a percent of net sales increased 0.6% in 2002
because of a 0.9% increase in occupancy costs and a 0.2% increase for the
effect of the LIFO cost method, offset by a 0.6% decrease in the cost of
merchandise. We did not have a LIFO provision or credit in fiscal 2002,
compared with a fiscal 2001 LIFO credit of $30 million ($0.06 per share). In
addition, division combination markdowns of $23 million were incurred in 2002
to conform merchandise assortments and synchronize pricing and promotional
strategies.

Cost of sales as a percent of net sales increased by 0.5% in 2001 compared with
2000 because of an 0.8% increase related to buying and occupancy costs growing
as net sales declined, partially offset by a 0.1% increase in the merchandise
gross margin rate due to lower markdowns and a 0.2% decrease because of the
addition of David's Bridal.

Selling, General, and Administrative Expenses
Selling, general, and administrative expenses and the related percent of net
sales were:

2002 2001 2000
(dollars in millions) $ % $ % $ %

Selling, general, and
administrative $2,772 20.5% $2,758 19.9% $2,665 18.8%

As a percent of net sales, selling, general, and administrative expenses
increased from 19.9% in 2001 to 20.5% in 2002 because of a 0.5% increase in
payroll and a 0.2% increase in advertising, offset by a 0.2% decrease from the
elimination of goodwill amortization.

As a percent of net sales, selling, general, and administrative expenses for
2001 increased by 1.1% compared with 2000 primarily because of a 0.4% increase
in department store payroll, a 0.3% increase in employee benefit expenses, and
a 0.3% increase from the addition of David's Bridal.

Selling, general, and administrative expenses included advertising and sales
promotion costs of $669 million, $652 million, and $632 million in 2002, 2001,
and 2000, respectively. As a percent of net sales, advertising and sales
promotion costs were 4.9% in 2002, 4.7% in 2001, and 4.5% in 2000.

Finance charge revenues are included as a reduction of selling, general, and
administrative expenses for all periods presented. Finance charge revenues
were $261 million in 2002, $292 in 2001, and $301 in 2000. In prior years,
these amounts were included as a component of revenues.

11

Division Combinations
In August 2002, we combined our Kaufmann's division with our Filene's division
and our Meier & Frank division with our Robinsons-May division. In 2002, we
also announced the closure of the Arizona Credit Center and the realignment of
our data centers. Pretax charges associated with these activities were $114
million or $0.24 per share, which consisted of $23 million as cost of sales and
$91 million as other operating expenses. We anticipate that these combinations
will save approximately $65 million (pretax) annually.

Remaining severance payments of $17 million related to the division combinations
are expected to be paid in 2003 and 2004.

Interest Expense
Interest expense components were:

(dollars in millions) 2002 2001 2000

Interest expense $378 $383 $373
Interest income (10) (7) (11)
Capitalized interest (23) (22) (17)

Interest expense, net $345 $354 $345

Percent of net sales 2.5% 2.5% 2.4%

The decrease in interest expense in 2002 was primarily due to lower interest on
both long-term and short-term debt, offset by a $5 million increase in early
debt redemption costs.

Income Taxes
The effective income tax rate for 2002 was 33.9%, compared with 38.3% in 2001
and 38.8% in 2000. The rate reduction in 2002 is due to the favorable impact of
eliminating goodwill amortization, corporate structure changes, changes in tax
regulations, and a 3.0% benefit for the recent resolution of various matters.

Impact of Inflation
Inflation did not have a material impact on our 2002 net sales and earnings.
We value inventory principally on a LIFO basis, and as a result the current cost
of merchandise is reflected in current operating results.

REVIEW OF FINANCIAL CONDITION

Return on Equity
Return on equity is our principal measure for evaluating our performance for
shareowners and our ability to invest shareowners' funds profitably. Excluding
division combination costs, return on beginning equity was 16.1% in 2002,
compared with 18.2% in 2001 and 21.0% in 2000. Including division combination
costs, return on beginning equity was 14.1% in 2002.

Return on Net Assets
Return on net assets measures performance independent of capital structure.
Return on net assets is pretax earnings before net interest expense and the
interest component of operating leases, divided by beginning-of-year net assets
(including present value of operating leases). Excluding division combination
costs, return on net assets was 12.9% in 2002, compared with 15.5% in 2001 and
19.5% in 2000. Including division combination costs, return on net assets was
11.8% in 2002.

Cash Flows
Cash flows from operations was $1.5 billion in 2002. This compares with $1.6
billion in 2001 and $1.3 billion in 2000. The decrease in cash flows from
operations in 2002 related primarily to the decrease in 2002 earnings.

12

Sources (uses) of cash flows were:

(dollars in millions) 2002 2001 2000

Net earnings $ 542 $ 703 $ 858
Depreciation and amortization 557 559 511
Working capital (increases) decreases 335 339 (71)
Other operating activities 26 43 48

Cash flows from operations 1,460 1,644 1,346

Net capital expenditures (790) (756) (550)
Business combinations - (425) (420)

Cash flows used for investing activities (790) (1,181) (970)

Net long-term debt issuances (repayments) (434) 72 835
Net short-term debt issuances 72 78 -
Net purchases of common stock (14) (420) (792)
Dividend payments (291) (297) (304)

Cash flows used for financing activities (667) (567) (261)

Increase (decrease) in cash and cash equivalents $ 3 $ (104) $ 115

See "Consolidated Statements of Cash Flows" on page 22.

Capital Expenditures
In 2002, capital expenditures were primarily made for new stores, remodels, and
expansions. Our strong financial condition enables us to make capital
expenditures to enhance growth and improve operations. The operating measures
we emphasize when we invest in new stores and remodel or expand existing stores
include return on net assets, internal rate of return, and net sales per square
foot.

The 2001 capital expenditures include the purchase of 15 former Wards and
Bradlees stores. These stores are operating as new store or expansions to
existing stores.

Business Combinations
In the fourth quarter of 2001, we acquired After Hours and Priscilla of Boston
for an aggregate cost of $121 million. In March 2001, we purchased nine
department stores in the Tennessee and Louisiana markets from Saks Incorporated
for approximately $304 million. In August 2000, David's Bridal joined May. The
cost of this transaction was approximately $420 million. These business
combinations were accounted for as purchases.

Liquidity, Available Credit, and Debt Ratings
We finance our activities primarily with cash flows from operations, borrowings
under credit facilities, and issuances of long-term debt. We have $1.0 billion
of credit under unsecured revolving facilities consisting of a $700 million
multi-year credit agreement expiring July 31, 2006, and a $300 million 364-day
credit agreement expiring July 29, 2003. These credit agreements support our
commercial paper borrowings. As of February 1, 2003, there was $150 million of
commercial paper outstanding. Financial covenants under the credit agreements
include a minimum fixed-charge coverage ratio and a maximum debt-to-
capitalization ratio. We also maintain a $30 million credit facility with a
group of minority-owned banks. In addition, we have filed a shelf registration
statement with the Securities and Exchange Commission that enables us to issue
up to $525 million of debt securities.

13

Annual maturities of long-term debt, including sinking fund requirements, are
$139 million, $239 million, $154 million, $131 million, and $260 million for
2003 through 2007. Interest payments on long-term debt are typically paid on a
semi-annual basis.

As of March 14, 2003, our bonds are rated A2 by Moody's Investors Service, Inc.
and A by Standard & Poor's Corporation. Our commercial paper is rated P1 by
Moody's and A1 by Standard & Poor's. Our senior unsecured bank credit agreement
is rated A1 by Moody's.

Off-balance-sheet Financing
We do not sell or securitize customer accounts receivable. We have not entered
into off-balance-sheet financing or other arrangements with any special-purpose
entity. Our existing operating leases do not contain any significant termination
payments if lease options are not exercised. The present value of operating
leases (minimum rents) was $534 million as of February 1, 2003.

Financial Ratios
Our debt-to-capitalization and fixed-charge coverage ratios are consistent with
our capital structure objective. Our capital structure provides us with
substantial financial and operational flexibility.

The debt-to-capitalization ratios were 48%, 51%, and 50% for 2002, 2001,
and 2000, respectively. For purposes of the debt-to-capitalization ratio, we
define total debt as short-term and long-term debt (including the Employee
Stock Ownership Plan [ESOP] debt reduced by unearned compensation) and the
capitalized value of all leases, including operating leases. We define
capitalization as total debt, noncurrent deferred taxes, ESOP preference
shares, and shareowners' equity. See "Profit Sharing" on page 27 for
discussion of the ESOP.

The fixed-charge coverage ratios were 2.8x in 2002, 3.5x in 2001, and 4.2x
in 2000. The ratio decline in 2002 was due to lower operating earnings,
compared with 2001, and division combination costs. The ratio excluding
division combination costs was 3.1x in 2002. The ratio declined in 2001
because of lower operating earnings and higher interest expense, compared
with 2000.

Employee Stock Options
Effective February 2, 2003, we began expensing the fair value of employee stock
options. We adopted the fair value method prospectively. The expense associated
with stock options is expected to be $0.01 per share in 2003, growing
to approximately $0.07 per share by 2006.

Common Stock Dividends and Market Prices
Our dividend policy is based on earnings growth and capital investment
requirements. We increased the annual dividend by $0.01 to $0.96 per share
effective with the March 2003 dividend. This is our 28th consecutive annual
dividend increase. We have paid consecutive quarterly dividends since 1911.

The quarterly price ranges of the common stock and dividends per share in 2002
and 2001 were:

2002 2001
Market Price Market Price
Dividends Dividends
Quarter High Low per Share High Low per Share

First $37.75 $33.04 $0.2375 $41.25 $33.85 $0.2350
Second 37.08 25.74 0.2375 37.29 30.61 0.2350
Third 30.50 20.10 0.2375 34.90 27.00 0.2350
Fourth 26.10 20.08 0.2375 38.86 33.17 0.2350

Year $37.75 $20.08 $0.9500 $41.25 $27.00 $0.9400

The approximate number of common shareowners as of March 1, 2003, was 40,000.

14

Critical Accounting Policies
In 2002, approximately 37% of our net sales were made under our department store
credit programs, which resulted in customer accounts receivable balances of
approximately $1.8 billion at February 1, 2003. We have significant experience
in managing our credit programs. Our allowance for doubtful accounts is based
upon a number of factors including account write-off experience, account aging,
and year-end balances. We do not expect actual results to vary significantly
from our estimate.

We use the retail inventory method. Under this method, we record markdowns to
value merchandise inventories at net realizable value. We closely monitor
actual and forecasted sales trends, current inventory levels, and aging
information by merchandise categories. If forecasted sales are not achieved,
additional markdowns may be needed in future periods to clear excess or slow-
moving merchandise, which may result in lower gross margins.

When a store experiences unfavorable operating performance, we evaluate
whether an impairment charge should be recorded. A store's assets are
evaluated for impairment by comparing its estimated undiscounted cash flows to
its carrying value. If the cash flows are not sufficient to recover the
carrying value, the assets are written down to fair value. Impairment losses
associated with these reviews have not been significant. However, if store-
for-store sales declines and general negative economic trends continue, future
impairment losses may be significant.

We self-insure a portion of the exposure for costs related to workers'
compensation and general liability. Expenses are recorded based on actuarial
estimates for reported and incurred but not reported claims considering a
number of factors, including historical claims experience, severity factors,
litigation costs, inflation, and other actuarial assumptions. Although we do
not expect the amount we will ultimately pay to differ significantly from our
estimates, self-insurance reserves could be affected if future claims
experience differs significantly from the historical trends and our
assumptions.

We use various assumptions and estimates to measure the expense and funded
status of our pension plans. Those assumptions and estimates include discount
rates, rates of return on plan assets, rates of future compensation increases,
employee turnover rates, and anticipated mortality rates. The use of different
assumptions and estimates in our pension plans could result in a significantly
different funded status and plan expense. Based on current estimates and
assumptions, we believe our 2003 pension expense will be approximately $105
million.

Impact of New Accounting Pronouncements
In the first quarter of fiscal 2002, we adopted Statement of Financial
Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets,"
which eliminates goodwill amortization and prescribes a new approach for
assessing potential goodwill impairments. Our transitional assessment of
potential goodwill impairments under SFAS No. 142 did not identify any
impairment. Goodwill amortization incurred in 2001 was $42 million or $0.11 per
share and $33 million or $0.09 per share in 2000. Net earnings excluding
goodwill amortization was $740 million or $2.32 per share in 2001 and $888
million or $2.71 per share in 2000.

In 2002, we adopted SFAS No. 145, "Rescission of FASB Statements No. 4, 44,
and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS
No. 145 eliminates the requirement to classify gains and losses from the
extinguishment of indebtedness as extraordinary, requires certain lease
modifications to be treated the same as a sale-leaseback transaction, and makes
other nonsubstantive technical corrections to existing pronouncements. The
impact of adopting SFAS No. 145 was the reclassification of the 2001
extraordinary loss of $3 million (net of $2 million in taxes) to interest
expense and income taxes, and the classification of early debt redemption costs
of $10 million as interest expense in the current year.

15

In 2002, we adopted SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities." SFAS No. 146 changes the timing of when certain costs
associated with restructuring activities may be recognized. SFAS No. 146 is
effective for exit or disposal activities initiated after December 31, 2002.
The combination of our Kaufmann's division with our Filene's division and our
Meier & Frank division with our Robinsons-May division was initiated in May
2002 and recorded in accordance with the rules effective at that time. The
closure of the Arizona Credit Center and the data center realignment were
recorded in accordance with SFAS No. 146.

In 2002, the Emerging Issues Task Force (EITF) reached a consensus on Issue
No. 02-16, "Accounting by a Customer (Including a Reseller) for Cash
Consideration Received from a Vendor." EITF Issue No. 02-16 provides guidance
on how cash consideration received by a customer or reseller should be
classified in the customer's statement of earnings. We do not expect EITF Issue
No. 02-16 to have a material impact on our consolidated financial position or
operating results.

Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk primarily arises from changes in interest rates on
short-term debt. Short-term debt has generally been used to finance seasonal
working capital needs resulting in minimal exposure to interest rate
fluctuations. Long-term debt is at fixed interest rates. Our merchandise
purchases are denominated in United States dollars. Operating expenses of our
international buying offices located outside the United States are generally
paid in local currency and are not material. During fiscal 2002, 2001, and 2000,
we did not enter into any derivative financial instruments.

Forward-looking Statements
Management's Discussion and Analysis contains forward-looking statements as
defined by the Private Securities Litigation Reform Act of 1995. While such
statements reflect all available information and management's judgment and
estimates of current and anticipated conditions and circumstances and are
prepared with the assistance of specialists within and outside the company,
there are many factors outside of our control that have an impact on our
operations. Such factors include but are not limited to competitive changes,
general and regional economic conditions, consumer preferences and spending
patterns, availability of adequate locations for building or acquiring new
stores, our ability to hire and retain qualified associates, and our ability to
manage the business to minimize the disruption of sales and customer service as
a result of the division combinations. Because of these factors, actual
performance could differ materially from that described in the forward-looking
statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Information required by this item is included in Quantitative and Qualitative
Disclosures About Market Risk in Item 7 "Management's Discussion and Analysis
of Financial Condition and Results of Operations," which is incorporated
herein by reference.

16

Item 8. Financial Statements and Supplementary Data

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareowners of
The May Department Stores Company

We have audited the accompanying consolidated balance sheet of The May
Department Stores Company and subsidiaries (the "Company") as of
February 1, 2003, and the related consolidated statement of earnings,
shareowners' equity, and cash flows for the year then ended. Our audit also
included the financial statement schedule, as of and for the year ended
February 1, 2003, listed at Item 15. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements and
financial statement schedule based on our audit. The consolidated financial
statements and financial statement schedule of the Company as of
February 2, 2002 and for the years ended February 2, 2002 and February 3, 2001
(fiscal 2001 and 2000, respectively), before the inclusion of the transitional
disclosures and reclassifications discussed in the notes to the consolidated
financial statements, were audited by other auditors who have ceased operations.
Those auditors expressed an unqualified opinion on those financial statements
and stated that such fiscal 2001 and 2000 financial statement schedules, when
considered in relation to the fiscal 2001 and 2000 basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein, in their reports dated February 13, 2002.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the fiscal 2002 consolidated financial statements present
fairly, in all material respects, the financial position of the Company as of
February 1, 2003 and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, the fiscal 2002 financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as whole, presents fairly, in all material respects,
the information set forth therein.

As discussed in notes to the consolidated financial statements, in fiscal 2002
the Company changed its method of accounting for goodwill to conform to
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets."

As discussed above, the Company's fiscal 2001 and 2000 consolidated financial
statements were audited by other auditors who have ceased operations. As
described in the notes, these financial statements have been revised to include
the transitional disclosures required by SFAS No. 142 and to reflect the
adoption of SFAS No. 145, "Rescission of FASB Statements 4, 44 and 64,
Amendment of FASB Statement No. 13 and Technical Corrections." Our audit
procedures with respect to the disclosures in the notes with respect to 2001
and 2000 included (1) comparing the previously reported net earnings to the
previously issued consolidated financial statements and the adjustments to

17

reported net earnings representing amortization expense (including any related
tax effects) recognized in those periods related to goodwill as a result of
initially applying SFAS No. 142 (including any related tax effects) to the
Company's underlying analysis obtained from management, and (2) testing the
mathematical accuracy of the reconciliation of adjusted net earnings to reported
net earnings, and the related earnings-per-share amounts. Our audit procedures
with respect to the 2001 reclassifications described in the notes, that were
applied to conform the 2001 consolidated financial statements to the
presentation required by SFAS No. 145, included (1) comparing the amount shown
as extraordinary loss, net of tax in the Company's consolidated statement of
earnings to the Company's underlying accounting analysis obtained from
management, (2) comparing the amounts comprising the loss on extinguishment of
debt and the related tax benefit to the Company's underlying accounting records
obtained from management, and (3) testing the mathematical accuracy of the
underlying analysis. In our opinion, the disclosures for 2001 and 2000 related
to SFAS No. 142 in the notes are appropriate and the reclassifications for 2001
have been properly applied. However, we were not engaged to audit, review, or
apply any procedures to the 2001 and 2000 consolidated financial statements of
the Company other than with respect to such disclosures and reclassifications
and, accordingly, we do not express an opinion or any other form of assurance
on the 2001 and 2000 consolidated financial statements taken as a whole.

/s/Deloitte & Touche LLP
St. Louis, Missouri
February 12, 2003

The following report is a copy of a report previously issued by Arthur Andersen
LLP in connection with the company's annual report on Form 10-K for the year
ended February 2, 2002. This opinion has not been reissued by Arthur Andersen
LLP. In fiscal 2002, the company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets" and SFAS No. 145, "Rescission of FASB Statement No. 4, 44
and 64, Amendment of FASB Statement No. 13 and Technical Corrections." As
discussed in the notes to the consolidated financial statements, the company
has presented the transitional disclosures for fiscal 2001 and 2000 required by
SFAS No. 142 and adjusted the 2001 consolidated financial statements as a
result of adoption of SFAS No. 145. The Arthur Andersen LLP report does not
extend to these transitional disclosures or adjustments. These disclosures and
adjustments are reported on by Deloitte & Touche LLP as stated in their report
appearing herein.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareowners of
The May Department Stores Company

We have audited the accompanying consolidated balance sheets of The May
Department Stores Company (a Delaware corporation) and subsidiaries as of
February 2, 2002, and February 3, 2001, and the related consolidated statement
of earnings, shareowners' equity and cash flows for each of the three fiscal
years in the period ended February 2, 2002. These financial statements are the
responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used

18

and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The May Department Stores
Company and subsidiaries as of February 2, 2002, and February 3, 2001, and the
results of their operations and their cash flows for each of the three fiscal
years in the period ended February 2, 2002, in conformity with accounting
principles generally accepted in the United States.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule II included in this Form 10-K is
presented for the purpose of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

/s/Arthur Andersen LLP
1010 Market Street
St. Louis, Missouri 63101-2089
February 13, 2002

19

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions, except per share) 2002 2001 2000

Net sales $13,491 $13,883 $14,210
Cost of sales:
Recurring 9,440 9,632 9,798
Nonrecurring-division combination markdowns 23 - -
Selling, general, and administrative expenses 2,772 2,758 2,665
Division combination costs 91 - -
Interest expense, net 345 354 345

Earnings before income taxes 820 1,139 1,402
Provision for income taxes 278 436 544

Net earnings $ 542 $ 703 $ 858

Basic earnings per share $ 1.82 $ 2.31 $ 2.74

Diluted earnings per share $ 1.76 $ 2.21 $ 2.62

See Notes to Consolidated Financial Statements.

20

CONSOLIDATED BALANCE SHEETS

February 1, February 2,
(dollars in millions, except per share) 2003 2002

Assets
Current assets:
Cash $ 21 $ 20
Cash equivalents 34 32
Accounts receivable, net of allowance for
doubtful accounts of $114 and $90 1,741 1,938
Merchandise inventories 2,857 2,875
Other current assets 69 60
Total current assets 4,722 4,925

Property and equipment:
Land 361 339
Buildings and improvements 4,753 4,536
Furniture, fixtures, equipment, and other 4,034 4,062
Property under capital leases 57 59
Total property and equipment 9,205 8,996
Accumulated depreciation (3,739) (3,732)
Property and equipment, net 5,466 5,264

Goodwill 1,441 1,433
Intangible assets, net of accumulated
amortization of $19 and $8 176 179
Other assets 131 119

Total assets $ 11,936 $ 11,920

Liabilities and shareowners' equity
Current liabilities:
Short-term debt $ 150 $ 78
Current maturities of long-term debt 139 255
Accounts payable 1,099 1,023
Accrued expenses 1,014 900
Income taxes payable 264 272
Total current liabilities 2,666 2,528

Long-term debt 4,035 4,403
Deferred income taxes 710 696
Other liabilities 377 370

ESOP preference shares 265 286
Unearned compensation (152) (204)

Shareowners' equity:
Common stock 144 144
Additional paid-in capital 9 -
Retained earnings 3,957 3,709
Accumulated other comprehensive loss (75) (12)
Total shareowners' equity 4,035 3,841

Total liabilities and shareowners' equity $ 11,936 $ 11,920

Common stock has a par value of $0.50 per share; 1 billion shares are authorized. At
February 1, 2003, 320.5 million shares were issued, with 288.3 million shares outstanding
and 32.2 million shares held in treasury. At February 2, 2002, 470.5 million shares were
issued, with 287.2 million shares outstanding and 183.3 million shares held in treasury.

ESOP preference shares have a par value of $0.50 per share and a stated value of $507 per
share; 800,000 shares are authorized. At February 1, 2003, 522,587 shares (convertible into
17.7 million shares of common stock) were issued and outstanding. At February 2, 2002,
564,047 shares (convertible into 19.1 million shares of common stock) were issued and
outstanding.

See Notes to Consolidated Financial Statements.

21

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions) 2002 2001 2000

Operating activities
Net earnings $ 542 $ 703 $ 858
Adjustments for noncash items included in earnings:
Depreciation and other amortization 546 511 476
Goodwill and other intangible amortization 11 48 35
Deferred income taxes 34 63 59
Working capital changes:
Accounts receivable, net 196 180 97
Merchandise inventories (6) 103 (77)
Other current assets 19 34 (9)
Accounts payable 77 51 (77)
Accrued expenses (57) (10) (70)
Income taxes payable (8) (19) 65
Division combination costs 114 - -
Other assets and liabilities, net (8) (20) (11)

Cash flows from operations 1,460 1,644 1,346

Investing activities
Capital expenditures (798) (797) (598)
Proceeds from dispositions of property and equipment 8 41 48
Business combinations - (425) (420)

Cash flows used for investing activities (790) (1,181) (970)

Financing activities
Issuances of long-term debt - 250 1,076
Repayments of long-term debt (434) (178) (241)
Net issuances of short-term debt 72 78 -
Purchases of common stock (45) (474) (828)
Issuances of common stock 31 54 36
Dividend payments (291) (297) (304)

Cash flows used for financing activities (667) (567) (261)

Increase (decrease) in cash and cash equivalents 3 (104) 115
Cash and cash equivalents, beginning of year 52 156 41

Cash and cash equivalents, end of year $ 55 $ 52 $ 156

Cash paid during the year:
Interest expense $ 369 $ 344 $ 376
Income taxes 225 369 414

See Notes to Consolidated Financial Statements.

22

CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY

Accumulated
Additional Other Total
(dollars in millions, Outstanding Common Stock Paid-in Retained Comprehensive Shareowners'
shares in thousands) Shares $ Capital Earnings Loss Equity

Balance at January 29, 2000 325,465 $163 $ - $3,914 $ - $4,077

Net earnings - - - 858 - 858
Dividends paid:
Common stock ($0.93 per share) - - - (286) - (286)
ESOP preference shares,
net of tax benefit - - - (18) - (18)
Common stock issued 2,350 1 51 - - 52
Common stock purchased (29,645) (15) (51) (762) - (828)

Balance at February 3, 2001 298,170 149 - 3,706 - 3,855

Net earnings - - - 703 - 703
Minimum pension liability, net - - - - (12) (12)
Comprehensive earnings 691
Dividends paid:
Common stock ($0.94 per share) - - - (278) - (278)
ESOP preference shares,
net of tax benefit - - - (19) - (19)
Common stock issued 3,038 2 64 - - 66
Common stock purchased (14,035) (7) (64) (403) - (474)

Balance at February 2, 2002 287,173 144 - 3,709 (12) 3,841

Net earnings - - - 542 - 542
Minimum pension liability, net - - - - (63) (63)
Comprehensive earnings 479
Dividends paid:
Common stock ($0.95 per share) - - - (273) - (273)
ESOP preference shares,
net of tax benefit - - - (18) - (18)
Common stock issued 2,723 1 51 - - 52
Common stock purchased (1,645) (1) (42) (3) - (46)

Balance at February 1, 2003 288,251 $144 $ 9 $3,957 $ (75) $4,035

Treasury Shares
(shares in thousands) 2002 2001 2000

Balance, beginning of year 183,282 172,285 144,990
Common stock issued:
Exercise of stock options (935) (1,588) (569)
Deferred compensation plan (151) (231) (221)
Restricted stock grants, net of forfeitures (236) (337) (158)
Conversion of ESOP preference shares (1,401) (876) (1,089)
Contribution to profit sharing plan - (6) (313)
(2,723) (3,038) (2,350)

Common stock purchased 1,645 14,035 29,645
Common stock retired (150,000) - -

Balance, end of year 32,204 183,282 172,285

Outstanding common stock excludes shares held in treasury.

See Notes to Consolidated Financial Statements.

23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year
The company's fiscal year ends on the Saturday closest to January 31. Fiscal
years 2002, 2001, and 2000 ended on February 1, 2003, February 2, 2002, and
February 3, 2001, respectively. Fiscal years 2002 and 2001 included 52 weeks.
Fiscal year 2000 included 53 weeks. The additional week did not materially
affect 2000 earnings. References to years in this annual report relate to fiscal
years or year-ends rather than calendar years.

Basis of Reporting
The consolidated financial statements include the accounts of The May Department
Stores Company, a Delaware corporation, and all subsidiaries (May or the
company). All intercompany transactions are eliminated. The company operates
as one reportable segment. The company's 443 quality department stores are
operated by six regional department store divisions across the United States
under 11 long-standing and widely recognized trade names. The company
aggregates its six department store divisions into a single reportable segment
because they have similar economic and operating characteristics. In addition,
the Bridal Group operates 180 David's Bridal stores, 235 After Hours Formalwear
(After Hours) stores, and 10 Priscilla of Boston stores.

Use of Estimates
Management makes estimates and assumptions that affect the amounts reported in
the consolidated financial statements. Actual results could differ from these
estimates.

Net Sales
Net sales include merchandise sales and lease department income. Merchandise
sales are recognized at the time the sale is made to the customer, are net of
estimated returns and promotional coupons, and exclude sales tax. Lease
department income is recognized based on a percentage of lease department sales,
net of estimated returns.

Cost of Sales
Cost of sales includes the cost of merchandise, inbound freight, distribution
expenses, and buying and occupancy costs.

Vendor Allowances
The company has arrangements with some vendors in which it receives cash or
allowances when merchandise does not achieve anticipated rates of sale. The
amounts recorded for these arrangements are recognized as reductions of cost of
sales.

Preopening Expenses
Preopening expenses of new stores are expensed as incurred.

Advertising Costs
Advertising and sales promotion costs are expensed at the time the advertising
occurs. These costs are net of cooperative advertising reimbursements and are
included in selling, general, and administrative expenses. Advertising and
sales promotion costs were $669 million, $652 million, and $632 million in 2002,
2001, and 2000, respectively.

Finance Charge Revenues
Finance charge revenues are recognized in accordance with the contractual
provisions of customer agreements and are included as a reduction of selling,
general, and administrative expenses for all periods presented. Finance charge
revenues were $261 million, $292 million, and $301 million in 2002, 2001, and
2000, respectively. In prior years, these amounts were included as a component
of revenues.

Income Taxes
Income taxes are accounted for by the liability method. The liability method
applies statutory tax rates in effect at the date of the balance sheet to
differences between the book basis and the tax basis of assets and liabilities.

24

Earnings per Share
References to earnings per share relate to diluted earnings per share.

Stock-based Compensation
The company accounts for stock-based compensation by applying Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," as allowed under Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation."

Effective February 2, 2003, the company began expensing the fair value of
employee stock options. The company adopted the fair value method
prospectively. The expense associated with stock options is expected to be
$0.01 per share in 2003.

Cash Equivalents
Cash equivalents consist primarily of commercial paper with maturities of less
than three months. Cash equivalents are stated at cost, which approximates fair
value.

Merchandise Inventories
Merchandise inventories are principally valued at the lower of LIFO (last-in,
first-out) cost basis or market using the retail method. Merchandise inventories
on a FIFO (first-in, first-out) cost basis approximate LIFO.

Property and Equipment
Property and equipment are recorded at cost and are depreciated on a
straight-line basis over their estimated useful lives. Properties under capital
leases and leasehold improvements are amortized over the shorter of their useful
lives or related lease terms. Software development costs are capitalized and
amortized over the expected useful life. Capitalized interest was $23 million,
$22 million, and $17 million in 2002, 2001, and 2000, respectively. The
estimated useful life for each major class of long-lived asset is as follows:

Buildings and improvements:
Buildings and improvements 10-50 years
Leasehold interests 5-30 years
Furniture, fixtures, equipment, and other:
Furniture, fixtures, and equipment 3-15 years
Software development costs 2-7 years
Rental formalwear 2-4 years
Property under capital leases 16-50 years

Goodwill and Other Intangibles
Goodwill represents the excess of cost over the fair value of net tangible and
separately recognized intangible assets acquired at the dates of acquisition.
The company completes its annual goodwill impairment test in the fourth quarter.
The 2002 test identified no impairment. Other intangibles include trade names
and customer lists and are amortized using the straight-line method over a
period of three to 40 years.

Impairment of Long-lived Assets
Long-lived assets and certain identifiable intangibles are reviewed when events
or circumstances indicate that the net book value may not be recoverable. The
estimated future undiscounted cash flows associated with the asset are compared
with the asset's carrying amount to determine if a write-down to fair value is
required. Impairment losses resulting from these reviews have not been
significant. However, if store-for-store sales declines and general negative
economic trends continue, future impairment losses may be significant.

Financial Derivatives
The company did not enter into any derivative financial instruments in 2002,
2001, or 2000.

Impact of New Accounting Pronouncements
In the first quarter of 2002, the company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets," which eliminates goodwill amortization and prescribes
a new approach for assessing potential goodwill impairments. The company's

25

transitional assessment of potential goodwill impairments under SFAS No. 142 did
not identify any impairment. The following table illustrates the impact of
goodwill amortization on the results of 2001 and 2000.

(millions, except per share) 2002 2001 2000

Reported net earnings $ 542 $ 703 $ 858
Add back: Goodwill amortization, net of tax - 37 30
Adjusted net earnings $ 542 $ 740 $ 888

Basic earnings per share:
Reported net earnings $ 1.82 $ 2.31 $ 2.74
Add back: Goodwill amortization, net of tax - 0.12 0.10
Adjusted basic earnings per share $ 1.82 $ 2.43 $ 2.84

Diluted earnings per share:
Reported net earnings $ 1.76 $ 2.21 $ 2.62
Add back: Goodwill amortization, net of tax - 0.11 0.09
Adjusted diluted earnings per share $ 1.76 $ 2.32 $ 2.71

In 2002, the company adopted SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145 eliminates the requirement to classify gains and
losses from the extinguishment of indebtedness as extraordinary, requires
certain lease modifications to be treated the same as a sale-leaseback
transaction, and makes other nonsubstantive technical corrections to existing
pronouncements. The impact of adopting SFAS No. 145 was the reclassification of
the 2001 extraordinary losses of $3 million (net of $2 million in taxes) to
interest expense and income taxes, and the classification of early debt
redemption costs of $10 million as interest expense in the current year.

In 2002, the company adopted SFAS No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities." SFAS No. 146 changes the timing of when certain
costs associated with restructuring activities may be recognized. SFAS No. 146
is effective for exit or disposal activities initiated after December 31, 2002.
The combination of Kaufmann's with Filene's and Meier & Frank with Robinsons-May
was initiated in May 2002 and recorded in accordance with the rules effective at
that time. The closure of the Arizona Credit Center and the data center
realignment were recorded in accordance with SFAS No. 146.

In 2002, the Emerging Issues Task Force (EITF) reached a consensus on Issue
No. 02-16, "Accounting by a Customer (Including a Reseller) for Cash
Consideration Received from a Vendor." EITF Issue No. 02-16 provides guidance
on how cash consideration received by a customer or reseller should be
classified in the customer's statement of earnings. The company does not expect
EITF Issue No. 02-16 to have a material impact on its consolidated financial
position or operating results.

Reclassifications
Certain prior-year amounts have been reclassified to conform with the
current-year presentation.

DIVISION COMBINATIONS

In August 2002, the company combined its Kaufmann's division with its Filene's
division and its Meier & Frank division with its Robinsons-May division. In
January 2003, the company also announced the closures of the Arizona Credit
Center and the realignment of its data centers. Pretax charges associated
with these activities were $114 million, which consisted of $23 million as cost
of sales and $91 million as other operating expenses. The $114 million charge
includes a $6 million reduction of charges recorded during the first three
quarters of 2002 because of changes in estimates of those amounts.

26

The significant components of the division combination costs and status of the
related liability are summarized below:

(dollars in millions) Balance at
Estimate Non-cash Feb. 1,
Charges Revision Payments Uses 2003

Severance and $ 65 $(6) $ (42) $ - $ 17
relocation benefits
Inventory alignment 23 - - (23) -
Central office closure 15 - (4) (11) -
Other 17 - (10) - 7

Total $120 $(6) $ (56) $(34) $ 24

Severance and relocation benefits include severance for approximately 2,000
associates and the costs to relocate certain employees. Inventory alignment
includes the markdowns incurred to conform merchandise assortments and to
synchronize pricing and promotional strategies. Central office closure
primarily includes accelerated depreciation of fixed assets in the closed
central offices. Remaining severance costs will be paid by the end of fiscal
2004.

PROFIT SHARING

The company has a qualified profit sharing plan that covers most associates
who work 1,000 hours or more in a year and have attained age 21. The plan is a
defined-contribution program that provides for discretionary matching
allocations at a variable matching rate generally based upon changes in the
company's annual earnings per share, as defined in the plan. The plan's
matching allocation value totaled $28 million for 2002, an effective match
rate of 46%. The matching allocation values were $33 million in 2001 and $52
million in 2000.

The plan includes an Employee Stock Ownership Plan (ESOP) under which the plan
borrowed $400 million in 1989, guaranteed by the company, at an average rate
of 8.5%. The proceeds were used to purchase $400 million (788,955 shares) of
convertible preference stock of the company (ESOP preference shares). Each
share is convertible into 33.787 shares of common stock and has a stated value
of $15.01 per common share equivalent. The annual dividend rate on the ESOP
preference shares is 7.5%.

The $152 million outstanding portion of the guaranteed ESOP debt is reflected
on the consolidated balance sheet as long-term debt because the company will
fund the required debt service through 2004. The company's contributions to
the ESOP and the dividends on the ESOP preference shares are used to repay the
loan principal and interest. Interest expense associated with the ESOP debt
was $14 million in 2002, $18 million in 2001, and $22 million in 2000. ESOP
preference shares' dividends were $20 million in 2002, $22 million in 2001,
and $23 million in 2000.

The release of ESOP preference shares is based upon debt-service payments.
Upon release, the shares are allocated to participating associates' accounts.
Unearned compensation, initially an equal offsetting amount to the $400
million guaranteed ESOP debt, has been adjusted for the difference between the
expense related to the ESOP and cash payments to the ESOP. It is reduced as
principal is repaid.

The company's profit sharing expense was $40 million in 2002, $47 million in
2001, and $41 million in 2000.

At February 1, 2003, the plan beneficially owned 13.3 million shares of the
company's common stock and 100% of the company's ESOP preference shares,
representing 10.1% of the company's common stock.

27

PENSION AND OTHER POSTRETIREMENT BENEFITS

The company has a qualified defined-benefit plan that covers most associates
who work 1,000 hours or more in a year and have attained age 21. The company
also maintains two nonqualified, supplementary defined-benefit plans for
certain associates. All plans are noncontributory and provide benefits based
upon years of service and pay during employment.

Pension expense is based on information provided by an outside actuarial firm
that uses assumptions to estimate the total benefits ultimately payable to
associates and allocates this cost to service periods. The actuarial
assumptions used to calculate pension costs are reviewed annually.

The components of net periodic benefit costs and actuarial assumptions for the
benefit plans were:

(dollars in millions) 2002 2001 2000

Components of pension expense (all plans)
Service cost $43 $39 $34
Interest cost 55 53 51
Expected return on assets (38) (42) (48)
Net amortization(1) 12 12 4

Total $72 $62 $41

(1) Prior service cost and actuarial (gain) loss are amortized over the
remaining service period.

(as of January 1) 2003 2002 2001
Actuarial assumptions
Discount rate 6.75% 7.25% 7.50%
Expected return on plan assets 7.00 7.50 7.75
Salary increase 4.00 4.00 4.25

The accumulated benefit obligations (ABO), change in projected benefit
obligations (PBO), change in net plan assets, and funded status of the benefit
plans were:

Qualified Plan Nonqualified Plans
(dollars in millions) 2002 2001 2002 2001
Change in PBO(1)
PBO at beginning of year $ 638 $592 $ 170 $ 147
Service cost 39 35 4 4
Interest cost 44 42 11 11
Actuarial loss(2) 53 23 - 15
Plan amendments 15 2 (1) 1
Benefits paid (62) (56) (9) (8)

PBO at end of year $ 727 $638 $ 175 $ 170

ABO at end of year(3) $ 641 $570 $ 152 $ 147

28

Qualified Plan Nonqualified Plans
(dollars in millions) 2002 2001 2002 2001
Change in net plan assets
Fair value of net plan assets at
beginning of year $ 549 $578 $ - $ -
Actual return on plan assets (47) (16) - -
Employer contribution 54 43 - -
Benefits paid (62) (56) - -

Fair value of net plan assets at
end of year $ 494 $549 $ - $ -

Funded status (PBO less plan assets) $(233) $(89) $(175) $(170)
Unrecognized net actuarial loss 192 54 40 41
Unrecognized prior service cost 60 54 11 14

Net prepaid (accrued) benefit cost $ 19 $ 19 $(124) $(115)

Plan assets (less than) ABO $(147) $(21) $(152) $(147)

Amounts recognized in the balance sheets(4)
Accrued benefit liability $(147) $(21) $(152) $(147)
Intangible asset 60 40 11 13
Accumulated other comprehensive loss 106 - 17 19

Net amount recognized $ 19 $ 19 $(124) $(115)

(1) PBO is the actuarial present value of benefits attributed by the benefit
formula to prior associate service; it takes into consideration future
salary increases.
(2) Actuarial loss is the change in benefit obligations or plan assets
resulting from changes in actuarial assumptions or from experience
different than assumed.
(3) ABO is the actuarial present value of benefits attributed by the pension
benefit formula to prior associate service based on current and past
compensation levels.
(4) Accrued benefit liability is included in accrued expenses and other
liabilities. Intangible pension assets are included in other assets.
Accumulated other comprehensive loss, net of tax benefit, is included in
equity.

The company also provides postretirement life and/or health benefits for
certain associates. As of February 1, 2003, the company's estimated PBO (at a
discount rate of 6.75%) for postretirement benefits was $62 million, of which
$49 million was accrued in other liabilities. As of February 2, 2002, the
company's estimated PBO (at a discount rate of 7.25%) for postretirement
benefits was $52 million, of which $49 million was accrued in other liabilities.
The postretirement plan is unfunded. The postretirement benefit expense was
$4 million in 2002, 2001 and 2000.

The estimated future obligations for postretirement medical benefits are based
upon assumed annual healthcare cost increases of 10% for 2003, decreasing by
1% annually to 5% for 2008 and future years. A 1% increase or decrease in the
assumed annual healthcare cost increases would increase or decrease the
present value of estimated future obligations for postretirement benefits by
approximately $3 million.

29

TAXES

The provision for income taxes and the related percent of pretax earnings for
the last three years were:

(dollars in millions) 2002 2001 2000
$ % $ % $ %

Federal $211 $315 $412
State and local 33 58 73
Current taxes 244 29.7% 373 32.7% 485 34.6%

Federal 62 54 50
State and local (28) 9 9
Deferred taxes 34 4.2 63 5.6 59 4.2

Total $278 33.9% $436 38.3% $544 38.8%

The reconciliation between the statutory federal income tax rate and the
effective income tax rate for the last three years follows:

(percent of pretax earnings) 2002 2001 2000

Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local income taxes 0.6 5.9 5.8
Federal tax benefit of state
and local income taxes (0.2) (2.1) (2.0)
Other, net (1.5) (0.5) 0.0

Effective income tax rate 33.9% 38.3% 38.8%

Major components of deferred tax assets (liabilities) were:

(dollars in millions) 2002 2001

Accrued expenses and reserves $ 127 $ 140
Deferred and other compensation 209 151
Merchandise inventories (188) (198)
Depreciation and amortization and basis differences (792) (692)
Other deferred income tax liabilities, net (53) (92)

Net deferred income taxes (697) (691)

Less: Net current deferred income tax assets 13 5

Noncurrent deferred income taxes $(710) $(696)

Net current deferred income tax assets are included in other current assets in
the accompanying balance sheets.

EARNINGS PER SHARE

All ESOP preference shares were issued in 1989 and earnings per share is
computed in accordance with the provisions of Statement of Position 76-3,
"Accounting Practices for Certain Employee Stock Ownership Plans," and Emerging
Issues Task Force 89-12, "Earnings Per Share Issues Related to Convertible
Preferred Stock Held by an Employee Stock Ownership Plan." For basic earnings
per share purposes, the ESOP preference shares dividend, net of income tax
benefit, is deducted from net earnings to arrive at net earnings available for
common shareowners. Diluted earnings per share is computed by use of the "if
converted" method, which assumes all ESOP preference shares were converted as

30

of the beginning of the year. Net earnings are adjusted to add back the ESOP
preference dividend deducted in computing basic earnings per share less the
amount of additional ESOP contribution required to fund ESOP debt service in
excess of the current common stock dividend attributable to the ESOP preference
shares.

Diluted earnings per share also includes the effect of outstanding options.
Options excluded from the diluted earnings per share calculation because of
their antidilutive effect totaled 18.5 million in 2002, 9.3 million in 2001,
and 14.0 million in 2000. The following tables reconcile net earnings and
weighted average shares outstanding to amounts used to calculate basic and
diluted earnings per share for 2002, 2001, and 2000.

(in millions, except per share) 2002
Net Earnings
Earnings Shares per Share

Net earnings $542
ESOP preference shares' dividends (18)

Basic earnings per share $524 288.2 $1.82

ESOP preference shares 17 18.5
Assumed exercise of options
(treasury stock method) - 1.2

Diluted earnings per share $541 307.9 $1.76

(in millions, except per share) 2001
Net Earnings
Earnings Shares per Share

Net earnings $703
ESOP preference shares' dividends (19)

Basic earnings per share $684 296.0 $2.31

ESOP preference shares 17 19.5
Assumed exercise of options
(treasury stock method) - 2.1

Diluted earnings per share $701 317.6 $2.21

(in millions, except per share) 2000
Net Earnings
Earnings Shares per Share

Net earnings $858
ESOP preference shares' dividends (18)

Basic earnings per share $840 306.4 $2.74

ESOP preference shares 17 20.5
Assumed exercise of options
(treasury stock method) - 0.8

Diluted earnings per share $857 327.7 $2.62

31

ACCOUNTS RECEIVABLE

Credit sales under department store credit programs as a percent of net sales
were 36.9% in 2002. This compares with 39.0% in 2001 and 40.5% in 2000. Net
accounts receivable consisted of:

(dollars in millions) 2002 2001

Customer accounts receivable $1,750 $1,907
Other accounts receivable 105 121

Total accounts receivable 1,855 2,028
Allowance for doubtful accounts (114) (90)

Accounts receivable, net $1,741 $1,938

The fair value of customer accounts receivable approximates their carrying
values at February 1, 2003, and February 2, 2002, because of the short-term
nature of these accounts. We do not sell or securitize customer accounts
receivables. The allowance for doubtful accounts is based upon a number of
factors including account write-off experience, account aging, and month-end
balances.

Net sales made through third-party debit and credit cards as a percent of net
sales were 38.7% in 2002, 36.7% in 2001, and 35.2% in 2000.

OTHER CURRENT ASSETS

In addition to net current deferred income tax assets, other current assets
consisted of prepaid expenses and supply inventories of $56 million in 2002
and $55 million in 2001.

OTHER ASSETS

Other assets consisted of:

(dollars in millions) 2002 2001

Intangible pension asset $ 71 $ 53
Deferred debt expense 39 43
Other 21 23

Total $131 $119

ACCRUED EXPENSES

Accrued expenses consisted of:

(dollars in millions) 2002 2001

Salaries, wages, and employee benefits $305 $202
Insurance costs 194 198
Advertising and other operating expenses 141 142
Interest and rent expense 139 140
Sales, use, and other taxes 104 105
Construction costs 68 59
Other 63 54

Total $1,014 $900

32

SHORT-TERM DEBT AND LINES OF CREDIT

Short-term debt for the last three years was:

(dollars in millions) 2002 2001 2000

Balance outstanding at year-end $ 150 $ 78 $ -
Average balance outstanding 235 397 242
Average interest rate:
At year-end 1.3% 1.8% -
On average balance 1.7% 3.0% 6.6%
Maximum balance outstanding $ 825 $1,090 $ 667

The average balance of short-term debt outstanding, primarily commercial
paper, and the respective weighted average interest rates are based on the
number of days such short-term debt was outstanding during the year. The
maximum balance outstanding in 2002 consisted of $595 million of commercial
paper and $230 million of short-term bank financing.

The company has $1.0 billion of credit under unsecured revolving facilities
consisting of a $700 million multi-year credit agreement expiring July 31,
2006, and a $300 million 364-day credit agreement expiring July 29, 2003.
These credit agreements support the company's commercial paper borrowings. As
of February 1, 2003, there was $150 million of commercial paper outstanding.
Financial covenants under the credit agreements include a minimum fixed-charge
coverage ratio and a maximum debt-to-capitalization ratio. The company also
maintains a $30 million credit facility with a group of minority-owned banks.

LONG-TERM DEBT

Long-term debt and capital lease obligations were:

(dollars in millions) 2002 2001

Unsecured notes and sinking-fund
debentures due 2003-2036 $4,104 $4,561
Mortgage notes and bonds due 2003-2020 21 47
Capital lease obligations 49 50

Total debt 4,174 4,658
Less: Current maturities of long-term debt 139 255

Long-term debt $4,035 $4,403

The weighted average interest rate of long-term debt was 8.0% at February 1,
2003, and 8.1% at February 2, 2002.

The annual maturities of long-term debt, including sinking fund requirements,
are $139 million, $239 million, $154 million, $131 million, and $260 million
for 2003 through 2007. Maturities of long-term debt are scheduled over the
next 34 years, with the largest principal repayment in any single year being
$260 million. Interest payments on long-term debt are typically paid on a
semi-annual basis.

The net book value of property encumbered under long-term debt agreements was
$76 million at February 1, 2003.

33

The fair value of long-term debt (excluding capital lease obligations) was
approximately $4.8 billion and $5.1 billion at February 1, 2003, and February
2, 2002, respectively. The fair value was determined using borrowing rates for
debt instruments with similar terms and maturities.

During the third quarter of 2002, the company recorded $10 million of interest
expense because of the call of $200 million of 8.375% debentures due in 2022.
The debentures were called effective October 1, 2002.

During the third quarter of 2001, the company recorded interest expense of
$5 million because of the call of $100 million of 9.875% debentures due in
2021. These debentures were called effective October 9, 2001.

LEASE OBLIGATIONS

The company leases approximately 26% of its gross retail square footage.
Rental expense for the company's operating leases consisted of:

(dollars in millions) 2002 2001 2000

Minimum rentals $ 97 $80 $63
Contingent rentals based on sales 13 15 18
Real property rentals 110 95 81
Equipment rentals 3 4 4

Total $113 $99 $85

Future minimum lease payments at February 1, 2003, were:

Capital Operating
(dollars in millions) Leases Leases Total

2003 $ 7 $ 96 $103
2004 7 90 97
2005 7 83 90
2006 7 76 83
2007 7 69 76
After 2007 63 375 438

Minimum lease payments $ 98 $789 $887

The present value of minimum lease payments under capital leases was $49
million at February 1, 2003, of which $2 million was included in current
liabilities. The present value of operating leases (minimum rents) was $534
million at February 1, 2003. Property under capital leases was:

(dollars in millions) 2002 2001

Cost $57 $59
Accumulated amortization (31) (31)

Total $26 $28

34

The company is a guarantor with respect to certain lease obligations of
previously divested businesses. The leases, two of which include potential
extensions to 2087, have future minimum lease payments aggregating
approximately $859 million, and are offset by payments from existing tenants and
subtenants. In addition, the company is liable for other expenses related to
the above leases, such as property taxes and common area maintenance, which are
also payable by the current tenants and subtenants. Potential liabilities
related to these guarantees are subject to certain defenses by the company. The
company believes that the risk of significant loss from these lease obligations
is remote.

OTHER LIABILITIES

In addition to accrued pension and postretirement costs, other liabilities
consisted principally of deferred compensation liabilities of $165 million at
February 1, 2003, and $164 million at February 2, 2002. Under the company's
deferred compensation plan, eligible associates may elect to defer part of
their compensation each year into cash and/or stock unit alternatives. The
company issues shares to settle obligations with participants who defer in
stock units and it maintains shares in treasury sufficient to settle all
outstanding stock unit obligations.

LITIGATION

The company is involved in claims, proceedings, and litigation arising from
the operation of its business. The company does not believe any such claim,
proceeding, or litigation, either alone or in the aggregate, will have a
material adverse effect on the company's financial position or results of
operations.

BUSINESS COMBINATIONS

In the fourth quarter of 2001, May acquired After Hours and substantially all
of the assets of Priscilla of Boston for an aggregate cost of $121 million.
In March 2001, the company purchased nine department stores in the Tennessee
and Louisiana markets from Saks Incorporated for approximately $304 million. In
August 2000, David's Bridal joined the company. The cost of this transaction
was approximately $420 million. These business combinations were accounted for
as purchases and did not have a material effect on the results of operations or
financial position.

STOCK OPTION AND STOCK-RELATED PLANS

Under the company's common stock option plans, options are granted at the
market price on the date of grant. Options to purchase may extend for up to 10
years, may be exercised in installments only after stated intervals of time,
and are conditional upon continued active employment with the company. The
company's plans are accounted for as provided by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." For stock options, no compensation
cost has been recognized because the option exercise price is fixed at the
market price on the date of grant.

Effective February 2, 2003, the company began expensing the fair value of
employee stock options. The company adopted the fair value method prospec-
tively. The expense associated with stock options is expected to be $0.01 per
share in 2003.

35

A combined summary of the stock option plans at the end of 2002, 2001, and
2000, and of the changes in outstanding shares within years is presented below:

(shares in thousands) 2002 2001 2000
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price

Beginning of year 22,474 $34 20,057 $33 14,872 $37
Granted 5,131 35 4,688 36 7,222 25
Exercised (947) 26 (1,588) 26 (570) 24
Forfeited or expired (1,383) 36 (683) 35 (1,467) 34

End of year 25,275 $34 22,474 $34 20,057 $33
Exercisable at
end of year 14,431 $35 11,049 $34 8,377 $34
Shares available
for grants 6,737 10,457 14,463
Fair value per share
of options granted $11 $11 $ 8

The following table summarizes information about stock options outstanding at
February 1, 2003:

Options Outstanding Options Exercisable
Average
Exercise Number Remaining Average Number Average
Price Outstanding Contractual Exercise Exercisable Exercise
Range (in thousands) Life Price (in thousands) Price

$22-30 7,912 6 $26 5,703 $27
31-35 6,679 8 34 1,871 32
36-45 10,684 7 41 6,857 42

25,275 7 $34 14,431 $35

Under the 1994 Stock Incentive Plan, the company is authorized to grant up to
3.4 million shares of restricted stock to management associates with or
without performance restrictions. No monetary consideration is paid by
associates who receive restricted stock. All restrictions lapse over periods
of up to 10 years. In 2002 and 2001, the company granted 439,208 and 419,392
shares of restricted stock, respectively. The aggregate outstanding shares of
restricted stock as of February 1, 2003, and February 2, 2002, were 1,140,750
and 1,058,425, respectively. For restricted stock grants, compensation expense
is based upon the grant date market price; it is recorded over the lapsing
period. For performance-based restricted stock, compensation expense is
recorded over the performance period and is based on estimates of performance
levels.

36

As an alternative to accounting for stock-based compensation under APB No. 25,
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes a fair-
value method of accounting for employee stock options or similar equity
instruments. The company used the Black-Scholes option pricing model to
estimate the grant date fair value of its 1995 and later option grants. The
fair value is recognized over the option vesting period, which is typically
four years. Had compensation cost for these plans been determined in
accordance with SFAS No. 123, the company's net earnings and net earnings
per share would have been:

(dollars in millions, except per share) 2002 2001 2000

Net earnings:
As reported $ 542 $ 703 $ 858
Pro forma 519 677 835
Basic earnings per share:
As reported $1.82 $2.31 $2.74
Pro forma 1.74 2.23 2.67
Diluted earnings per share:
As reported $1.76 $2.21 $2.62
Pro forma 1.69 2.14 2.55

The Black-Scholes assumptions were:

2002 2001 2000

Risk-free interest rate 5.1% 4.6% 6.4%
Expected dividend $0.95 $0.94 $0.93
Expected option life (years) 7 7 7
Expected volatility 32% 32% 32%

COMMON STOCK REPURCHASE PROGRAMS

In 2001, the company's board of directors authorized a common stock repurchase
program of $400 million. During 2001, the company completed this repurchase
program totaling 11.9 million shares of May common stock at an average price
of $34 per share.

During 2000, the company purchased $789 million or 28.4 million shares of May
common stock. These repurchases completed the remaining $139 million of stock
repurchases related to the $500 million 1999 stock repurchase program and the
$650 million common stock repurchase program authorized in 2000. The 2000
buyback was in addition to $361 million, or 9.9 million shares, purchased in
1999.

PREFERENCE STOCK

The company is authorized to issue up to 25 million shares of $0.50 par value
preference stock. As of February 1, 2003, there were 800,000 ESOP preference
shares authorized and 522,587 shares outstanding. Each ESOP preference share is
convertible into shares of May common stock, at a conversion rate of 33.787
shares of May common stock for each ESOP preference share. Each ESOP
preference share carries the number of votes equal to the number of shares of
May common stock into which the ESOP preference share could be converted.
Dividends are cumulative and are paid semi-annually at a rate of $38.025 per
share per year. ESOP preference shares have a liquidation preference of $507
per share plus accumulated and unpaid dividends. ESOP preference shares may be
redeemed, in whole or in part, at the option of May or an ESOP preference
shareowner, at a redemption price of $507 per share, plus accumulated and
unpaid dividends. The redemption price may be satisfied in cash or May common
stock or a combination of both.

37

The ESOP preference shares are shown outside of shareowners' equity in the
consolidated balance sheet because the shares are redeemable by the holder or
by the company in certain situations.

SHAREOWNER RIGHTS PLAN

The company has a shareowner rights plan under which a right is attached to
each share of the company's common stock. The rights become exercisable only
under certain circumstances involving actual or potential acquisitions of
May's common stock by a person or by affiliated persons. Depending upon the
circumstances, the holder may be entitled to purchase units of the company's
preference stock, shares of the company's common stock, or shares of common
stock of the acquiring person. The rights will remain in existence until
August 31, 2004, unless they are terminated, extended, exercised, or redeemed.

QUARTERLY RESULTS (UNAUDITED)

Quarterly results are determined in accordance with annual accounting policies.
They include certain items based upon estimates for the entire year. The
quarterly information below is presented using the same classifications as the
annual financial statements. Summarized quarterly results for the last two
years were:

(dollars in millions,
except per share) 2002
First Second Third Fourth Year

Net sales $3,096 $3,030 $2,992 $4,373 $13,491
Cost of sales:
Recurring 2,203 2,119 2,171 2,947 9,440
Nonrecurring-division
combination markdowns - 20 3 - 23
Selling, general, and
administrative expenses 658 657 691 766 2,772
Division combination costs 40 39 6 6 91
Pretax earnings 112 109 25 574 820
Net earnings 70 69 16 387 542

Earnings per share:
Basic $ 0.23 $ 0.22 $ 0.05 $ 1.32 $ 1.82
Diluted 0.23 0.22 0.05 1.26 1.76

(dollars in millions,
except per share) 2001
First Second Third Fourth Year

Net sales $3,071 $3,101 $3,135 $4,576 $13,883
Cost of sales 2,175 2,151 2,275 3,031 9,632
Selling, general, and
administrative expenses 633 678 684 763 2,758
Pretax earnings 177 183 84 695 1,139
Net earnings 109 111 52 431 703

Earnings per share:
Basic $ 0.35 $ 0.36 $ 0.16 $ 1.44 $ 2.31
Diluted 0.34 0.35 0.16 1.36 2.21

38

There are variables and uncertainties in the factors used to estimate the
annual LIFO provision (credit) on an interim basis. There was no LIFO provision
or credit in 2002. If the final 2001 variables and factors had been known at
the beginning of the year, the pro forma earnings (loss) per share impact of
LIFO would have been:
2002 2001
Pro As Pro As
Quarter Forma Reported Forma Reported

First $ - $ - $0.01 $(0.02)
Second - - 0.01 (0.02)
Third - - 0.02 (0.01)
Fourth - - 0.02 0.11

Year $ - $ - $0.06 $ 0.06

39

CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The May Department Stores Company, Delaware("Parent") has fully and
unconditionally guaranteed certain long-term debt obligations of its
wholly-owned subsidiary, The May Department Stores Company, New York
("Subsidiary Issuer"). Other subsidiaries of the Parent include May Department
Stores International, Inc. ("MDSI"), Leadville Insurance Company, Snowdin
Insurance Company, Priscilla of Boston and David's Bridal, Inc. and subsidiaries
including, After Hours Formalwear, Inc. Condensed consolidating balance sheets
as of February 1, 2003, and February 2, 2002, and the related condensed
consolidating statements of earnings and cash flows for each of the three fiscal
years in the period ended February 1, 2003, are presented below.

Condensed Consolidating Balance Sheet
As of February 1, 2003
(millions)

Subsidiary Other
Parent Issuer Subsidiaries Eliminations Consolidated

ASSETS
Current assets:
Cash and cash equivalents $ - $ 37 $ 18 $ - $ 55
Accounts receivable, net - 1,733 44 (36) 1,741
Merchandise inventories - 2,787 70 - 2,857
Other current assets - 49 23 (3) 69
Total current assets - 4,606 155 (39) 4,722

Property and equipment, at cost - 9,024 181 - 9,205
Accumulated depreciation - (3,690) (49) - (3,739)
Property and equipment, net - 5,334 132 - 5,466

Goodwill - 1,129 312 - 1,441
Intangible assets, net - 6 170 - 176
Other assets - 122 9 - 131
Intercompany (payable)
receivable (671) 254 417 - -
Investment in subsidiaries 4,824 - - (4,824) -
Total assets $ 4,153 $11,451 $ 1,195 $ (4,863) $11,936

LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt $ - $ 150 $ - $ - $ 150
Current maturities of long-
term debt - 139 - - 139
Accounts payable - 1,021 78 - 1,099
Accrued expenses 5 957 88 (36) 1,014
Income taxes payable - 244 23 (3) 264
Total current liabilities 5 2,511 189 (39) 2,666

Long-term debt - 4,034 1 - 4,035
Intercompany note payable
(receivable) - 3,200 (3,200) - -
Deferred income taxes - 646 64 - 710
Other liabilities - 840 10 (473) 377
ESOP preference shares 265 - - - 265
Unearned compensation (152) (152) - 152 (152)
Shareowners' equity 4,035 372 4,131 (4,503) 4,035
Total liabilities and
shareowners' equity $ 4,153 $11,451 $ 1,195 $ (4,863) $11,936

40

CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued) -

Condensed Consolidating Statement of Earnings
For the Fiscal Year Ended February 1, 2003

(millions)

Subsidiary Other
Parent Issuer Subsidiaries Eliminations Consolidated

Net sales $ - $ 12,978 $ 1,865 $ (1,352) $ 13,491
Cost of sales - 9,317 1,477 (1,331) 9,463
Selling, general, and
administrative expenses - 2,654 245 (36) 2,863
Interest expense (income), net:
External - 345 - - 345
Intercompany - 284 (284) - -
Equity in earnings of subsidiaries (542) - - 542 -
Earnings before income taxes 542 378 427 (527) 820
Provision for income taxes - 123 155 - 278
Net earnings $ 542 $ 255 $ 272 $ (527) $ 542

Condensed Consolidating Statement of Cash Flows
For the Fiscal Year Ended February 1, 2003
(millions)

Subsidiary Other
Parent Issuer Subsidiaries Eliminations Consolidated

Operating activities:
Net earnings $ 542 $ 255 $ 272 $ (527) $ 542
Equity in earnings of subsidiaries (542) - - 542 -
Depreciation and amortization - 522 35 - 557
(Increase) decrease in working
capital (1) 201 22 (1) 221
Division combination costs - 114 - - 114
Other, net (170) 304 (94) (14) 26
(171) 1,396 235 - 1,460

Investing activities:
Net additions to property and
equipment - (745) (45) - (790)
- (745) (45) - (790)

Financing activities:
Issuances of long-term debt - - - - -
Repayments of long-term debt - (433) (1) - (434)
Net issuances of short-term debt - 72 - - 72
Net (purchases) issuances of
common stock (22) 8 - - (14)
Dividend payments, net of tax
benefit (294) 3 - - (291)
Intercompany activity, net 487 (300) (187) - -
171 (650) (188) - (667)
Decrease in cash and
cash equivalents - 1 2 - 3

Cash and cash equivalents,
beginning of year - 36 16 - 52

Cash and cash equivalents,
end of year $ - $ 37 $ 18 $ - $ 55

41

CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued) -

Condensed Consolidating Balance Sheet
As of February 2, 2002

(millions)

Subsidiary Other
Parent Issuer Subsidiaries Eliminations Consolidated

ASSETS
Current assets:
Cash and cash equivalents $ - $ 36 $ 16 $ - $ 52
Accounts receivable, net - 1,930 45 (37) 1,938
Merchandise inventories - 2,801 74 - 2,875
Other current assets - 43 17 - 60
Total current assets - 4,810 152 (37) 4,925

Property and equipment, at cost - 8,844 152 - 8,996
Accumulated depreciation - (3,709) (23) - (3,732)
Property and equipment, net - 5,135 129 - 5,264

Goodwill - 1,128 305 - 1,433
Intangible assets, net - 6 173 - 179
Other assets - 109 10 - 119
Intercompany (payable)
receivable (841) 523 318 - -
Investment in subsidiaries 4,770 - - (4,770) -
Total assets $ 3,929 $11,711 $ 1,087 $ (4,807) $11,920

LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt $ - $ 78 $ - $ - $ 78
Current maturities of long-
term debt - 254 1 - 255
Accounts payable - 947 76 - 1,023
Accrued expenses 6 854 77 (37) 900
Income taxes payable - 263 9 - 272
Total current liabilities 6 2,396 163 (37) 2,528

Long-term debt - 4,402 1 - 4,403
Intercompany note payable
(receivable) - 3,200 (3,200) - -
Deferred income taxes - 629 67 - 696
Other liabilities - 818 10 (458) 370
ESOP preference shares 286 - - - 286
Unearned compensation (204) (204) - 204 (204)
Shareowners' equity 3,841 470 4,046 (4,516) 3,841
Total liabilities and
shareowners' equity $ 3,929 $11,711 $ 1,087 $ (4,807) $11,920

42

CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued) -

Condensed Consolidating Statement of Earnings
For the Fiscal Year Ended February 2, 2002

(millions)

Subsidiary Other
Parent Issuer Subsidiaries Eliminations Consolidated

Net sales $ - $ 13,562 $ 1,647 $ (1,326) $13,883
Cost of sales - 9,586 1,358 (1,312) 9,632
Selling, general, and
administrative expenses - 2,637 151 (30) 2,758
Interest expense (income), net:
External - 355 (1) - 354
Intercompany - 284 (284) - -
Equity in earnings of subsidiaries (703) - - 703 -
Earnings before income taxes 703 700 423 (687) 1,139
Provision for income taxes - 280 156 - 436
Net earnings $ 703 $ 420 $ 267 $ (687) $ 703

Condensed Consolidating Statement of Cash Flows
For the Fiscal Year Ended February 2, 2002
(millions)

Subsidiary Other
Parent Issuer Subsidiaries Eliminations Consolidated

Operating activities:
Net earnings $ 703 $ 420 $ 267 $ (687) $ 703
Equity in earnings of subsidiaries (703) - - 703 -
Depreciation and amortization - 536 23 - 559
(Increase) decrease in working
capital (1) 293 47 - 339
Other, net 193 (13) (121) (16) 43
192 1,236 216 - 1,644

Investing activities:
Net additions to property and
equipment - (725) (31) - (756)
Business combination - (304) (121) - (425)
- (1,029) (152) - (1,181)

Financing activities:
Issuances of long-term debt - 250 - - 250
Repayments of long-term debt - (176) (2) - (178)
Net issuances of short-term debt - 78 - - 78
Net (purchases) issuances of
common stock (432) 12 - - (420)
Dividend payments, net of tax
benefit (300) 3 - - (297)
Intercompany activity, net 540 (475) (65) - -
(192) (308) (67) - (567)
Decrease in cash and
cash equivalents - (101) (3) - (104)

Cash and cash equivalents,
beginning of year - 137 19 - 156

Cash and cash equivalents,
end of year $ - $ 36 $ 16 $ - $ 52

43

CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued) -

Condensed Consolidating Statement of Earnings
For the Fiscal Year Ended February 3, 2001

(millions)

Subsidiary Other
Parent Issuer Subsidiaries Eliminations Consolidated

Net sales $ - $ 14,105 $ 1,283 $ (1,178) $14,210
Cost of sales - 9,847 1,115 (1,164) 9,798
Selling, general, and
administrative expenses - 2,629 63 (27) 2,665
Interest expense (income), net:
External - 346 (1) - 345
Intercompany - 287 (287) - -
Equity in earnings of subsidiaries (858) - - 858 -
Earnings before income taxes 858 996 393 (845) 1,402
Provision for income taxes - 404 140 - 544
Net earnings $ 858 $ 592 $ 253 $ (845) $ 858

Condensed Consolidating Statement of Cash Flows
For the Fiscal Year Ended February 3, 2001

(millions)

Subsidiary Other
Parent Issuer Subsidiaries Eliminations Consolidated

Operating activities:
Net earnings $ 858 $ 592 $ 253 $ (845) $ 858
Equity in earnings of subsidiaries (858) - - 858 -
Depreciation and amortization - 501 10 - 511
Increase in working capital (8) (41) (22) - (71)
Other, net 647 (545) (41) (13) 48
639 507 200 - 1,346

Investing activities:
Net additions to property and
equipment - (539) (11) - (550)
Business combinations (427) - 7 - (420)
(427) (539) (4) - (970)

Financing activities:
Issuances of long-term debt - 1,076 - - 1,076
Repayments of long-term debt - (241) - - (241)
Net (purchases) issuances of
common stock (815) 23 - - (792)
Dividend payments, net of tax
benefit (309) 5 - - (304)
Intercompany activity, net 912 (725) (187) - -
(212) 138 (187) - (261)
Increase in cash and
cash equivalents - 106 9 - 115

Cash and cash equivalents,
beginning of year - 31 10 - 41

Cash and cash equivalents,
end of year $ - $ 137 $ 19 $ - $ 156

44

SCHEDULE II

THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

FOR THE THREE FISCAL YEARS ENDED FEBRUARY 1, 2003

(millions)

Charges to
costs and
Balance expenses Balance
beginning and other Deductions end of
of period adjustments (a) period

FISCAL YEAR ENDED
February 1, 2003
Allowance for
Uncollectible
accounts and
merchandise returns $ 90 $126 $(102) $114

FISCAL YEAR ENDED
February 2, 2002
Allowance for
uncollectible
accounts and
merchandise returns $ 76 $117 $(103) $ 90

FISCAL YEAR ENDED
February 3, 2001
Allowance for
uncollectible
accounts and
merchandise returns $ 76 $ 91 $ (91) $ 76

(a) Write-off of accounts determined to be uncollectible, net of
recoveries of $25 million in 2002, $24 million in 2001, and $23 million in
2000.

45

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

The company had no disagreements with its accountants during the last two
fiscal years. On April 10, 2002, the company engaged Deloitte & Touche LLP to
act as its independent auditors as successor to Arthur Andersen LLP. All
information relating to such change in accountants is incorporated by reference
from the company's Current Report on Form 8-K, dated April 12, 2002.

PART III

Items 10, 11, 12, 13. Directors and Executive Officers of May, Executive
Compensation, Security Ownership of Certain
Beneficial Owners and Management, Certain
Relationships and Related Transactions

Pursuant to paragraph G (Information to be Incorporated by Reference) of the
General Instructions to Form 10-K, the information required by Items 10, 11, 12
and 13 (other than information about executive officers of May) is incorporated
by reference from the definitive proxy statement for the registrant's 2003
Annual Meeting of Shareowners to be filed with the commission pursuant to
Regulation 14A. Information about executive officers of May is set forth in
Part I of this Form 10-K, under the heading "Items 1. and 2. Business and
Description of Property."

Item 14 - Disclosure Controls and Procedures.

Within the 90-day period prior to the filing of this report, we carried out an
evaluation, under the supervision and with the participation of the company's
management, including the Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-14 and 15d-14 of the Securities Exchange
Act of 1934, as amended). Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures are effective. There have been no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date the controls were evaluated.

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) Documents filed as part of this report:
(1) Financial Statements. Page in
this Report
Report of Deloitte & Touche LLP,
Independent Auditors 17-18
Report of Arthur Andersen LLP,
Independent Auditors 18-19
Consolidated Statement of Earnings for
the three fiscal years ended
February 1, 2003 20
Consolidated Balance Sheet as of
February 1, 2003, and February 2, 2002 21
Consolidated Statement of Cash Flows
for the three fiscal years ended
February 1, 2003 22
Consolidated Statement of Shareowners'
Equity for the three fiscal years
ended February 1, 2003 23
Notes to Consolidated Financial Statements 24-44

46

Item 15. Exhibits, Financial Statement Schedules and Reports on
Form 8-K (continued) Page in
this report
(2) Supplemental Financial Statement Schedule (for the
three fiscal years ended February 1, 2003):
Schedule II Valuation and Qualifying Accounts 45

(3) Exhibits: Location

3.1 Amended and Restated Certificate Incorporated
of Incorporation of May, by Reference
dated May 22, 1996 to Exhibit
4(a) of Post
Effective
Amendment No. 1
to Form S-8,
filed May 29,
1996.

3.2 Certificate of Amendment of the Incorporated by
Amended and Restated Certificate of Reference to
Incorporation, dated May 21, 1999 Exhibit 3(b) of
Form 10-Q filed
June 8, 1999.

3.3 By-Laws of May Incorporated by
Reference to
Exhibit 4.3 of
Form S-8 filed
February 20,
2003.

4.1 Rights Agreement, dated August Incorporated by
19, 1994 Reference to
Exhibit 1 to
Current Report
on Form 8-K,
dated September,
2, 1994

4.2 Assignment and Assumption of the Incorporated by
Rights Agreement, dated May 24, 1996 Reference to
Exhibit 4(d) of
Post-Effective
Amendment No. 1
to Form S-8,
dated May 29,
1996

10.1 1994 Stock Incentive Plan Incorporated by
Reference to
Exhibit 10.1 of
Form 10-K,filed
April 19, 2000.

10.2 Deferred Compensation Plan Incorporated by
Reference to
Exhibit 10.2 of
Form 10-K,filed
April 19, 2000.

47

Item 15. Exhibits, Financial Statement Schedules and Reports on
Form 8-K (continued)

10.3 Executive Incentive Compensation Incorporated by
Plan for Corporate Executives Reference to
Exhibit 10.3 of
Form 10-K filed
April 5, 2002.

10.4 Form of Employment Agreement Incorporated by
Reference to
Exhibit 10.4 of
Form 10-K filed
April 19, 2000.

12 Computation of Ratio of Filed
Earnings to Fixed Charges herewith.

21 Subsidiaries of May Filed
herewith.

23 Independent Auditors' Consent Filed
herewith.

(b) Reports on Form 8-K
None.

All other schedules and exhibits of May for which provision is made in the
applicable regulations of the Securities and Exchange Commission have been
omitted, as they are not required or are inapplicable or the information
required thereby has been given otherwise.

48

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, May has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

THE MAY DEPARTMENT STORES COMPANY

Date: March 28, 2003 By: /s/ Thomas D. Fingleton
Thomas D. Fingleton
Executive Vice President and
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of May and in
the capacities and on the dates indicated.

Date Signature Title

Principal Executive Officer:

March 28, 2003 /s/ Eugene S. Kahn Director,
Eugene S. Kahn Chairman of the Board
and Chief Executive
Officer

Principal Financial and
Accounting Officer:

March 28, 2003 /s/ Thomas D. Fingleton Executive Vice
Thomas D. Fingleton President and Chief
Financial Officer

Directors:

March 28, 2003 /s/ John L. Dunham Director and
John L. Dunham President

March 28, 2003 /s/ R. Dean Wolfe Director and
R. Dean Wolfe Executive Vice
President

March 28, 2003 /s/ Marsha J. Evans Director
Marsha J. Evans

March 28, 2003 /s/ James M. Kilts Director
James M. Kilts

March 28, 2003 /s/ Russell E. Palmer Director
Russell E. Palmer

March 28, 2003 /s/ Michael R. Quinlan Director
Michael R. Quinlan

March 28, 2003 /s/ Joyce M. Roche' Director
Joyce M. Roche'

49

CERTIFICATIONS

I, Eugene S. Kahn, certify that:

1. I have reviewed this annual report on Form 10-K of The May Department
Stores Company;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effective-
ness of the disclosure controls and procedures based on our evalua-
tion as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: March 28, 2003 /s/ Eugene S. Kahn
Eugene S. Kahn
Chairman of the Board and
Chief Executive Officer

50

I, Thomas D. Fingleton, certify that:

1. I have reviewed this annual report on Form 10-K of The May Department
Stores Company;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effective-
ness of the disclosure controls and procedures based on our evalua-
tion as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: March 28, 2003 /s/ Thomas D. Fingleton
Thomas D. Fingleton
Executive Vice President and
Chief Financial Officer

51

In connection with the Annual Report of The May Department Stores Company
(the "Company") on Form 10-K for the period ending February 1, 2003, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), we, Eugene S. Kahn, Chairman of the Board and Chief Executive
Officer, and Thomas D. Fingleton, Executive Vice President and Chief
Financial Officer of the Company, each certify, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (18 U.S.C. Subsection 1350, as adopted), that:

1. The Report fully complies with the requirements of section 13(a)
or section 15(d) of the Securities Exchange Act of 1934, and

2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.

Dated: March 28, 2003

/s/ Eugene S. Kahn /s/ Thomas D. Fingleton
Eugene S. Kahn Thomas D. Fingleton
Chairman of the Board and Executive Vice President and
Chief Executive Officer Chief Financial Officer

52