UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 _________________________________

FORM 10-Q

 _________________________________

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

For the quarterly period ended October 30, 2021

OR

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

For the transition period from              to             

Commission file number 1-8344

 _________________________________

BATH & BODY WORKS, INC.

(Exact name of registrant as specified in its charter)

 _______________________________

Delaware		31-1029810
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
Three Limited Parkway
Columbus,	Ohio	43230
(Address of principal executive offices)		(Zip Code)
(614)	415-7000
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

    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 and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) 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, 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	☐  (Do not check if a smaller reporting company)	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 is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ☐    No  ☒

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	BBWI	The New York Stock Exchange

As of November 26, 2021, the number of outstanding shares of the Registrant’s common stock, was 257,722,930 shares.

BATH & BODY WORKS, INC.

TABLE OF CONTENTS

	Page No.
Part I. Financial Information
Item 1. Financial Statements *
Consolidated Statements of Income (Loss) for the Thirteen-Weeks and Thirty-Nine-Weeks Ended October 30, 2021 and October 31, 2020 (Unaudited)	3
Consolidated Statements of Comprehensive Income (Loss) for the Thirteen-Weeks and Thirty-Nine-Weeks Ended October 30, 2021 and October 31, 2020 (Unaudited)	3
Consolidated Balance Sheets as of October 30, 2021, January 30, 2021 and October 31, 2020 (Unaudited)	4
Consolidated Statements of Total Equity (Deficit) for the Thirteen-Weeks and Thirty-Nine-Weeks Ended October 30, 2021 and October 31, 2020 (Unaudited)	5
Consolidated Statements of Cash Flows for the Thirty-Nine-Weeks Ended October 30, 2021 and October 31, 2020 (Unaudited)	7
Notes to Consolidated Financial Statements (Unaudited)	8
Report of Independent Registered Public Accounting Firm	21
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995	22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk	36
Item 4. Controls and Procedures	37
Part II. Other Information	38
Item 1. Legal Proceedings	38
Item 1A. Risk Factors	38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults Upon Senior Securities	39
Item 4. Mine Safety Disclosures	39
Item 5. Other Information	39
Item 6. Exhibits	40
Signature	41

* The Company's fiscal year ends on the Saturday nearest to January 31. As used herein, “third quarter of 2021” and “third quarter of 2020” refer to the thirteen-week periods ended October 30, 2021 and October 31, 2020, respectively. “Year-to-date 2021” and “year-to-date 2020” refer to the thirty-nine-week periods ended October 30, 2021 and October 31, 2020, respectively.

2

PART I—FINANCIAL INFORMATION

Item 1.    FINANCIAL STATEMENTS

BATH & BODY WORKS, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in millions except per share amounts)

(Unaudited)

	Third Quarter				Year-to-Date
	2021		2020		2021		2020
Net Sales	$	1,681	$	1,702	$	4,854	$	3,716
Costs of Goods Sold, Buying and Occupancy	(842)		(839)		(2,445)		(2,027)
Gross Profit	839		863		2,409		1,689
General, Administrative and Store Operating Expenses	(430)		(427)		(1,279)		(954)
Operating Income	409		436		1,130		735
Interest Expense	(91)		(119)		(301)		(317)
Other Loss	(91)		(52)		(196)		(47)
Income from Continuing Operations Before Income Taxes	227		265		633		371
Provision for Income Taxes	50		69		150		63
Net Income from Continuing Operations	177		196		483		308
Income (Loss) from Discontinued Operations, Net of Tax	(89)		135		256		(324)
Net Income (Loss)	$	88	$	331	$	739	$	(16)
Net Income (Loss) per Basic Share
Continuing Operations	$	0.67	$	0.70	$	1.77	$	1.11
Discontinued Operations	$	(0.34)	$	0.48	$	0.94	$	(1.17)
Total Net Income (Loss) per Basic Share	$	0.33	$	1.19	$	2.71	$	(0.06)
Net Income (Loss) per Diluted Share
Continuing Operations	$	0.66	$	0.69	$	1.74	$	1.10
Discontinued Operations	$	(0.33)	$	0.48	$	0.92	$	(1.15)
Total Net Income (Loss) per Diluted Share	$	0.33	$	1.17	$	2.67	$	(0.06)
Dividends Per Share	$	0.15	$	—	$	0.30	$	0.30

BATH & BODY WORKS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

(Unaudited)

	Third Quarter				Year-to-Date
	2021		2020		2021		2020
Net Income (Loss)	$	88	$	331	$	739	$	(16)
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation	1		(1)		4		(4)
Unrealized Gain (Loss) on Cash Flow Hedges	(1)		—		(1)		2
Reclassification of Cash Flow Hedges to Earnings	1		—		2		(2)
Total Other Comprehensive Income (Loss), Net of Tax	1		(1)		5		(4)
Total Comprehensive Income (Loss)	$	89	$	330	$	744	$	(20)

The accompanying Notes are an integral part of these Consolidated Financial Statements.

3

BATH & BODY WORKS, INC.

CONSOLIDATED BALANCE SHEETS

(in millions except par value amounts)

(Unaudited)

	October 30, 2021		January 30, 2021		October 31, 2020
ASSETS
Current Assets:
Cash and Cash Equivalents	$	1,441	$	3,568	$	2,433
Accounts Receivable, Net	242		148		161
Inventories	1,149		572		883
Other	153		52		72
Current Assets of Discontinued Operations	—		1,239		1,378
Total Current Assets	2,985		5,579		4,927
Property and Equipment, Net	1,017		1,017		1,064
Operating Lease Assets	1,023		968		875
Goodwill	628		628		628
Trade Names	165		165		165
Deferred Income Taxes	62		58		59
Other Assets	151		175		279
Other Assets of Discontinued Operations	—		2,981		3,164
Total Assets	$	6,031	$	11,571	$	11,161
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable	$	655	$	345	$	553
Accrued Expenses and Other	636		727		871
Current Operating Lease Liabilities	143		173		182
Income Taxes	1		83		112
Current Liabilities of Discontinued Operations	—		1,498		1,612
Total Current Liabilities	1,435		2,826		3,330
Deferred Income Taxes	146		141		117
Long-term Debt	4,852		6,366		6,364
Long-term Operating Lease Liabilities	993		942		857
Other Long-term Liabilities	280		290		164
Other Long-term Liabilities of Discontinued Operations	—		1,667		1,893
Shareholders’ Equity (Deficit):
Preferred Stock - $1.00 par value; 10 shares authorized; none issued	—		—		—
Common Stock - $0.50 par value; 1,000 shares authorized; 275, 286 and 286 shares issued; 260, 278 and 278 shares outstanding, respectively	137		143		143
Paid-in Capital	904		891		879
Accumulated Other Comprehensive Income	80		83		48
Retained Earnings (Accumulated Deficit)	(1,975)		(1,421)		(2,280)
Less: Treasury Stock, at Average Cost; 15, 8 and 8 shares, respectively	(822)		(358)		(358)
Total Shareholders’ Equity (Deficit)	(1,676)		(662)		(1,568)
Noncontrolling Interest	1		1		4
Total Equity (Deficit)	(1,675)		(661)		(1,564)
Total Liabilities and Equity (Deficit)	$	6,031	$	11,571	$	11,161

The accompanying Notes are an integral part of these Consolidated Financial Statements.

4

BATH & BODY WORKS, INC.

CONSOLIDATED STATEMENTS OF TOTAL EQUITY (DEFICIT)

(in millions except per share amounts)

(Unaudited)

Third Quarter 2021

	Common Stock			Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings (Accumulated Deficit)		Treasury Stock, at Average Cost		Noncontrolling Interest		Total Equity (Deficit)
	Shares Outstanding	Par Value
Balance, July 31, 2021	265	$	140	$	911	$	87	$	(1,505)	$	(822)	$	1	$	(1,188)
Net Income	—	—		—		—		88		—		—		88
Other Comprehensive Income	—	—		—		1		—		—		—		1
Total Comprehensive Income	—	—		—		1		88		—		—		89
Victoria's Secret Spin-Off	—	—		—		(8)		(175)		—		—		(183)
Cash Dividends ($0.15 per share)	—	—		—		—		(39)		—		—		(39)
Repurchases of Common Stock	(5)	—		—		—		—		(365)		—		(365)
Treasury Share Retirement	—	(3)		(18)		—		(344)		365		—		—
Share-based Compensation and Other	—	—		11		—		—		—		—		11
Balance, October 30, 2021	260	$	137	$	904	$	80	$	(1,975)	$	(822)	$	1	$	(1,675)

Third Quarter 2020

	Common Stock			Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings (Accumulated Deficit)		Treasury Stock, at Average Cost		Noncontrolling Interest		Total Equity (Deficit)
	Shares Outstanding	Par Value
Balance, August 1, 2020	278	$	143	$	869	$	49	$	(2,611)	$	(358)	$	4	$	(1,904)
Net Income	—	—		—		—		331		—		—		331
Other Comprehensive Loss	—	—		—		(1)		—		—		—		(1)
Total Comprehensive Income	—	—		—		(1)		331		—		—		330
Share-based Compensation and Other	—	—		10		—		—		—		—		10
Balance, October 31, 2020	278	$	143	$	879	$	48	$	(2,280)	$	(358)	$	4	$	(1,564)

The accompanying Notes are an integral part of these Consolidated Financial Statements.

5

BATH & BODY WORKS, INC.

CONSOLIDATED STATEMENTS OF TOTAL EQUITY (DEFICIT)

(in millions except per share amounts)

(Unaudited)

Year-to-Date 2021

	Common Stock			Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings (Accumulated Deficit)		Treasury Stock, at Average Cost		Noncontrolling Interest		Total Equity (Deficit)
	Shares Outstanding	Par Value
Balance, January 30, 2021	278	$	143	$	891	$	83	$	(1,421)	$	(358)	$	1	$	(661)
Net Income	—	—		—		—		739		—		—		739
Other Comprehensive Income	—	—		—		5		—		—		—		5
Total Comprehensive Income	—	—		—		5		739		—		—		744
Victoria's Secret Spin-Off	—	—		—		(8)		(175)		—		—		(183)
Cash Dividends ($0.30 per share)	—	—		—		—		(81)		—		—		(81)
Repurchases of Common Stock	(22)	—		—		—		—		(1,559)		—		(1,559)
Treasury Share Retirement	—	(8)		(50)		—		(1,037)		1,095		—		—
Share-based Compensation and Other	4	2		63		—		—		—		—		65
Balance, October 30, 2021	260	$	137	$	904	$	80	$	(1,975)	$	(822)	$	1	$	(1,675)

Year-to-Date 2020

	Common Stock			Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings (Accumulated Deficit)		Treasury Stock, at Average Cost		Noncontrolling Interest		Total Equity (Deficit)
	Shares Outstanding	Par Value
Balance, February 1, 2020	277	$	142	$	847	$	52	$	(2,182)	$	(358)	$	4	$	(1,495)
Net Loss	—	—		—		—		(16)		—		—		(16)
Other Comprehensive Loss	—	—		—		(4)		—		—		—		(4)
Total Comprehensive Loss	—	—		—		(4)		(16)		—		—		(20)
Cash Dividends ($0.30 per share)	—	—		—		—		(83)		—		—		(83)
Share-based Compensation and Other	1	1		32		—		—		—		—		33
Balance, October 31, 2020	278	$	143	$	879	$	48	$	(2,280)	$	(358)	$	4	$	(1,564)

The accompanying Notes are an integral part of these Consolidated Financial Statements.

6

BATH & BODY WORKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

	Year-to-Date
	2021 (a)		2020 (a)
Operating Activities:
Net Income (Loss)	$	739	$	(16)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Depreciation of Long-lived Assets	310		393
Loss on Extinguishment of Debt	195		53
Victoria's Secret Asset Impairment Charges	—		214
Share-based Compensation Expense	38		39
Deferred Income Taxes	19		(14)
Gain from Victoria's Secret Hong Kong Store Closure and Lease Termination	—		(39)
Gain Related to Formation of Victoria's Secret U.K. Joint Venture	—		(30)
Changes in Assets and Liabilities:
Accounts Receivable	(61)		9
Inventories	(617)		(590)
Accounts Payable, Accrued Expenses and Other	132		591
Income Taxes Payable	(149)		(29)
Other Assets and Liabilities	(159)		125
Net Cash Provided by Operating Activities	447		706
Investing Activities:
Capital Expenditures	(241)		(200)
Other Investing Activities	13		17
Net Cash Used for Investing Activities	(228)		(183)
Financing Activities:
Proceeds from Issuance of Long-Term Debt, Net of Issuance Costs	—		2,219
Payments of Long-term Debt	(1,716)		(1,307)
Proceeds from Spin-Off of Victoria's Secret & Co.	976		—
Transfers and Payments to Victoria's Secret & Co. related to Spin-Off	(362)		—
Borrowing from Credit Agreement	—		950
Repayment of Credit Agreement	—		(950)
Net Repayments of Victoria's Secret Foreign Facilities	—		(57)
Repurchases of Common Stock	(1,544)		—
Dividends Paid	(81)		(83)
Tax Payments related to Share-based Awards	(58)		(8)
Proceeds from Stock Option Exercises	81		1
Other Financing Activities	(9)		(36)
Net Cash Provided by (Used for) Financing Activities	(2,713)		729
Effects of Exchange Rate Changes on Cash and Cash Equivalents and Restricted Cash	2		(1)
Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash	(2,492)		1,251
Cash and Cash Equivalents and Restricted Cash, Beginning of Period	3,933		1,499
Cash and Cash Equivalents and Restricted Cash, End of Period	$	1,441	$	2,750

 _______________

(a)The cash flows related to discontinued operations have not been segregated. Accordingly, the Consolidated Statements of Cash Flows include the results of continuing and discontinued operations.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

7

BATH & BODY WORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business and Basis of Presentation

Description of Business

Bath & Body Works, Inc. ("Bath & Body Works" or the "Company") is a specialty retailer of home fragrance products, body care, and soaps and sanitizers. Through the Bath & Body Works retail brand, the Company sells merchandise through company-operated specialty retail stores in the U.S. and Canada, and through its websites and other channels. The Company's international operations are primarily through franchise, license and wholesale partners.

On August 2, 2021, the Company completed the spin-off of its Victoria's Secret business, which included the Victoria's Secret and PINK brands, into an independent publicly traded company. As a result, the operating results for the Victoria's Secret business through the date of the spin-off are reported in Income (Loss) from Discontinued Operations, Net of Tax in the Consolidated Statements of Income (Loss) for all periods presented. In addition, the related assets and liabilities are reported as Assets and Liabilities of Discontinued Operations on the Consolidated Balance Sheets. Unless otherwise noted, all amounts and disclosures included in the Notes to Consolidated Financial Statements reflect only the Company's continuing operations. For additional information, see Note 2, "Discontinued Operations."

On August 2, 2021, in connection with the spin-off of the Victoria's Secret business discussed above, the Company changed its name from L Brands, Inc. to Bath & Body Works, Inc. Additionally, starting August 3, 2021, the Company's common stock began trading under the stock symbol "BBWI."

Impacts of COVID-19

The coronavirus pandemic ("COVID-19") has created significant public health concerns as well as economic disruption, uncertainty and volatility. The Company's operations and financial performance have been materially impacted by the COVID-19 pandemic. In the first quarter of 2020, all the Company-operated stores were closed on March 17, 2020, but the Company was able to re-open the majority of its stores as of the end of the second quarter of 2020. The Direct business remained open for the duration of 2020. During 2020, the Company took prudent actions to manage expenses and to maintain its cash position and financial flexibility.

The Company adopted new operating models focused on safety. The Company continues to remain focused on providing a safe store environment for its customers and associates, while also delivering an engaging shopping experience. The Company also remains focused on the safe operations of its distribution and fulfillment centers while maximizing its direct business. There remains the potential for COVID-related closures or operating restrictions, which could materially impact the Company's operations and financial performance in future periods.

Fiscal Year

The Company’s fiscal year ends on the Saturday nearest to January 31. As used herein, “third quarter of 2021” and “third quarter of 2020” refer to the thirteen-week periods ended October 30, 2021 and October 31, 2020, respectively. “Year-to-date 2021” and “year-to-date 2020” refer to the thirty-nine-week periods ended October 30, 2021 and October 31, 2020, respectively.

Basis of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company accounts for investments in unconsolidated entities where it exercises significant influence, but does not have control, using the equity method. Under the equity method of accounting, the Company recognizes its share of the investee's net income or loss. Losses are only recognized to the extent the Company has positive carrying value related to the investee. Carrying values are only reduced below zero if the Company has an obligation to provide funding to the investee. The Company’s share of net income or loss of all unconsolidated entities is included in Other Loss in the Consolidated Statements of Income (Loss). The Company’s equity method investments are required to be reviewed for impairment when it is determined there may be an other-than-temporary loss in value.

Segment Reporting

The Company operates as a single segment that includes all of its continuing operations, which is designed to enable customers to purchase its products through stores or digital channels. The Company previously had two reportable segments: Bath & Body Works and Victoria's Secret. The Victoria's Secret reportable segment was spun-off on August 2, 2021 and is now reported as discontinued operations for all periods through that date.

8

Interim Financial Statements

The Consolidated Financial Statements as of and for the periods ended October 30, 2021 and October 31, 2020 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in the Company’s 2020 Annual Report on Form 10-K.

In the opinion of management, the accompanying Consolidated Financial Statements reflect all adjustments that are of a normal recurring nature and necessary for a fair presentation of the results for the interim periods.

Seasonality of Business

Due to the seasonal variations in the retail industry, the results of operations for the interim period are not necessarily indicative of the results expected for the full fiscal year.

Restricted Cash

During 2020, the Company placed cash on deposit with certain financial institutions as collateral for their lending commitments to certain former Victoria's Secret subsidiaries. These deposits totaled $30 million and $128 million as of January 30, 2021 and October 31, 2020, respectively, and were recorded in Other Assets on the Consolidated Balance Sheets. During the second quarter of 2021, these lending commitments were terminated which released the restrictions on this cash. Accordingly, the balance was reclassified to Cash and Cash Equivalents during the second quarter of 2021.

Derivative Financial Instruments

The Company uses derivative financial instruments to manage exposure to foreign currency exchange rates. The Company does not use derivative instruments for trading purposes. All derivative instruments are recorded on the Consolidated Balance Sheets at fair value.

The earnings of the Company's Canadian operations are subject to exchange rate risk as substantially all the merchandise is sourced through U.S. dollar transactions. The Company uses foreign currency forward contracts designated as cash flow hedges to mitigate this foreign currency exposure. Amounts are reclassified from accumulated other comprehensive income (loss) upon sale of the hedged merchandise to the customer. These gains and losses are recognized in Costs of Goods Sold, Buying and Occupancy in the Consolidated Statements of Income (Loss). The fair value of designated cash flow hedges is not significant for any period presented.

Concentration of Credit Risk

The Company maintains cash and cash equivalents and derivative contracts with various major financial institutions. The Company monitors the relative credit standing of financial institutions with whom the Company transacts and limits the amount of credit exposure with any one entity. The Company’s investment portfolio is primarily comprised of U.S. government obligations, U.S. Treasury and AAA-rated money market funds, commercial paper and bank deposits.

The Company also periodically reviews the relative credit standing of franchise, license and wholesale partners and other entities to which the Company grants credit terms in the normal course of business. The Company determines the required allowance for expected credit losses using information such as customer credit history and financial condition. Amounts are recorded to the allowance when it is determined that expected credit losses may occur.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from those estimates, and the Company revises its estimates and assumptions as new information becomes available.

Recently Issued Accounting Pronouncements

The Company did not adopt any new accounting standards during the third quarter of 2021 that had a material impact on the Company's consolidated results of operations, financial position or cash flows. In addition, there are no new accounting standards not yet adopted that are expected to have a material impact on the Company's consolidated results of operations, financial position or cash flows.

9

2. Discontinued Operations

On July 9, 2021, the Company announced that its Board of Directors approved the previously announced separation of the Victoria’s Secret business (the "Separation") into an independent, publicly traded company, Victoria's Secret & Co. On August 2, 2021 (the “Distribution Date”), after the New York Stock Exchange ("NYSE") market closing, the Separation was completed. The Separation was achieved through the Company's distribution (the "Distribution") of 100% of the shares of Victoria's Secret & Co. common stock to holders of L Brands, Inc. common stock as of the close of business on the record date of July 22, 2021. The Company's stockholders of record received one share of Victoria’s Secret & Co. common stock for every three shares of the Company's common stock. On August 3, 2021, Victoria’s Secret & Co. became an independent, publicly-traded company trading on the NYSE under the stock symbol "VSCO." The Company retained no ownership interest in Victoria’s Secret & Co. following the Separation.

In July 2021, Victoria’s Secret & Co., prior to the Separation and while a subsidiary of the Company, issued $600 million of 4.625% notes due in July 2029 (the "VSCO Notes"). As of July 31, 2021, the initial proceeds were held in escrow for release to Victoria's Secret & Co. upon satisfaction of certain conditions, including completion of the Separation. Additionally, on August 2, 2021, in connection with the Separation, Victoria's Secret & Co. entered into a term loan facility with a credit limit of $400 million and a senior secured asset-based revolving credit facility with a credit limit of $750 million. In connection with the Separation, Victoria's Secret & Co. received net cash proceeds of $384 million from its $400 million borrowing under its credit facilities. The proceeds from the credit facilities and the $592 million net proceeds from the VSCO Notes were used to fund cash payments of $976 million to the Company in connection with the Separation. The Company does not guarantee the VSCO Notes, the Victoria's Secret & Co. term loan facility or the Victoria's Secret & Co. senior secured asset-based revolving credit facility following the Separation.

Cash and Cash Equivalents of $282 million held by Victoria's Secret subsidiaries were transferred to Victoria's Secret & Co. on the Distribution Date. Additionally, the Company made payments of $80 million to Victoria's Secret & Co. during the third quarter for costs incurred prior to the Distribution Date pursuant to the terms of the Separation agreements.

During the third quarter of 2021, the Company recognized a net reduction to retained earnings of $175 million as a result of the Separation, primarily related to the transfer of certain assets and liabilities associated with its Victoria's Secret business to Victoria's Secret & Co. net of the $976 million of cash payments received from Victoria's Secret & Co. Additionally, the Company reclassified out of accumulated other comprehensive income $8 million of accumulated foreign currency translation adjustments related to the Victoria's Secret business.

In connection with the Separation, the Company entered into several agreements with Victoria's Secret & Co. that govern the relationship of the parties following the spin-off, including the Separation and Distribution Agreement, the Transition Services Agreements, the Tax Matters Agreement, the Employee Matters Agreement and the Domestic Transportation Services Agreement.

Under the terms of the Transition Services Agreements, the Company will provide to Victoria's Secret & Co. various services or functions, including human resources, payroll and certain logistics functions. Additionally, Victoria's Secret & Co. will provide to the Company various services or functions, including information technology, certain logistics functions, customer marketing and customer call center services. Generally, these services will be performed for a period of up to two years following the Distribution, except for information technology services, which will be provided for a period of up to three years following the Distribution and may be extended for a maximum of two additional one-year periods subject to increased administrative charges. Consideration and costs for the transition services are determined using several billing methodologies as described in the agreements, including customary billing, pass-through billing, percent of sales billing or fixed fee billing. Consideration for transition services provided to Victoria's Secret & Co. are recorded within the 2021 Consolidated Statements of Income based on the nature of the service and as an offset to expenses incurred to provide the services. Costs for transition services provided by Victoria's Secret & Co. are recorded within the 2021 Consolidated Statements of Income based on the nature of the service. During the third quarter of 2021, the Company recognized consideration of $20 million and recognized costs of $24 million pursuant to the Transition Service Agreements.

Under the terms of the Domestic Transportation Services Agreement, the Company will continue to provide transportation services for Victoria's Secret & Co. merchandise in the United States and Canada for an initial term of three years following the Distribution, which term will thereafter continuously renew unless and until Victoria’s Secret & Co. or the Company elects to terminate the arrangement upon 18 or 36 months’ prior written notice, respectively. Consideration for the transportation services is determined using customary billing and fixed billing methodologies, which are described in the agreement, and are subject to an administrative charge. During the third quarter of 2021, the Company recognized consideration of $18 million pursuant to the Domestic Transportation Services Agreement.

In conjunction with the Separation, the Company has contingent obligations relating to certain lease payments under the current terms of noncancelable leases. For additional information, see Note 13, "Commitments and Contingencies."

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Financial Information of Discontinued Operations

Income (Loss) from Discontinued Operations, Net of Tax in the Consolidated Statements of Income (Loss) reflects the after-tax results of the Victoria's Secret business and Separation-related fees, and does not include any allocation of general corporate overhead expense or interest expense of the Company.

The following table summarizes the significant line items included in Income (Loss) from Discontinued Operations, Net of Tax in the Consolidated Statements of Income (Loss) for the third quarter and year-to-date 2021 and 2020:

	Third Quarter				Year-to-Date
	2021		2020		2021		2020
	(in millions)
Net Sales	$	25	$	1,353	$	3,194	$	3,313
Costs of Goods Sold, Buying and Occupancy	(14)		(856)		(1,841)		(2,643)
General, Administrative and Store Operating Expenses (a)	(83)		(352)		(975)		(1,098)
Interest Expense	—		(1)		(2)		(5)
Other Income (Loss)	—		1		(1)		(1)
Income (Loss) from Discontinued Operations Before Income Taxes	(72)		145		375		(434)
Provision (Benefit) for Income Taxes	17		10		119		(110)
Income (Loss) from Discontinued Operations, Net of Tax	$	(89)	$	135	$	256	$	(324)

 _______________

(a)Includes Separation-related expenses of $76 million and $104 million for the third quarter and year-to-date 2021, respectively. Prior to the third quarter of 2021, these costs were reported in the Other category under the Company's previous segment reporting.

The information presented as discontinued operations on the Consolidated Balance Sheets includes certain assets and liabilities that were transferred to Victoria’s Secret & Co. pursuant to the Separation agreements, and excludes certain liabilities that were retained by the Company in connection with the Separation.

There were no assets or liabilities classified as discontinued operations as of October 30, 2021. The following table summarizes the carrying value of the significant classes of assets and liabilities classified as discontinued operations as of January 30, 2021 and October 31, 2020:

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	January 30, 2021		October 31, 2020
	(in millions)
Cash and Cash Equivalents	$	335	$	189
Accounts Receivable, Net	121		135
Inventories	701		981
Other	82		73
Current Assets of Discontinued Operations	1,239		1,378
Property and Equipment, Net	1,078		1,167
Operating Lease Assets	1,590		1,683
Trade Names	246		246
Deferred Income Taxes	11		11
Other Assets	56		57
Other Assets of Discontinued Operations	$	2,981	$	3,164
Accounts Payable	$	338	$	548
Accrued Expenses and Other	730		608
Current Debt	—		11
Current Operating Lease Liabilities	421		443
Income Taxes	9		2
Current Liabilities of Discontinued Operations	1,498		1,612
Deferred Income Taxes	93		73
Long-term Debt	—		87
Long-term Operating Lease Liabilities	1,553		1,709
Other Long-term Liabilities	21		24
Other Long-term Liabilities of Discontinued Operations	$	1,667	$	1,893

The cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows for all periods presented. The following table summarizes depreciation and other significant operating noncash items, capital expenditures and financing activities of discontinued operations for each period presented:

	Year-to-Date
	2021		2020
	(in millions)
Depreciation of Long-Lived Assets	$	158	$	250
Share-based Compensation Expense	15		20
Victoria's Secret Asset Impairment Charges	—		214
Gain from Victoria's Secret Hong Kong Store Closure and Lease Termination	—		(39)
Gain Related to Formation of Victoria's Secret U.K. Joint Venture	—		(30)
Capital Expenditures	(66)		(111)
Net Repayments of Victoria's Secret Foreign Facilities	—		(57)

3. Revenue Recognition

Accounts receivable, net from revenue-generating activities were $86 million as of October 30, 2021, $51 million as of January 30, 2021 and $82 million as of October 31, 2020. Accounts receivable primarily relate to amounts due from the Company's franchise, license and wholesale partners. Under these arrangements, payment terms are typically 45 to 75 days.

The Company records deferred revenue when cash payments are received in advance of transfer of control of goods or services. Deferred revenue primarily relates to gift cards, loyalty points and direct channel shipments, which are all impacted by seasonal and holiday-related sales patterns. Deferred revenue, which is recorded within Accrued Expenses and Other on the

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Consolidated Balance Sheets, was $123 million as of October 30, 2021, $115 million as of January 30, 2021 and $98 million as of October 31, 2020. The Company recognized $66 million as revenue year-to-date 2021 from amounts recorded as deferred revenue at the beginning of the year.

The following table provides a disaggregation of Net Sales for the third quarter and year-to-date 2021 and 2020:

	Third Quarter				Year-to-Date
	2021		2020		2021		2020
	(in millions)
Stores - U.S. and Canada	$	1,238	$	1,202	$	3,518	$	2,304
Direct - U.S. and Canada	369		446		1,126		1,254
International (a)	74		54		210		158
Total Net Sales	$	1,681	$	1,702	$	4,854	$	3,716

 _______________

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

The Company’s net sales outside of the U.S. include sales from company-operated stores in Canada, royalty revenue from franchise and license arrangements and wholesale revenues. Certain of these sales are subject to the impact of fluctuations in foreign currency. The Company’s net sales outside of the U.S. totaled $159 million and $134 million for the third quarter of 2021 and 2020, respectively, and $397 million and $308 million for year-to-date 2021 and 2020, respectively.

4. Restructuring Activities

During the second quarter of 2020, the Company completed a comprehensive review of its home office organizations in order to achieve meaningful reductions in overhead expenses and decentralize significant shared functions and services to support the separation of the Bath & Body Works and Victoria's Secret businesses. Pre-tax severance and related costs associated with these reductions, totaling $30 million, are included in General, Administrative and Store Operating Expenses in the year-to-date 2020 Consolidated Statement of Loss. The remaining liability for unpaid severance and related costs was not significant as of October 30, 2021.

5. Earnings (Loss) Per Share and Shareholders’ Equity (Deficit)

Earnings (Loss) Per Share

Earnings (loss) per basic share is computed based on the weighted-average number of common shares. Earnings (loss) per diluted share include the weighted-average effect of dilutive restricted stock and options on the weighted-average shares outstanding.

The following table provides the weighted-average shares utilized for the calculation of basic and diluted earnings (loss) per share for the third quarter and year-to-date 2021 and 2020:

	Third Quarter		Year-to-Date
	2021	2020	2021	2020
	(in millions)
Common Shares	278	287	285	286
Treasury Shares	(15)	(8)	(13)	(8)
Basic Shares	263	279	272	278
Effect of Dilutive Restricted Stock and Options	4	4	5	3
Diluted Shares	267	283	277	281
Anti-dilutive Options and Awards (a)	1	4	1	5

 _______________

(a)These options and awards were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

Shareholders’ Equity (Deficit)

Common Stock Share Repurchases

In March 2021, the Company's Board of Directors authorized a new $500 million share repurchase plan, which replaced the $79 million remaining under the March 2018 repurchase program. Pursuant to the Board's authorization, the Company entered into a Rule 10b5-1 purchase plan to effectuate share repurchases for the first $250 million. In May 2021, the Company initiated a

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second $250 million Rule 10b5-1 purchase plan to effectuate the remaining share repurchases under the March 2021 repurchase plan.

In July 2021, the Company's Board of Directors authorized a new $1.5 billion share repurchase program (the "July 2021 Program"), which replaced the $36 million remaining under the March 2021 repurchase program. Under the authorization of this program, in July 2021 the Company entered into a stock repurchase agreement with its former Chief Executive Officer and certain of his affiliated entities pursuant to which the Company repurchased 10 million shares of its common stock for an aggregate purchase price of $730 million.

The Company repurchased the following shares of its common stock during year-to-date 2021:

Repurchase Program	Amount Authorized		Shares Repurchased	Amount Repurchased		Average Stock Price
	(in millions)		(in thousands)	(in millions)
March 2021 (a)	$	500	6,996	$	464	$	66.30
July 2021 (a)	$	1,500	10,000	$	730	$