Federated Department Stores, Inc.
Reconciliation of GAAP to non-GAAP Financial Measures
($ in millions)

The following information relates to, and should be read in conjunction with, a conference call hosted by the management of Federated Department Stores, Inc. on August 10, 2005 to discuss the Company's financial condition and results of operations as of and for the 13 and 26 weeks ended July 30, 2005. An audio archive of the conference call and the text of the related press release can be accessed at www.macysinc.com/Investors.

The Company reports its financial results in accordance with generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP performance and condition measures and ratios, used in managing the Company's business, provide users of the Company's financial information with additional useful information. See the tables below for supplemental financial data and corresponding reconciliations to GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. Certain of the items that may be excluded or included in these non-GAAP financial measures may constitute significant items that could impact the Company's financial position, results of operations and cash flows and should therefore be considered in assessing the Company's actual financial condition and performance. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.

Management believes that total net debt to total capitalization is a useful measure to assist the reader in evaluating the capital structure of the Company. As computed above, the ratio of total net debt to total capitalization includes as components of total net debt the Company's long-term debt and short-term debt, as offset by cash recorded on the balance sheet. Management believes that this measure is useful in evaluating the amount of leverage employed by the Company.

Management believes that cash flow before financing activities is a useful measure in evaluating the Company's ability to generate cash from operating and investing activities. Management believes that excluding cash flows from financing activities from the calculation of this measure is particularly useful where such financing activities are discretionary, as in the case of voluntary debt prepayments and share repurchases.

Management believes that gross margin, excluding inventory valuation adjustments primarily related to the Macy's home store centralization, as a percent to net sales is a useful measure in evaluating the Company's gross margin performance. Management believes that excluding the inventory valuation adjustments from the calculation of this measure is particularly useful where the amount of such costs are not consistent in the periods presented.

Management believes that SG&A expenses, excluding store closing, centralization and consolidation costs, as a percent to net sales is a useful measure in evaluating the Company's ability to leverage sales. Management believes that excluding store closing, centralization and consolidation costs from the calculation of this measure is particularly useful where the amount of such costs are not consistent in the periods presented.

Management believes that operating income, excluding inventory valuation adjustments and store closing, centralization and consolidation costs, as a percent to net sales is a useful measure in evaluating the Company's ability to leverage sales. Management believes that excluding inventory valuation adjustments and store closing, centralization and consolidation costs from the calculation of this measure is particularly useful where the amount of such costs are not consistent in the periods presented.

Management believes that providing a measure of earnings excluding the effect of the one-time costs associated with the debt repurchase is a useful measure to assist the reader in evaluating the Company's ability to generate earnings from operations and that providing such a measure will allow investors to more readily compare the earnings referred to in the press release to the earnings reported by Federated in past and future periods. Management believes that excluding the one-time costs associated with the debt repurchase from the calculation of this measure is particularly useful where the amount of such costs are not consistent in the periods presented.

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