<PAGE>

                                                        EXHIBIT 13

[The following "Management's Discussion and Analysis" section is a
reproduction of the same named section included in the paper format
Annual Report on pages 16-20.]


Management's Discussion and Analysis

Our 24th consecutive year of record sales and earnings per
share positions May as one of the most consistent companies in
the retail industry. Our five-year earnings per share compound
growth rate of 10.0% and our 22.2% return on equity are
among the industry's best.  

Sales were $13.1 billion, an increase of 6.4% over 1997 sales
of $12.3 billion. The increase reflects a 3.5% rise in store-for-
store sales, 1998 store openings, and the full-year impact of
1997 store openings. Store-for store sales increases for the first
through fourth quarters in 1998 were 4.6%, 4.3%, 2.2%, and 3.3%,
respectively.

Our 1998 diluted earnings per share increased 11.1% to $2.30 from
last year's $2.07. Net earnings totaled $849 million, compared with
$779 million last year. Return on beginning equity increased to
22.2% from 21.2% in 1997, and return on net assets was 19.8%,
compared with 18.5% in 1997.

During 1998, the company purchased 11 former Mercantile stores. Ten
of these stores were in operation at fiscal year-end 1998. The
remaining store was closed for remodeling and will reopen in fall
1999. We acquired two additional stores which will open in 1999. 

We opened 29 department stores as detailed below during 1998,
including the 10 former Mercantile stores, adding 4.6 million
square feet of retail space:

Lord & Taylor: 10 stores
NY   Palisades Ctr.       West Nyack
     South Shore          Bayshore
     Walt Whitman         Long Island
MD   Owings Mill          Baltimore
     White Marsh          Baltimore
     Annapolis Mall       Annapolis
     The Mall             Columbia 
VA   Dulles Town Ctr.     Reston 
TX   Willowbrook          Houston
KY   St. Matthews         Louisville

Hecht's: 3 stores
VA   Patrick Henry        Newport News
     Lynnhaven            Virginia Beach
     Dulles Town Ctr.     Reston

Foley's: 2 stores
CO   Chapel Hill          Colorado Springs
TX   Ridgmar Mall         Ft. Worth

Robinsons-May: 1 store
CA   Inland Ctr.          San Bernardino

Filene's: 2 stores
NY   Palisades Ctr.       West Nyack
MA   Bangor Mall          Bangor

Kaufmann's: 2 stores
PA   Robinson Town Ctr.   Pittsburgh
OH   Richmond Town Sq.    Cleveland

Famous-Barr: 9 stores
Operating as The Jones Store:
MO   Metro North          Kansas City
     Bannister            Kansas City
     Blue Ridge           Kansas City      
     Independence         Independence
KS   Metcalf South        Overland Park
     West Ridge           Topeka
     Prairie Village Ctr. Prairie Village
Operating as Famous-Barr:
KY   Towne Sq.            Owensboro
Operating as L.S. Ayres:
IN   Honey Creek Sq.      Terre Haute

In addition, we remodeled 19 department stores in 1998, totaling
1.5 million retail square feet, which included the expansion of
five stores by 164,000 square feet. At fiscal year-end, May
operated 393 department stores in 32 states and the District of
Columbia. 

Our expansion program for 1999 includes 18 new department stores,
totaling 2.5 million square feet of retail space. In addition, the
company plans to remodel 29 department stores totaling 1.5 million
square feet of retail space, which includes the expansion of 23
stores by a total of 734,000 square feet. We also plan to continue
the aggressive pursuit of home store sales by converting space
previously dedicated to consumer electronics. We plan to complete
conversion of this space in 190 stores in 1999 and 70 stores in
2000.

The new-store plan for 1999 through 2003 would add 78 new
department stores totaling 12 million retail square feet, a 3%
annualized increase, net of closings.  During this five-year
period, May plans to invest $1.5 billion for new stores, $800
million to expand and remodel existing stores, and $360 million
related to systems and operations. These are the major components
of our $3.4 billion capital plan.

During 1998, the company completed a $500 million stock repurchase
program totaling 12.5 million shares. The 1998 buyback was in
addition to a $300 million 1997 stock repurchase program totaling
9.6 million shares and a $600 million 1996 stock repurchase program
totaling 19.1 million shares. In February 1999, the company
announced plans to repurchase up to an additional $500 million of
May shares. 


Review of Operations

Diluted earnings per share reached $2.30 in 1998, compared with
$2.07 in 1997 and $1.87 in 1996. Net earnings totaled $849 million
in 1998, compared with $779 million in 1997 and $749 million in
1996. The 1998 and 1997 diluted earnings per share growth rates
were 11.1% and 10.7%, respectively. Net earnings growth rates were
lower than diluted earnings per share growth rates due to $1.4
billion of stock repurchases completed in 1998, 1997, and 1996.
Return on revenues was 6.3% in 1998, compared with 6.1% in 1997 and
6.2% in 1996.

<TABLE>
<CAPTION>
Results for the past three years on a continuing operations basis
and the related percent of revenues were as follows:              
                     
                                        1998              1997             1996 
(dollars in millions, except
per share data)                     $      %          $      %         $      %

<S>                           <C>      <C>      <C>      <C>     <C>      <C>   
Net retail sales              $13,072           $12,291          $11,492

Revenues                      $13,413  100.0%   $12,685  100.0%  $12,000  100.0%
Cost of sales                   9,224   68.8      8,732   68.8     8,226   68.5
Selling, general, and 
  administrative expenses       2,516   18.7      2,375   18.7     2,265   18.9
Interest expense, net             278    2.1        299    2.4       277    2.3

Earnings before income taxes    1,395   10.4      1,279   10.1     1,232   10.3
Provision for income taxes*       546   39.1        500   39.1       483   39.3

Net earnings                  $   849    6.3%   $   779    6.1%  $   749    6.2%

Diluted earnings per share**  $  2.30           $  2.07          $  1.87

*   Percent of revenues columns represent effective income tax rates.
**  Reflects three-for-two common stock split effective March 22, 1999.

</TABLE>
<PAGE>

LIFO (last-in, first-out) was a credit of $28 million, $5 million,
and $20 million in 1998, 1997, and 1996, respectively. The impact
of LIFO on cost of sales, as a percent of revenues, is shown below:

                                      1998     1997     1996

Cost of sales                         68.8%    68.8%    68.5%
LIFO credit                           (0.2)    (0.1)    (0.2) 
Cost of sales before LIFO credit      69.0%    68.9%    68.7% 

Earnings before interest and taxes excluding the LIFO credit for
the past three years were as follows:                 
                                                                  
                                                         Increase
(dollars in millions)     1998     1997     1996      1998   1997
Operating earnings      $1,645   $1,573   $1,489       4.6%   5.7%
Percent of revenues       12.3%    12.4%    12.4% 

The slight decline in operating earnings as a percentage of
revenues was due to lower gross margins resulting from higher
markdown levels. 
 
May's 393 quality department stores are operated by eight regional
department store companies across the United States under 11
long-standing and widely recognized trade names. Each store company
holds a leading market position in its region.  

The table below summarizes net retail sales, sales per square foot,
gross retail square footage, and number of stores for each store
company:

<TABLE> 
<CAPTION>
                                                       Net Retail                  Gross Retail 
                                                Sales in Millions   Sales per    Square Footage                          
                                                       of Dollars  Square Foot     in Thousands         Number of Stores
Store Company: Headquarters                          1998    1997   1998  1997     1998    1997 1998   New  Closed  1997
<S>                                               <C>     <C>       <C>   <C>    <C>     <C>     <C>    <C>     <C>  <C>
Lord & Taylor: New York City                      $ 1,976 $ 1,875   $232  $243    9,461   8,208   73    10       -    63 
Hecht's, Strawbridge's: Washington, D.C.            2,368   2,285    200   195   12,231  12,318   71     3       3    71
Foley's: Houston                                    2,060   1,888    196   186   10,993  10,647   57     2       -    55 
Robinsons-May: Los Angeles                          1,936   1,849    196   189   10,156  10,140   55     1       1    55 
Filene's: Boston                                    1,578   1,450    244   236    6,710   6,394   42     2       -    40 
Kaufmann's: Pittsburgh                              1,549   1,489    199   193    8,177   7,961   48     2       1    47 
Famous-Barr, L.S. Ayres, The Jones Store: St. Louis 1,206   1,060    207   202    7,159   5,408   39     9       -    30 
Meier & Frank: Portland, Ore.                         399     395    231   229    1,768   1,768    8     -       -     8
The May Department Stores Company                 $13,072 $12,291   $209  $204   66,655  62,844  393    29       5   369<PAGE>

Net retail sales represent sales of stores open at the end of 1998.
Sales per square foot are calculated from revenues and average gross retail square footage. 
Gross retail square footage represents square footage of stores open at the end of the period presented.

</TABLE>

<TABLE>
<CAPTION>
                             1998    1997    1996    1995    1994    1993    1992    1991    1990    1989    1988    
<S>                          <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     
Return on beginning equity   22.2%   21.2%   19.4%   20.8%   21.3%   22.1%   21.5%   20.7%   21.8%   18.0%   18.6%   
</TABLE>
 
<TABLE>
<CAPTION>
                             1998    1997    1996    1995    1994    1993    1992    1991    1990    1989    1988    
<S>                          <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     
Return on net assets         19.8%   18.5%   18.8%   20.1%   20.1%   19.0%   15.4%   14.5%   15.8%   16.9%   16.2%   
</TABLE>

<TABLE>
<CAPTION>
                              1998    1997    1996    1995    1994    1993    1992    1991    1990    1989    1988
<S>                          <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
Year-end dividend rate
per common share             $0.85   $0.80   $0.77   $0.76   $0.69   $0.61   $0.55   $0.54   $0.53   $0.47   $0.38
</TABLE>

<TABLE>
<CAPTION>
                              1998     1997     1996     1995     1994     1993     1992     1991     1990     1989     1988
<S>                         <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C> 
Common stock closing price
and price range:
Low price                   $33.17   $29.08   $27.00   $22.33   $21.50   $22.29   $17.33   $15.08   $12.46   $11.54   $ 9.58
High price                  $47.25   $38.08   $34.83   $30.83   $30.08   $31.00   $24.83   $20.13   $19.71   $17.54   $13.33
Closing price               $40.25   $35.04   $29.67   $29.25   $23.42   $26.50   $23.46   $18.29   $15.17   $15.25   $12.50
</TABLE>

<PAGE>

Net Retail Sales 
Net retail sales (see page 25 for definition) increases for 1998
and 1997 were as follows:                    

                   1998 vs. 1997      1997 vs. 1996
                                                        Five-year 
                     Store-for-          Store-for-      Compound 
           Total          Store   Total       Store   Growth Rate 
           
             6.4%           3.5%    7.0%        3.6%          7.9% 

The total sales increase for 1998 reflects a 3.5% rise in
store-for-store sales, the opening of 24 net new stores in 1998,
and the full-yearimpact of 1997 store openings. The total sales
increase for 1997 includes a 3.6% store for-store sales increase,
the opening of four net new stores, and the full year impact of
1996 store openings.  

Sales include leased and licensed department sales of $385
million, $353 million, and $326 million in 1998, 1997, and
1996,respectively. Revenues include finance charge revenues of $298
million, $319 million, and $338 million in 1998, 1997, and 1996,
respectively. Finance charge revenues have decreased due to
increased use of third-party credit cards and corresponding
decreased use of the company's proprietary credit cards.  

Cost of Sales 
Cost of sales includes cost of merchandise sold and buying and
occupancy costs. Cost of sales was $9.22 billion in 1998, compared
with $8.73 billion in 1997, a 5.6% increase. The overall increase
resulted from a 6.4% increase in sales. As a percent of revenues,
cost of sales remained constant between 1997 and 1998 at 68.8%.
Excluding the LIFO credit, cost of sales increased to 69.0% in
1998, compared with 68.9% in 1997. This increase was primarily the
result of higher promotional markdown levels.   

Cost of sales was $8.73 billion in 1997, compared with $8.23
billion in 1996, a 6.2% increase. The overall increase resulted
from a 7.0% increase in sales. As a percent of revenues, cost of
sales increased 0.3% from 68.5% in 1996 to 68.8% in 1997. This
increase was due to higher promotional activity and a lower LIFO
credit in 1997.  Excluding the LIFO credit, cost of sales increased
to 68.9% in 1997, compared with 68.7% in 1996.   

Selling, General, and Administrative Expenses 
Selling, general, and administrative expenses were $2.52 billion in
1998, compared with $2.38 billion in 1997, a 5.9% increase. The
overall increase was due to a 6.4% increase in sales. As a percent
of revenues, selling, general, and administrative expenses remained
constant at 18.7% in 1998, compared with 1997. A decrease in credit
expense, partly related to lower bankruptcy rates, was offset by
increases in advertising, retirement, and profit-sharing expense. 

Selling, general, and administrative expenses were $2.38 billion in
1997, compared with $2.27 billion in 1996, a 4.8% increase. The
overall increase was due to a 7.0% increase in sales. As a percent
of revenues, selling, general, and administrative expenses
decreased 0.2% to 18.7% in 1997, compared with 18.9% in 1996, due
to a decrease in credit expense that was partially offset by higher
payroll costs. 

Selling, general, and administrative expenses include advertising
and sales promotion costs of $500 million, $463 million, and $439
million in 1998, 1997, and 1996, respectively.   

Interest Expense
Interest expense components were:

(dollars in millions)       1998    1997     1996 
Interest expense            $311    $324     $310
Interest income              (19)    (11)     (16) 
Capitalized interest         (14)    (14)     (17)
Interest expense, net       $278    $299     $277 
Percent of revenues          2.1%    2.4%     2.3%  

The decrease in 1998 net interest expense compared with 1997 was
due to both lower average long-term debt balances and higher
average cash equivalent balances. 

The increase in 1997 net interest expense compared with 1996 was
due to increased averagelong-term debt balances related to
borrowings to finance the company's 1996 common stock repurchases
and debt assumed in the Strawbridge & Clothier transaction.  

Income Taxes 
The effective income tax rates were 39.1%, 39.1%, and 39.3% in
1998, 1997, and 1996, respectively.  

Discontinued Operation 
Effective May 4, 1996,the company spun off Payless ShoeSource, Inc.
(Payless) as a tax-free distribution to shareowners.  

Extraordinary Items 
The company recorded an aftertax loss of $4 million ($5 million
pretax) in 1997 and $5 million ($8 million pretax) in 1996 related
to the early retirement of debt.  

Impact of Inflation 
Inflation did not have a material impact on the company's 1998
sales growth and earnings. The company values its inventory on a
LIFO basis, and as a result, the current cost of merchandise is
reflected in current operating results.  

<PAGE>

Review of Financial Condition 

We continue to meet our objective of generating superior shareowner
returns while maintaining access to capital at reasonable costs.  

Return on Equity 
Return on equity is our principal measure for evaluating our
performance for shareowners and our ability to invest shareowners'
funds profitably. Our objective is performance that places our
return on equity in the top quartile of the retail industry. Return
on beginning equity was 22.2% in 1998, compared with 21.2% in 1997
and 19.4% in 1996. Both years' increases resulted from net earnings
growth and stock repurchases in the prior year.  

Return on Net Assets 
Return on net assets measures performance independent of capital
structure. Return on net assets represents 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 19.8% in 1998,
compared with 18.5% in 1997 and 18.8% in 1996.

Cash Flow
Cash flow from operations (net earnings plus depreciation/
amortization) was $1.3 billion, or 9.6% of revenues in 1998. This
compares with 9.4% in 1997 and 9.3% in 1996. The company's cash
flow as a percent of revenues continues to be one of the highest in
the retail industry, and provides the company with significant
resources to enhance shareowners' value.  

Sources (uses) of cash flows are summarized below:

(dollars in millions)             1998      1997       1996 
Net earnings and
   depreciation/amortization    $1,288     $1,191     $1,123
Working capital decreases          158        265        142
Discontinued operation               -          -        (13) 
Other operating activities          59         70          7
Capital expenditures and
   other investing activities     (888)      (463)      (603) 
Net long-term debt
   issuances (repayments)          129       (340)       412 
Net purchases of common stock     (525)      (329)      (820)
Dividend payments                 (308)      (297)      (305)
Increase (decrease) in   
   cash and cash equivalents    $  (87)     $  97      $ (57) 

See "Consolidated Statement of Cash Flows" on page 23.  

Financing Activities
During the third quarter of 1998, May issued $350 million in new
debt: $200 million of 6.70% debentures due September 15, 2028, and
$150 million of 5.95% notes due November 1, 2008. The proceeds from
the issuances were added to the company's general funds and were
used primarily for repayment of a portion of May's short-term
indebtedness, capital expenditures, store acquisitions, and stock
repurchases. Commercial paper borrowings were made to fund seasonal
working capital requirements. In 1997, the company did not issue
any long term debt.  

Available Credit 
The company has $767 million of available borrowing under its
multiyear credit agreements, including a minority-owned bank
facility. In addition, the company has filed with the Securities
and Exchange Commission shelf registration statements that would
enable it to issue up to $1.0 billion of additional debt
securities.  

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

The debt-to-capitalization ratios were 45%, 44%, and 48% for 1998,
1997, and 1996, respectively. For purposes of the
debt-to-capitalization ratio, total debt is defined 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. Capitalization is
defined as total debt, noncurrent deferred taxes, ESOP preference
shares, and shareowners' equity. See "Profit Sharing" on page 26
for discussion of the ESOP.  

The fixed-charge coverage ratios were 4.5x in 1998 and 4.1x in 1997
and 1996. Fixed charges are defined as gross interest expense,
interest expense on the ESOP debt, total rent expense, and the
pretax equivalent of dividends on redeemable preferred stock.  

Debt Ratings 
In November 1998, May's bond rating by Moody's Investors Service,
Inc. was increased from A2 to A1. Our bonds continue to be rated A
by Standard & Poor's Corporation. Our commercial paper is rated P1
by Moody's and A1 by Standard & Poor's. May's senior unsecured bank
credit agreement was assigned an A1 rating by Moody's.   

Capital Expenditures 
Our strong financial condition enables us to make capital
expenditures to enhance shareowners' returns. Return on net assets,
internal rate of return, and sales per square foot are emphasized
as the principal operating measures as we invest in new stores,
remodel existing stores, and eliminate unproductive space.  

The 1999 capital expenditure plan approximates $700 million.
Capital expenditures for the period 1999 through 2003 are planned
at $3.4 billion.  

<PAGE>

Common Stock Dividends and Market Prices 
Subsequent to year-end, the board of directors approved a
three-for-two common stock split for distribution on March 22,
1999, equivalent to one share of common stock for each two shares
of common stock held by shareowners of record on March 1, 1999. All
share and per share data included in this annual report have been
restated to reflect the stock split.   

Our dividend policy is based on earnings growth and capital
investment requirements. Our objective is to increase dividends on
common stock as we achieve earnings growth. The company increased
the 1999 annual dividend rate by 5.1%, or 4-1/3 cents per share, to
89 cents per share. This is our 24th consecutive annual dividend
increase. The new annual dividend rate of 89 cents per share was
effective with the March 1999 dividend payment. Dividends paid have
increased at a compound rate of 7.2% during the past five years.
The company has paid consecutive quarterly dividends since 1911.  

The quarterly price ranges of the common stock and dividends per
share in 1998 and 1997 were:       
                                1998                               1997
             Market Price  Dividends           Market Price   Dividends
Quarter    High       Low  per Share        High       Low    per Share
First  $44-5/16  $35-5/16   $.21-1/6   $33-3/16   $29-1/16         $.20 
Second  47-1/4    41-5/16    .21-1/6    37-15/16   30-3/16          .20 
Third   44-11/16  33-3/16    .21-1/6    38-1/16    33-13/16         .20 
Fourth  43        37-11/16   .21-1/6    37-15/16   33-1/4           .20 
Year   $47-1/4   $33-3/16   $.84-2/3    $38-1/16   $29-1/16        $.80 

The approximate number of common shareowners as of March 1, 1999,
was 46,000.  

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, prepared with the
assistance of specialists within and outside the company, many
factors outside of May's control exist that have an impact on its
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; ability to
hire and retain qualified associates; possible widespread inability
to perform due to year 2000 issues by merchandise vendors, public
utilities, telecommunications providers, and financial
institutions; and the general economic impact of the year 2000
issues. Because of these factors, actual performance could differ
materially from that described in the forward-looking statements. 

Year 2000 Readiness 
In 1996, May began assessing and preparing its critical information
systems, communications networks, equipment, and facilities for the
year 2000. As of the end of fiscal 1998, May completed this
assessment and substantially completed the coding, testing, and
installation of necessary modifications. May will test certain
interfaces with some merchandise and service vendors for year 2000
compliance through the spring of 1999. Since May is substantially
complete with its modifications, the company does not expect any
material disruption of business. Through participation in a
National Retail Federation sponsored survey and other means, May is
receiving assurances from its primary merchandise vendors and
service providers regarding their year 2000 readiness.  

May developed and maintains most of its application systems
internally. Over the past 12 months, May used approximately 15% of
its information systems resources to address companywide year 2000
issues. May's use of outside consultants and contractors to address
year 2000 compliance has not been significant. Through fiscal 1998,
the cumulative cost of the company's year 2000 effort approximates
$6 million, which May expensed as incurred.  

Under the most reasonably likely worst case scenario, May does not
anticipate more than isolated, temporary disruptions of its
operations caused by year 2000 failures affecting either the
company or its primary merchandise and service vendors. May expects
that its technically trained personnel, working in cooperation with
key vendors and service providers, should be able to address year
2000 system issues that may arise. To the extent May's vendors are
unable to deliver products and provide services due to their own
year 2000 issues, May believes it will generally have alternative
sources for comparable products and services and does not expect to
experience any material business disruptions. Many risks, however,
such as the failure to perform by public utilities,
telecommunications providers, and financial institutions, and the
impact of the year 2000 issue on the economy as a whole, are
outside May's control and could adversely affect the company and
its ability to conduct business. While May has made a significant
effort to address all anticipated risks within its control, this is
an event without precedent; consequently, there can be no assurance
that the year 2000 issue will not have a material adverse impact on
May's financial condition, operating results, or business.  

<PAGE>

[The following "Consolidated Financial Statements" section is a
reproduction of the same named section in the paper format Annual
Report on pages 21-24.]

Consolidated Statement of Earnings  

(dollars in millions, except per share)    
                                             1998     1997     1996
  
Net retail sales                          $13,072  $12,291  $11,492 

Revenues                                  $13,413  $12,685  $12,000
Cost of sales                               9,224    8,732    8,226 
Selling, general, and
  administrative expenses                   2,516    2,375    2,265 
Interest expense, net                         278      299      277 

Total cost of sales and expenses           12,018   11,406   10,768 
Earnings from continuing operations
  before income taxes                       1,395    1,279    1,232
Provision for income taxes                    546      500      483 

Net earnings from continuing operations       849      779      749 
Net earnings from discontinued operation        -        -       11 
Net earnings before extraordinary loss        849      779      760

Extraordinary loss related to early  
  extinguishment of debt, net
  of income taxes                               -       (4)      (5) 

Net earnings                              $   849  $   775  $   755 

Basic earnings per share:
  Continuing operations                   $  2.43  $  2.18  $  1.97 
  Discontinued operation                        -        -     0.03 
  Net earnings before extraordinary loss     2.43     2.18     2.00 
  Extraordinary loss                            -    (0.01)   (0.01) 
Basic earnings per share                  $  2.43  $  2.17  $  1.99 

Diluted earnings per share:  
  Continuing operations                   $  2.30  $  2.07  $  1.87 
  Discontinued operation                        -        -     0.03 
  Net earnings before extraordinary loss     2.30     2.07     1.90 
  Extraordinary loss                            -    (0.01)   (0.01) 
Diluted earnings per share                $  2.30  $  2.06  $  1.89 

See Notes to Consolidated Financial Statements.  

<PAGE>


Consolidated Balance Sheet                           
                       
(dollars in millions,                     January 30,  January 31, 
 except per share)                              1999         1998 

Assets 
Current assets:   
  Cash                                    $       15   $       14 
  Cash equivalents                                97          185
  Accounts receivable, net                     2,144        2,164 
  Merchandise inventories, net of LIFO 
   reserves of $65 and $93                     2,655        2,433 
  Other current assets                            76           82
Total current assets                           4,987        4,878 

Property and equipment:  
  Land                                           316          304 
  Buildings and improvements                   3,581        3,393 
  Furniture, fixtures, and equipment           3,232        3,028 
  Property under capital leases                  131           62
Total property and equipment                   7,260        6,787 
Accumulated depreciation                      (2,747)      (2,563) 
  Property and equipment, net                  4,513        4,224 

Goodwill, net of accumulated
   amortization of $199 and $174                 933          752
Other assets                                     100           76
Total assets                              $   10,533   $    9,930 

Liabilities and shareowners' equity 
Current liabilities:   
  Current maturities of long-term debt    $       98   $      233 
  Accounts payable                             1,017          842 
  Accrued expenses                               755          640 
  Income taxes payable                           189          151
Total current liabilities                      2,059        1,866 

Long-term debt                                 3,825        3,512 
Deferred income taxes                            482          449 
Other liabilities                                309          277 

ESOP preference shares                           327          337
Unearned compensation                           (305)        (320) 

Shareowners' equity:  
  Common stock                                   167          173 
  Additional paid-in capital                       -            - 
  Retained earnings                            3,669        3,636 
Total shareowners' equity                      3,836        3,809 

Total liabilities and shareowners' equity $   10,533   $    9,930 

Common stock has a par value of $.50 per share; 700 million shares
are authorized and 470.5 million shares were issued. At January 30,
1999, 334.7 million shares were outstanding, and 135.8 million
shares were held in treasury. At January 31, 1998, 346.5 million
shares were outstanding, and 124.0 million shares were held in
treasury.  

ESOP preference shares have a par value of $.50 per share and a
stated value of $507 per share; 800,000 shares are authorized. At
January 30, 1999, 645,320 shares (convertible into 21.8 million
shares of common stock) were issued and outstanding. At January 31,
1998, 665,866 shares (convertible into 22.5 million shares of
common stock) were issued and outstanding.   

See Notes to Consolidated Financial Statements.  

<PAGE>

Consolidated  Statement of Cash Flows
(dollars in millions)                            1998    1997   1996 

Operating activities: 
Net earnings                                  $   849  $  775 $  755 
Adjustments for noncash items
 included in earnings:
  Depreciation and amortization                   439     412    374 
  Deferred income taxes                            48      58     45 
  Deferred and unearned compensation                5       8     10 
Working capital changes*                          158     265    142 
Other assets and liabilities, net                   6       8    (43)

Total operating activities                      1,505   1,526  1,283 

Investing activities:
Capital expenditures                             (630)   (496)  (632) 
Dispositions of property and equipment             44      33     29 
Acquisition                                      (302)      -      - 
Cash used in discontinued operation                 -       -    (24)

Total investing activities                       (888)   (463)  (627) 

Financing activities: 
Issuances of long-term debt                       350       -    800 
Repayments of long-term debt                     (221)   (340)  (388)
Purchases of common stock                        (589)   (394)  (869)

Issuances of common stock                          64      65     49 
Dividend payments                                (308)   (297)  (305)

Total financing activities                       (704)   (966)  (713) 

Increase (decrease) in
  cash and cash equivalents                       (87)     97    (57)

Cash and cash equivalents, beginning of year      199     102    159
Cash and cash equivalents, end of year        $   112  $  199   $102 

*Working capital changes comprise:
  Accounts receivable, net                    $    20  $  262   $139
  Merchandise inventories                        (176)    (53)  (211) 
  Other current assets                             12      46     45 
  Accounts payable                                176     (30)   180 
  Accrued expenses                                 89      26    (20) 
  Income taxes payable                             37      14      9 
  Net decrease in working capital             $   158  $  265 $  142 

Cash paid during the year:
Interest                                      $   297   $ 319 $  288 
Income taxes                                      411     355    380 

See Notes to Consolidated Financial Statements.  


<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Shareowners' Equity        

                                                  Outstanding    Additional                             Total            
(dollars in millions,                            Common Stock       Paid-in       Retained        Shareowners'
shares in thousands)                     Shares       Dollars       Capital       Earnings             Equity  
<S>                                      <C>             <C>        <C>             <C>                <C>  
Balance at February 3, 1996              373,307         $187       $   -           $4,398             $4,585 
Net earnings                                   -           -            -              755                755 
Dividends paid:  
  Common stock ($0.77 per share)               -           -            -             (287)              (287)   
  ESOP preference shares, 
   net of tax benefit                          -           -            -              (18)                (18) 
Common stock issued                        9,968           5          256                -                 261 
Common stock purchased                   (27,886)        (14)        (256)            (599)               (869)
Distribution of equity in 
   Payless ShoeSource, Inc.                    -           -            -             (777)               (777)  

Balance at February 1, 1997              355,389         178            -            3,472               3,650 
Net earnings                                   -           -            -              775                 775 
Dividends paid:   
  Common stock ($0.80 per share)               -           -            -             (279)               (279)   
  ESOP preference shares, 
   net of tax benefit                          -           -            -              (18)                (18) 
Common stock issued                        3,419           2           73                -                  75 
Common stock purchased                   (12,296)         (7)         (73)            (314)               (394)  

Balance at January 31, 1998              346,512         173            -            3,636               3,809 
Net earnings                                   -           -            -              849                 849 
Dividends paid:
  Common stock ($0.84 2/3 per share)           -           -            -             (290)               (290)   
  ESOP preference shares, 
   net of tax benefit                          -           -            -              (18)                (18) 
Common stock issued                        3,141           1           74                -                  75 
Common stock purchased                   (14,989)         (7)         (74)            (508)               (589) 

Balance at January 30, 1999              334,664        $167        $   -           $3,669              $3,836  
</TABLE>
<TABLE>

<CAPTION>
Outstanding common stock excludes shares held in treasury. Treasury share activity for the last three years is
summarized below:                                                 
                                                                     1998            1997                1996  
<S>                                                               <C>             <C>                  <C>  
Balance, beginning of year                                        123,943         115,066              97,148 
Common stock issued:   
  Exercise of stock options                                        (1,914)         (2,372)             (1,495)   
  Deferred compensation plan                                         (227)           (243)               (225)   
  Restricted stock grants,
   net of forfeitures                                                (306)           (156)               (368)  
  Conversion of ESOP preference shares                               (694)           (648)             (1,194)   
  Acquisitions                                                          -               -              (6,686)           
                                                                   (3,141)         (3,419)             (9,968) 
Common stock purchased                                             14,989          12,296              27,886 
Balance, end of year                                              135,791         123,943             115,066 

See Notes to Consolidated Financial Statements.   
</TABLE>
<PAGE>

[The following "Notes to Consolidated Financial Statements" section
is a reproduction of the same named section included in the paper
format Annual Report on pages 25-31.]


Notes to Consolidated Financial Statements

Summary of Significant Accounting Policies 

Fiscal Year  
The company's fiscal year ends the Saturday closest to January 31.
Fiscal years 1998, 1997, and 1996 ended on January 30, 1999,
January 31, 1998, and February 1, 1997, respectively. References to
years in this annual report relate to fiscal years 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
wholly owned subsidiaries (May or the company). The company's 393
quality department stores are operated by eight regional department
store companies across the United States under 11 long-standing and
widely recognized trade names.  The company aggregates its eight
store companies into one reportable segment. The consolidated
financial statements reflect Payless ShoeSource, Inc. (Payless), as
a discontinued operation through May 4, 1996. All the notes, except
"Discontinued Operation" on page 31, reflect data on a continuing
operations basis.  

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 Retail Sales and Revenues 
Net retail sales (sales) represent sales of stores operating at the
end of the latest period, and exclude finance charge revenues and
the sales of stores that have been closed and not replaced. Sales
include sales of merchandise and services, and sales from leased
and licensed departments. Sales are net of returns and exclude
sales tax. Store-for-store sales represent sales of those stores
open during both years. Revenues include finance charge revenues
and all sales from all stores operating during the period.   

Cost of Sales 
Cost of sales includes the cost of merchandise sold and the
company's buying and occupancy costs. 

Advertising Costs 
Advertising and sales promotion costs are expensed at the time the
advertising takes place.

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

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.  

Earnings per Share 
In 1997, the company adopted Statement of Financial Accounting
Standards (SFAS) No.128, "Earnings per Share," for all periods
presented. References to earnings per share relate to diluted
earnings per share.  

Common Stock Split 
All share and per share data included in this annual report have
been restated to reflect a three-for-two common stock split
effective March 22, 1999.  

Stock-based Compensation 
The company accounts for stock-based compensation by applying APB
Opinion No. 25, as allowed under SFAS No. 123, "Accounting for
Stock-based Compensation." 

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.  

Accounts Receivable 
In accordance with industry practice, installments on deferred-
payment accounts receivable maturing in more than one year have
been included in current assets.  

Merchandise Inventories 
Merchandise inventories are valued by the retail method and are
stated on the LIFO (last-in, first-out) cost basis, which is lower
than market.  

Property and Equipment 
Property and equipment are recorded at cost and are depreciated on
a straight line basis over their estimated useful lives.
Investments in properties under capital leases and leasehold
improvements are amortized over their useful lives or related lease
terms, whichever is shorter. In 1998, the company adopted Statement
of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," which did not
have a significant impact on the company.  

Goodwill 
Goodwill represents the excess of cost over the fair value, at the
dates of acquisition, of net tangible assets acquired. 
Substantially all amounts are amortized using the straight-line method
over a 40-year period.  

Long-lived Assets 
Long-lived assets and certain identifiable intangibles, to be held
and used or disposed of, are reviewed to determine whether the
carrying amount of the asset is recoverable. Impairment losses
resulting from these reviews have not been significant.  

Financial Derivatives 
Financial derivatives are used only to reduce risk in specific
business transactions. The company periodically purchased forward
contracts on firm commitments to minimize the risk of foreign
currency fluctuations. These contracts were not significant.  

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

<PAGE>

Quarterly Results (Unaudited) 

Quarterly results are determined in accordance with annual
accounting policies. They include certain items based upon
estimates for the entire year. Summarized quarterly results for the
last two years were as follows:

(dollars in millions,                         1998 Quarter    1998
except per share)           First  Second    Third  Fourth    Year
Revenues                   $2,817  $2,889   $3,089  $4,618 $13,413
Cost of sales               1,983   2,019    2,180   3,042   9,224
Selling, general, and   
  administrative expenses     584     587      625     720   2,516
Pretax earnings               183     218      215     779   1,395
Net earnings                  110     131      130     478     849
Basic earnings per share   $ 0.30  $ 0.37   $ 0.36  $ 1.40 $  2.43
Diluted earnings per share   0.29    0.35     0.35    1.31    2.30 


(dollars in millions,                         1997 Quarter    1997
except per share)           First  Second    Third  Fourth    Year
Revenues                   $2,675  $2,749   $2,969  $4,292 $12,685
Cost of sales               1,881   1,921    2,097   2,833   8,732
Selling, general, and   
  administrative expenses     555     559      599     662   2,375
Pretax earnings               163     193      199     724   1,279
Net earnings                   98     116      120     445     779
Basic earnings per share   $ 0.26  $ 0.32   $ 0.34  $ 1.26 $  2.18
Diluted earnings per share   0.26    0.31     0.32    1.18    2.07 

There are variables and uncertainties in the factors used to
estimate the annual LIFO provision (credit) on an interim basis.
The following unaudited supplementary information shows what the
pro forma diluted per share impact of LIFO would have been had the
final variables and factors been known at the beginning of each
year:   
                                    1998              1997
                          Pro         As     Pro        As 
Quarter                 Forma   Reported   Forma   Reported 
First                  $(0.01)    $ 0.01  $ 0.00     $ 0.01 
Second                  (0.01)      0.01    0.00       0.01 
Third                   (0.01)      0.01    0.00       0.01 
Fourth                  (0.02)     (0.08)  (0.01)     (0.04) 
Year                   $(0.05)    $(0.05) $(0.01)    $(0.01) 

Profit Sharing 

The company has a qualified profit-sharing plan that covers
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 $57 million for 1998, which represents a record effective
match rate of 113%. The matching allocation value was $48 million
and $43 million in 1997 and 1996, respectively. 

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 $317 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, along with the
dividends on the ESOP preference shares, are used to repay the loan
principal and interest. Interest expense associated with the ESOP
debt was $27 million in 1998, $29 million in 1997, and $31 million
in 1996. ESOP preference shares' dividends were $25 million in
1998, and $26 million in 1997 and 1996.    

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 $28 million, $24 million,
and $22 million in 1998, 1997, and 1996, respectively.  

At January 30, 1999, the plan beneficially owned 15.6 million
shares of the company's common stock and 100% of the company's ESOP
preference shares. These holdings represent 10.5% of the company's
common stock.  

Pension and Other Postretirement Benefits 

The company has two qualified defined-benefit plans that cover
associates who work 1,000 hours or more in a year and have attained
age 21. The company also maintains two nonqualifled, 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, which uses assumptions to estimate the total
benefits ultimately payable to associates, then allocates this cost
to service periods. The actuarial assumptions used to calculate
pension costs are reviewed annually.  

<PAGE>

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

                                            Qualified   Nonqualified
                                                Plans          Plans
                                              (funded)     (unfunded)
(dollars in millions)                      1998  1997   1998    1997 
Change in PBO: (1) 
PBO at beginning of year                   $476  $383   $102   $  90
Service cost                                 30    25      3       3
Interest cost                                32    28      8       6
Business combinations                         8     -      -       -
Actuarial loss (2)                           24    71     14       7
Benefits paid                               (53)  (31)    (5)     (4) 
PBO at end of year                         $517  $476   $122   $ 102 
ABO at end of year (3)                     $464  $433   $ 99   $  86 

Change in net plan assets:
Fair value of net plan assets 
   at beginning of year                    $490  $409   $  -   $   -
Actual return on plan assets                 89    89      -       -
Employer contribution                        44    23      -       -
Business combinations                         9     -      -       -
Benefits paid                               (53)  (31)     -       - 
Fair value of net plan 
   assets at end of year                   $579  $490   $  -   $   - 

Funded status:  
Plan assets in excess of(less than) PBO    $ 62  $ 14  $(122)  $(102)
Unrecognized net actuarial loss (gain)      (50)  (20)    21      10
Unrecognized prior service cost               2     3     14      14
Additional minimum liability (4)              -     -    (12)      -
Prepaid (accrued) benefit cost             $ 14   $(3) $ (99)  $ (78)
Plan assets in excess of(less than) ABO    $115   $57  $ (99)  $ (86) 

The components of net periodic benefit costs and actuarial
assumptions for the benefit plans are summarized in the following
tables:

(dollars in millions)                       1998     1997     1996
Components of pension expense (all plans): 
Service cost                                $ 33     $ 28     $ 27
Interest on PBO                               40       34       24
Expected return on assets                    (34)     (30)     (20)
Net amortization (5)                           3        2        -
Total                                       $ 42     $ 34     $ 31 
                                                   
                                                         January 1, 
                                            1999     1998     1997
Actuarial assumptions: 
Discount rate                               6.75%    7.00%    7.50%
Expected return on plan assets              7.00     7.25     7.75
Salary increase                             4.25     4.50     4.50 

Definition of terms: 
(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 value of the benefit         
     obligations or the plan assets resulting from changes in     
     actuarial assumptions or from experience different than      
     assumed. 
(3)  ABO is the actuarial present value of benefits (both vested  
     and nonvested) attributed by the pension benefit formula to  
     prior associate service based on current and past compensation 
     levels. 
(4)  The additional minimum liability represents the excess of the 
     accumulated benefit obligation over the accrued pension costs 
     recognized. Recognizing the additional minimum liability     
     results in an intangible asset being recorded for an equal   
     amount. 
(5)  Prior service cost is amortized over the remaining service   
     period.

The accrued pension costs are included in other liabilities.
Prepaid pension costs and intangible assets are included in other
assets.

The company also provides postretirement life and/or health
benefits for certain associates. As of January 30, 1999, the
company's estimated PBO (using a discount rate of 6.75%) for
postretirement benefits was $48 million, of which $45 million was
accrued in other liabilities.  As of January 31, 1998, the
company's estimated PBO (using a discount rate of 7.0%) for
postretirement benefits was $44 million, of which $42 million was
accrued in other liabilities. An unrecognized net loss of less than
10% of PBO need not be amortized. The postretirement plan is
unfunded. The postretirement benefit expense was $4 million in
1998, and $3 million in 1997 and 1996.  

The estimated future obligations for postretirement medical
benefits are based upon assumed annual healthcare cost increases of
10% for 1999, decreasing by 1% annually to 6% for 2003 and future
years. A 1% increase or decrease in the assumed annual health care
cost increases would increase or decrease the present value of
estimated future obligations for postretirement benefits by
approximately $1 million.   

Another important element in the retirement programs is the federal
Social Security system, into which the company paid $155 million in
1998 as its matching contribution to the $155 million paid in by
associates.

Taxes

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

                            1998        1997        1996 
(dollars in millions)    $     %     $     %     $     % 
Federal               $420        $359        $344      
State and local         77          65          69      
Current taxes          497  35.6%  424  33.2%  413  33.6%  

Federal                 41          64          58 
State and local          8          12          12 
Deferred taxes          49   3.5    76   5.9    70   5.7 
Total                 $546  39.1% $500  39.1% $483  39.3%  

The reconciliation between the statutory federal income tax rate
and the effective income tax rate for the last three years follows: 
                               
                                    1998        1997        1996 
Statutory federal income tax rate   35.0%       35.0%       35.0% 
State and local income taxes         6.1         6.0         6.6 
Federal tax benefit of state
   and local incometaxes            (2.2)       (2.1)       (2.3) 
Other, net                           0.2         0.2           -
Effective income tax rate           39.1%       39.1%       39.3% 

<PAGE>

Major components of deferred tax assets (liabilities) were as 
follows:                                   
                                               Jan. 30,  Jan. 31,
(dollars in millions)                             1999      1998
Accrued expenses and reserves                     $102     $ 144 
Deferred and other compensation                    123       116
Depreciation/amortization and basis differences   (474)     (460)
Other deferred income tax liabilities, net        (206)     (224)
Net deferred income taxes                         (455)     (424)
Less: Net current deferred income tax assets        27        25
Noncurrent deferred income taxes                 $(482)    $(449) 

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

Earnings per Share 

The following tables reconcile net earnings and weighted average
shares outstanding to amounts used to calculate basic and
diluted earnings per share for 1998, 1997, and 1996.              

                                                              1998 
                                         Net              Earnings 
(in millions, except per share)     Earnings   Shares    per Share
Net earnings                            $849                
ESOP preference 
   shares' dividends                     (18)     
Basic earnings per share                 831    342.6        $2.43
ESOP preference shares                    15     22.2     
Assumed exercise of options
   (treasury stock method)                 -      2.6 
Diluted earnings per share              $846    367.4        $2.30 
                                             
                                                              1997 
                                         Net              Earnings
(in millions, except per share)     Earnings    Shares   per Share
Net earnings                            $779           
ESOP preference 
   shares' dividends                     (18)           
Basic earnings per share                 761     348.5       $2.18 
ESOP preference shares                    14      22.9 
Assumed exercise of options 
   (treasury stock method)                 -       2.2 
Diluted earnings per share              $775     373.6       $2.07 
                       
                                                              1996 
                                         Net              Earnings
(in millions, except per share)     Earnings    Shares   per Share
Net earnings                            $749           
ESOP preference 
   shares' dividends                     (18)           
Basic earnings per share                 731     370.8       $1.97
ESOP preference shares                    13      23.1     
Assumed exercise of options 
   (treasury stock method)                 -       2.3      
Diluted earnings per share              $744     396.2       $1.87 

Accounts Receivable 

During 1998, credit sales under department store credit programs
were $5.8 billion, or 43.6% of 1998 revenues; this compares with
45.6% in 1997 and 50.0% in 1996. An estimated 27 million customers
hold credit cards under the company's various credit programs.
Sales made through third-party credit cards totaled $4.1 billion in
1998, compared with $3.6 billion in 1997 and $3.0 billion in 1996. 
Net accounts receivable consisted of:   
                                              Jan. 30,   Jan. 31,
(dollars in millions)                            1999       1998
Customer accounts receivable                   $2,127     $2,167 
Other accounts receivable                          99         93
Total accounts receivable                       2,226      2,260
Allowance for uncollectible accounts              (82)       (96)
Accounts receivable, net                       $2,144     $2,164  

The fair value of customer accounts receivable approximates their
carrying values at January 30, 1999, and January 31, 1998, due to
the short-term nature of these accounts.  

Other Current Assets 

In addition to net current deferred income tax assets, other
current assets consisted of prepaid expenses and supply inventories
of $49 million and $57 million in 1998 and 1997, respectively.  

Other Assets 

Other assets consisted of:                                        
                                                Jan. 30,   Jan. 31,
(dollars in millions)                              1999       1998 
Deferred debt expense                              $ 33        $30 
Notes receivable                                     30         29 
Prepaid and intangible pension asset                 26          - 
Other                                                11         17
Total                                              $100        $76 

Accrued Expenses 

Accrued expenses consisted of:              
                                                Jan. 30,   Jan. 31,
(dollars in millions)                              1999       1998 
Insurance costs                                    $179       $164 
Salaries, wages, and employee benefits              127        112 
Sales, use, and other taxes                         107         97
Interest and rent expense                            96         92 
Advertising and other operating expenses             79         65
Construction costs                                   51         34
Store closings and real estate-related expenses      45         38
Other                                                71         38
Total                                              $755       $640 

<PAGE>

Short-term Debt and Lines of Credit

Short-term borrowings for the last three years were:  

(dollars in millions)                       1998     1997     1996
Balance outstanding at year end                -        -        -
Average balance outstanding                 $195     $182     $ 35
Average interest rate on average balance     5.4%     5.7%     5.7%
Maximum balance outstanding                 $621     $487     $178 

The average balance of short-term borrowings outstanding, primarily
commercial paper, and the respective weighted average interest
rates are based on the number of days such short-term borrowings
were outstanding during the year. The company has $767 million
available under credit agreements, including a minority-owned bank
facility.  

Long-term Debt 

Long-term debt and capital lease obligations were:                
                                                 Jan. 30,  Jan. 31,
(dollars in millions)                               1999      1998 
5.7% to 10.75% unsecured notes and 
   sinking-fund debentures due 1999-2036          $3,741    $3,630
3.0% to 10.0% mortgage notes and  
   bonds due 2000-2012                                59        62 
Debt                                               3,800     3,692
Capital lease obligations                            123        53 
Total debt and capital lease obligations           3,923     3,745
Less current maturities                               98       233 
Total long-term                                   $3,825    $3,512 

The company recorded an extraordinary aftertax loss of $4 million
($5 million pretax) in 1997 and $5 million ($8 million pretax) in
1996 related to the early retirement of debt. 

The annual maturities of long-term debt, including sinking fund
requirements, are $98 million, $260 million, $86 million, $270
million, and $134 million for 1999 through 2003.  

The net book value of property and equipment encumbered under
long-term debt agreements was $114 million at January 30, 1999.  

The fair value of long-term debt (excluding capital lease
obligations) was approximately $4.5 billion and $4.2 billion at
January 30, 1999, and January 31, 1998, respectively. The fair
value was determined using borrowing rates for debt instruments
with similar terms and maturities.  

Lease Obligations 

The company owns approximately 75% of its stores. Rental expense
for the company's operating leases consisted of:  

(dollars in millions)                       1998     1997    1996 
Minimum rentals                              $49      $47     $45
Contingent rentals based on sales             18       17      17
Real property rentals                         67       64      62
Equipment rentals                              3        4       4
Total                                        $70      $68     $66 

Future minimum lease payments at January 30, 1999, were as follows: 
                  
                                     Capital    Operating 
(dollars in millions)                 Leases       Leases    Total
1999                                    $ 14         $ 46     $ 60
2000                                      13           41       54
2001                                      13           37       50
2002                                      13           35       48
2003                                      13           31       44
After 2003                               189          241      430 

Minimum lease payments                  $255         $431     $686

Less imputed interest component          132 

Present value of net minimum
  lease payments of which  
  $3 million is included in  
  current liabilities                   $123  

The present value of operating leases was $256 million at January
30, 1999.  

Property under capital leases, including property under capital
leases described in the "Acquisitions" footnote (page 31), is
summarized as follows:      

                                              Jan. 30,     Jan. 31,
(dollars in millions)                            1999         1998
Cost                                             $131         $ 62
Accumulated amortization                          (32)         (33)
Total                                            $ 99         $ 29 

<PAGE>

Other Liabilities

In addition to accrued pension and postretirement costs, other
liabilities consisted principally of deferred compensation
liabilities of $161 million at January 30, 1999, and $154 million
at January 31, 1998. 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.  

Preference Stock 

The company is authorized to issue up to 25,000,000 shares of $.50
par value preference stock. As of January 30, 1999, 800,000 ESOP
preference shares were authorized and 645,320 were outstanding.

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

Common Stock Repurchase Programs 

During 1998, 1997, and 1996, the company repurchased $500 million,
$300 million, and $600 million of May common stock (12.5 million
shares, 9.6 million shares, and 19.1 million shares, respectively)
in the open market.

On February 10, 1999, the board of directors authorized the company
to repurchase up to an additional $500 million of May shares as
market conditions allow.  

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 options may be exercised
during certain periods following retirement, disability, or death. 
 
A summary of the status of the various stock option plans at the
end of 1998 and 1997 and of the changes within years is presented
below:          
   
                                     1998                       1997 
                       Exercise   Average          Exercise  Average 
(shares in                Price  Exercise             Price Exercise
   thousands)    Shares   Range     Price    Shares   Range    Price
Outstanding 
   at beginning
   of year       10,230  $ 7-36     $28      10,081  $ 7-33     $25 
Granted           4,230   36-43      43       3,158   32-36      32
Exercised        (1,922)   7-36      25      (2,384)   7-32      21
Forfeited or
   expired         (774)  16-43      33        (625)  12-36      28 

Outstanding at
  end of year    11,764  $ 7-43     $33      10,230  $ 7-36     $28 

Exercisable at
   end of year    3,719  $ 7-36     $26       3,214  $ 7-33     $24

Shares available
   for additional
   grants         9,832                       13,287 

Fair value of
   options granted                  $12                         $11 

The following table summarizes information about stock options
outstanding at January 30, 1999:
                    
                Options Outstanding              Options Exercisable
                Number      Average                 Number
Exercise   Outstanding    Remaining  Average   Exercisable   Average
   Price    at Jan. 30  Contractual Exercise    at Jan.30   Exercise
   Range (in thousands)        Life    Price (in thousands)     Life
  
  $    7             2           2       $ 7            2          2
   16-24         2,143           5        22        1,740          5 
   25-36         5,853           8        30        1,977          8 
   40-43         3,766           9         -            -          - 
                11,764           8        26        3,719          6 

Under the 1994 Stock Incentive Plan, the company is authorized to
grant a maximum of 2.9 million shares of restricted stock to
management associates. No monetary consideration is paid by
associates who receive restricted stock.  Restricted stock can be
granted with or without performance restrictions. All restrictions
lapse over periods of up to 10 years, as determined at the date of
the grant. In 1998 and 1997, the company granted 328,356 and
184,548 shares of restricted stock, respectively, under the 1994 
Stock Incentive Plan.   

<PAGE>

The company's plans are accounted for as provided by APB Opinion
No. 25. 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. 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 based
on estimates of performance levels.  

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. As the fair value
represents only 1995 and later option grants, the pro forma impact
shown below may not be representative of future 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 as follows: 


(dollars in millions, except per share)     1998     1997     1996
Net earnings from continuing operations:   
  As reported                              $ 849    $ 779    $ 749 
  Pro forma                                  833      766      740 

Basic EPS from continuing operations:   
  As reported                              $2.43    $2.18    $1.97 
  Pro forma                                 2.38     2.14     1.95 

Diluted EPS from continuing operations:   
  As reported                              $2.30     $2.07   $1.87 
  Pro forma                                 2.27      2.04    1.85 

The following Black-Scholes assumptions were used in the
calculations above:    

                                            1998      1997    1996 

Risk-free interest rate                      5.6%      6.6%    6.8%
Expected dividend yield                    $0.85     $0.80   $0.77
Expected option life (years)                   7         7       7
Expected volatility                           23%       24%     25% 

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 the company's common stock by
a person or by affiliated persons. Depending upon the
circumstances, if the rights become exercisable, 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.  

Acquisitions 

In September 1998, May purchased 11 former Mercantile stores for
approximately $302 million, including merchandise inventories. Nine
of these stores are leased under a long-term capital lease. The
lease has both put and call options that, if exercised, would
result in the company buying the underlying properties for
approximately $100 million.   

In July 1996, the company purchased 13 former Strawbridge &
Clothier department stores in the greater Philadelphia area. The
company delivered 4.5 million shares of May common stock and
assumed $255 million of debt and certain other liabilities in
exchange for the Strawbridge & Clothier department store assets.  

These acquisitions have been accounted for as purchases and did not
have a material effect on the results of operations or financial
position.  

Discontinued Operation 

The company spun off Payless effective May 4, 1996, as a tax-free
distribution to shareowners. The company's financial statements
reflect Payless as a discontinued operation.  

Payless revenues were $601 million in 1996. The reported net
earnings from the discontinued operation were net of $16 million in
income tax expense for 1996.   

<PAGE>

[The following "Eleven-year Financial Summary" is a reproduction of
the same named section in the paper format Annual Report on pages
32-33.]

<TABLE>
<CAPTION>

Eleven-year Financial Summary

(in millions, except per share and operating statistics)  

                                       1998     1997     1996     1995     1994    1993    1992     1991    1990    1989    1988  
<S>                                 <C>      <C>      <C>      <C>      <C>      <C>     <C>      <C>     <C>     <C>     <C>
Net retail sales                    $13,072  $12,291  $11,492  $10,374  $ 9,666  $8,921  $8,304   $7,755  $7,386  $6,917  $6,072
  Total percent increase                6.4%     7.0%    10.8%     7.3%     8.4%    7.4%    7.1%     5.0%    6.8%   13.9%   30.6%  
  Store-for-store percent increase      3.5%     3.6%     4.3%     2.5%     5.4%    5.4%    4.5%    (0.6%)   0.6%    6.4%    5.5%  

Operations
Revenues                            $13,413  $12,685  $12,000  $10,952  $10,107  $9,562  $9,362   $9,068  $8,700  $8,356  $7,742 
Cost of sales                         9,224    8,732    8,226    7,461    6,879   6,537   6,459    6,275   6,047   5,734   5,348 
Selling, general, and
  administrative expenses             2,516    2,375    2,265    2,081    1,916   1,824   1,859    1,861   1,772   1,735   1,645 
Interest expense, net                   278      299      277      250      233     244     279      315     278     231     196 
Earnings before income taxes          1,395    1,279    1,232    1,160    1,079     957     579*     617     603     656     553 
Provision for income taxes              546      500      483      460      429     379     107*     213     199     231     191  
Net earnings (1)                        849      779      749      700      650     578     472      404     404     425     362   
  Percent of revenues                   6.3%     6.1%     6.2%     6.4%     6.4%    6.0%    5.0%     4.5%    4.6%    5.1%    4.7%  
LIFO charge (credit)                $   (28) $    (5) $   (20) $   (53) $   (46) $    7  $   10   $   26  $   39  $  (22) $   (3)  

Per share 
Net earnings (1)                    $  2.30  $  2.07  $  1.87  $  1.75  $  1.62  $ 1.43  $ 1.18   $ 1.02  $ 1.01  $ 1.00  $  .82  
Dividends paid (2)                      .85      .80      .77      .74      .67     .60     .55      .54     .51     .46     .42 
Book value                            11.46    10.99    10.27    12.28    11.10    9.77    8.55     7.51    6.69    6.22    7.17 
Market price - high                   47.25    38.08    34.83    30.83    30.08   31.00   24.83    20.13   19.71   17.54   13.33 
Market price - low                    33.17    29.08    27.00    22.33    21.50   22.29   17.33    15.08   12.46   11.54    9.58
Market price - year-end close         40.25    35.04    29.67    29.25    23.42   26.50   23.46    18.29   15.17   15.25   12.50  

Financial statistics 
Return on equity                       22.2%    21.2%    19.4%    20.8%    21.3%   22.1%   21.5%    20.7%   21.8%   18.0%   18.6% 
Return on net assets                   19.8     18.5     18.8     20.1     20.1    19.0    15.4**   14.5    15.8    16.9    16.2  

Operating Statistics 
Stores open at year-end                 393      369      365      346      314     301     303      318     324     288     297 
Gross retail square footage 
   (in millions)                       66.7     62.8     62.1     57.6     52.0    49.4    49.5     51.9    52.4    48.4    50.0 
Sales per square foot (3)           $   209  $   204  $   201  $   201  $   200  $  191  $  179   $  171  $  172  $  168  $  158  

Cash flow and financial position 
Cash flow from operations (4)       $ 1,288  $ 1,191  $ 1,123  $ 1,033  $   947  $  859  $  755   $  677  $  657  $  659  $  599   
  Percent of revenues                   9.6%     9.4%     9.3%     9.4%     9.4%    9.0%    8.1%     7.5%    7.6%    7.9%    7.7%  
Depreciation and amortization       $   439  $   412  $   374  $   333  $   297  $  281  $  283   $  273  $  253  $  234  $  236 
Capital expenditures                    630      496      632      801      682     560     284      366     466     470     292 
Dividends on common stock               290      279      287      277      251     223     204      198     191     186     184 
Working capital                       2,928    3,012    3,156    3,536    3,069   2,960   2,730    3,089   2,672   2,094   2,123 
Long-term debt and
   preference stock                   4,152    3,849    4,196    3,701    3,240   3,192   3,256    4,299  3,948    3,387   2,384 
Shareowners' equity                   3,836    3,809    3,650    4,585    4,135   3,639   3,181    2,781  2,467    2,319   3,050 
Total assets                         10,533    9,930   10,059   10,122    9,237   8,614   8,376    8,566  8,083    7,570   7,374  

Average shares outstanding
   and equivalents 
Diluted                               367.4    373.6    396.2    397.3    397.3   398.2   397.0    394.3  397.1    419.3   442.2 

All years included 52 weeks, except 1995 and 1989, which included 53 weeks. Net retail sales for 1995 and 1989 are shown
on a 52-week basis for comparability. 
(1) Represents net earnings and diluted earnings per share from continuing operations.  
(2) The annual dividend was increased to $.89 per share effective with the March 15, 1999, dividend payment. 
(3) Sales per square foot are calculated from revenues and average gross retail square footage. 
(4) Cash flow from operations represents net earnings plus depreciation/amortization. It is different from cash flow from 
    operating activities as shown on the statement of cash flows. 
*   Pretax earnings include a net special and nonrecurring charge of $187 million, and the provision for income taxes    
    includes a nonrecurring tax benefit of $187 million. 
**  Based on pretax earnings before special and nonrecurring items.  
</TABLE>
<PAGE>

[The following "Reports of Management and Audit Committee" and
"Report of Independent Public Accountants" section is a
reproduction of the same named section included in the paper format
Annual Report on page 34.]

Reports of Management and Audit Committee 

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 acceptedaccounting principles applied on a
consistent basis. The preparation of financial statements in
conformity with generally accepted accounting principles 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 withinand outside the company, actual results could
differ from those estimates.

Management has established and maintains an internal control
structure 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 preparation
of financial statements, and that such financial statements are not
misstated due to material fraud or error. Internal controls include
the careful selection of associates, the proper segregation of
duties, and the communication and application of formal policies
and procedures that are consistent with high standards of
accounting and administrative practices. An important element of
this structure is a comprehensive internal audit program.
Management continually reviews, modifies, and improves its systems
of accounting and controls in response to changes in business
conditions and operations, and in response to recommendations in
the reports prepared by the independent public accountants
andinternal auditors.

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. This standard is
described in the company's policies on business conduct, which are
publicized throughout the company.  

Report of Audit Committee 

The Board of Directors, through the activities of its audit
committee, participates in the reporting of financialinformation by
the company. The committee meets regularly with management, the
internal auditors, and the independent public accountants. The
committee met three times during 1998. It reviewed the scope,
timing, and fees for the annual audit and the results of audit
examinations completed by the internal auditors and independent
public accountants. The audit results included recommendations to
improve certain internal controls and the follow-up reports
prepared by management. The independent public accountants and
internal auditors have free access to the committee and the Board
of Directors. They attend each meeting of the committee. The audit
committee reports the results of its activities to the Board of
Directors. 

Members of the audit committee are Russell E. Palmer (chairman),
Marsha J. Evans, Helene L. Kaplan, James M. Kilts, Edward H. Meyer,
Michael R. Quinlan, William P. Stiritz, Robert D. Storey, and
Murray L. Weidenbaum. 

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 sheet of The
May Department Stores Company (a Delaware corporation) and
subsidiaries as of January 30, 1999, and January 31, 1998, and the
related consolidated statements of earnings, shareowners' equity
and cash flows for each of the three fiscal years in the period
ended January 30, 1999. 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 generally accepted
auditing standards. 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, 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 January 30, 1999,
and January 31, 1998, and the results of their operations and their
cash flows for each of the three fiscal years in the period ended
January 30, 1999, in conformity with generally accepted accounting
principles. 


/s/Arthur Andersen LLP 
1010 Market Street 
St. Louis, Missouri 63101-2089 
February 10, 1999