May Department Stores Co. disclosed the following in its 1997 annual report:

Earnings before interest and taxes (EBIT) for the past three years were as follows:
Increase (dollars in millions) 1997 1996 1995 1997 1996 Operating earnings $1,578 $1,509 $1,410 4.6% 7.0%
Percent of revenues 12.5% 12.6% 12.9%
EBIT presented above includes a LIFO (last-in, first-out) credit of $5 million, $20 million, and $53 million in 1997, 1996, and 1995, respectively.
EBIT, excluding LIFO, is presented below on a supplementary basis for comparative purposes:
Increase (dollars in millions) 1997 1996 1995 1997 1996 Operating earnings $1,573 $1,489 $1,357 5.7% 9.6%
Percent of revenues 12.4% 12.4% 12.4%
Cost of Sales Cost of sales includes cost of merchandise sold and buying and occupancy costs. 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.Approximately 0.2% of this increase relates to the finance charge component of revenues decreasing 5.7% with no corresponding decrease in cost of sales. The remaining increase was caused by the decrease in the LIFO credit.
Cost of sales was $8.23 billion in 1996, compared with $7.46 billion in 1995, a 10.2% increase. The overall increase resulted from a 9.9% increase in sales (52 weeks in 1996 versus 53 weeks in 1995).As a percent of revenues, cost of sales increased 0.4% from 68.1% in 1995 to 68.5% in 1996. This increase was caused primarily by the decrease in the LIFO credit.
The impact of LIFO on cost of sales, as a percent of revenues, is shown below:
1997 a 1996 1995 eee Cost of sales 68.8% 68.5% 68.1% LIFO credit (0.1) (0.2) (0.5)
Cost of sales before LIFO 68.9% 68.7% 68.6%
Required: Assume you are a financial analyst.Write a report that explains May’s inventory disclosure for those of your clients who you know are not financially sophisticated. (A LIFO credit is the same as a change in the LIFO reserve for the year.)