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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

______________________________________________________ 

FORM 10-K

______________________________________________________ 

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                  to                 

Commission file number 1-8344

______________________________________________________ 

L BRANDS, INC.

(Exact name of registrant as specified in its charter)

_________________________________________________

Delaware		31-1029810
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
Three Limited Parkway,
Columbus,	Ohio	43230
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (614) 415-7000

______________________________________________________

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.50 Par Value	LB	The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒    Accelerated filer ☐    Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was: $5,687,395,135.

Number of shares outstanding of the registrant’s Common Stock as of March 12, 2021: 278,814,447.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the Registrant’s 2021 Annual Meeting of Stockholders are incorporated by reference into Part III.

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Table of Contents

		Page No.
Part I
Item 1.	Business	1
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	21
Item 2.	Properties	22
Item 3.	Legal Proceedings	23
Item 4.	Mine Safety Disclosures	23
Part II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Selected Financial Data	26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 8.	Financial Statements and Supplementary Data	61
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	97
Item 9A.	Controls and Procedures	97
Item 9B.	Other Information	97
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	98
Item 11.	Executive Compensation	98
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	98
Item 13.	Certain Relationships and Related Transactions, and Director Independence	98
Item 14.	Principal Accountant Fees and Services	98
Part IV
Item 15.	Exhibits, Financial Statement Schedules	99
Item 16.	Form 10-K Summary	103
	Signatures	104

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PART I

ITEM 1. BUSINESS.

General

L Brands, Inc. ("we” or the "Company") operates the Bath & Body Works, Victoria's Secret and PINK retail brands in the highly competitive specialty retail business. Founded in 1963 in Columbus, Ohio, we have evolved from an apparel-based specialty retailer to a segment leader focused on home fragrance products, body care, soaps and sanitizers, women’s intimate and other apparel, and personal and beauty care products. We sell our merchandise through company-operated specialty retail stores in the United States ("U.S."), Canada and Greater China, through international franchise, license and wholesale partners (collectively, "partners") and through websites worldwide.

We are committed to establishing our Bath & Body Works business as a pure-play public company and are taking the necessary steps to prepare the Victoria's Secret business, including PINK, to operate as a separate standalone company. Our Board of Directors (the "Board") is currently evaluating all options, including a potential spin-off of the Victoria’s Secret business into a public company or a private sale of the business.

Segment Reporting

In the third quarter of 2020, we changed our segment reporting as a result of leadership changes and restructuring actions taken to facilitate the ongoing efforts to separate Bath & Body Works and Victoria’s Secret into separate businesses. We now have two reportable segments: Bath & Body Works and Victoria’s Secret. Accordingly, we will no longer report a Victoria’s Secret and Bath & Body Works International segment as these businesses are now included with their respective brand. Additionally, the Bath & Body Works and Victoria’s Secret segments now include sourcing and production functions (formerly known as Mast) and certain other corporate functions that directly support each brand. These functions were previously included within Other. While this reporting change did not impact our consolidated results, the segment data has been recast to be consistent for all periods presented.

For additional information, including the financial results of our reportable segments, see Note 20 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Bath & Body Works

Bath & Body Works, which sells products under the Bath & Body Works, White Barn, C.O. Bigelow and other brand names, is one of the leading specialty retailers of body care, home fragrance products, soaps and sanitizers. We operate more than 1,735 Bath & Body Works stores in the U.S. and Canada and online at www.BathandBodyWorks.com. Additionally, Bath & Body Works has more than 285 stores in more than 30 other countries operating under franchise, license and wholesale arrangements.

Victoria’s Secret

Victoria’s Secret, including PINK, is a specialty retailer of women's intimate and other apparel with fashion-inspired collections and prestige fragrances. We operate more than 930 Victoria’s Secret and PINK stores in the U.S., Canada and Greater China as well as online at www.VictoriasSecret.com and www.PINK.com. Additionally, Victoria’s Secret and PINK have more than 455 stores in more than 70 countries operating under franchise, license and wholesale arrangements.

Impacts of COVID-19

In March 2020, the spread of a novel coronavirus ("COVID-19") was declared a global pandemic by the World Health Organization. This pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions, including mandatory closures and orders to “shelter-in-place.” The actions that governments around the world have taken to contain the spread of COVID-19 have resulted in a period of disruption, including closure of our stores, limited store operating hours, reduced customer traffic and consumer spending and delays in manufacturing and shipping of products and raw materials. During this period, we are focused on protecting the health and safety of our customers, employees, contractors, suppliers and other business partners. We are also working with our suppliers to minimize potential disruptions, while managing our business in response to a changing dynamic. There remains a high level of uncertainty around the pandemic and the potential for further restrictions.

Our business operations and financial performance for 2020 were materially impacted by the COVID-19 pandemic. During the COVID-19 pandemic, our first priority was and continues to be the safety of our associates and customers. All of our stores in North America were closed on March 17, 2020, but we were able to re-open the majority of our stores as of the beginning of the third quarter of 2020. We adopted new operating models in our stores that focused on providing a safe shopping experience. We followed capacity limitations that ranged from 25% to 50% of normal, reduced store operating hours, closed fitting rooms at Victoria's Secret stores, added registers to promote social distancing and invested in increased labor to accommodate capacity restrictions and new cleaning protocols and in personal protective equipment for our employees. At Bath & Body Works, we

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launched Buy Online Pick Up In Store ("BOPIS") capabilities in some locations and are able to operate stores as BOPIS Only in jurisdictions that do not permit open shopping. We will continue to follow local laws to ensure a safe environment.

We are engaged in maximizing our direct businesses while focusing on distribution, fulfillment and call center safety during the pandemic. Bath & Body Works Direct, which remained open for the duration of fiscal 2020, grew sales by 109% to $2.003 billion. Although operations for Victoria’s Secret Direct were temporarily suspended for approximately one week in late March 2020, sales grew 31% in fiscal 2020 to $2.223 billion. We have dedicated resources to maximize our fulfillment capacity to meet the significant increase in digital demand, and as a result are achieving record productivity while maintaining standard delivery times despite fulfillment and shipping capacity constraints.

In response to the global COVID-19 crisis, we took prudent actions to manage expenses and to maintain our solid cash position and financial flexibility. We:

•Furloughed most store associates as of April 5, 2020 during the temporary store closures, while continuing to provide healthcare benefits for eligible associates;

•Suspended associate merit increases;

•Temporarily reduced salaries for senior vice presidents and above by 20%;

•Temporarily suspended cash compensation for all members of the Board of Directors;

•Reduced fiscal 2020 capital expenditures from an original forecast of $550 million to $228 million;

•Actively managed inventory to adjust for the impact of channel shifts to meet customer demand;

•Temporarily suspended the quarterly cash dividend beginning in the second quarter of fiscal 2020;

•Suspended many store and select office rent payments during the temporary closures. We completed negotiations with the majority of landlords, leading to a combination of rent waivers or abatements relating to closure periods, rent relief relating to the post-reopening “recovery” period given traffic declines, and rent deferrals;

•Converted the revolving credit facility to an asset-backed loan facility, issued $2.25 billion in new notes and extinguished $1.259 billion of notes primarily with near-term maturities; and

•Extended payment terms to vendors.

As of January 30, 2021, we had $3.9 billion in cash and cash equivalents with no outstanding borrowings on our asset-backed revolving credit facility (the “ABL Facility”).

Divestitures and Closure

Victoria's Secret U.K.

Due to challenging business results for Victoria's Secret in the United Kingdom ("U.K."), we entered into Administration in June 2020 to restructure store lease agreements and reduce operating losses in the Victoria's Secret U.K. business. In October 2020, we entered into a joint venture with Next PLC for the Victoria’s Secret business in the U.K. and Ireland. Under this agreement, we own 49% of the joint venture, and Next owns 51% and is responsible for operations. We account for our investment in the joint venture under the equity method of accounting. For additional information, see Note 5 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

La Senza

On January 6, 2019, we completed the sale of the La Senza business to an affiliate of Regent LP, a global private equity firm. For additional information, see Note 5 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Henri Bendel

In January 2019, we closed all of our Henri Bendel stores and the e-commerce website. For additional information, see Note 5 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Fiscal Year

Our fiscal year ends on the Saturday nearest to January 31. As used herein, “2020,” “2019,” “2018” and "2016" refer to the 52-week periods ended January 30, 2021, February 1, 2020, February 2, 2019 and January 28, 2017, respectively. "2017" refers to the 53-week period ended February 3, 2018.

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Real Estate

Company-operated Retail Stores

Our company-operated retail stores are located in shopping malls, lifestyle centers and off-mall locations in the U.S., Canada and Greater China. As a result of our strong brands and established retail presence, we have been able to lease high-traffic locations in most retail centers in which we operate.

The following table provides the number of our company-operated retail stores in operation for each brand as of January 30, 2021 and February 1, 2020:

	January 30, 2021	February 1, 2020
Bath & Body Works U.S.	1,633	1,637
Bath & Body Works Canada	103	102
Victoria’s Secret U.S.	846	1,053
Victoria’s Secret Canada	25	38
Victoria's Secret U.K. / Ireland	—	26
Victoria's Secret Beauty and Accessories Greater China	36	41
Victoria's Secret Greater China	26	23
Total	2,669	2,920

The following table provides the changes in the number of our company-operated retail stores operated for the past three fiscal years:

	Beginning of Year	Opened	Closed	Sold (a)	Transferred to Joint Venture (b)	End of Year
2020	2,920	53	(278)	—	(26)	2,669
2019	2,943	64	(87)	—	—	2,920
2018	3,075	88	(90)	(130)	—	2,943

_______________

(a)    Relates to the sale of the La Senza business. For additional information see Note 5 to the Consolidated Financial

    Statements included in Item 8. Financial Statements and Supplementary Data.

(b)    Relates to the Victoria's Secret U.K. joint venture with Next PLC. For additional information see Note 5 to the

Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Franchise, License and Wholesale Arrangements

In addition to our company-operated stores, our products are sold at hundreds of partner locations and on partner websites in more than 70 countries. Revenue recognized under franchise and license arrangements generally consists of royalties earned and recognized upon sale of merchandise by franchise and license partners to retail customers. Revenue is generally recognized under wholesale and sourcing arrangements at the time the title passes to the partner. We continue to increase the number of locations under these types of arrangements as part of our international expansion.

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The following table provides the number of our international stores operated by our partners for each business as of January 30, 2021 and February 1, 2020:

	January 30, 2021	February 1, 2020
Bath & Body Works	288	278
Victoria’s Secret Beauty and Accessories	338	360
Victoria’s Secret	120	84
Total	746	722

Our Strengths

We believe the following competitive strengths contribute to our leading market position, differentiate us from our competitors and will drive future growth:

Industry Leading Brands

We have developed and operate brands that allow us to target markets across the economic spectrum, across demographics and across the world. We believe that our three brands, Bath & Body Works, Victoria's Secret and PINK, are highly recognizable, which provides us with a competitive advantage.

•Bath & Body Works caters to our customers’ entire well-being, providing shower gels and lotions, aromatherapy, home fragrance, soaps and sanitizers and body care accessories.

•At Victoria’s Secret, we market fashionable product lines to our customers. While bras and panties are the core of what we do, this brand also gives our customers choices in beauty products, fragrances, sleepwear, loungewear, athletic attire, swimwear and personal care accessories.

•At PINK, we market products to the college-aged woman. While bras and panties are the core of what we do, this brand also gives our customers choices in apparel, loungewear, athletic attire, swimwear and accessories.

In-Store Experience and Store Operations

We view our customers' in-store experience as an important vehicle for communicating the image of each brand. We utilize visual presentation of merchandise, in-store marketing, music and our sales associates to reinforce the image represented by the brands.

Our in-store marketing is designed to convey the principal elements and personality of each brand. The store design, furniture, fixtures and music are all carefully planned and coordinated to create a unique shopping experience. Every brand displays merchandise uniformly to ensure a consistent store experience, regardless of location. Store managers receive detailed plans designating fixture and merchandise placement to ensure coordinated execution of the company-wide merchandising strategy.

Our sales associates and managers are a central element in creating the atmosphere of the stores by providing a high level of customer service.

Digital Experience

In addition to our in-store experience, we strive to create a customer-centric digital platform that integrates the digital and physical brand experience. Our digital presence, including social media, our websites and our mobile applications, allows us to get to know our customers better and communicate with them anytime and anywhere.

Product Development, Sourcing and Logistics

We believe a large part of our success comes from frequent and innovative product launches, which include new fragrance and other product launches at Bath & Body Works, and bra launches at Victoria’s Secret and PINK. Our merchant, design and sourcing teams have a long history of bringing innovative products to our customers. Additionally, we believe that our sourcing and production functions have a long and deep presence in the key sourcing markets including those in the U.S. and Asia, which helps us partner with the best manufacturers to get high-quality products quickly.

Experienced and Committed Management Team

Our senior management team has a wealth of retail and business experience at L Brands, Inc. and other companies such as The Gap, Banana Republic, Ann Taylor, Loft, The Home Depot, Yum Brands, Ross Stores, Abercrombie & Fitch and Boots. We believe that we have one of the most experienced management teams in retail.

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Additional Information

Merchandise Vendors

During 2020, we purchased merchandise from approximately 320 vendors located throughout the world. No vendor provided 10% or more of our merchandise purchases.

Distribution and Merchandise Inventory

A substantial portion of our merchandise is shipped to our distribution centers in the Columbus, Ohio area. Additionally, we use third-party operated distribution centers located throughout North America to distribute our merchandise. We use a variety of shipping terms that result in the transfer of title of the merchandise at either the point of origin or point of destination.

Our policy is to maintain sufficient quantities of inventories on hand in our retail stores and distribution centers to enable us to offer customers an appropriate selection of current merchandise. We emphasize rapid turnover and take markdowns as required to keep merchandise fresh and current.

We are actively managing our inventory to adjust for the impacts of COVID-19, including store closures, channel shifts, product category shifts and meeting customer demand. The current environment requires unprecedented agility, and we are leveraging the speed that we have in our supply chain, our close partnerships with our suppliers and the capabilities of our sourcing, production and logistics teams to respond quickly.

Information Systems

Our management information systems consist of a full range of retail, financial and merchandising systems. The systems include applications related to point-of-sale, e-commerce, merchandising, planning, sourcing, logistics, inventory management, data security and support systems including human resources and finance.

Seasonal Business

Our operations are seasonal in nature and consist of two principal selling seasons: Spring (the first and second quarters) and Fall (the third and fourth quarters). The fourth quarter, including the holiday season, typically accounts for approximately one-third of our net sales and is our most profitable quarter. Accordingly, cash requirements are highest in the third quarter as our inventories build in advance of the holiday season.

Working Capital

We fund our business operations through a combination of available cash and cash equivalents and cash flows generated from operations. In addition, our credit facilities are available for additional working capital needs and investment opportunities.

Regulation

We and our products are subject to regulation by various federal, state, local and foreign regulatory authorities. We are subject to a variety of tax and customs regulations and international trade arrangements.

Trademarks and Patents

Our trademarks and patents, which constitute our primary intellectual property, have been registered or are the subject of pending applications in the U.S. Patent and Trademark Office and with the registries of many foreign countries and/or are protected by common law. We believe our products are identified by our intellectual property and, thus, our intellectual property is of significant value. Accordingly, we intend to maintain our intellectual property and related registrations and vigorously protect our intellectual property assets against infringement.

Other Information

For additional information about our business, including our net sales and profits for the last three years and selling square footage, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Competition

The sale of home fragrance products, body care, soaps and sanitizers, women’s intimate and other apparel, and personal and beauty care products is a highly competitive business with numerous competitors, including individual and chain specialty stores, department stores, online retailers and discount retailers. Brand image, presentation, marketing, design, price, service, fulfillment, assortment and quality are the principal competitive factors.

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Human Capital Management

L Brands Human Capital

At L Brands, our purpose goes beyond selling product. We work to foster a safe, welcoming and empowering workplace for our thousands of associates around the globe and are truly making a difference in our communities.

The Company has a Human Capital and Compensation Committee that oversees the Company’s programs, policies, practices and strategies relating to culture, talent diversity, inclusion and equal employment opportunities as well as the Company’s executive compensation plans.

Workforce Demographics

As of January 30, 2021, we employed approximately 92,300 associates, 69,900 of whom were part-time. In addition, temporary associates are hired during peak periods, such as the holiday season. Approximately 85% of our associates work in our stores, 5% in distribution centers with the balance in home office and call centers.

Through our brands, we are focused on women. Women fill roles from our stores to our Board room. As of January 30, 2021, women make up 89% of our workforce and 50% of our Board members.

Focus on Inclusion

We focus on recruiting, retaining and advancing diverse talent that reflects the customers we serve and the communities where we live and work. By continuing to encourage a workplace environment where diversity and inclusion are valued, we believe we can serve our customers better, as well as retain highly talented associates, suppliers and vendors of different backgrounds and experiences.

Led by our Office of Inclusion and with oversight from the Human Capital and Compensation Committee, the enterprise has built an inclusion strategy with five key pillars:

•Increase the diversity of candidate slates and hires for all roles.

•Develop, deploy and ensure completion of required learning at all levels bringing awareness and education to associates on diversity, equity and inclusion.

•Improve retention of diverse associates at all levels. Monitor culture change and employee satisfaction through survey results.

•Increase volunteerism and giving to organizations targeting racial equity and social justice.

•Increase spend with minority-owned third-party companies.

More than 99% of our associates have completed training on our strategic vision for diversity and inclusion which includes lessons on bias, equity and conscious inclusion. The training emphasizes both the Company’s and associates’ responsibility to build an inclusive culture.

In addition, we have Inclusion Resource Groups that provide opportunity for associates to connect with one another around their shared passion for creating an inclusive workplace for all associates. These groups provide professional development for associates, support the needs of the business, help shape the culture of our company and volunteer in the community. We have over 1,400 associates participating in four Inclusion Resource Groups designed for associates who identify as, or are allies of, the following groups: Hispanic and Latinx, LGBTQ, Black and African American and women.

Commitment to Equitable and Competitive Wages

We are committed to equal opportunity and treatment for all associates which includes equal career advancement opportunities and equitable and competitive wages. We evaluate fairness in total compensation with reference to both internal and external comparisons. Our compensation programs are designed to link annual changes in compensation to overall Company performance, as well as each individual’s contribution to the results achieved. The emphasis on overall Company performance is intended to align the associates’ financial interests with the interests of shareholders.

Our investment in our workforce in 2020 included the expansion of participation in the short-term cash incentive compensation (IC) program to include all salaried associates in the home office, distribution or call centers beginning with the Fall 2020 season and going forward.

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Commitment to Providing Quality Benefits

At L Brands, we offer competitive, performance-based compensation; a company-matched savings and retirement plan; and flexible and affordable health and wellness and lifestyle benefits. Subject to certain eligibility requirements, associates can choose benefits and resources that fit their lifestyle, including, but not limited to, 14 weeks paid maternity leave, 6 weeks paid paternal leave, tuition reimbursement, free access to life planning services and generous L Brands merchandise discount.

Associate Development

We are committed to investing in all our associates. We provide diverse learning opportunities and challenging work experiences. We believe that associates can reach their career goals through multiple roles, career paths and locations around the world. We offer a variety of enrichment experiences for those joining us as interns, new graduates, in mid-career or as a capstone to a career. Examples include:

•Development Days: Dedicated time to advance technical, creative or business skills.

•Leadership Development: Courses for associates in management positions to build critical skills and grow as effective leaders.

•Merchant-in-Training Program: Immersive program to learn the craft both on the job and from experts in the classroom.

•Onboarding: Dedicated time to learn the business and to form important relationships for mentoring and development.

•Tuition Assistance: Reimbursement of 80 percent of eligible tuition expenses, up to $3,000 per calendar year.

Safety is Our Priority

Health and safety of our associates, customers and vendors is our highest priority. We provide safe and clean facilities, comply with all applicable workplace safety laws and have global safety policies and procedures to protect from avoidable injury.

In response to COVID-19, we implemented robust safety protocols to protect associates working in our distribution centers, stores and home offices. Associates whose work can be done remotely are working from home. For associates who are working in our stores, offices and distribution centers, we are utilizing COVID-19 safety measures developed to align with CDC guidelines.

Code of Conduct

We have a written Code of Conduct that is based on our values and is a resource where associates can find information that defines behaviors that are acceptable and those that are not. We conduct an annual Code of Conduct compliance process which requires associates to complete a Code of Conduct disclosure and a separate training course.

We maintain an Ethics Hotline 24 hours a day, 7 days a week where associates may anonymously report potential instances of unethical conduct and potential violations of law or company policies.

Executive Officers of Registrant

To navigate our business transformation, and manage the COVID-19 crisis, our Board prioritized establishing a leadership team that will address the challenges facing the business and position our brands for success, resulting in changes at the most senior executive levels. In May, our founder, Leslie H. Wexner stepped down as Chief Executive Officer ("CEO") and Chairman of the Board of L Brands, remaining a member of the Board as Chairman Emeritus. Andrew M. Meslow, previously CEO of Bath & Body Works, was named CEO of L Brands and joined the Board. Stuart B. Burgdoerfer, Chief Financial Officer of L Brands, took on the added role of interim CEO for Victoria's Secret. On March 18, 2021, we announced that Leslie H. Wexner would not stand for reelection to the Board at the annual shareholders’ meeting in May 2021.

In June 2020, Charles C. McGuigan left his role as Chief Operating Officer of L Brands and CEO and President of Mast Global. In September, Julie B. Rosen was hired as President at Bath & Body Works to lead the development of products across all categories. In October, Shelley B. Milano left her role as Chief Human Resources Officer of L Brands, allowing for separate human resources leadership teams for each of Bath & Body Works and Victoria's Secret going forward. Deon N. Riley joined L Brands in December to fill the Chief Human Resources Officer role for L Brands and Bath & Body Works, and Laura Miller joined L Brands in November to fill the Chief Human Resources Officer role for Victoria's Secret.

Following these changes, as of the end of fiscal 2020, our named executive officers are as follows:

•Andrew M. Meslow, 51, has been our Chief Executive Officer since May 2020 and has had senior leadership positions with Bath & Body Works since 2005. Mr. Meslow, who joined L Brands in 2003, has 29 years of experience in the retail industry, including previous roles at Ann Taylor and Banana Republic;

•Stuart B. Burgdoerfer, 57, has been our Executive Vice President and Chief Financial Officer since April 2007, served in senior leadership positions with the Company from 1998 to 2004 and has previous retail experience with The Home Depot, Inc.;

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•James L. Bersani, 62, has been our President of Real Estate since March 2014 and has led our real estate function since April 2006. Mr. Bersani has held a variety of roles in the real estate department with increasing leadership since joining L Brands in 1986;

•Julie B. Rosen, 55, has been our President of Bath & Body Works since September 2020. Prior to joining L Brands, Ms. Rosen ran her own retail consulting business with clients including Nike, Theory and Bare Escentuals and has prior retail experience at Banana Republic, Gap, Ann Taylor and Loft; and

•Deon N. Riley, 53, has been our Chief Human Resources Officer since December 2020. Ms. Riley joined L Brands from Ross Stores and served in leadership roles at Abercrombie & Fitch.

In February 2021, we announced Mr. Burgdoerfer's intention to retire from the Company effective in August 2021. Mr. Burgdoerfer will continue to serve as the Company's Chief Financial Officer until his retirement, but no longer serves as the interim CEO for Victoria’s Secret. Upon the announcement of Mr. Burgdoerfer's planned retirement, Martin Waters was promoted to CEO of Victoria's Secret.

Recent Developments

On February 20, 2020, we and an affiliate of Sycamore Partners Management, L.P. ("Sycamore"), entered into a Transaction Agreement (the "Transaction Agreement") pursuant to which, among other things, the Company would have sold a 55% interest in the Company's Victoria's Secret and PINK businesses. On May 4, 2020, we and Sycamore mutually agreed to terminate the Transaction Agreement.

During 2020, we took a number of important steps to improve performance at Victoria's Secret and to prepare Bath & Body Works and Victoria's Secret to operate as separate standalone companies. All options, including a spin-off of the Victoria’s Secret business into a public company or a private sale of the business, are being evaluated.

On March 12, 2021, we announced actions we are taking to further enhance shareholder value and decrease leverage. Our Board of Directors authorized the following:

•A reduction in our debt that will be effected by a make whole call to repurchase the remaining $285 million of outstanding notes due February 2022 and the $750 million of outstanding secured notes due July 2025. This make whole call was issued on March 12, 2021 and we anticipate using approximately $1.1 billion in cash to complete the debt repurchase;

•A new $500 million share repurchase plan, which replaces the $79 million remaining under the March 2018 repurchase program; and

•A reinstatement of our annual dividend at $0.60 per share, beginning with the quarterly dividend to be paid in June 2021.

Available Information

We are subject to the reporting requirements of the Exchange Act and its rules and regulations. The Exchange Act requires us to file reports, proxy statements and other information with the U.S. Securities and Exchange Commission ("SEC"). The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC's website at www.sec.gov.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on our website at www.lb.com.

Copies of any of the above-referenced documents will also be made available, free of charge, upon written request to:

L Brands, Inc.

Investor Relations Department

Three Limited Parkway

Columbus, Ohio 43230

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ITEM 1A. RISK FACTORS.

We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this report or made by our Company or our management involve risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “planned,” “potential” and any similar expressions may identify forward-looking statements. Risks associated with the following factors, among others, in some cases have affected and in the future could affect our financial performance and actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this report or otherwise made by our company or our management:

•general economic conditions, consumer confidence, consumer spending patterns and market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises or other major events, or the prospect of these events;

•the novel coronavirus (COVID-19) global pandemic has had and is expected to continue to have an adverse effect on our business and results of operations;

•the seasonality of our business;

•divestitures or other dispositions, including any sale or spin-off of Victoria’s Secret and related operations and contingent liabilities from businesses that we have divested;

•difficulties arising from turnover in company leadership or other key positions;

•our ability to attract, develop and retain qualified associates and manage labor-related costs;

•the dependence on mall traffic and the availability of suitable store locations on appropriate terms;

•our ability to grow through new store openings and existing store remodels and expansions;

•our ability to successfully operate and expand internationally and related risks;

•our independent franchise, license and wholesale partners;

•our direct channel businesses;

•our ability to protect our reputation and our brand images;

•our ability to attract customers with marketing, advertising and promotional programs;

•our ability to maintain, enforce and protect our trade names, trademarks and patents;

•the highly competitive nature of the retail industry and the segments in which we operate;

•consumer acceptance of our products and our ability to manage the life cycle of our brands, keep up with fashion trends, develop new merchandise and launch new product lines successfully;

•our ability to source, distribute and sell goods and materials on a global basis, including risks related to:

•political instability, environmental hazards or natural disasters;

•significant health hazards or pandemics, which could result in closed factories, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in infected areas;

•duties, taxes and other charges;

•legal and regulatory matters;

•volatility in currency exchange rates;

•local business practices and political issues;

•potential delays or disruptions in shipping and transportation and related pricing impacts;

•disruption due to labor disputes; and

•changing expectations regarding product safety due to new legislation;

•our geographic concentration of vendor and distribution facilities in central Ohio;

•fluctuations in foreign currency exchange rates;

•the ability of our vendors to deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations;

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•fluctuations in product input costs;

•our ability to adequately protect our assets from loss and theft;

•fluctuations in energy costs;

•increases in the costs of mailing, paper, printing or other order fulfillment logistics;

•claims arising from our self-insurance;

•our and our third-party service providers' ability to implement and maintain information technology systems and to protect associated data;

•our ability to maintain the security of customer, associate, third-party and company information;

•stock price volatility;

•our ability to pay dividends and related effects;

•shareholder activism matters;

•our ability to maintain our credit rating;

•our ability to service or refinance our debt and maintain compliance with our restrictive covenants;

•our ability to comply with laws, regulations and technology platform rules or other obligations related to data privacy and security;

•our ability to comply with regulatory requirements;

•legal and compliance matters; and

•tax, trade and other regulatory matters.

We are not under any obligation and do not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this report to reflect circumstances existing after the date of this report or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.

The following discussion of risk factors contains “forward-looking statements.” These risk factors may be important to understanding any statement in this Form 10-K, other filings or in any other discussions of our business. The following information should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation and Item 8. Financial Statements and Supplementary Data.

In addition to the other information set forth in this report, the reader should carefully consider the following factors which could materially affect our business, financial condition or future results. The risks described below are not our only risks. Additional risks and uncertainties not currently known or that are currently deemed to be immaterial may also adversely affect our business, operating results and/or financial condition in a material way.

Risks related to our business:

Our net sales, profit results and cash flows are sensitive to, and may be affected by, general economic conditions, consumer confidence, spending patterns, significant health hazards or pandemics, weather or other market disruptions.

Our net sales, profit, cash flows and future growth may be affected by negative local, regional, national or international political or economic trends or developments that reduce the consumers’ ability or willingness to spend, including the effects of national and international security concerns such as war, terrorism or the threat thereof. In addition, market disruptions due to natural disasters, significant health hazards or pandemics, or other major events or the prospect of these events could also impact consumer spending and confidence levels. Extreme weather conditions in the areas in which our stores are located, particularly in markets where we have multiple stores, could adversely affect our business. Purchases of our products may decline during periods when economic or market conditions are unsettled or weak. In such circumstances, we may increase the number of promotional sales, which could have a material adverse effect on our results of operations, financial condition and cash flows.

The decision by the U.K. to leave the European Union (commonly referred to as “Brexit”) has increased the uncertainty in the economic and political environment in Europe. On December 24, 2020, the U.K. and EU reached a post-Brexit Trade and Cooperation Agreement that contains new rules governing the new relationship between the U.K. and the EU, including with respect to trade, travel and immigration among other things. Our business in the U.K. may be adversely impacted by ongoing uncertainty, fluctuations in currency exchange rates, changes in trade policies, or changes in labor, immigration, tax, data

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privacy or other laws. Any of these effects, among others, could materially and adversely affect our business, results of operations, and financial condition.

The novel coronavirus global pandemic has had and is expected to continue to have an adverse effect on our business and results of operations.

In March 2020, the coronavirus pandemic was declared a global pandemic by the World Health Organization. This pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions, including mandatory closures and orders to “shelter-in-place.” The actions that governments around the world have taken to contain the spread of COVID-19 have resulted in a period of disruption, including closure of our stores, limited store operating hours, reduced customer traffic and consumer spending and delays in manufacturing and shipping of products and raw materials. During this period, we are focused on protecting the health and safety of our customers, employees, contractors, suppliers, and other business partners. We are also working with our suppliers to minimize potential disruptions, while managing our business in response to a changing dynamic. Our business operations and financial performance for 2020 have been materially impacted by the COVID-19 pandemic. All of our stores in North America were closed on March 17, 2020 and almost all remained closed as of the beginning of the second quarter. We reopened our stores by the end of the second quarter 2020 in accordance with local restrictions and where we believed we could provide for the safety and well-being of our employees and customers. Due to the uncertainty of COVID-19 and the speed at which the pandemic continues to impact our markets, we are continuing to assess the situation, including government-imposed restrictions, market by market.

We are unable to accurately predict the full impact that COVID-19 will have on our operations going forward due to uncertainties which will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unknowable duration and spread of the COVID-19 pandemic, actions taken to limit the spread, and the public’s willingness to comply with such actions, the availability and efficacy of a vaccine and positive treatments for COVID-19, and the impact of governmental regulations that might be imposed in response to the pandemic. Numerous state and local jurisdictions have imposed, and others in the future may impose, shelter-in-place orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19. Such orders, restrictions and changes in consumer behavior have negatively impacted our operations, especially in our stores. In addition to these more near-term impacts, we are unable to accurately predict the full impact COVID-19 will have on our longer-term operations as well, particularly with respect to our current mix of merchandise offerings, event-based categories and store traffic trends.

To the extent COVID-19 adversely affects our business, operations, financial condition and operating results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to our high level of indebtedness, our need to generate sufficient cash flows to service our indebtedness and our ability to comply with the covenants contained in the agreements that govern our indebtedness.

Our net sales, operating income, cash and inventory levels fluctuate on a seasonal basis.

We experience major seasonal fluctuations in our net sales and operating income, with a significant portion of our operating income typically realized during the fourth quarter holiday season. Any decrease in sales or margins during this period could have a material adverse effect on our results of operations, financial condition and cash flows.

Seasonal fluctuations also affect our cash and inventory levels, since we usually order merchandise in advance of peak selling periods and sometimes before new fashion trends are confirmed by customer purchases. We must carry a significant amount of inventory, especially before the holiday season selling period. If we are not successful in selling inventory, we may have to sell the inventory at significantly reduced prices or may not be able to sell the inventory at all, which could have a material adverse effect on our results of operations, financial condition and cash flows.

The proposed separation of the Victoria’s Secret business and related operations could negatively impact our business, and contingent liabilities from the divestiture of such business could adversely affect our financial position and results of operations.

On February 4, 2021, we announced that we are currently targeting August 2021 to complete the separation of the Victoria’s Secret and Bath & Body Works businesses. We are considering all options, including a spin-off of the Victoria’s Secret business into a public company or a private sale of the Victoria’s Secret business. The separation poses risks and challenges that could negatively impact our business. For example, we may be unable to do so on satisfactory terms within our anticipated timeframe or at all, and unanticipated developments could delay, prevent or otherwise adversely affect any such separation, including but not limited to market disruptions in general or financial market conditions or potential problems or delays in obtaining various regulatory and tax approvals or clearances. In addition, the separation may dilute our earnings per share, have other adverse financial and accounting impacts and distract management. In addition, we may be required to indemnify buyers or any spun-off entity against known and unknown contingent liabilities in connection with the separation of the Victoria’s

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Secret business. The resolution of these contingencies may have a material effect on our financial position and results of operations. Uncertainty about the effect of the separation of the Victoria’s Secret business on employees, commercial partners and vendors may have an adverse effect on us. These uncertainties may impair our ability to retain and motivate key personnel and could cause commercial partners, vendors and others that deal with us to defer or decline entering into contracts with us or seek to change existing business relationships with us. In addition, if key employees depart because of uncertainty about their future roles and the potential complexities of any potential separation of Victoria’s Secret, our business could be harmed. If we are unable to separate the Victoria’s Secret business, we will continue to be subject to the risks of operating such business. We may incur significant expenses and challenges in connection with the separation of the Victoria’s Secret business, which may include expenses and challenges related to the separation of Victoria's Secret from our current information technology environment. In addition, we may not be able to achieve the full strategic and financial benefits that are expected to result from such separation and the anticipated benefits of such separation are based on a number of assumptions, some of which may prove incorrect.

Retained or contingent liabilities from businesses that we divest could adversely affect our financial results.

In the fourth quarter of 2018, we completed the sale of La Senza to an affiliate of Regent LP, a global private equity firm. As a result of the La Senza divestiture, we may incur unexpected contingent liabilities, including with respect to leases assumed by the buyer. Our divestiture activities may also present financial and operational risks. Those risks may include difficulties separating personnel, financial and other systems, and indemnities and potential disputes with the buyer. Any of these factors could adversely affect our financial condition and results of operations.

Turnover in company leadership or other key positions may have an adverse impact on company performance.

We may experience further changes in key leadership or key positions in the future. The departure of key leadership personnel can result in the loss of significant knowledge and experience. This loss of knowledge and experience can be mitigated through successful hiring and transition, but there can be no assurance that we will be successful in such efforts. Attracting and retaining qualified senior leadership may be more challenging under adverse business conditions. Failure to attract and retain the right talent, or to smoothly manage the transition of responsibilities resulting from such turnover, could affect our ability to meet our challenges and may cause us to miss performance objectives or financial targets or disrupt our relationships with our customers.

We may be impacted by our ability to attract, develop and retain qualified associates and manage labor-related costs.

We believe our competitive advantage is providing a positive, engaging and satisfying experience for each individual customer, which requires us to have highly trained and engaged associates. Our success depends in part upon our ability to attract, develop and retain a sufficient number of qualified associates, including store personnel and talented merchants. The turnover rate in the retail industry is generally high, and qualified individuals of the requisite caliber and number needed to fill these positions may be in short supply in some areas. Competition for such qualified individuals or changes in labor and healthcare laws could require us to incur higher labor costs. Our inability to recruit a sufficient number of qualified individuals in the future may delay planned openings of new stores or affect the speed with which we expand. Delayed store openings, significant increases in associate turnover rates or significant increases in labor-related costs could have a material adverse effect on our results of operations, financial condition and cash flows.

Our net sales depend on a volume of traffic to our stores and the availability of suitable lease space.

Most of our stores are located in retail shopping areas including malls and other types of retail centers. Sales at these stores are derived, in part, from the volume of traffic in those retail areas. Our stores benefit from the ability of the retail center and other attractions in an area, including “destination” retail stores, to generate consumer traffic in the vicinity of our stores. Sales volume and retail traffic may be adversely affected by factors that we cannot control, such as economic downturns or changes in consumer demographics in a particular area, consumer trends away from brick-and-mortar retail toward online shopping, competition from internet and other retailers and other retail areas where we do not have stores, significant health hazards or pandemics, the closing of other stores or the decline in popularity or safety in the shopping areas where our stores are located and the deterioration in the financial condition of the operators or developers of the shopping areas in which our stores are located.

Part of our future growth is significantly dependent on our ability to operate stores in desirable locations with capital investment and lease costs providing the opportunity to earn a reasonable return. We cannot be sure as to when or whether such desirable locations will become available at reasonable costs. Some of our store locations require significant upfront capital investment and have material lease commitments. Additionally, we are dependent upon the suitability of the lease spaces that we currently use. The leases that we enter into are generally noncancelable leases with initial terms of 10 years. If we determine that it is no longer economical to operate a store and decide to close it, we may remain obligated under the applicable lease for, among other things, payment of the base rent for the balance of the lease term.

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These risks could have a material adverse effect on our ability to grow and our results of operations, financial condition and cash flows.

Our ability to grow depends in part on new store openings and existing store remodels and expansions.

Our continued growth and success will depend in part on our ability to open and operate new stores and expand and remodel existing stores on a timely and profitable basis. Accomplishing our new and existing store expansion goals will depend upon a number of factors, including the ability to partner with developers and landlords to obtain suitable sites for new and expanded stores at acceptable costs, the hiring and training of qualified personnel and the integration of new stores into existing operations. There can be no assurance we will be able to achieve our store expansion goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and expanded stores profitably. These risks could have a material adverse effect on our ability to grow and results of operations, financial condition and cash flows.

Our international operations and our plans for international expansion include risks that could impact our results and reputation.

We intend to continue to operate internationally and further expand into international markets, including mainland China, through partner arrangements and/or company-operated stores. The risks associated with international markets include difficulties in attracting customers due to a lack of customer familiarity with our brands, our lack of familiarity with local customer preferences and seasonal differences in the market. Any of these difficulties may lead to disruption in the overall timing of our international expansion efforts or increased costs. Further, entry into other markets may bring us into competition with new competitors or with existing competitors with an established market presence. Other risks include general economic conditions in specific countries or markets, volatility in the geopolitical landscape, restrictions on the repatriation of funds held internationally, disruptions or delays in shipments, occurrence of significant health hazards or pandemics, changes in diplomatic and trade relationships, political instability and foreign governmental regulation. Such expansions will also have upfront investment costs that may not be accompanied by sufficient revenues to achieve typical or expected operational and financial performance.

Further, our results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates. See “Fluctuations in foreign currency exchange rates could impact our financial condition and results of operations” below.

These risks could have a material adverse effect on our results of operations, financial condition and cash flows.

Our licensees, franchisees and wholesalers could take actions that could harm our business or brand images.

We have global representation through independently owned stores operated by our partners. Although we have criteria to evaluate and select prospective partners, the level of control we can exercise over our partners is limited, and the quality and success of their operations may be diminished by any number of factors beyond our control. For example, our partners may not have the business acumen or financial resources necessary to successfully operate stores in a manner consistent with our standards and may not hire and train qualified store managers and other personnel. Further, we have no control as to whether our partners comply with federal and local law. Our brand image and reputation may suffer materially, and our sales could decline if our partners do not operate successfully. These risks could have an adverse effect on our results of operations, financial condition and cash flows.

Our direct channel businesses include risks that could have an effect on our results.

Our direct operations are subject to numerous risks that could have a material adverse effect on our results. Risks include, but are not limited to, the difficulty in recreating the in-store experience through our direct channels; domestic or international resellers purchasing merchandise and reselling it outside our control; our ability to anticipate and implement innovations in technology and logistics in order to appeal to existing and potential customers who increasingly rely on multiple channels to meet their shopping needs; the failure of and risks related to the systems that operate our web infrastructure, websites and the related support systems, including computer viruses, theft of customer information, privacy concerns, telecommunication failures and electronic break-ins and similar disruptions.

Our failure to maintain efficient and uninterrupted order-taking and fulfillment operations could also have a material adverse effect on our results. The satisfaction of our online customers depends on their timely receipt of merchandise. If we encounter difficulties with the distribution facilities, or if the facilities were to shut down for any reason, including as a result of fire, natural disaster or work stoppage, we could face shortages of inventory; incur significantly higher costs and longer lead times associated with distributing our products to our customers; and cause customer dissatisfaction.

Any of these issues could have a material adverse effect on our operations, financial condition and cash flows.

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Our ability to protect our reputation could have a material effect on our brand images.

Our ability to maintain our reputation is critical to our brand images. Our reputation could be jeopardized if we fail to maintain high standards for merchandise quality and integrity. Any negative publicity, including information publicized through traditional or social media platforms and similar venues such as blogs, websites and other forums, may affect our reputation and brand and, consequently, reduce demand for our merchandise, even if such publicity is unverified or inaccurate.

Failure to comply with or the perception that the Company has failed to comply with ethical, social, product, labor, privacy and environmental standards, or related political considerations, could also jeopardize our reputation and potentially lead to various adverse consumer actions, including boycotts. Failure to comply with local laws and regulations, to maintain an effective system of internal controls, to maintain the security of customer, associate, third-party and company information or to provide accurate and timely financial statement information could also hurt our reputation. Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations, financial condition and cash flows, as well as require additional resources to rebuild our reputation.

If our marketing, advertising and promotional programs are unsuccessful, or if our competitors are more effective with their programs than we are, our revenue or results of operations may be adversely affected.

Customer traffic and demand for our merchandise are influenced by our advertising, marketing and promotional activities, the name recognition and reputation of our brands and the location of and service offered in our stores. Although we use marketing, advertising and promotional programs to attract customers through various media, including social media, websites, mobile applications, email, print and television, some of our competitors may expend more for their programs than we do, or use different approaches than we do, which may provide them with a competitive advantage. Our programs may not be effective or could require increased expenditures, which could have a material adverse effect on our revenue and results of operations.

Our ability to adequately maintain, enforce and protect our trade names, trademarks and patents could have an impact on our brand images and ability to penetrate new markets.

We believe that our trade names, trademarks and patents are important assets and an essential element of our strategy. We have obtained or applied for federal registration of these trade names, trademarks and patents and have applied for or obtained registrations in many foreign countries. There can be no assurance that we will obtain such registrations or that the registrations we obtain will prevent the imitation of our products or infringement or other violation of our intellectual property rights by others. In particular, the laws of certain foreign countries may not protect proprietary rights to the same extent as the laws of the U.S. If any third-party copies our products or our stores in a manner that projects lesser quality or carries a negative connotation, it could have a material adverse effect on our brand image and reputation as well as our results of operations, financial condition and cash flows.

Third parties may assert rights in or ownership of our trademarks and other intellectual property rights, or trademarks that are similar to our trademarks, or claim that we are infringing, misappropriating or otherwise violating their intellectual property rights. We may be unable to successfully resolve these type of conflicts to our satisfaction and may be required to enter into costly license agreements, be required to pay significant royalty, settlements costs or damages, required to rebrand our products and/or be prevented from selling some of our products.

Our ability to compete favorably in our highly competitive segment of the retail industry could impact our results.

The retail industry is highly competitive. We compete for sales with a broad range of other retailers, including individual and chain specialty stores, department stores and discount retailers. In addition to the traditional store-based retailers, we also compete with direct marketers or retailers that sell similar lines of merchandise and who target customers through online channels. Brand image, marketing, design, price, service, assortment, quality, image presentation and fulfillment are all competitive factors in both the store-based and online channels.

Some of our competitors may have greater financial, marketing and other resources available and trends across our product categories may favor our competitors. We rely to a greater degree than some of our competitors on physical locations in shopping malls and centers and so declines in traffic to such locations may affect us more significantly than our competitors. Some of our competitors sell their products in stores that are located in the same shopping malls and centers as our stores. In addition to competing for sales, we compete for favorable site locations and lease terms in shopping malls and centers.

Increased competition, combined with declines in mall and/or online website traffic, could result in price reductions, increased marketing expenditures and loss of pricing power and market share, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.

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Our ability to manage the life cycle of our brands and to remain current with fashion trends and launch new product lines successfully could impact the image and relevance of our brands.

Our success depends in part on management’s ability to effectively manage the life cycle of our brands and to anticipate and respond to changing fashion preferences and consumer demands and to translate market trends into appropriate, salable product offerings in advance of the actual time of sale to the customer. We are dependent on certain product categories, and a decline in consumer demand in these product categories could negatively effect on our results of operations, financial condition and cash flows. Customer demands and fashion trends change rapidly. If we are unable to successfully anticipate, identify or react to changing styles or trends or we misjudge the market for our products or any new product lines, our sales will be lower, potentially resulting in significant amounts of unsold inventory. In response, we may be forced to increase our marketing promotions or price markdowns. These risks could have a material adverse effect on our brand image and reputation as well as our results of operations, financial condition and cash flows.

We may be impacted by our ability to adequately source, distribute and sell merchandise and other materials on a global basis.

We source merchandise and other materials directly in international markets and in our domestic market. We distribute merchandise and other materials globally to our partners in international locations and to our stores. Many of our imports and exports are subject to a variety of customs regulations and international trade arrangements, including existing or potential duties, tariffs or safeguard quotas. We compete with other companies for production facilities.

We also face a variety of other risks generally associated with doing business on a global basis. For example:

•political instability, environmental hazards or natural disasters which could negatively affect international economies, financial markets and business activity;

•significant health hazards or pandemics, which could result in closed factories, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in infected areas;

•imposition of new or retaliatory trade duties, sanctions or taxes and other charges on imports or exports;

•evolving, new or complex legal and regulatory matters;

•volatility in currency exchange rates;

•local business practice and political issues (including issues relating to compliance with domestic or international labor standards) which may result in adverse publicity or threatened or actual adverse consumer actions, including boycotts;

•potential delays or disruptions in shipping and transportation and related pricing impacts;

•disruption due to labor disputes; and

•changing expectations regarding product safety due to new legislation or other factors.

We also rely upon third-party transportation providers for substantially all of our product shipments, including shipments to and from our distribution centers, to our stores and to our customers. Our utilization of these delivery services for shipments is subject to risks, including increases in labor costs and fuel prices, which would increase our shipping costs, and associate strikes and inclement weather, which may impact our transportation providers’ ability to provide delivery services that adequately meet our shipping needs. Further, the rapid increase in demand for online shopping has led to increased pressure on the capacity of our fulfillment network.

For example, the COVID-19 global pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets. The COVID-19 global pandemic resulted in the temporary shut-down of many of our supply chain facilities. The pandemic continues to have the potential to significantly impact our supply chain if the factories that manufacture our products, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers are disrupted, temporarily closed or experience worker shortages. We may also see disruptions or delays in shipments and negative impacts to pricing of certain components of our products. In addition, the impact of COVID-19 on macroeconomic conditions may impact the proper functioning of financial and capital markets, foreign currency exchange rates, commodity prices, and interest rates. Even after the COVID-19 global pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future.

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We rely on a number of vendor and distribution facilities located in the same vicinity, making our business susceptible to local and regional disruptions or adverse conditions.

To achieve the necessary speed and agility in producing our beauty, personal care and home fragrance products, we rely heavily on vendor and distribution facilities in close proximity to our headquarters in Central Ohio. As a result of geographic concentration of the vendor and distribution facilities that we rely upon, our operations are susceptible to local and regional factors, such as accidents, system failures, economic and weather conditions, natural disasters, demographic and population changes, and other unforeseen events and circumstances. Any significant interruption in the operations of these facilities could lead to inventory issues or increased costs, which could have a material adverse effect on our results of operations, financial condition and cash flows.

Fluctuations in foreign currency exchange rates could impact our financial condition and results of operations.

We are exposed to foreign currency exchange rate risk with respect to our sales, profits, assets and liabilities denominated in currencies other than the U.S. dollar. In addition, our royalty arrangements are calculated based on sales in local currency and, as such, we are exposed to foreign currency exchange rate fluctuations. Although we use foreign currency forward contracts to hedge certain foreign currency risks, these measures may not succeed in offsetting all of the short-term negative impacts of foreign currency rate movements on our business and results of operations. Hedging would generally not be effective in offsetting the long-term impact of sustained shifts in foreign exchange rates on our business results. As a result, the fluctuation in the value of the U.S. dollar against other currencies could have a material adverse effect on our results of operations, financial condition and cash flows.

We may be impacted by our vendors’ ability to manufacture and deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations.

We purchase products from third-party vendors. Factors outside our control, such as production or shipping delays or quality problems, could disrupt merchandise deliveries and result in lost sales, cancellation charges or excessive markdowns.

In addition, quality problems could result in a product liability judgment or a widespread product recall that may negatively impact our sales and profitability for a period of time depending on product availability, competition reaction and consumer attitudes. Even if the product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertions could adversely impact our reputation with existing and potential customers and our brand image.

Our business could also suffer if our third-party vendors fail to comply with applicable laws and regulations. While our internal and vendor operating guidelines promote ethical business practices and our associates visit and monitor the operations of our third-party vendors, we do not control these vendors or their practices. The violation of labor, environmental or other laws by third-party vendors used by us, or the divergence of a third-party vendor’s or partner’s labor or environmental practices from those generally accepted as ethical or appropriate, could interrupt or otherwise disrupt the shipment of finished products to us or damage our reputation.

These risks could have a material adverse effect on our results of operations, financial condition and cash flows.

Our results may be affected by fluctuations in product input costs.

Product input costs, including freight, labor and raw materials, fluctuate. These fluctuations may result in an increase in our production costs. We may not be able to, or may elect not to, pass these increases on to our customers which may adversely impact our profit margins. These risks could have a material adverse effect on our results of operations, financial condition and cash flows.

Our ability to adequately protect our assets from loss and theft.

Our assets are subject to loss, including those caused by illegal or unethical conduct by associates, customers, vendors or unaffiliated third parties. We have experienced events such as inventory shrinkage in the past, and we cannot assure that incidences of loss and theft will decrease in the future or that the measures we are taking will effectively reduce these losses. Higher rates of loss or increased security costs to combat theft could have a material adverse effect on our results of operations, financial condition and cash flows.

Our results may be affected by fluctuations in energy costs.

Energy costs have fluctuated in the past. These fluctuations may result in an increase in our transportation costs for distribution, utility costs for our retail stores and costs to purchase products from our manufacturers. A continual rise in energy costs could

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adversely affect consumer spending and demand for our products and increase our operating costs, both of which could have a material adverse effect on our results of operations, financial condition and cash flows.

We may be impacted by increases in the cost of mailing, paper, printing or other order fulfillment logistics.

Postal rate increases and paper and printing costs will affect the cost of our order fulfillment and promotional mailings. We rely on discounts from the basic postal rate structure, such as discounts for bulk mailings and sorting. Future paper and postal rate increases could adversely impact our earnings if we are unable to recover these costs or if we are unable to implement more efficient printing, mailing, delivery and order fulfillment systems. We may face unexpected costs in transportation, warehousing or other logistics-related services. These risks could have a material adverse effect on our results of operations, financial condition and cash flows.

We self-insure certain risks and may be impacted by unfavorable claims experience.

We are self-insured for various types of insurable risks including associate medical benefits, workers’ compensation, property, general liability and automobile up to certain stop-loss limits. Claims are difficult to predict and may be volatile. Any adverse claims experience could have a material adverse effect on our results of operations, financial condition and cash flows.

We significantly rely on our and our third-party service providers' ability to implement and sustain information technology systems and to protect associated data and system availability.

Our success depends, in part, on the secure and uninterrupted performance of our and our third-party services providers' and vendors' information technology systems. Our information technology systems, as well as those of our service providers and vendors are vulnerable to damage, interruption or breach from a variety of sources, including cyberattacks, ransomware attacks, telecommunication failures, malicious human acts and natural disasters. Moreover, despite maintaining comprehensive measures, some of our systems, e-commerce environments, servers and those of our service providers and vendors are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Such incidents could disrupt our operations including our ability to timely ship and track product orders and project inventory requirements, and lead to interruptions or delays in our supply chain. Additionally, these types of problems could result in an actual or perceived breach of confidential customer, merchandise, financial, employee or other important information (including personal information), which could result in damage to our reputation, costly litigation, customer complaints, negative publicity, breach notification obligations, regulatory or administrative sanctions, inquiries, orders or investigations, indemnity obligations, damages for contract breach or penalties for violations of applicable laws or regulations. The increased use of smartphones, tablets and other mobile devices may also heighten these and other operational risks. Despite the precautions we have taken, unanticipated problems or events may nevertheless cause failures in, or unauthorized access to, our and our third-party services providers’ and vendors' information technology systems. Sustained or repeated system disruptions that interrupt our ability to process orders and deliver products to the stores, impact our customers’ ability to access our websites in a timely manner, or expose confidential customer information, merchandise, financial or other important information (including personal information) could have a material adverse effect on our results of operations, financial condition and cash flows.

In addition, from time to time, we make hardware, software and code modifications and upgrades to our information technology systems for point-of-sale, e-commerce, mobile apps, merchandising, planning, sourcing, logistics, inventory management and support systems including human resources and finance. Modifications involve replacing existing systems with successor systems, making changes to existing systems or acquiring new systems with new functionality. We are aware of inherent risks associated with replacing and modifying our information technology systems, including risks relative to data integrity and system disruptions. Information technology system disruptions or data corruption, if not anticipated and appropriately mitigated, could have a material adverse effect on our operations, financial condition and cash flows.

In addition to our own systems, networks and databases, we use third-party service providers to store, transmit and otherwise process certain of this information on our behalf, and our third-party service providers are subject to similar cybersecurity risks. Due to applicable laws and regulations or contractual obligations, we may be held responsible for any cybersecurity incident attributed to our service providers as they relate to the information we share with them or to which they are granted access. Although we contractually require these service providers to implement and maintain a standard of security (such as implementing reasonable measures), we cannot control third parties and cannot guarantee that a security breach will not occur in their systems.

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Any significant compromise or breach of our data security, including the security of customer, associate, third-party or company information, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.

In the operation of our business, we collect, use, transmit and otherwise process a large volume of personal and other confidential, proprietary and sensitive information. Information systems are susceptible to an increasing threat of continually evolving cybersecurity risks. Any significant compromise or breach of our data security, media reports about such an incident, whether accurate or not, or our failure to make adequate or timely disclosures to the public or law enforcement agencies following any such event, whether due to delayed discovery or a failure to follow existing protocols, could significantly damage our reputation with our customers, associates, investors and other third parties, cause the disclosure of personal, confidential, proprietary or sensitive customer, associate, third-party or company information, cause interruptions to our operations and distraction to our management, cause our customers to stop shopping with us and result in significant legal, regulatory and financial liabilities and lost revenues.

While we train our associates and have implemented systems, processes and security measures to protect our physical facilities and information technology systems against unauthorized access and prevent data loss, there is no guarantee that these procedures are adequate to safeguard against all data security threats. Despite these measures, we may be vulnerable to targeted or random attacks on our systems that could lead to security breaches, phishing attacks, denial of service attacks, acts of vandalism, computer viruses, malware, ransomware, misplaced or lost data, programming and/or human errors or similar events. Our systems and facilities are also subject to compromise from internal threats, such as theft, misuse, unauthorized access or other improper actions by employees, third-party service providers and other third parties with otherwise legitimate access to our systems, website or facilities (which risks may be heightened as a result of work-from-home policies and technologies implemented in the wake of the COVID-19 pandemic). Furthermore, because the methods of cyber-attack and deception change frequently, are increasingly complex and sophisticated, and can originate from a wide variety of sources, including nation-state actors, despite our reasonable efforts to ensure the integrity of our systems and website, it is possible that we may not be able to anticipate, detect, appropriately react and respond to, or implement effective preventative measures against, all cybersecurity incidents.

We may be required to expend significant capital and other resources to protect against, respond to, and recover from any potential, attempted, or existing cybersecurity incidents. As cybersecurity incidents continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. In addition, our remediation efforts may not be successful, or may not be completed in a timely manner. The inability to implement, maintain and upgrade adequate safeguards could have a material adverse effect on our results of operations, financial condition and cash flow. Moreover, there could be public announcements regarding any cybersecurity incidents and any steps we take to respond to or remediate such incidents, and if securities analysts or investors perceive these announcements to be negative, it could, among other things, have a substantial adverse effect on the price of our common stock.

While we currently maintain cybersecurity insurance, such insurance may not be sufficient in type or amount to cover us against claims related to breaches, failures or other data security-related incidents, and we cannot be certain that cyber insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our results of operations, financial condition and cash flows.

Risks related to our common stock:

Our stock price may be volatile.

Our stock price may fluctuate substantially as a result of variations in our actual or projected performance or the financial performance of other companies in the retail industry. Any guidance that we provide is based on goals that we believe are reasonably attainable at the time guidance is given. If, or when, we announce actual results that differ from those that have been predicted by us, outside investment analysts or others, our stock price could be adversely affected. Investors who rely on these predictions when making investment decisions with respect to our securities do so at their own risk.

The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies. In particular, our common stock may in the future be traded by short sellers which may put pressure on the supply and demand for our common stock, further influencing volatility in its market price. Public perception and other factors outside of our control may additionally impact the stock price of companies like us that garner a disproportionate degree of public attention, regardless of actual operating performance.

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If we are unable to pay quarterly dividends at intended levels, our reputation and stock price may be impacted.

In March 2021, our Board of Directors reinstated our annual dividend at $0.60 per share, beginning with the quarterly dividend to be paid in June 2021. Our dividend program requires the use of a portion of our cash flow. Our ability to pay dividends will depend on our ability to generate sufficient cash flows from operations in the future. This ability may be subject to certain economic, financial, competitive and other factors that are beyond our control. Our Board of Directors may, at its discretion, decrease the level of dividends or entirely discontinue the payment of dividends at any time. Any failure to pay dividends after we have announced our intention to do so may negatively impact our reputation, investor confidence in us and our stock price.

Shareholder activism could cause us to incur significant expense, hinder execution of our business strategy and impact our stock price.

Shareholder activism, which can take many forms and arise in a variety of situations, could result in substantial costs and divert management’s and our board’s attention and resources from our business. Additionally, such shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with our associates, customers or service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant fees and other expenses related to activist shareholder matters, including for third-party advisors. Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any shareholder activism.

Risks related to our indebtedness:

Our ability to maintain our credit rating could affect our ability to access capital and could increase our interest expense.

The credit rating agencies periodically review our capital structure and the quality and stability of our earnings. A deterioration in our capital structure or the quality and stability of our earnings could result in a downgrade of our credit rating. Any negative ratings actions could constrain the capital available to our company or our industry and could limit our access to funding for our operations. We are dependent upon our ability to access capital at rates and on terms we determine to be attractive. If our ability to access capital becomes constrained, our interest costs will likely increase, which could have a material adverse effect on our results of operations, financial condition and cash flows. Additionally, changes to our credit rating could affect our future interest costs.

We may be unable to service or refinance our debt or maintain compliance with restrictive covenants in our debt instruments, including our Asset-Backed Revolving Credit Facility.

We currently have substantial indebtedness. Our Asset-Backed Revolving Credit Facility contains a covenant which under certain circumstances requires maintenance of a certain financial ratio and also, under certain conditions, restrict our ability to pay dividends, repurchase common shares and make other restricted payments as defined in the agreement. Our cash flow from operations provides the primary source of funds for our debt service payments. If our cash flow from operations declines, we may be unable to service or refinance our current debt. If we fail to comply with any covenant, including our financial covenant, it could result in an event of default and our lenders could terminate the commitments under our Asset-Backed Revolving Credit Facility as well as certain foreign borrowing facilities and make the entire debt incurred thereunder immediately due and payable or we may be forced to sell assets, restructure our indebtedness or seek additional equity capital, which would dilute our stockholders’ interests.

Risks related to law and regulation:

Changes in laws, regulations or technology platform rules relating to data privacy and security, or any actual or perceived failure by us to comply with such laws and regulations, or contractual or other obligations relating to data privacy and security, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.

We are, and may increasingly become, subject to various laws, directives, industry standards and regulations, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate. The regulatory environment related to data privacy and security is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future. These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material adverse effect on our results of operations, financial condition and cash flows.

In the U.S., various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning

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personal information and data security and have prioritized privacy and information security violations for enforcement actions. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal, international or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts. For example, the California Consumer Privacy Act (“CCPA”), which increases privacy rights for California residents and imposes obligations on companies that process their personal information, went into effect on January 1, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain data sharing arrangements of personal information, and the ability to access and delete personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. Furthermore, in November 2020, California voters passed the California Privacy Rights Act of 2020 (“CPRA”). Effective beginning January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding California residents’ rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and CPRA. Other states (such as Virginia) also plan to pass data privacy laws that are similar to the CCPA, CPRA, and GDPR (described below), further complicating the legal landscape. In addition, laws in all 50 U.S. states require businesses to provide notice to consumers (and, in some cases, to regulators) whose personal information has been accessed or acquired as a result of a data breach. State laws are changing rapidly and there is discussion in Congress of a new comprehensive federal data privacy law to which we would become subject if it is enacted, which may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs or changes in business practices and policies.

We are also subject to international laws, regulations and standards in many jurisdictions, which apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information. For example, the E.U. General Data Protection Regulation (“GDPR”), which became effective in May 2018, greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for handling personal data. EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations. The GDPR, together with national legislation, regulations and guidelines of the EU member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data. In particular, the GDPR includes obligations and restrictions concerning data transparency and consent, the overall rights of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area ("EEA") or the United Kingdom, security breach notifications and the security and confidentiality of personal data. The GDPR authorizes fines for certain violations of up to 4% of global annual revenue or €20 million, whichever is greater. Recent legal developments in Europe have created further complexity and uncertainty regarding transfers of personal data from the EEA and the United Kingdom to the United States. Most recently, in July 2020, the Court of Justice the European Union (“CJEU”) invalidated the EU-U.S. Privacy Shield Framework (“Privacy Shield”) under which personal data could be transferred from the EEA to the United States. While the CJEU upheld the adequacy of standard contractual clauses, a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism and potential alternative to the Privacy Shield, it made clear that reliance on them alone may not necessarily be sufficient in all circumstances. Further, the United Kingdom’s decision to leave the EU has created uncertainty with regard to data protection regulation in the United Kingdom. As of January 1, 2021, we are also subject to the UK GDPR and UK Data Protection Act of 2018, which retains the GDPR in the United Kingdom’s national law. These recent developments will require us to review and amend the legal mechanisms by which we make and/or receive personal data transfers. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses and other mechanisms cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we do business, the geographical location or segregation of our relevant operations, and could adversely affect our financial results.

All of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational changes, implementing additional protection technologies, training associates and engaging consultants, which are likely to increase over time. In addition, such requirements may require us to modify our data processing practices and policies, distract management or divert resources from other initiatives and projects, all of which could have a material adverse effect on our results of operations, financial condition and cash flows. Any failure or perceived failure by us to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security could result in damage to our reputation and our relationship with our customers, as well as proceedings or litigation by governmental agencies or customers, including class action privacy litigation in certain jurisdictions, which could subject us to significant fines, sanctions, awards,

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penalties or judgments, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.

We may be impacted by our ability to comply with regulatory requirements.

We are subject to numerous regulatory requirements. Our policies, procedures and internal controls are designed to comply with all applicable foreign and domestic laws and regulations, including those required by the Sarbanes-Oxley Act of 2002, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, the SEC and the New York Stock Exchange (the “NYSE”), among others. Although we have put in place policies and procedures aimed at ensuring legal and regulatory compliance, our associates, subcontractors, vendors, licensees, franchisees and other third parties could take actions that violate these laws and regulations. Any violations of such laws or regulations could have an adverse effect on our reputation, market price of our common stock, results of operations, financial condition and cash flows.

It can be difficult to comply with sometimes conflicting regulations in local, national or foreign jurisdictions as well as new or changing regulations. Also, changes in such laws could make operating our business more expensive or require us to change the way we do business. For example, changes in product safety or other consumer protection laws could lead to increased costs for certain merchandise, or additional labor costs associated with readying merchandise for sale. It may be difficult for us to oversee regulatory changes impacting our business, and our responses to changes in the law could be costly and may negatively impact our operations.

We may be adversely impacted by certain compliance or legal matters.

We, along with third parties we do business with, are subject to complex compliance and litigation risks. Actions filed against us from time to time include commercial, tort, intellectual property, customer, employment, wage and hour, data privacy, securities, anti-corruption and other claims, including purported class action lawsuits. In addition, notwithstanding our adoption of CDC-recommended guidelines and preventative efforts to ensure the health and safety of our customers and employees, it is possible that our customers and employees may contract COVID-19 while at our stores or facilities, which could subject us to litigation. The cost of defending against these types of claims against us or the ultimate resolution of such claims, whether by settlement or adverse court decision, may harm our business. Further, potential claimants may be encouraged to bring suits based on a settlement from us or adverse court decisions against us. We cannot currently assess the likely outcome of such suits, but if the outcome were negative, it could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.

In addition, we may be impacted by litigation trends, including class action lawsuits involving consumers and shareholders, that could have a material adverse effect on our reputation, the market price of our common stock, results of operations, financial condition and cash flows.

We may be impacted by changes in taxation, trade and other regulatory requirements.

We are subject to income tax in local, national and international jurisdictions. In addition, our products are subject to import and excise duties and/or sales or value-added taxes in many jurisdictions. We are also subject to the examination of our tax returns and other tax matters by the Internal Revenue Service and other tax authorities and governmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes. There can be no assurance as to the outcome of these examinations. Fluctuations in tax rates and duties, changes in tax legislation or regulation or adverse outcomes of these examinations could have a material adverse effect on our results of operations, financial condition and cash flows.

There is increased uncertainty with respect to tax policy and trade relations between the U.S. and other countries, including as a result of any executive action taken or legislative priorities set by the current Biden administration. Major developments in tax policy or trade relations, such as the imposition of unilateral tariffs on imported products, could have a material adverse effect on our results of operations, financial condition and cash flows.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

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ITEM 2. PROPERTIES.

The following table provides the location, use and size of our distribution, corporate and product development facilities as of January 30, 2021:

Location	Use	Approximate Square Footage
Columbus, Ohio area	Distribution, shipping and corporate offices	6,938,000
New York	Office, sourcing and product development/design	495,000
Kettering, Ohio	Call center	94,000
Hong Kong	Office and sourcing	55,000
Mainland China	Office	53,000
Canada	Office	20,000
Various international locations	Office and sourcing	151,000

United States

Our business for the Bath & Body Works and Victoria's Secret segments is principally conducted from office, distribution and shipping facilities located in the Columbus, Ohio, area. Additional facilities are located in New York and Kettering, Ohio.

Our distribution and shipping facilities consist of eight buildings located in the Columbus, Ohio, area. These buildings, including attached office space, comprise approximately 6.9 million square feet.

As of January 30, 2021, we operate 2,479 retail stores located in leased facilities, primarily in malls and shopping centers, throughout the U.S. A substantial portion of these lease commitments consists of store leases generally with an initial term of 10 years. The store leases expire at various dates between 2021 and 2034.

Typically, when space is leased for a retail store in a mall or shopping center, we supply all improvements, including interior walls, floors, ceilings, fixtures and decorations. The cost of improvements varies widely, depending on the design, size and location of the store. In certain cases, the landlord of the property may provide an allowance to fund all or a portion of the cost of improvements, serving as a lease incentive. Rental terms for new locations usually include a fixed minimum rent plus a percentage of sales in excess of a specified amount. We usually pay certain operating costs such as common area maintenance, utilities, insurance and taxes. For additional information, see Note 8 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

International

Canada

We lease offices in the Montreal, Quebec, and Toronto, Ontario, areas.

As of January 30, 2021, we operate 128 retail stores located in leased facilities, primarily in malls and shopping centers, throughout the Canadian provinces. These lease commitments consist of store leases with initial terms of 5 to 10 years expiring on various dates between 2021 and 2031.

United Kingdom / Ireland

As a result of our joint venture with Next PLC, we no longer operate any stores in the U.K. or Ireland. However, as of January 30, 2021, we continue to lease a store in the U.K., with a lease expiration in 2025, and a store in Ireland, with a lease expiration in 2037, which are sublet to and operated by the joint venture.

Greater China

We lease offices in Shanghai, Shenzhen and Hong Kong within Greater China.

As of January 30, 2021, we operate 62 retail stores in leased facilities in Greater China. These lease commitments consist of store leases with initial terms ranging from 3 to 15 years expiring on various dates between 2021 and 2030.

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Other International

As of January 30, 2021, we also have global representation through stores operated by our partners:

•338 Victoria’s Secret Beauty and Accessories stores in 67 countries;

•288 Bath & Body Works stores in more than 30 countries;

•103 Victoria's Secret stores in 30 countries; and

•17 PINK stores in 6 countries.

We also operate sourcing-related office facilities in various international locations.

ITEM 3. LEGAL PROCEEDINGS.

We are a defendant in a variety of lawsuits arising in the ordinary course of business. Actions filed against our Company from time to time include commercial, tort, intellectual property, customer, employment, data privacy, securities and other claims, including purported class action lawsuits. Although it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, our current legal proceedings are not expected to have a material adverse effect on our results of operations, financial condition and cash flows.

On February 19, 2020, a plaintiff shareholder filed a complaint in the U.S. District Court for the Southern District of Ohio alleging derivative claims on our behalf against certain of our current and former directors and officers. We were named as nominal defendant. The lawsuit asserts claims for breach of fiduciary duty, corporate waste and unjust enrichment in connection with alleged misstatements about our quarterly dividend prior to the announced reduction of the dividend in November 2018. On July 21, 2020, the court so-ordered a stipulation staying all proceedings in this lawsuit, pending resolution of the motion to dismiss that we filed on February 18, 2020 in the putative class action lawsuit described above. Following the dismissal of the putative class action lawsuit described above, the parties filed a joint stipulation to dismiss the derivative claims without prejudice on November 5, 2020.

On May 19, 2020, a purported shareholder filed a derivative lawsuit on behalf of L Brands, Inc. in the Court of Common Pleas for Franklin County, Ohio. The complaint names as defendants certain current and former directors and officers of L Brands, Inc. and alleges, among other things, that these defendants breached their fiduciary duties by violating law and/or company policies relating to workplace conduct. We were named as nominal defendant only, and there are no claims asserted against us. On June 16, 2020, the lawsuit was removed to the United States District Court for the Southern District of Ohio. On July 6, 2020, the court so-ordered a stipulation staying the lawsuit until December 29, 2020. That stay has since been extended until March 29, 2021.

On January 12, 2021, another purported shareholder filed a derivative lawsuit on behalf of L Brands, Inc. in the Delaware Court of Chancery. The complaint names as defendants certain current and former directors and officers of L Brands, Inc. and alleges, among other things, breaches of fiduciary duty through asserted violations of law and failures to monitor workplace conduct. We were named as a nominal defendant, and there are no claims asserted against us.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock (“LB”) is traded on the NYSE. As of January 30, 2021, there were approximately 33,000 shareholders of record. However, including active associates who participate in our stock purchase plan, associates who own shares through our sponsored retirement plans and others holding shares in broker accounts under street names, we estimate the shareholder base to be approximately 132,000.

The following table provides our quarterly market prices and cash dividends per share for 2020 and 2019:

	Market Price				Cash Dividend per Share
	High		Low
2020
Fourth quarter	$	48.30	$	32.19	$	—
Third quarter	35.41		23.79		—
Second quarter	26.66		10.03		—
First quarter	25.26		8.00		0.30
2019
Fourth quarter	$	23.63	$	15.80	$	0.30
Third quarter	24.09		15.82		0.30
Second quarter	28.02		21.45		0.30
First quarter	29.02		24.73		0.30

Our Board of Directors temporarily suspended our quarterly cash dividend beginning in the second quarter of 2020. In March 2021, our Board of Directors reinstated our annual dividend at $0.60 per share, beginning with the quarterly dividend to be paid in June 2021.

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The following graph shows the changes, over the past five-year period, in the value of $100 invested in our common stock, the Standard & Poor’s ("S&P") 500 Composite Stock Price Index and the Standard & Poor’s 500 Retail Composite Index.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (a) (b)

AMONG L BRANDS, INC., THE S&P 500 INDEX AND THE S&P 500 RETAIL COMPOSITE INDEX

_______________

(a)This table represents $100 invested in stock or in index at the closing price on January 30, 2016, including reinvestment of dividends.

(b)The January 28, 2017 cumulative total return includes the $2 special dividend in March 2016.

The following table provides our repurchases of our common stock during the fourth quarter of 2020:

Period	Total Number of Shares Purchased (a)	Average Price Paid per Share (b)		Total Number of Shares Purchased as Part of Publicly Announced Programs (c)	Maximum Dollar Value of Shares that May Yet be Purchased Under the Programs (c)
	(in thousands)			(in thousands)
November 2020	26	$	35.18	—	$	78,677
December 2020	65	38.35		—	78,677
January 2021	5	39.44		—	78,677
Total	96			—

 ________________

(a)The total number of shares repurchased includes shares repurchased in connection with tax payments due upon vesting of employee restricted stock awards and the use of our stock to pay the exercise price on employee stock options.

(b)The average price paid per share includes any broker commissions.

(c)For additional share repurchase program information, see Note 18 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

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ITEM 6. SELECTED FINANCIAL DATA.

	Fiscal Year Ended
	January 30, 2021			February 1, 2020			February 2, 2019			February 3, 2018 (a)			January 28, 2017
Summary of Operations	(in millions)
Net Sales	$	11,847		$	12,914		$	13,237		$	12,632		$	12,574
Gross Profit	4,667			4,450			4,899			4,959			5,125
Operating Income (b)	1,580			258			1,237			1,728			2,003
Net Income (Loss) (c)	844			(366)			644			983			1,158
	(as a percentage of net sales)
Gross Profit	39.4		%	34.5		%	37.0		%	39.3		%	40.8		%
Operating Income	13.3		%	2.0		%	9.3		%	13.7		%	15.9		%
Net Income (Loss)	7.1		%	(2.8		%)	4.9		%	7.8		%	9.2		%
Per Share Results
Net Income (Loss) Per Basic Share	$	3.04		$	(1.33)		$	2.33		$	3.46		$	4.04
Net Income (Loss) Per Diluted Share	$	3.00		$	(1.33)		$	2.31		$	3.42		$	3.98
Dividends Per Share	$	0.30		$	1.20		$	2.40		$	2.40		$	4.40
Weighted Average Diluted Shares Outstanding (in millions)	281			276			279			287			291
Other Financial Information	(in millions)
Cash and Cash Equivalents	$	3,903		$	1,499		$	1,413		$	1,515		$	1,934
Total Assets (d)	11,571			10,125			8,090			8,149			8,170
Working Capital (d)	2,753			873			1,274			1,262			1,451
Net Cash Provided by Operating Activities	2,039			1,236			1,377			1,406			1,990
Capital Expenditures	228			458			629			707			990
Long-term Debt	6,366			5,487			5,739			5,707			5,700
Other Long-term Liabilities (d)	311			490			1,004			924			831
Shareholders’ Equity (Deficit)	(662)			(1,499)			(869)			(753)			(729)
Comparable Sales Increase (Decrease) (e)	21		%	(1		%)	3		%	(3		%)	2		%
Comparable Store Sales Increase (Decrease) (e)	5		%	(3		%)	(1		%)	(4		%)	1		%
Return on Average Assets (d)	8		%	(4		%)	8		%	12		%	14		%
Current Ratio (d)	2.0			1.4			1.6			1.6			1.7
Stores and Associates at End of Year
Number of Stores (f)	2,669			2,920			2,943			3,075			3,074
Selling Square Feet (in thousands) (f)	10,919			12,258			12,396			12,656			12,395
Number of Associates	92,300			94,400			88,900			93,200			93,600

 ________________

(a)The fiscal year ended February 3, 2018 represents a 53-week fiscal year.

(b)Operating income includes the effect of the following special items:

i.In 2020, a $254 million charge related to the impairment of certain Victoria's Secret store and lease assets, an $81 million charge related to restructuring actions, a $54 million net gain related to the establishment of a joint venture for the Victoria’s Secret U.K. and Ireland business with Next PLC and a $36 million net gain related to the closure and termination of our lease and the related liability for the Victoria’s Secret Hong Kong flagship store.

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ii.In 2019, a $720 million impairment charge related to Victoria's Secret goodwill and a $263 million charge related to the impairment of certain Victoria's Secret store and lease assets.

iii.In 2018, a $101 million charge related to the impairment of certain Victoria's Secret store assets, a $99 million loss on the sale of La Senza and $23 million of Henri Bendel closure costs.

iv.In 2016, a $35 million charge related to strategic actions at Victoria's Secret, including severance charges, fabric cancellations and the write-off of catalogue paper.

(c)In addition to the special items previously discussed in (b), net income (loss) includes the effect of the following special items:

i.In 2020, a net income tax benefit of $94 million from the resolution of certain tax matters and changes in tax legislation and a $40 million loss associated with the early extinguishment of outstanding notes.

ii.In 2019, a $30 million loss associated with the early extinguishment of outstanding notes, and $28 million of charges to increase reserves related to ongoing contingent obligations for the La Senza business.

iii.In 2017, a $92 million tax benefit related to changes in U.S. tax legislation partially offset by a $29 million loss associated with the early extinguishment of outstanding notes.

iv.In 2016, a $70 million gain related to a $124 million cash distribution from Easton Town Center, LLC, a $42 million tax benefit related to the favorable resolution of a discrete income tax matter, partially offset by a $22 million loss associated with the early extinguishment of outstanding notes.

For additional information on these special items, see the Notes to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

The effect of the special items described in (b) and (c) above decreased earnings per share by $0.46, $3.62 and $0.51 in 2020, 2019 and 2018, respectively, and increased earnings per share by $0.22 and $0.23 in 2017 and 2016, respectively.

(d)The 2020 and 2019 amounts reflect our adoption of Accounting Standards Codification ("ASC") 842, Leases, in the first quarter of 2019.

(e)The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more. Therefore, comparable sales results for 2020 exclude stores that were closed for four consecutive days or more as a result of the COVID-19 pandemic. Additionally, stores of a given brand are excluded if total selling square footage for the brand in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Therefore, the percentage change in comparable sales for 2020, 2019, 2018 and 2016 were calculated on a 52-to-52-week basis, and the percentage change in comparable sales for 2017 was calculated on a 53-to-53-week basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.

(f)Number of stores and selling square feet excludes independently owned stores operated by our partners.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") as codified in the Accounting Standards Codification. The following information should be read in conjunction with our financial statements and the related notes included in Item 8. Financial Statements and Supplementary Data.

Our operating results are generally impacted by economic changes and, therefore, we monitor the retail environment using, among other things, certain key industry performance indicators including competitor performance and mall traffic data. These can provide insight into consumer spending patterns and shopping behavior in the current retail environment and assist us in assessing our performance as well as the potential impact of industry trends on our future operating results. Additionally, we evaluate a number of key performance indicators including comparable sales, gross profit, operating income and other performance metrics such as sales per average selling square foot and inventory per selling square foot in assessing our performance.

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COVID-19

In March 2020, the spread of COVID-19 was declared a global pandemic by the World Health Organization. This pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions, including mandatory closures and orders to “shelter-in-place.” The actions that governments around the world have taken to contain the spread of COVID-19 have resulted in a period of disruption, including closure of our stores, limited store operating hours, reduced customer traffic and consumer spending and delays in manufacturing and shipping of products and raw materials. During this period, we are focused on protecting the health and safety of our customers, employees, contractors, suppliers and other business partners. We are also working with our suppliers to minimize potential disruptions, while managing our business in response to a changing dynamic.

Our business operations and financial performance for 2020 were materially impacted by the COVID-19 pandemic. All of our stores in North America were closed on March 17, 2020 but we were able to re-open the majority of our stores as of the beginning of the third quarter. Operations for Victoria’s Secret Direct were temporarily suspended for approximately one week in late March 2020, while Bath & Body Works Direct remained open for the duration of fiscal 2020. Additionally, we have dedicated resources to maximize capacity in our direct fulfillment centers to meet increased customer demand, while focusing on distribution, fulfillment and call center safety. There remains a high level of uncertainty around the pandemic and the potential for further restrictions.

Segments

In the third quarter of 2020, we changed our segment reporting as a result of leadership changes and restructuring actions taken to facilitate the ongoing efforts to separate Bath & Body Works and Victoria’s Secret into separate businesses. We now have two reportable segments: Bath & Body Works and Victoria’s Secret. Accordingly, we will no longer report a Victoria’s Secret and Bath & Body Works International segment as these businesses are now included with their respective brand. Additionally, the Bath & Body Works and Victoria’s Secret segments now include sourcing and production functions (formerly known as Mast) and certain other corporate functions that directly support each brand. These functions were previously included within Other. While this reporting change did not impact our consolidated results, the segment data has been recast to be consistent for all periods presented.

Executive Overview

The pandemic had a profound impact on the retail industry and our business. In response, we led with our values and an emphasis on safety, so we could be confident in our decisions and actions to support associates, customers, partners and our businesses. Accordingly, we adopted new operating models in our stores focused on providing a safe environment, while also delivering an engaging shopping experience. Additionally, we remain focused on the safe operations of our distribution, fulfillment and call centers while maximizing our direct channels. We implemented cost reduction and performance improvements at Victoria’s Secret, while continuing to drive substantial growth at Bath & Body Works and improved performance at Victoria’s Secret.

We are committed to establishing our Bath & Body Works business as a pure-play public company and are taking the necessary steps to prepare the Victoria's Secret business, including PINK, to operate as a separate standalone company. Our Board of Directors is currently evaluating all options, including a potential spin-off of the Victoria’s Secret business into a public company or a private sale of the business.

During 2020, we took a number of important steps to improve performance at Victoria's Secret and to prepare Bath & Body Works and Victoria's Secret to operate as separate standalone companies, including:

•Retaining Goldman Sachs and JPMorgan as financial advisors on the separation of Bath & Body Works and Victoria’s Secret;

•Completing a comprehensive review of our home office organizations in order to achieve meaningful reductions in overhead expenses and decentralize significant shared functions and services to support the creation of standalone companies. This resulted in a reduction of our home office headcount by approximately 15%, or about 850 associates;

•Executing our previously announced plan to permanently close 241 Victoria’s Secret stores in the U.S. and Canada while also negotiating with landlords for ongoing rent relief;

•Closing the unprofitable Hong Kong flagship store, restructuring lease terms on the two mainland China flagship stores and implementing a significant overhead expense reduction plan; and

•Managing inventories with discipline, including working with suppliers to identify opportunities to reduce merchandise costs in order to increase merchandise margin rates at Victoria’s Secret and PINK.

We expect to deliver $400 million of annual savings under our profit improvement plan outlined above, which was implemented at the beginning of the third quarter. Roughly half of the savings were realized in the back half of fiscal 2020, principally at Victoria’s Secret, with the remainder expected to be realized in the first half of fiscal 2021.

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Growth Strategy

We have a multi-year goal to increase sales and operating income by focusing on these key business priorities:

•Grow our business in North America;

•Extend our brand internationally; and

•Focus on the fundamentals of our business.

We also continue to focus on:

•Attracting and retaining top talent;

•Maintaining a strong cash and liquidity position while optimizing our capital structure; and

•Returning value to our shareholders.

The following is a discussion regarding certain of our key business priorities:

Grow our business in North America

We see opportunities for meaningful growth in all our categories by focusing on product newness and innovation and expanding into under-penetrated markets and price segments. We will continue to invest in the Bath & Body Works White Barn store design, which continues to yield strong results. In 2021, we are forecasting approximately 50 new Bath & Body Works North America stores, almost entirely off-mall, partially offset by about 20 to 40 closures, principally in malls, resulting in net square footage growth of 3% to 4%.

We are focused on continued innovation and enhancements to our digital platforms and applications, and development of omni-channel capabilities that integrate our online presence with our stores. During 2020, we tested BOPIS at certain of our Bath & Body Works and Victoria's Secret stores and expect to continue improving our online and in-store BOPIS experience during 2021.

Extend our brand internationally

We believe there is substantial opportunity for international growth. We have separate, dedicated teams that have taken a methodical, "test and learn" approach to expansion. We plan to expand our presence outside of North America by increasing the number of stores operated by our international partners.

Our partners opened 10 net new Bath & Body Works stores in 2020, bringing the total in the Middle East, Latin America, Southeast Asia and Europe to 288 stores. Additionally, our partners opened 16 new international digital sites. Our partners plan to open another 50 to 70 new international stores, increasing our store count by 15% to 23%, in 2021.

At Victoria's Secret in 2021, our partners will continue to expand international digital operations with the opening of another 20 websites. Additionally, in 2020, we entered into a joint venture with Next PLC for the Victoria’s Secret business in the U.K. and Ireland. We believe Next’s capabilities and experience in the U.K. market will provide meaningful growth opportunities for the business.

Focus on the fundamentals of our business

We are focused on the fundamentals of our business which include knowing our customers, focusing on core merchandise categories, inventory management, speed and agility, managing real estate and store selling and execution. In terms of speed and agility, we are focused on inventory discipline through lead-time reductions and in-season agility to increase sales and reduce promotional activity. In terms of real estate, we will continue to proactively and rigorously review our portfolio, and we will continue to open and close stores when we believe it makes sense to do so. We continue to optimize our store selling and execution by concentrating on a better store experience and developing, retaining and investing in talented, trained and productive store associates. In the direct businesses, we continue to focus on ensuring a positive customer experience on our websites and developing our fulfillment capacity in order to provide delivery times that meet our customer's needs.

2020 Overview

Despite operating in the COVID-19 environment, both our segments were able to meaningfully improve performance, driven primarily by strong growth in our direct channels. 2020 net sales were $11.847 billion, and total comparable sales increased 21%. The gross profit rate increased 490 basis points to 39.4%, driven by an increase in the merchandise margin rate. General, Administrative and Store Operating Expenses declined 11% and leveraged approximately 80 basis points. The dollar decline was driven by our profit improvement plan and the closure of 248 Victoria’s Secret stores. Operating income for the full year increased $1.322 billion to $1.580 billion driven by merchandise margin growth at Bath & Body Works, savings realized on our profit improvement plan and Victoria's Secret goodwill impairment charges of $720 million recorded in 2019. The total company operating income rate increased to 13.3% in 2020 from 2.0% last year.

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For the Bath & Body Works segment, net sales grew by 20%, or $1.078 billion, to $6.434 billion and total comparable sales increased 45%. Store comparable sales increased 26% and our direct channel grew sales by 109%. Our store sales were roughly flat to last year at $4.207 billion, despite the fact that the majority of stores were closed for roughly 3 months. We surpassed the $2 billion mark in the direct channel with full-year sales of $2.003 billion in 2020. Segment operating income for 2020 was $1.821 billion, up 49% compared to last year, and the operating income rate was 28.3%, an increase of 540 basis points compared to last year.

For the Victoria’s Secret segment, net sales declined by 28%, or $2.096 billion, to $5.413 billion, and total comparable sales increased 1%. Store comparable sales declined 15% and our direct channel grew sales by 31%. Our North America store sales were down 45%, or $2.317 billion, to last year. Store sales were negatively impacted by the temporary COVID-19-related closures, declines in store traffic, particularly constrained on high volume Holiday days, occupancy restrictions and the impact of the 241 North American stores that were permanently closed. Sales in the direct channel were $2.223 billion, up 31% to last year despite a temporary suspension of operations in March 2020. International revenue declined by $309 million in 2020, or 44%, driven by pandemic related store closures and the exclusion of U.K. retail sales due to the establishment of the joint venture with Next. Segment operating loss decreased by $757 million to $25 million in 2020, primarily driven by the benefits of our profit improvement plan and by goodwill impairment charges of $720 million recorded in 2019, partially offset by the impact of store closures as a result of the pandemic in the first half of the year.

For additional information related to our 2020 financial performance, see “Results of Operations – 2020 Compared to 2019.”

Impacts of COVID-19

In response to the global COVID-19 crisis, we took prudent actions to manage expenses and to maintain our solid cash position and financial flexibility. We:

•Furloughed most store associates as of April 5, 2020 during the temporary store closures, while continuing to provide healthcare benefits for eligible associates;

•Suspended associate merit increases;

•Temporarily reduced salaries for senior vice presidents and above by 20%;

•Temporarily suspended cash compensation for all members of the Board of Directors;

•Reduced fiscal 2020 capital expenditures from an original forecast of $550 million to $228 million;

•Actively managed inventory to adjust for the impact of channel shifts to meet customer demand;

•Temporarily suspended the quarterly cash dividend beginning in the second quarter of fiscal 2020;

•Suspended many store and select office rent payments during the temporary closures. We completed negotiations with the majority of landlords, leading to a combination of rent waivers or abatements relating to closure periods, rent relief relating to the post-reopening “recovery” period given traffic declines, and rent deferrals;

•Converted the revolving credit facility to an asset-backed loan facility, issued $2.25 billion in new notes and extinguished $1.259 billion of notes primarily with near-term maturities; and

•Extended payment terms to vendors.

As of January 30, 2021, we had $3.9 billion in cash and cash equivalents with no outstanding borrowings on our ABL Facility.

Adjusted Financial Information

In addition to our results provided in accordance with GAAP above and throughout this Form 10-K, provided below are non-GAAP measurements which present operating income, net income (loss) and earnings (loss) per share in 2020, 2019 and 2018 on an adjusted basis, which remove certain special items. We believe that these special items are not indicative of our ongoing operations due to their size and nature. We use adjusted financial information as key performance measures of results of operations for the purpose of evaluating performance internally. These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Instead, we believe that the presentation of adjusted financial information provides additional information to investors to facilitate the comparison of past and present operations. Further, our definition of adjusted financial information may differ from similarly titled measures used by other companies. The table below reconciles the GAAP financial measures to the non-GAAP financial measures.

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(in millions, except per share amounts)	2020		2019		2018
Detail of Special Items - Income (Expense)
Victoria's Secret Asset Impairments (a)	$	(214)	$	(253)	$	(81)
Restructuring Charges (b)	(81)		—		—
Hong Kong Store Closure and Lease Termination (c)	36		—		—
Establishment of Victoria's Secret U.K. and Ireland Joint Venture with Next PLC (d)	30		—		—
Impairment of Goodwill (e)	—		(720)		—
Loss on Divestiture of La Senza (f)	—		—		(99)
Henri Bendel Closure Costs (g)	—		—		(20)
Special Items included in Operating Income	(228)		(973)		(200)
Loss on Extinguishment of Debt (h)	(53)		(40)		—
La Senza Charges (i)	—		(37)		—
Special Items included in Other Income (Loss)	(53)		(77)		—
Net Tax Benefit from the Resolution of Certain Tax Matters and Changes in Tax Legislation (j)	94		—		—
Tax Effect of Special Items included in Operating Income and Other Income (Loss)	57		46		58
Special Items included in Net Income (Loss)	$	(130)	$	(1,004)	$	(142)
Reconciliation of Reported Operating Income to Adjusted Operating Income
Reported Operating Income	$	1,580	$	258	$	1,237
Special Items included in Operating Income	228		973		200
Adjusted Operating Income	$	1,808	$	1,231	$	1,437
Reconciliation of Reported Net Income (Loss) to Adjusted Net Income
Reported Net Income (Loss)	$	844	$	(366)	$	644
Special Items included in Net Income (Loss)	130		1,004		142
Adjusted Net Income	$	974	$	638	$	786
Reconciliation of Reported Earnings (Loss) Per Diluted Share to Adjusted Earnings Per Diluted Share
Reported Earnings (Loss) Per Diluted Share	$	3.00	$	(1.33)	$	2.31
Special Items included in Earnings (Loss) Per Diluted Share	0.46		3.62		0.51
Adjusted Earnings Per Diluted Share	$	3.46	$	2.29	$	2.82

 ________________

(a)We recognized pre-tax impairment charges of $97 million ($72 million after tax) and $117 million ($99 million after tax) related to certain Victoria's Secret store and lease assets in the first and second quarter of 2020, respectively. We recognized pre-tax impairment charges of $218 million ($200 million after-tax) and $35 million ($30 million after-tax) related to certain Victoria's Secret store and lease assets in the third and fourth quarter of 2019, respectively. In the third quarter of 2018, we recognized an $81 million pre-tax impairment charge ($73 million after-tax) related to certain Victoria's Secret store assets. For additional information see Note 7, "Long-Lived Assets" included in Item 8. Financial Statements and Supplementary Data.

(b)In the second quarter of 2020, we recognized pre-tax severance charges of $81 million ($65 million after tax) related to restructuring activities. For additional information, see Note 5, “Restructuring Activities" included in Item 8. Financial Statements and Supplementary Data.

(c)In the second quarter of 2020, we recognized a net pre-tax gain of $36 million ($25 million after tax) related to the closure and termination of our lease for the Victoria’s Secret Hong Kong flagship store. For additional information, see Note 8, "Leases" included in Item 8. Financial Statements and Supplementary Data.

(d)In the third quarter of 2020, we recognized a pre-tax gain of $30 million ($27 million after tax) related to the establishment of a joint venture for the Victoria’s Secret U.K. and Ireland business with Next PLC. For additional information, see Note 5, “Restructuring Activities" included in Item 8. Financial Statements and Supplementary Data.

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(e)In the fourth quarter of 2019, we recognized a $690 million pre-tax goodwill impairment charge ($687 million after-tax) related to the Victoria's Secret reporting unit. In the third quarter of 2019, we recognized a $30 million goodwill impairment charge (no tax impact) related to the Victoria's Secret Greater China reporting unit. For additional information see Note 9, "Goodwill and Trade Names" included in Item 8. Financial Statements and Supplementary Data.

(f)In the fourth quarter of 2018, we recognized a $99 million ($55 million after-tax) loss on the sale of La Senza. For additional information see Note 5, "Restructuring Activities" included in Item 8. Financial Statements and Supplementary Data.

(g)In the third quarter of 2018, we recognized $20 million ($15 million after-tax) of closure costs related to the closure of the Henri Bendel business. For additional information see Note 5, "Restructuring Activities" included in Item 8. Financial Statements and Supplementary Data.

(h)In the third quarter of 2020, we early extinguished $1.259 billion of outstanding notes, resulting in a pre-tax loss on extinguishment of $53 million (after-tax loss of $40 million). In the second quarter of 2019, we redeemed $764 million of outstanding notes, resulting in a pre-tax loss on extinguishment of $40 million (after-tax loss of $30 million). For additional information see Note 13, "Long-term Debt and Borrowing Facilities" included in Item 8. Financial Statements and Supplementary Data.

(i)In the third quarter of 2019, we recognized $37 million of pre-tax charges ($28 million after-tax) to increase reserves related to ongoing contingent obligations for the La Senza business, which was sold in the fourth quarter of 2018. For additional information see Note 16, "Commitments and Contingencies" included in Item 8. Financial Statements and Supplementary Data.

(j)In the third quarter of 2020, we recognized a $23 million net income tax benefit related to tax matters associated with foreign investments and recent changes in tax legislation. In the second quarter of 2020, we recognized a $21 million income tax benefit related to recent changes in tax legislation included in the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). In the first quarter of 2020, we recognized a $50 million tax benefit related to the resolution of certain tax matters. For additional information see Note 12, "Income Taxes" included in Item 8. Financial Statements and Supplementary Data.

2021 Outlook

In the first quarter of 2021, we expect our operating performance to increase significantly compared to last year. The remainder of the year will present more challenging comparisons to last year, although we do expect growth versus 2019. We experienced record productivity and strong growth online in 2020. In 2020, Bath & Body Works grew operating income by $153 million, or 84%, in the second quarter, by $285 million, or 137%, in the third quarter and by $250 million, or 38%, in the fourth quarter. Strong demand allowed us to significantly pull back on promotional activity, and the 2020 operating income rate was 28.3%.

We believe an operating margin in the low to mid-twenties is appropriate for the current Bath & Body Works segment, which reflects the right value/quality proposition for our customers, as well as the right level of investment in product innovation, quality and engaging, best-in-class store and online experiences. We will continue to focus on maximizing our performance, leveraging the strength of our brand, our close connection to our customers and the speed we have in our supply chain, and we have confidence in our opportunities for long-term growth.

In the Victoria’s Secret business, we believe we have opportunities for continued improved performance, particularly in the first half of the year, driven by improved assortments, more disciplined inventory management, our profit improvement plan and lapping 2020 pandemic related store closures. We have long-term opportunities for growth in the Victoria’s Secret business, which continues to lead the lingerie market, and are targeting a 10-15% operating margin.

We caution there is ongoing uncertainty in the current environment due to the COVID-19 pandemic, as well as an impending separation of the Bath & Body Works and Victoria’s Secret businesses, which we are targeting to complete in August 2021. Over the next 6 months, we will continue to work toward the separation of the two businesses, proceeding down a dual track to prepare for either a spin-off or a sale.

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Company-Operated Store Data

The following table compares 2020 company-operated store data to the comparable periods for 2019 and 2018:

							% Change
	2020		2019		2018		2020		2019
Sales per Average Selling Square Foot (a)
Bath & Body Works U.S.	$	916	$	931	$	891	(2	%)	4	%
Victoria’s Secret U.S.	415		684		739		(39	%)	(7	%)
Sales per Average Store (in thousands) (a)
Bath & Body Works U.S.	$	2,424	$	2,428	$	2,279	—	%	7	%
Victoria’s Secret U.S.	2,789		4,455		4,763		(37	%)	(6	%)
Average Store Size (selling square feet)
Bath & Body Works U.S.	2,660		2,631		2,585		1	%	2	%
Victoria’s Secret U.S.	6,928		6,551		6,484		6	%	1	%
Total Selling Square Feet (in thousands)
Bath & Body Works U.S.	4,343		4,306		4,185		1	%	3	%
Victoria’s Secret U.S.	5,861		6,898		7,119		(15	%)	(3	%)

 ________________

(a)Sales per average selling square foot and sales per average store, which are indicators of store productivity, are calculated based on store sales for the period divided by the average, including the beginning and end of period, of total square footage and store count, respectively. As a result of the COVID-19 pandemic, all our stores in the U.S. were closed on March 17, 2020 with the majority having been re-opened as of the beginning of the third quarter. As a result, comparisons of 2020 trends to prior years is not a meaningful way to discuss our operating results.

The following table represents company-operated store data for 2020:

	Stores at			Transferred to	Stores at
	February 1, 2020	Opened	Closed	Joint Venture (a)	January 30, 2021
Bath & Body Works U.S.	1,637	26	(30)	—	1,633
Bath & Body Works Canada	102	1	—	—	103
Total Bath & Body Works	1,739	27	(30)	—	1,736
Victoria’s Secret U.S.	1,053	21	(228)	—	846
Victoria’s Secret Canada	38	—	(13)	—	25
Victoria's Secret U.K. / Ireland	26	—	—	(26)	—
Victoria's Secret Beauty and Accessories Greater China	41	1	(6)	—	36
Victoria's Secret Greater China	23	4	(1)	—	26
Total Victoria's Secret	1,181	26	(248)	(26)	933
Total L Brands Stores	2,920	53	(278)	(26)	2,669

_______________

(a)    For additional information see Note 5, "Restructuring Activities" included in Item 8. Financial Statements

and Supplementary Data.

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The following table represents company-operated store data for 2019:

	Stores at			Stores at
	February 2, 2019	Opened	Closed	February 1, 2020
Bath & Body Works U.S.	1,619	38	(20)	1,637
Bath & Body Works Canada	102	1	(1)	102
Total Bath & Body Works	1,721	39	(21)	1,739
Victoria’s Secret U.S.	1,098	7	(52)	1,053
Victoria’s Secret Canada	45	—	(7)	38
Victoria's Secret U.K. / Ireland	26	—	—	26
Victoria's Secret Beauty and Accessories Greater China	38	10	(7)	41
Victoria's Secret Greater China	15	8	—	23
Total Victoria's Secret	1,222	25	(66)	1,181
Total L Brands Stores	2,943	64	(87)	2,920

The following table represents company-operated store data for 2018:

	Stores at				Stores at
	February 3, 2018	Opened	Closed	Sold	February 2, 2019
Bath & Body Works U.S.	1,592	54	(27)	—	1,619
Bath & Body Works Canada	102	1	(1)	—	102
Total Bath & Body Works	1,694	55	(28)	—	1,721
Victoria’s Secret U.S.	1,124	3	(29)	—	1,098
Victoria’s Secret Canada	46	—	(1)	—	45
Victoria's Secret U.K. / Ireland	24	2	—	—	26
Victoria's Secret Beauty and Accessories Greater China	29	13	(4)	—	38
Victoria's Secret Greater China	7	8	—	—	15
Total Victoria's Secret	1,230	26	(34)	—	1,222
Henri Bendel (a)	27	—	(27)	—	—
La Senza U.S. (a)	5	7	—	(12)	—
La Senza Canada (a)	119	—	(1)	(118)	—
Total Other	151	7	(28)	(130)	—
Total L Brands Stores	3,075	88	(90)	(130)	2,943

_______________

(a)    For additional information see Note 5, "Restructuring Activities" included in Item 8. Financial Statements

and Supplementary Data.

Partner-Operated Store Data

The following table represents partner-operated store data for 2020:

	Stores at			Transferred to	Stores at
	February 1, 2020	Opened	Closed	Joint Venture (a)	January 30, 2021
Bath & Body Works	278	14	(4)	—	288
Victoria’s Secret Beauty & Accessories	360	8	(30)	—	338
Victoria's Secret	84	12	(2)	26	120
Total	722	34	(36)	26	746

_______________

(a)    For additional information see Note 5, "Restructuring Activities" included in Item 8. Financial Statements

and Supplementary Data.

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The following table represents partner-operated store data for 2019:

	Stores at			Stores at
	February 2, 2019	Opened	Closed	February 1, 2020
Bath & Body Works	235	47	(4)	278
Victoria’s Secret Beauty & Accessories	383	24	(47)	360
Victoria's Secret	56	28	—	84
Total	674	99	(51)	722

The following table represents partner-operated store data for 2018:

	Stores at				Stores at
	February 3, 2018	Opened	Closed	Sold (a)	February 2, 2019
Bath & Body Works	185	56	(6)	—	235
Victoria’s Secret Beauty & Accessories	397	32	(46)	—	383
Victoria's Secret	37	19	—	—	56
La Senza	194	2	(17)	(179)	—
Total	813	109	(69)	(179)	674

_______________

(a)    For additional information see Note 5, "Restructuring Activities" included in Item 8. Financial Statements

and Supplementary Data.

Results of Operations—2020 Compared to 2019

The following information summarizes our results of operations for 2020 compared to 2019.

Operating Income (Loss)

The following table provides our segment operating income (loss) and operating income (loss) rates (expressed as a percentage of net sales) for 2020 in comparison to 2019:

					Operating Income (Loss) Rate
	2020		2019		2020		2019
	(in millions)
Bath & Body Works	$	1,821	$	1,224	28.3	%	22.9	%
Victoria’s Secret	(25)		(782)		(0.5	%)	(10.4	%)
Other (a)	(216)		(184)		—	%	(369.1	%)
Total Operating Income	$	1,580	$	258	13.3	%	2.0	%

 ________________

(a)Includes corporate infrastructure and governance functions, and other non-recurring items that are deemed to be corporate in nature.

For 2020, operating income increased $1.322 billion to $1.580 billion, and the operating income rate increased to 13.3% from 2.0%. The drivers of the operating income results are discussed in the following sections.

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Net Sales

The following table provides net sales for 2020 in comparison to 2019:

	2020		2019		% Change
	(in millions)
Bath & Body Works Stores - U.S. and Canada	$	4,207	$	4,212	—	%
Bath & Body Works Direct	2,003		958		109	%
Bath & Body Works International (a)	224		185		21	%
Total Bath & Body Works	6,434		5,355		20	%
Victoria’s Secret Stores - U.S. and Canada	2,795		5,112		(45	%)
Victoria’s Secret Direct	2,223		1,693		31	%
Victoria's Secret International (b)	395		704		(44	%)
Total Victoria’s Secret	5,413		7,509		(28	%)
Other (c)	$	—	50		(100	%)
Total Net Sales	$	11,847	$	12,914	(8	%)

________________

(a)Results include royalties associated with franchised store and wholesale sales.

(b)Results include company-operated stores in the U.K. (pre-joint venture) and Greater China, royalties associated with franchised stores and wholesale sales.

(c)Results include wholesale revenues to La Senza subsequent to the Company's divestiture of the business in 2018.

The following table provides a reconciliation of net sales for 2019 to 2020:

	Bath & Body Works		Victoria’s Secret		Other		Total
	(in millions)
2019 Net Sales	$	5,355	$	7,509	$	50	$	12,914
Comparable Store Sales	824		(499)		—		325
Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net (a)	(830)		(1,930)		—		(2,760)
Direct Channels	1,045		524		—		1,569
Private Label Credit Card	—		(59)		—		(59)
International Wholesale, Royalty and Other	39		(135)		(50)		(146)
Foreign Currency Translation	1		3		—		4
2020 Net Sales	$	6,434	$	5,413	$	—	$	11,847

________________

(a)Includes the impact of COVID-19-related stores closures.

The following table compares 2020 comparable sales to 2019:

	2020		2019
Comparable Sales (Stores and Direct) (a)
Bath & Body Works (b)	45	%	10	%
Victoria's Secret (c)	1	%	(8	%)
Total Comparable Sales	21	%	(1	%)
Comparable Store Sales (a)
Bath & Body Works (b)	26	%	5	%
Victoria's Secret (c)	(15	%)	(9	%)
Total Comparable Store Sales	5	%	(3	%)

 ________________

(a)The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. The change in comparable sales provides an indication of period over period growth (decline). A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has

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not had a change in selling square footage of 20% or more. Stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more. Therefore, comparable sales results for 2020 exclude stores that were closed for four consecutive days or more as a result of the COVID-19 pandemic. Additionally, stores of a given brand are excluded if total selling square footage for the brand in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.

(b)Includes company-operated stores in the U.S. and Canada.

(c)Includes company-operated stores in the U.S., Canada, the U.K. (pre-joint venture) and Greater China.

The results by segment are as follows:

Bath & Body Works

For 2020, net sales increased $1.079 billion to $6.434 billion; comparable sales increased 45%; and comparable store sales increased 26%. In both channels, sales were strong across all merchandise categories, driven by continued high demand for soaps and sanitizers combined with strong sales performance in home fragrance and body care. The Bath & Body Works Direct channel, which remained open throughout the year, grew sales by 109% to $2.003 billion and we have focused on increasing our fulfillment capacity to meet the increase in demand. We are achieving increased productivity while maintaining standard delivery times for our customers. These increases were partially offset by a decrease as a result of the COVID-19-related store closures as our stores were closed for a significant amount of time, primarily in the first and second quarter.

The increase in comparable sales was driven by increases in digital traffic, conversion and average unit retail, partially offset by a decline in store traffic.

Victoria’s Secret

For 2020, net sales decreased $2.096 billion to $5.413 billion; comparable sales increased 1%; and comparable store sales decreased 15%. Net sales decreased due to the store closures impacting company-operated and partner-operated stores and due to declines in store traffic. These declines were partially offset by an increase in Victoria's Secret Direct channel sales, which increased 31% to $2.223 billion despite a temporary suspension of operations in March, reflecting growth in Lingerie, PINK and Beauty.

The increase in comparable sales was driven by increases in digital traffic, conversion and average unit retail, partially offset by a decline in store traffic.

Other

For 2020, net sales decreased $50 million as we no longer provide sourcing services to La Senza, a company we divested in fiscal 2018.

Gross Profit

For 2020, our gross profit increased $217 million to $4.667 billion, and our gross profit rate (expressed as a percentage of net sales) increased to 39.4% from 34.5% primarily as a result of:

Bath & Body Works

For 2020, the gross profit increase was due to increased merchandise margin dollars related to the increase in net sales and the strong customer response to our merchandise assortment which allowed us to strategically pull back on promotional activity and marketing related offers, partially offset by higher expenses due to increased direct channel fulfillment and shipping costs.

The gross profit rate increase was driven by an increase in the merchandise margin rate reflecting a meaningful pullback in promotional activity and buying and occupancy leverage on higher net sales.

Victoria’s Secret

For 2020, the gross profit decrease was due to lower merchandise margin dollars related to the decrease in net sales due to store closures. This decrease was partially offset by improved response to our merchandise assortments, the disciplined management of inventory, as well as strong selling execution in stores and online, all of which enabled us to reduce promotional activity during the year. Additionally, occupancy expenses were lower this year due to the store closures, rent relief totaling $90 million and a $34 million decrease in store and lease asset impairment charges recognized in occupancy expense.

The gross profit rate increase was driven by an increase in the merchandise margin rate reflecting a meaningful pullback in promotional activity, partially offset by buying and occupancy deleverage on lower net sales.

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General, Administrative and Store Operating Expenses

For 2020, our general, administrative and store operating expenses decreased $385 million to $3.087 billion due to reductions at Victoria's Secret driven by lower store selling and marketing expenses as a result of permanent store closures and our profit improvement plan, and a net $29 million pre-tax gain resulting from the formation of the Victoria's Secret U.K. joint venture. These decreases were partially offset by severance and related costs associated with headcount reductions totaling $81 million and increases in Bath & Body Works store selling expenses due to the increase in net sales and to support COVID-19 guidelines.

The general, administrative and store operating expense rate decreased to 26.1% from 26.9% due to savings realized on our profit improvement plan, leverage at Bath & Body Works with higher sales, and the Victoria's Secret U.K. gain, partially offset by deleverage at Victoria's Secret on lower net sales and the severance and related costs.

Impairment of Goodwill

In 2019, our goodwill impairment assessments concluded that the carrying values of our Victoria's Secret and Victoria's Secret Greater China reporting units exceeded their fair values. Accordingly, we recognized pre-tax goodwill impairment charges of $720 million in the Victoria's Secret segment.

Other Income (Loss) and Expenses

Interest Expense

The following table provides the average daily borrowings and average borrowing rates for 2020 and 2019:

	2020			2019
Average daily borrowings (in millions)	$	6,418		$	5,725
Average borrowing rate (in percentages)	6.8		%	6.6		%

For 2020, our interest expense increased $60 million to $438 million due to both higher average daily borrowings and average borrowing rate.

Other Loss

For 2020, our other loss of $50 million consisted primarily of a $53 million pre-tax loss associated with the early extinguishment of outstanding notes recognized in 2020. For 2019, our other loss was $61 million, primarily due to a $40 million pre-tax loss associated with the early extinguishment of outstanding notes and a $37 million charge to increase reserves related to ongoing contingent obligations for the La Senza business, partially offset by interest income received on invested cash.

Provision for Income Taxes

For 2020, our effective tax rate was 22.7% compared to (101.9%) in 2019. The 2020 rate varied from our combined estimated federal and state statutory rate primarily due to the resolution of certain tax matters, which resulted in a $50 million tax benefit, and tax matters associated with foreign investments and recent changes in tax legislation, which resulted in a $23 million tax benefit. The 2019 rate was impacted by the Victoria's Secret goodwill impairment charges, which generated minimal tax benefit.

Results of Operations—Fourth Quarter of 2020 Compared to Fourth Quarter of 2019

The following information summarizes our results of operations for the fourth quarter of 2020 compared to the fourth quarter of 2019.

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Operating Income (Loss)

The following table provides our segment operating income (loss) and operating income (loss) rates (expressed as a percentage of net sales) for the fourth quarter of 2020 in comparison to the fourth quarter of 2019:

	Fourth Quarter				Operating Income (Loss) Rate
	2020		2019		2020		2019
	(in millions)
Bath & Body Works	$	914	$	664	33.6	%	29.8	%
Victoria’s Secret	403		(531)		19.2	%	(21.5	%)
Other (a)	(44)		(51)		—	%	—	%
Total Operating Income	$	1,273	$	82	26.4	%	1.7	%

 ________________

(a)Includes corporate infrastructure and governance functions, and other non-recurring items that are deemed to be corporate in nature.

For the fourth quarter of 2020, operating income increased $1.191 billion to $1.273 billion, and the operating income rate increased to 26.4% from 1.7%. The drivers of the operating income results are discussed in the following sections.

Net Sales

The following table provides net sales for the fourth quarter of 2020 in comparison to the fourth quarter of 2019:

	2020		2019		% Change
	(in millions)
Bath & Body Works Stores - U.S. and Canada	$	1,903	$	1,744	9	%
Bath & Body Works Direct	750		431		74	%
Bath & Body Works International (a)	66		56		18	%
Total Bath & Body Works	2,719		2,231		22	%
Victoria’s Secret Stores - U.S. and Canada	1,162		1,649		(30	%)
Victoria’s Secret Direct	831		627		33	%
Victoria's Secret International (b)	107		200		(47	%)
Total Victoria’s Secret	2,100		2,476		(15	%)
Total Net Sales	$	4,819	$	4,707	2	%

________________

(a)Results include royalties associated with franchised store and wholesale sales.

(b)Results include company-operated stores in the U.K. (pre-joint venture) and Greater China, royalties associated with franchised stores and wholesale sales.

The following table provides a reconciliation of net sales for the fourth quarter of 2019 to the fourth quarter of 2020:

	Bath & Body Works		Victoria’s Secret		Total
	(in millions)
2019 Net Sales	$	2,231	$	2,476	$	4,707
Comparable Store Sales	154		(251)		(97)
Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net (a)	4		(291)		(287)
Direct Channels	319		201		520
Private Label Credit Card	—		(14)		(14)
International, Wholesale, Royalty and Other	9		(27)		(18)
Foreign Currency Translation	2		6		8
2020 Net Sales	$	2,719	$	2,100	$	4,819

________________

(a)Includes the impact of COVID-19-related stores closures.

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The following table compares fourth quarter of 2020 comparable sales to fourth quarter of 2019:

	2020		2019
Comparable Sales (Stores and Direct) (a)
Bath & Body Works (b)	22	%	10	%
Victoria's Secret (c)	(3	%)	(10	%)
Total Comparable Sales	10	%	(2	%)
Comparable Store Sales (a)
Bath & Body Works (b)	9	%	5	%
Victoria's Secret (c)	(18	%)	(11	%)
Total Comparable Store Sales	(3	%)	(4	%)

 ________________

(a)The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. The change in comparable sales provides an indication of period over period growth (decline). A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more. Therefore, comparable sales results for the fourth quarter of 2020 exclude stores that were closed for four consecutive days or more as a result of the COVID-19 pandemic. Additionally, stores of a given brand are excluded if total selling square footage for the brand in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.

(b)Includes company-operated stores in the U.S. and Canada.

(c)Includes company-operated stores in the U.S., Canada, the U.K. (pre-joint venture) and Greater China.

The results by segment are as follows:

Bath & Body Works

For the fourth quarter of 2020, net sales increased $488 million to $2.719 billion; comparable sales increased 22%; and comparable store sales increased 9%. We achieved growth in all merchandise categories with two-thirds of our dollar growth coming from our home fragrance and body care categories, and one-third of the growth coming from soaps and sanitizers. In the direct channel, fourth quarter sales increased by 74%, or $319 million. We focused on increasing our fulfillment capacity to meet the significant increase in demand, and, as a result, are achieving record productivity while maintaining consistent delivery times for our customers. Traffic in the stores channel was limited during the Holiday time period by capacity constraints in stores on high volume days.

The increase in comparable sales was driven by increases in digital traffic, conversion and average unit retail, partially offset by a decline in store traffic, which was particularly constrained on high volume Holiday days.

Victoria’s Secret

For the fourth quarter of 2020, net sales decreased $376 million to $2.100 billion; comparable sales decreased 3%; and comparable store sales decreased 18%. Net sales decreased due to the permanent store closures and declines in store traffic. These declines were partially offset by an increase in Victoria's Secret Direct channel sales, which increased 33% to $831 million, reflecting growth in Lingerie, PINK and Beauty.

The decrease in comparable sales was driven by a decline in store traffic, which was particularly constrained on high volume Holiday days, partially offset by increases in conversion, average unit retail and digital traffic.

Gross Profit

For the fourth quarter of 2020, our gross profit increased $515 million to $2.309 billion, and our gross profit rate (expressed as a percentage of net sales) increased to 47.9% from 38.1% primarily as a result of:

Bath & Body Works

For the fourth quarter of 2020, the gross profit increase was due to increased merchandise margin dollars related to the increase in net sales and the strong customer response to our merchandise assortment which allowed us to strategically pull back on promotional activity and marketing related offers, partially offset by higher expenses due to increased direct channel fulfillment and shipping costs.

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The gross profit rate increase was driven by an increase in the merchandise margin rate reflecting a meaningful pullback in promotional activity and buying and occupancy leverage on higher net sales.

Victoria’s Secret

For the fourth quarter of 2020, the gross profit increase was due to improved response to our merchandise assortments, the disciplined management of inventory, as well as strong selling execution in stores and online, all of which enabled us to reduce promotional activity during the quarter. Additionally, occupancy expenses were lower this period due to the permanent store closures, rent relief totaling $66 million and a $30 million decrease in store and lease asset impairment charges recognized in occupancy expense. These increases were partially offset by lower merchandise margin dollars related to the decrease in net sales.

The gross profit rate increase was primarily driven by a higher merchandise margin rate reflecting a meaningful pullback in promotional activity, leverage on buying and occupancy expense from the mix shift to the direct channel, and the higher asset impairment charges in the prior year.

General, Administrative and Store Operating Expenses

For the fourth quarter of 2020, our general, administrative and store operating expenses increased $12 million to $1.034 billion due to an increase in Bath & Body Works store selling expenses due to the increase in net sales and to support COVID-19 guidelines, and an increase in incentive compensation payouts given company performance, partially offset by reductions at Victoria's Secret driven by lower store selling and other expenses as a result of our profit improvement plan and store closures.

The general, administrative and store operating expense rate decreased to 21.5% from 21.7% driven by leverage on higher net sales.

Impairment of Goodwill

In the fourth quarter of 2019, our annual goodwill impairment assessment concluded that the carrying value of the Victoria's Secret reporting unit exceeded its fair value. Accordingly, we recognized a pre-tax goodwill impairment charge of $690 million in the Victoria's Secret segment.

Other Income (Loss) and Expenses

Interest Expense

The following table provides the average daily borrowings and average borrowing rates for the fourth quarter of 2020 and 2019:

Fourth Quarter	2020			2019
Average daily borrowings (in millions)	$	6,499		$	5,617
Average borrowing rate (in percentages)	7.2		%	6.6		%

For the fourth quarter of 2020, our interest expense increased $25 million to $117 million due to both higher average daily borrowings and average borrowing rate.

Provision for Income Taxes

For the fourth quarter of 2020, our effective tax rate was 25.5%, in line with our combined estimated federal and state statutory rate. The 2019 rate was lower than our combined estimated federal and state statutory rate primarily due to the Victoria's Secret goodwill impairment charge, which generated minimal tax benefit in the U.S.

Results of Operations—2019 Compared to 2018

The following information summarizes our results of operations for 2019 compared to 2018.

Operating Income (Loss)

The following table provides our segment operating income (loss) and operating income (loss) rates (expressed as a percentage of net sales) for 2019 in comparison to 2018:

					Operating Income (Loss) Rate
	2019		2018		2019		2018
	(in millions)
Bath & Body Works	$	1,224	$	1,103	22.9	%	23.1	%
Victoria’s Secret	(782)		518		(10.4	%)	6.4	%
Other (a)	(184)		(384)		(369.1	%)	(107.1	%)
Total Operating Income	$