UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

For the transition period from                                                             to                                                            

Commission File Number 1-79

The May Department Stores Company

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

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

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 and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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. þ

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

Aggregate market value of the registrant’s common stock held by non-affiliates as of March 1, 2005: $10,581,435,122

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 294,143,303 shares of common stock. $.50 par value, as of March 1, 2005.

Table of Contents

2      The May Department Stores Company

Part I

Items 1 and 2. Business and Properties

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.

     On February 28, 2005, May and Federated Department Stores, Inc. (“Federated”) announced that they have entered into a merger agreement. Pursuant to the agreement, each share of May will be converted into the right to receive $17.75 per share of cash and 0.3115 shares of Federated stock. In addition, Federated will assume approximately $6 billion of May debt.

     Completion of the merger is contingent on regulatory review and approval by the shareowners of both companies. The transaction is expected to close in the third quarter of 2005.

     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 seven quality regional department store divisions nationwide under 12 long-standing and widely recognized trade names. Each department store division holds a leading market position in its region. Effective July 31, 2004, May acquired the Marshall Field’s department store group, which operates 62 department stores primarily in the Chicago, Detroit, and Minneapolis metropolitan areas. At fiscal year-end 2004, May operated 491 department stores in 39 states and the District of Columbia. The department store divisions and the markets served are shown in the table below.

     We plan to open eight department stores in 2005 in the following cities:

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 2004, David’s Bridal operated 239 stores in 45 states and Puerto Rico.

     After Hours Formalwear, Inc. is the largest tuxedo rental and sales retailer in the United States. During 2003, After Hours acquired 225 stores, including 125 Gingiss Formalwear and Gary’s Tux Shop stores, 64 Desmonds Formalwear stores, and 25 Modern Tuxedo stores. At fiscal year-end 2004, After Hours operated 449 stores in 31 states.

     Priscilla of Boston, Inc. is one of the most highly recognized upscale bridal retailers in the United States. At fiscal year-end 2004, Priscilla of Boston operated 11 stores in nine states.

     We plan to open 18 David’s Bridal stores and 20 After Hours stores in 2005.

A. Associates

May employs approximately 70,000 full-time and 62,000 part-time associates in 46 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 January 29, 2005:

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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 January 29, 2005, 34.8% of net sales were made through May’s department store credit plans.

May National Bank of Ohio (“MBO”) is an indirectly wholly-owned and consolidated subsidiary of May. MBO extends credit to customers of May’s seven department store divisions. In 2003, May received approval from the Office of the Comptroller of the Currency and completed its merger of May National Bank of Arizona into MBO.

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 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 880 people worldwide. In addition to its corporate office in St. Louis, MDSI operates offices in New York City and 10 countries.

F. Executive Officers of May

The names and ages (as of March 25, 2005) of all executive officers of May, and the positions and offices held with May by each such person are as follows:

     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. Dunham and Wolfe are also directors of May.

     All of the executive officers have held their current position and have been an officer of May for at least the last five years, with the following exceptions:

•	Mr. Dunham served as chairman of May Merchandising Company from 1993 to 1996 when he became executive vice president and chief financial officer and an executive officer of May. He assumed the position of president in April 2001 and chairman and chief executive officer in January 2005.
•	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.

4     The May Department Stores Company

•	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. Ott served as a senior engagement manager with McKinsey & Company from 1987 to 1993 when he joined Macy’s West as senior vice president of planning and systems. In 2000, he joined Homewarehouse.com, an online home improvement site, as vice president of product management and marketing, until becoming president of See Change Services, a division of APL Logistics. He assumed his current position in October 2003.
•	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. Web Site Access to Reports and Code of Ethics

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 the Investor Relations page on our internet Web site, www.mayco.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

     In addition, the Governance page on our Web site provides our Policy on Business Conduct, Statement of Corporate Responsibility, and information on corporate governance, including the board of directors governance guidelines and the charters for our board committees. We intend to disclose any amendments to the Policy on Business Conduct and any waivers that are required to be disclosed by the rules of either the Securities and Exchange Commission or The New York Stock Exchange on the Governance page on our Web site.

Item 3. Legal Proceedings

On February 28, 2005, Edward Decristofaro, an alleged May shareowner, filed a purported class action lawsuit on behalf of all May shareowners in the Circuit Court of St. Louis, Missouri, against May and the directors of May. The complaint generally alleges that the directors of May breached their fiduciary duties to May shareowners in approving the merger agreement with Federated Department Stores, Inc. and the merger consideration, including by not obtaining the highest possible price for May. The complaint generally seeks to preliminarily and permanently enjoin the merger, as well as other relief. May and the directors of May believe the allegations contained in the complaint are without merit and intend to contest the allegations vigorously.

     The company is involved in other 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 consolidated financial statements taken as a whole.

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 January 29, 2005.

Part II

Item 5. Market for May’s Common Equity, Related Shareowner Matters and Issuer Purchases of Equity Securities

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.

     In the fourth quarter 2004, the company did not repurchase any of its common stock.

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Item 6. Selected Financial Data

Five-year Financial Summary

All years included 52 weeks, except 2000, which included 53 weeks. Amounts for all years conform to the 2004 presentation.

6  The May Department Stores Company

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

Overview

Operating results for fiscal 2004 were not in line with our expectations. However, during the year, we made several key investments and implemented initiatives that will benefit future results. Among our significant 2004 achievements are:

•	Acquired Marshall Field’s department store group.
•	Generated $1.4 billion of operating cash flows. Our strong cash flow enables us to build new stores, remodel and expand existing stores, and reduce debt.
•	Invested in new stores and expanded or remodeled many existing stores.
•	Continued the repositioning of Lord & Taylor as an upscale fashion retailer.
•	Focused on key initiatives to improve future operating performance.

     In July 2004, we completed our acquisition of the Marshall Field’s department store group. Marshall Field’s is a traditional department store that emphasizes fashion leadership, quality merchandise, and superior service. Marshall Field’s operates 62 department stores primarily in the Chicago, Detroit, and Minneapolis metropolitan areas. The Marshall Field’s acquisition gives us a leading position in those three large upper-Midwest markets. In addition, we anticipate that the addition of Marshall Field’s to our department store portfolio will improve our buying power, expand our distribution network, and produce economies of scale. The acquisition was financed through $2.2 billion of long-term debt and $1.0 billion of short-term borrowings and cash on hand.

     Our operating cash flow was $1.4 billion in 2004. May is committed to using our strong cash flow to reduce the debt associated with the Marshall Field’s acquisition. We expect to fully repay the short-term debt used to fund the acquisition by the end of 2005 and repay $1 billion of the long-term debt within five years.

     In 2004, we also opened eight department stores totaling 1.3 million square feet of retail space.

     We also remodeled 1.0 million square feet of retail space in 12 department stores in 2004, including the expansion of four stores by 214,000 square feet. At fiscal year-end, we operated 491 department stores in 39 states and the District of Columbia.

     In 2004, our Bridal Group opened 30 David’s Bridal stores and 16 After Hours Formalwear stores. At fiscal year-end, our Bridal Group operated 239 David’s Bridal stores in 45 states and Puerto Rico, 449 After Hours Formalwear stores in 31 states, and 11 Priscilla of Boston stores in nine states.

     Our planned capital expenditures for 2005 are approximately $640 million. This plan includes opening eight new department stores totaling 1.2 million square feet of retail space; remodeling or expanding 10 stores totaling 946,000 square feet of retail space; and the Bridal Group’s addition of 18 David’s Bridal stores and 20 After Hours stores, totaling 182,000 square feet of retail space.

     Lord & Taylor continues to make strides in its strategy to reposition itself as an upscale fashion retailer. Lord & Taylor is committed to offering better and more distinctive merchandise in response to customers’ desire for more prestige and luxury. We also have made solid progress in our plan to divest 32 underperforming Lord & Taylor stores. To date, we have closed 25 stores and continue active negotiations for the remaining seven stores.

     On February 28, 2005, May and Federated Department Stores, Inc. announced that they have entered into a merger agreement. Pursuant to the agreement, each share of May will be converted into the right to receive $17.75 per share of cash and 0.3115 shares of Federated stock. In addition, Federated will assume approximately $6 billion of May debt.

     Completion of the merger is contingent on regulatory review and approval by the shareowners of both companies. The transaction is expected to close in the third quarter of 2005.

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Results of Operations

Earnings per share were $1.70 in 2004, compared with $1.41 in 2003 and $1.76 in 2002. Net earnings totaled $524 million in 2004, compared with $434 million in 2003 and $542 million in 2002. In 2004, earnings include restructuring costs of $48 million, or $0.10 per share. Earnings include restructuring costs of $328 million, or $0.67 per share, in 2003 and $114 million, or $0.24 per share, in 2002. Marshall Field’s results of operations are included beginning August 1, 2004.

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 and exclude sales of stores closed during both years. Net sales increases (decreases) for 2004 and 2003 were:

     The 8.2% increase in total net sales from $13.3 billion in 2003 to $14.4 billion in 2004 was due primarily to a $1.6 billion increase from new store sales, including Marshall Field’s, offset by a $286 million decrease in store-for-store sales and a $206 million decrease related to divested store sales. The total net sales decrease in 2003 was primarily due to a $378 million decrease in store-for-store sales, offset by $284 million of new store sales.

     The 2004 decrease in store-for-store sales was characterized by a decrease in the number of department store transactions, partially offset by an increase in the average selling price per item. The 2003 decrease in store-for-store sales was characterized by a decrease in both the number of department store transactions and the average selling price per item. Overall, 2004 sales for women’s apparel, home furnishings, and furniture lagged, partially offset by stronger sales of fashion accessories and men’s apparel.

     Cost of Sales Recurring cost of sales includes the cost of merchandise, inbound freight, distribution expenses, buying, and occupancy costs. In 2004 and 2003, restructuring markdowns were incurred to liquidate inventory as stores to be divested were closed. In 2002, restructuring markdowns were incurred to conform merchandise assortments and synchronize pricing and promotional strategies during the division combinations. Cost of sales and the related percent of net sales were:

     Recurring cost of sales as a percent of net sales increased 0.2% in 2004. Like many companies in the retail industry, we recently reviewed our lease accounting policies. After completing this review, we concluded we should synchronize the assumptions used to calculate our straightline rent expense and to estimate useful lives for leased assets. Our 2004 fourth quarter results include a $42 million lease expense adjustment to synchronize these assumptions, of which $36 million represents cumulative prior-year corrections. Our prior calculation for determining lease and depreciation expense was not materially different from our annual expense using the new calculation. This adjustment plus other occupancy cost increases of 0.2% were partially offset by a 0.4% decrease in the cost of merchandise.

     Recurring cost of sales as a percent of net sales increased 0.3% in 2003, compared with 2002, because of a 0.3% increase in occupancy costs.

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

     Selling, general, and administrative expenses as a percent of net sales increased 0.8% in 2004. The expense structure at Marshall Field’s and start-up integration costs accounted for 0.2% of the increase. The remaining 0.6% increase was primarily due to decreased sales leverage.

     The 0.4% decrease in selling, general, and administrative expenses as a percent of net sales in 2003 was due to a 0.3% decrease in payroll costs, a 0.3% decrease in net credit expense, and a 0.2% decrease in advertising costs, offset by a 0.4% increase in pension and other costs.

     Selling, general, and administrative expenses included advertising and sales promotion costs of $688 million, $628 million, and $669 million in 2004, 2003, and 2002, respectively. As a percent of net sales, advertising and sales promotion costs were 4.8% in 2004, 4.7% in 2003, and 4.9% in 2002. In 2004, we continued the shift in our media mix to increase the use of electronic media and reduce the use of print media, which began in 2003.

     Finance charge revenues are included as a reduction of selling, general, and administrative expenses. Finance charge revenues were $285 million in 2004, $244 million in 2003, and $261 million in 2002.

Business Combinations Effective July 31, 2004, we acquired the Marshall Field’s department store group for $3.2 billion, plus transaction fees. Marshall Field’s operates 62 department stores primarily in the Chicago, Detroit, and Minneapolis metropolitan areas. We acquired substantially all of Marshall Field’s operating assets, including stores, inventory, customer receivables, and distribution centers, and assumed certain liabilities, including accounts payable and accrued expenses. The acquisition was financed through $2.2 billion of long-term debt and $1.0 billion of short-term borrowings and cash on hand. We also acquired nine Mervyn’s store locations in the Twin Cities area, six of which have been disposed. Marshall Field’s results of operations have been included in our consolidated financial statements since acquisition.

8     The May Department Stores Company

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

(1)

Marshall Field’s reflects net sales beginning August 1, 2004.

     In 2003, our Bridal Group acquired 225 tuxedo rental and retail locations, primarily in the midwestern and western United States. These purchases include certain assets of Gingiss Formalwear, Desmonds Formalwear, and Modern Tuxedo. These transactions did not have a material effect on our results of operations or financial position.

Restructuring Charges In July 2003, we announced our intention to divest 34 underperforming department stores. These divestitures will result in total estimated charges of $380 million, consisting of asset impairments of $330 million, inventory liquidation markdowns of $45 million, and severance benefits of $20 million. Other charges are offset by net gains on the disposal of property. Approximately $50 million of the $380 million represents the cash cost of the store divestitures, not including the benefit from future tax credits. Of the $380 million in expected total charges, $48 million was recognized in 2004, of which $29 million was included in cost of sales, and $328 million was recognized in 2003, of which $6 million was included in cost of sales. The remaining costs are expected to be recognized in 2005 and 2006.

     Asset impairment charges were recorded to reduce store assets to their estimated fair value because of the shorter period over which they will be used. Estimated fair values were based on estimated market values for similar assets. Disposal gains or losses are recognized as each store is divested. Inventory liquidation markdowns are incurred to liquidate inventory as stores to be divested are closed. The company is negotiating agreements with landlords and developers for each store divestiture. Through the end of fiscal 2004, 27 stores have been closed. Severance benefits are recognized as each store is closed. Severance benefits of $16 million for approximately 2,100 associates and inventory liquidation markdowns and other costs of $31 million have been incurred to date. Remaining amounts will be recognized as each store is divested.

     In 2002, we recorded restructuring charges of $102 million for the Filene’s/Kaufmann’s and Robinsons-May/Meier & Frank division combinations and $12 million for the closure of the Arizona Credit Center and realignment of the company’s data centers. Of the $114 million in total charges, $23 million was included as cost of sales. Severance and relocation benefits were given to approximately 2,000 associates.

Interest Expense Components of net interest expense were:

     On July 20, 2004, we issued $2.2 billion of long-term debt maturing over three to 30 years at a weighted average interest rate, including amortized hedge and financing costs, of 5.71% to partially fund the Marshall Field’s acquisition.

     The increase in interest expense in 2004 was due primarily to higher long-term borrowings as a result of new debt and a $10 million increase in early debt redemption costs. The decrease in interest expense in 2003 was due primarily to lower long-term borrowings and a $10 million decrease in early debt redemption costs, partially offset by a $7 million decrease in capitalized interest.

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Short-term borrowings were:

Income Taxes The effective income tax rate for 2004 was 34.8%, compared with 32.1% in 2003 and 33.9% in 2002. The 2004, 2003, and 2002 effective tax rates included the effect of provision reductions recorded on the resolution of various federal and state income tax issues: $18 million in 2004, $31 million in 2003, and $25 million in 2002. We do not expect the recently enacted tax legislation to have a significant effect on our effective tax rate.

Impact of Inflation Inflation did not have a material impact on our 2004, 2003, or 2002 net sales or earnings. We value inventory principally on a LIFO basis, and as a result, the current cost of merchandise is reflected in current operating results.

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. Return on beginning equity was 12.5% in 2004, compared with 10.7% in 2003 and 14.1% in 2002. Restructuring charges reduced return on equity by 0.7% in 2004, 5.1% in 2003, and 2.0% 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). Return on net assets was 12.1% in 2004, compared with 9.8% in 2003 and 12.0% in 2002. Restructuring charges reduced return on net assets by 0.5% in 2004, 3.3% in 2003, and 1.1% in 2002.

Cash Flows Cash flows from operations were $1.4 billion in 2004, compared with $1.7 billion in 2003 and $1.5 billion in 2002. The decrease in cash flows from operations in 2004 was due primarily to an increase in cash paid for income taxes and the effect of accounts receivable and accounts payable balance changes. The increase in cash flows from operations in 2003 was due primarily to a decrease in cash paid for income taxes and the effect of inventory and accounts payable balance changes.

     Sources (uses) of cash flows were:

See “Consolidated Statements of Cash Flows” on page 16.

Investing Activities In 2004, investing activities consisted primarily of the Marshall Field’s acquisition, which was financed with a combination of short-term and long-term debt and cash on hand. In 2003, business combinations included the purchase of certain assets of Gingiss Formalwear, Desmonds Formalwear, and Modern Tuxedo.

Capital expenditures were made primarily for new stores, remodels, and expansions. 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.

Liquidity and Available Credit We finance our activities primarily with cash flows from operations, borrowings under credit facilities, and issuances of long-term debt. We can borrow up to $1.4 billion under an unsecured multi-year credit agreement expiring August 24, 2009. This credit agreement supports our commercial paper borrowings. Financial covenants under the credit agreement 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.

     On July 20, 2004, we issued $2.2 billion of long-term debt maturing over three to 30 years at a weighted average interest rate, including amortized hedge and financing costs, of 5.71% to partially fund the Marshall Field’s acquisition.

     Annual maturities of long-term debt, including sinking fund requirements and capital lease obligations, are $145 million, $119 million, $651 million, $169 million, and $625 million for 2005 through 2009. These maturities include $400 million in 2007 and $600 million in 2009 related to the debt incurred to acquire Marshall Field’s. Maturities of long-term debt

10     The May Department Stores Company

are scheduled over the next 32 years, with the largest single-year principal repayment being $651 million in 2007. Interest payments on long-term debt are typically paid on a semi-annual basis.

     In the second quarter of 2004, we announced the suspension of our $500 million special share repurchase program and the suspension of our common stock repurchase program used to repurchase shares issued through our employee benefit plans.

     On August 1, 2004, we redeemed $200 million 8.375% debentures due in 2024, resulting in early debt redemption costs of $10 million, or $0.02 per share.

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), including option periods where failure to exercise would result in an economic penalty, was $844 million as of January 29, 2005.

Financial Ratios In previous years, our debt-to-capitalization and fixed-charge coverage ratios have been consistent with our capital structure objective. Although the financing of the Marshall Field’s acquisition negatively impacted our financial ratios, we expect to restore our debt-to-capitalization ratio to historical levels by the end of 2006. Our capital structure provides us with financial and operational flexibility.

     Our debt-to-capitalization ratios were 55%, 46%, and 48% for 2004, 2003, and 2002, 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 20 for discussion of the ESOP.

     Our fixed-charge coverage ratios were 2.8x in 2004, 2.6x in 2003, and 2.8x in 2002. Restructuring charges reduced the fixed-charge coverage ratio by 0.1x in 2004, 0.9x in 2003, and 0.3x in 2002.

Employee Stock Options Effective February 2, 2003, we began expensing the fair value of all stock-based compensation granted after February 2, 2003. We adopted the fair value method prospectively. The expense associated with stock options was $9 million, or $0.02 per share, and $3 million, or $0.01 per share, in 2004 and 2003, respectively.

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 $0.98 per share effective with the March 2005 dividend. This is our 30th 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 2004 and 2003 were:

The approximate number of common shareowners as of March 1, 2005, was 37,000.

Contractual Obligations The following table summarizes our contractual cash obligations as of January 29, 2005:

     In the ordinary course of business, we enter into arrangements with vendors to purchase merchandise up to 12 months in advance of expected delivery. These purchase orders do not contain any significant termination payments or other penalties if cancelled.

     In 2005, we expect to make a cash contribution of approximately $100 million to the qualified pension plan and cash payments of $18 million for the nonqualified pension plan. Funding projections beyond 2005 for the qualified pension plan and all other retirement, profit sharing, and other associate benefit plans are not included in this table of contractual obligations because they are not reasonably estimable.

Critical Accounting Policies

Accounts Receivable Allowance In 2004, approximately 35% of our net sales were made under our department store credit programs, which resulted in customer accounts receivable balances of approximately $2.2 billion at January 29, 2005. 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 experience to vary significantly from our estimate.

Retail Inventory Method Under the retail inventory 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 could result in lower gross margins.

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Asset Impairments 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 with its carrying value. If the cash flows are not sufficient to recover the carrying value, the assets are written down to fair value. In 2003, we recorded an asset impairment loss of $317 million because of the planned divestiture of 34 department stores. In 2004, an additional $12 million of asset impairments was recognized related to the planned store divestitures. Prior to 2003, impairment losses associated with these reviews were not significant. In addition, we complete our annual goodwill and other intangible asset impairment tests in the fourth quarter of each year. No significant intangible asset impairments were identified in 2004, 2003, or 2002. In the future, if store-for-store sales continue to decline and general economic conditions are negative, impairment losses could be significant.

Self-insurance Reserves We self-insure a portion of the exposure for costs related primarily to workers’ compensation, general liability, and medical insurance. 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.

Pension Plans 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 2005 pension expense will be approximately $126 million.

Impact of New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), “Share-Based Payment.” SFAS No. 123 (revised 2004) establishes standards that require companies to record the cost resulting from all share-based payment transactions using the fair value method. Transition under SFAS No. 123 (revised 2004) requires using a modified version of prospective application under which compensation costs are recorded for all unvested share-based payments outstanding or a modified retrospective method under which all prior periods impacted by SFAS No. 123 are restated. SFAS No. 123 (revised 2004) is effective as of the first quarter that begins after June 15, 2005, with early adoption permitted.

Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk arises primarily 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. Under certain circumstances, short-term debt is also used to temporarily finance a portion of an acquisition, such as the Marshall Field’s acquisition in 2004, which may result in increased market risk from 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 offices are generally paid in local currency and are not material. In 2004, we entered into treasury lock agreements to hedge interest rate fluctuations in anticipation of the issuance of long-term debt. The results of the hedges did not have a material impact on our results of operations or financial position. We were not a party to any other derivative financial instruments during 2004, 2003, and 2002.

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, our ability to manage the business to minimize the disruption of sales and customer service as a result of restructuring activities, and those risks generally associated with the integration of Marshall Field’s with May. Additional factors related to the proposed business combination of May and Federated include the ability to obtain governmental approvals of the transaction on the proposed terms and schedule, the failure of May and Federated shareowners to approve the transaction, the risk that the businesses will not be integrated successfully, and the disruption from the transaction making it more difficult to maintain relationships with customers, employees, or suppliers. 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.

12     The May Department Stores Company

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

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 and subsidiaries (the “Company”) as of January 29, 2005 and January 31, 2004 and the related consolidated statements of earnings, shareowners’ equity, and cash flows for each of the three years in the period ended January 29, 2005. Our audits also included the financial statement schedules listed in the index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.

     We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (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 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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 29, 2005 and January 31, 2004, and the results of its operations and its cash flows for each of the three years in the period ended January 29, 2005, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

     We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of January 29, 2005, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 23, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

St. Louis, Missouri
March 23, 2005

Report of Management

Management is responsible for the preparation, integrity, and objectivity of the financial information included in this annual report. The financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts. Although the financial statements reflect all available information and management’s judgment and estimates of current conditions and circumstances, prepared with the assistance of specialists within and outside the company, actual results could differ from those estimates.

     Management is responsible for establishing and maintaining internal controls over financial reporting to provide reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition, that the accounting records provide a reliable basis for the financial information included in this annual report, and that such financial information is presented fairly in conformity with generally accepted accounting principles and is not misstated due to material fraud or error. Internal controls over financial reporting include the careful selection of associates, the proper segregation of duties, and the communication and application of formal polices and procedures that are consistent with high standards of accounting and administrative practices. An important element of this system is a comprehensive internal audit program. Management continually reviews, modifies, and improves its internal controls in response to changes in business conditions and operations, and in response to recommendations in the reports prepared by the independent public accountants and internal auditors. Management evaluated the internal controls over financial reporting using the framework prescribed by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework and believes it is designed and operating effectively as of January 29, 2005, and provides a reasonable basis for the financial information included in this annual report. In July 2004, the company acquired substantially all the operating assets of the Marshall Field’s department store group. As permitted under Section 404 of the Sarbanes-Oxley Act, the company excluded Marshall Field’s from the scope of the internal control evaluation. Marshall Field’s represented 10% of the company’s consolidated net sales and 24% of the company’s consolidated assets as of and for the year ended January 29, 2005. The company’s independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report, contained herein, on management’s assessment of internal controls over financial reporting.

     Management believes that it is essential for the company to conduct its business affairs in accordance with the highest ethical standards and in conformity with the law. These standards are described in the company’s policies on business conduct, which are publicized throughout the company.

The May Department Stores Company     13

Report of Independent Registered Public Accounting Firm

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

We have audited management’s assessment, included in the accompanying Report of Management, that The May Department Stores Company and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of January 29, 2005, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in the accompanying Report of Management, management excluded from their assessment the internal control over financial reporting at its Marshall Field’s division, which was acquired on July 31, 2004, and whose financial statements reflect total assets and net sales constituting 24 and 10 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended January 29, 2005. Accordingly, our audit did not include the internal control over financial reporting at the Marshall Field’s division. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

     We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

     A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

     Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

     In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of January 29, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 29, 2005, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

     We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended January 29, 2005, of the Company and our report dated March 23, 2005, expressed an unqualified opinion on those financial statements and financial statement schedules.

     We do not express an opinion or any other form of assurance on the first and third paragraphs in the Report of Management.

/s/ Deloitte & Touche LLP

St. Louis, Missouri
March 23, 2005

14    The May Department Stores Company

Consolidated Statements of Earnings

See Notes to Consolidated Financial Statements.

The May Department Stores Company   15

Consolidated Balance Sheets

Common stock has a par value of $0.50 per share; 1 billion shares are authorized. At January 29, 2005, 320.5 million shares were issued, with 293.1 million shares outstanding and 27.4 million shares held in treasury. At January 31, 2004, 320.5 million shares were issued, with 288.8 million shares outstanding and 31.7 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 January 29, 2005, 415,451 shares (convertible into 14.0 million shares of common stock) were issued and outstanding. At January 31, 2004, 462,846 shares (convertible into 15.6 million shares of common stock) were issued and outstanding.

See Notes to Consolidated Financial Statements.

16   The May Department Stores Company

Consolidated Statements of Cash Flows