Search and Replace Destroys All Formatting?!

Hello, All.  I am shocked by this  "Search and Replace" behavior. 

In a new spreadsheet,

1. Type "This is a test" in a cell.
2. Italicize the word "test".
3. Save the file.
4. Search and replace the word "This" with the word "That."

The italics of the word "test" -- which should be unaffected since that word was not searched and replaced -- is removed. This also happens with bold, underline, font, and point size. In fact, no matter how much text is in the cell, all formatting everywhere in the cell is wiped out by a simple search and replace of anything anywhere in the cell.

Is there a way to search and replace an unformatted word with another unformatted word without wiping out all formatting in the cell?  And if you search and replace anything that appears in every cell, without wiping out all formatting in the entire spreadsheet!? 

Thanks.  I am on a MacBook Air 2011 running Excel for Mac 16.52 in a Microsoft 365 Subscription. But I have asked others running PCs and other Excel versions to try this test and they all report the same behavior.