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 July 30, 2022

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 August 26, 2022, the number of outstanding shares of the Registrant’s common stock, was 228,374,316 shares.

BATH & BODY WORKS, INC.

TABLE OF CONTENTS

	Page No.
Part I. Financial Information
Item 1. Financial Statements *
Consolidated Statements of Income for the Thirteen-Weeks and Twenty-Six-Weeks Ended July 30, 2022 and July 31, 2021 (Unaudited)	3
Consolidated Statements of Comprehensive Income for the Thirteen-Weeks and Twenty-Six-Weeks Ended July 30, 2022 and July 31, 2021 (Unaudited)	3
Consolidated Balance Sheets as of July 30, 2022 (Unaudited), January 29, 2022 and July 31, 2021 (Unaudited)	4
Consolidated Statements of Total Equity (Deficit) for the Thirteen-Weeks and Twenty-Six-Weeks Ended July 30, 2022 and July 31, 2021 (Unaudited)	5
Consolidated Statements of Cash Flows for the Twenty-Six-Weeks Ended July 30, 2022 and July 31, 2021 (Unaudited)	7
Notes to Consolidated Financial Statements (Unaudited)	8
Report of Independent Registered Public Accounting Firm	18
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995	19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures About Market Risk	31
Item 4. Controls and Procedures	32
Part II. Other Information	33
Item 1. Legal Proceedings	33
Item 1A. Risk Factors	33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3. Defaults Upon Senior Securities	33
Item 4. Mine Safety Disclosures	34
Item 5. Other Information	34
Item 6. Exhibits	34
Signature	35

* The Company's fiscal year ends on the Saturday nearest to January 31. As used herein, “second quarter of 2022” and “second quarter of 2021” refer to the thirteen-week periods ended July 30, 2022 and July 31, 2021, respectively. “Year-to-date 2022” and “year-to-date 2021” refer to the twenty-six-week periods ended July 30, 2022 and July 31, 2021, respectively.

2

PART I—FINANCIAL INFORMATION

Item 1.    FINANCIAL STATEMENTS

BATH & BODY WORKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)

(Unaudited)

	Second Quarter				Year-to-Date
	2022		2021		2022		2021
Net Sales	$	1,618	$	1,704	$	3,067	$	3,173
Costs of Goods Sold, Buying and Occupancy	(958)		(876)		(1,739)		(1,603)
Gross Profit	660		828		1,328		1,570
General, Administrative and Store Operating Expenses	(418)		(444)		(806)		(849)
Operating Income	242		384		522		721
Interest Expense	(86)		(97)		(175)		(210)
Other Income (Loss)	2		—		3		(105)
Income from Continuing Operations Before Income Taxes	158		287		350		406
Provision for Income Taxes	38		72		75		100
Net Income from Continuing Operations	120		215		275		306
Income from Discontinued Operations, Net of Tax	—		159		—		345
Net Income	$	120	$	374	$	275	$	651
Net Income per Basic Share
Continuing Operations	$	0.52	$	0.78	$	1.17	$	1.10
Discontinued Operations	—		0.58		—		1.25
Total Net Income per Basic Share	$	0.52	$	1.36	$	1.17	$	2.35
Net Income per Diluted Share
Continuing Operations	$	0.52	$	0.77	$	1.16	$	1.08
Discontinued Operations	—		0.57		—		1.22
Total Net Income per Diluted Share	$	0.52	$	1.34	$	1.16	$	2.31

BATH & BODY WORKS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(Unaudited)

	Second Quarter				Year-to-Date
	2022		2021		2022		2021
Net Income	$	120	$	374	$	275	$	651
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation	—		(2)		—		4
Unrealized Gain (Loss) on Cash Flow Hedges	—		2		—		(1)
Reclassification of Cash Flow Hedges to Earnings	—		1		—		1
Total Other Comprehensive Income, Net of Tax	—		1		—		4
Total Comprehensive Income	$	120	$	375	$	275	$	655

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)

	July 30, 2022		January 29, 2022		July 31, 2021
	(Unaudited)				(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	452	$	1,979	$	1,695
Accounts Receivable, Net	184		240		131
Inventories	971		709		728
Other	147		81		134
Current Assets of Discontinued Operations	—		—		1,826
Total Current Assets	1,754		3,009		4,514
Property and Equipment, Net	1,071		1,009		1,002
Operating Lease Assets	1,087		1,021		1,051
Goodwill	628		628		628
Trade Names	165		165		165
Deferred Income Taxes	45		45		59
Other Assets	151		149		142
Other Assets of Discontinued Operations	—		—		2,831
Total Assets	$	4,901	$	6,026	$	10,392
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable	$	587	$	435	$	460
Accrued Expenses and Other	512		651		717
Current Operating Lease Liabilities	158		170		148
Income Taxes	1		34		—
Current Liabilities of Discontinued Operations	—		—		1,300
Total Current Liabilities	1,258		1,290		2,625
Deferred Income Taxes	157		157		149
Long-term Debt	4,858		4,854		5,346
Long-term Operating Lease Liabilities	1,050		989		1,020
Other Long-term Liabilities	240		253		270
Other Long-term Liabilities of Discontinued Operations	—		—		2,170
Shareholders’ Equity (Deficit):
Preferred Stock - $1.00 par value; 10 shares authorized; none issued	—		—		—
Common Stock - $0.50 par value; 1,000 shares authorized; 243, 269 and 280 shares issued; 228, 254 and 265 shares outstanding, respectively	122		134		140
Paid-in Capital	791		893		911
Accumulated Other Comprehensive Income	80		80		87
Retained Earnings (Accumulated Deficit)	(2,834)		(1,803)		(1,505)
Less: Treasury Stock, at Average Cost; 15, 15 and 15 shares, respectively	(822)		(822)		(822)
Total Shareholders’ Equity (Deficit)	(2,663)		(1,518)		(1,189)
Noncontrolling Interest	1		1		1
Total Equity (Deficit)	(2,662)		(1,517)		(1,188)
Total Liabilities and Equity (Deficit)	$	4,901	$	6,026	$	10,392

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)

Second Quarter 2022

	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, April 30, 2022	236	$	126	$	618	$	80	$	(2,661)	$	(822)	$	1	$	(2,658)
Net Income and Total Comprehensive Income	—	—		—		—		120		—		—		120
Cash Dividends ($0.20 per share)	—	—		—		—		(46)		—		—		(46)
Repurchases of Common Stock	(2)	—		—		—		—		(77)		—		(77)
Accelerated Share Repurchase Program	(7)	—		200		—		—		(200)		—		—
Treasury Share Retirement	—	(4)		(26)		—		(247)		277		—		—
Share-based Compensation and Other	1	—		(1)		—		—		—		—		(1)
Balance, July 30, 2022	228	$	122	$	791	$	80	$	(2,834)	$	(822)	$	1	$	(2,662)

Second 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, May 1, 2021	277	$	144	$	903	$	86	$	(1,144)	$	(523)	$	1	$	(533)
Net Income	—	—		—		—		374		—		—		374
Other Comprehensive Income	—	—		—		1		—		—		—		1
Total Comprehensive Income	—	—		—		1		374		—		—		375
Cash Dividends ($0.15 per share)	—	—		—		—		(42)		—		—		(42)
Repurchases of Common Stock	(14)	—		—		—		—		(1,029)		—		(1,029)
Treasury Share Retirement	—	(5)		(32)		—		(693)		730		—		—
Share-based Compensation and Other	2	1		40		—		—		—		—		41
Balance, July 31, 2021	265	$	140	$	911	$	87	$	(1,505)	$	(822)	$	1	$	(1,188)

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 2022

	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 29, 2022	254	$	134	$	893	$	80	$	(1,803)	$	(822)	$	1	$	(1,517)
Net Income and Total Comprehensive Income	—	—		—		—		275		—		—		275
Cash Dividends ($0.40 per share)	—	—		—		—		(94)		—		—		(94)
Repurchases of Common Stock	(7)	—		—		—		—		(312)		—		(312)
Accelerated Share Repurchase Program	(20)	—		—		—		—		(1,000)		—		(1,000)
Treasury Share Retirement	—	(13)		(87)		—		(1,212)		1,312		—		—
Share-based Compensation and Other	1	1		(15)		—		—		—		—		(14)
Balance, July 30, 2022	228	$	122	$	791	$	80	$	(2,834)	$	(822)	$	1	$	(2,662)

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	—	—		—		—		651		—		—		651
Other Comprehensive Income	—	—		—		4		—		—		—		4
Total Comprehensive Income	—	—		—		4		651		—		—		655
Cash Dividends ($0.15 per share)	—	—		—		—		(42)		—		—		(42)
Repurchases of Common Stock	(17)	—		—		—		—		(1,194)		—		(1,194)
Treasury Share Retirement	—	(5)		(32)		—		(693)		730		—		—
Share-based Compensation and Other	4	2		52		—		—		—		—		54
Balance, July 31, 2021	265	$	140	$	911	$	87	$	(1,505)	$	(822)	$	1	$	(1,188)

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
	2022		2021 (a)
Operating Activities:
Net Income	$	275	$	651
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation of Long-lived Assets	106		258
Loss on Extinguishment of Debt	—		105
Share-based Compensation Expense	15		30
Deferred Income Taxes	—		16
Changes in Assets and Liabilities:
Accounts Receivable	55		39
Inventories	(261)		(200)
Accounts Payable, Accrued Expenses and Other	16		(42)
Income Taxes Payable	(69)		(144)
Other Assets and Liabilities	(56)		(140)
Net Cash Provided by Operating Activities	81		573
Investing Activities:
Capital Expenditures	(161)		(178)
Other Investing Activities	(1)		10
Net Cash Used for Investing Activities	(162)		(168)
Financing Activities:
Proceeds from Victoria's Secret & Co. Notes	—		600
Payments of Long-term Debt	—		(1,130)
Repurchases of Common Stock	(1,312)		(1,194)
Dividends Paid	(94)		(42)
Tax Payments related to Share-based Awards	(31)		(56)
Proceeds from Stock Option Exercises	2		76
Other Financing Activities	(11)		(6)
Net Cash Used for Financing Activities	(1,446)		(1,752)
Effects of Exchange Rate Changes on Cash and Cash Equivalents and Restricted Cash	—		2
Net Decrease in Cash and Cash Equivalents and Restricted Cash	(1,527)		(1,345)
Cash and Cash Equivalents and Restricted Cash, Beginning of Period	1,979		3,933
Cash and Cash Equivalents and Restricted Cash, End of Period	$	452	$	2,588

 _______________

(a)The cash flows related to discontinued operations have not been segregated. Accordingly, the 2021 Consolidated Statement of Cash Flows includes 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, body care and soap and sanitizer products. The Company sells merchandise through its specialty retail stores in the United States of America ("U.S.") and Canada, and through its websites and other channels, under the Bath & Body Works, White Barn and other brand names. The Company's international business is primarily conducted through franchise, license and wholesale partners. The Company operates as and reports a single segment that includes all of its continuing operations.

On August 2, 2021, the Company completed the tax-free spin-off of its Victoria's Secret business, which included the Victoria's Secret and PINK brands, into an independent publicly traded company (the "Separation"). Accordingly, the operating results of, and costs to separate, the Victoria's Secret business are reported in Income from Discontinued Operations, Net of Tax in the Consolidated Statements of Income 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. All amounts and disclosures included in the Notes to Consolidated Financial Statements reflect only the Company's continuing operations unless otherwise noted. For additional information, see Note 2, "Discontinued Operations."

COVID-19

The coronavirus ("COVID-19") pandemic has created significant public health concerns as well as economic disruption, uncertainty and volatility. The Company remains focused on providing a safe store environment for its customers and associates while delivering an engaging shopping experience, and in establishing the necessary protocols to ensure the safe operations of its distribution and fulfillment centers and corporate offices. As expected, the Company has experienced channel and product category shifts as customer mindset and needs have shifted coming out of the pandemic.

The Company continues to monitor the COVID-19 pandemic and the effects on its operations and financial performance. There remains the potential for future COVID-19-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, “second quarter of 2022” and “second quarter of 2021” refer to the thirteen-week periods ended July 30, 2022 and July 31, 2021, respectively. “Year-to-date 2022” and “year-to-date 2021” refer to the twenty-six-week periods ended July 30, 2022 and July 31, 2021, 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 Income (Loss) in the Consolidated Statements of Income. 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.

Interim Financial Statements

The Consolidated Financial Statements as of and for the periods ended July 30, 2022 and July 31, 2021 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 2021 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 periods are not necessarily indicative of the results expected for the full fiscal year.

8

Cash and Cash Equivalents and Restricted Cash

The following table summarizes the location of the Company's Cash and Cash Equivalents and restricted cash in the Consolidated Balance Sheets as of July 30, 2022, January 29, 2022 and July 31, 2021:

	July 30, 2022		January 29, 2022		July 31, 2021
	(in millions)
Cash and Cash Equivalents	$	452	$	1,979	$	1,695
Current Assets of Discontinued Operations	—		—		893
Total Cash and Cash Equivalents and Restricted Cash	$	452	$	1,979	$	2,588

Derivative Financial Instruments

The Company's Canadian dollar denominated earnings are subject to exchange rate risk as substantially all the Company's merchandise sold in Canada 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. All designated cash flow hedges are recorded on the Consolidated Balance Sheets at fair value. The fair value of designated cash flow hedges is not significant for any period presented. The Company does not use derivative financial instruments for trading purposes.

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 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 in 2022 that had a material impact on its consolidated results of operations, financial position or cash flows. In addition, as of September 2, 2022, there were no new accounting standards that the Company has not yet adopted that are expected to have a material impact on its consolidated results of operations, financial position or cash flows.

2. Discontinued Operations

Victoria's Secret & Co. Spin-Off

On July 9, 2021, the Company announced that its Board of Directors (the "Board") approved the previously announced Separation of the Victoria’s Secret business 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 tax-free 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 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

9

Agreements, the Tax Matters Agreement, the Employee Matters Agreement and the Domestic Transportation Services Agreement.

Under the terms of the Transition Services Agreements, as amended, the Company provides to Victoria's Secret & Co. various services or functions, including human resources, payroll and certain logistics functions. Additionally, Victoria's Secret & Co. provides 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 2022 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 2022 Consolidated Statements of Income based on the nature of the service. During the second quarter of 2022, the Company recognized consideration of $19 million and recognized costs of $20 million pursuant to the Transition Service Agreements. During year-to-date 2022, the Company recognized consideration of $38 million and recognized costs of $40 million pursuant to the Transition Service Agreements.

Under the terms of the Domestic Transportation Services Agreement, the Company provides transportation services for Victoria's Secret & Co. merchandise in the U.S. 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. Consideration for logistics services provided to Victoria's Secret & Co. are recorded within Costs of Goods Sold, Buying and Occupancy in the 2022 Consolidated Statements of Income and as an offset to expenses incurred to provide the services. During the second quarter of 2022, the Company recognized consideration of $21 million pursuant to the Domestic Transportation Services Agreement. During year-to-date 2022, the Company recognized consideration of $39 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 12, "Commitments and Contingencies."

Financial Information of Discontinued Operations

Income from Discontinued Operations, Net of Tax in the Consolidated Statements of Income 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 Company did not report any results from discontinued operations year-to-date 2022.

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

	Second Quarter		Year-to-Date
	(in millions)
Net Sales	$	1,614	$	3,168
Costs of Goods Sold, Buying and Occupancy	(944)		(1,826)
General, Administrative and Store Operating Expenses (a)	(455)		(892)
Interest Expense	(2)		(2)
Other Loss	(1)		(1)
Income from Discontinued Operations Before Income Taxes	212		447
Provision for Income Taxes	53		102
Income from Discontinued Operations, Net of Tax	$	159	$	345

 _______________

(a)The second quarter of 2021 includes Separation-related costs of $18 million. Year-to-date 2021 includes Separation-related costs of $27 million. Prior to the Separation, these costs were reported in the Other category under the Company's previous segment reporting.

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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 July 30, 2022 or January 29, 2022.

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 "Victoria's Secret & Co. 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. The $600 million initial proceeds are included in Current Assets of Discontinued Operations on the July 31, 2021 Consolidated Balance Sheet. The long-term debt is included in Other Long-Term Liabilities of Discontinued Operations on the July 31, 2021 Consolidated Balance Sheet. On August 2, 2021, the Victoria's Secret & Co. Notes became the obligations of Victoria's Secret & Co. concurrent with the Separation.

The following table summarizes the carrying value of the significant classes of assets and liabilities classified as discontinued operations as of July 31, 2021:

	(in millions)
Cash and Cash Equivalents	$	293
Cash in Escrow related to Victoria's Secret & Co. Spin-Off	600
Accounts Receivable, Net	99
Inventories	745
Other	89
Current Assets of Discontinued Operations	1,826
Property and Equipment, Net	999
Operating Lease Assets	1,513
Trade Names	246
Deferred Income Taxes	11
Other Assets	62
Other Assets of Discontinued Operations	$	2,831
Accounts Payable	$	379
Accrued Expenses and Other	587
Current Operating Lease Liabilities	332
Income Taxes	2
Current Liabilities of Discontinued Operations	1,300
Deferred Income Taxes	101
Long-term Debt	592
Long-term Operating Lease Liabilities	1,457
Other Long-term Liabilities	20
Other Long-term Liabilities of Discontinued Operations	$	2,170

The cash flows related to discontinued operations have not been segregated. Accordingly, the 2021 Consolidated Statement of Cash Flows includes the results of continuing and discontinued operations. The Company did not report any cash flows from discontinued operations year-to-date 2022.

The following table summarizes Depreciation of Long-Lived Assets, Share-based Compensation Expense, Capital Expenditures and Financing Activities of discontinued operations for year-to-date 2021:

	(in millions)
Depreciation of Long-Lived Assets	$	158
Share-based Compensation Expense	15
Capital Expenditures	(66)
Proceeds from Victoria's Secret & Co. Notes	600

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3. Revenue Recognition

Accounts receivable, net from revenue-generating activities were $98 million as of July 30, 2022, $64 million as of January 29, 2022 and $56 million as of July 31, 2021. 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 Consolidated Balance Sheets, was $123 million as of July 30, 2022, $148 million as of January 29, 2022 and $106 million as of July 31, 2021. The Company recognized $76 million as revenue year-to-date 2022 from amounts recorded as deferred revenue at the beginning of the Company's 2022 fiscal year.

The following table provides a disaggregation of Net Sales for the second quarters of and year-to-date 2022 and 2021:

	Second Quarter				Year-to-Date
	2022		2021		2022		2021
	(in millions)
Stores - U.S. and Canada	$	1,161	$	1,230	$	2,220	$	2,280
Direct - U.S. and Canada	367		407		684		756
International (a)	90		67		163		137
Total Net Sales	$	1,618	$	1,704	$	3,067	$	3,173

 _______________

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

The Company’s net sales outside of the U.S. include sales from Company-operated stores and its e-commerce site in Canada, royalties associated with franchised stores and wholesale sales. 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 $164 million and $122 million for the second quarters of 2022 and 2021, respectively, and $301 million and $238 million for year-to-date 2022 and 2021, respectively.

4. Earnings Per Share and Shareholders’ Equity (Deficit)

Earnings Per Share

Earnings per basic share is computed based on the weighted-average number of common shares outstanding. Earnings per diluted share include the weighted-average effect of dilutive restricted stock units, performance share units and stock options (collectively, "Dilutive Awards") on the weighted-average common shares outstanding.

The following table provides the weighted-average shares utilized for the calculation of basic and diluted earnings per share for the second quarters of and year-to-date 2022 and 2021:

	Second Quarter		Year-to-Date
	2022	2021	2022	2021
	(in millions)
Common Shares	245	288	250	288
Treasury Shares	(15)	(13)	(15)	(11)
Basic Shares	230	275	235	277
Effect of Dilutive Awards	1	5	2	5
Diluted Shares	231	280	237	282
Anti-dilutive Awards (a)	2	1	1	1

 _______________

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

Common Stock Share Repurchases

2021 Repurchase Programs

In March 2021, the Board authorized a $500 million share repurchase plan (the "March 2021 Program"), which replaced the $79 million remaining under a March 2018 repurchase program.

In July 2021, the Board authorized a $1.5 billion share repurchase program (the "July 2021 Program"), which replaced the $36 million remaining under the March 2021 Program. Under the authorization of this program, the Company entered into a stock

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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 in July 2021.

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		73.01
Total			16,996	$	1,194

 _______________

(a)Reflects repurchases of L Brands, Inc. common stock prior to the August 2, 2021 spin-off of Victoria's Secret & Co.

Under the July 2021 Program, the Company repurchased an additional 11 million shares of its common stock for an aggregate purchase price of $770 million during the third and fourth quarters of 2021.

2022 Repurchase Program

In February 2022, the Board authorized a new $1.5 billion share repurchase program (the "February 2022 Program"). As part of the February 2022 Program, the Company entered into an accelerated share repurchase program ("ASR") under which the Company repurchased $1 billion of its own outstanding common stock. The delivery of shares under the ASR resulted in an immediate reduction of the Company's outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted net income per share. Pursuant to the Board's authorization, the Company made other share repurchases in the open market under the February 2022 Program during 2022.

On February 4, 2022, the Company delivered $1 billion to the ASR bank, and the bank delivered 13.6 million shares of common stock to the Company (the "Initial Shares"). Pursuant to the terms of the ASR, the Initial Shares represented 80% of the number of shares determined by dividing the $1 billion Company payment by the closing price of its common stock on February 2, 2022.

In May 2022, the Company received an additional 6.7 million shares of its common stock from the ASR bank for the final settlement of the ASR. The final number of shares of common stock delivered under the ASR was based generally upon a discount to the average daily Rule 10b-18 volume-weighted average price at which the shares of common stock traded during the regular trading sessions on the NYSE during the term of the repurchase period. In connection with the final settlement, in the second quarter the Company reclassified the $200 million recorded in Paid-in Capital as of April 30, 2022.

The Company repurchased the following shares of its common stock during year-to-date 2022:

Repurchase Program	Amount Authorized		Shares Repurchased	Amount Repurchased		Average Stock Price
	(in millions)		(in thousands)	(in millions)
February 2022	$	1,500	6,401	$	312	$	48.77
February 2022 - Accelerated Share Repurchase Program			20,295	1,000		49.27
Total			26,696	$	1,312

The February 2022 Program had $188 million of remaining authority as of July 30, 2022.

Common Stock Retirement

Shares of common stock repurchased under the July 2021 Program were retired and cancelled upon repurchase. As a result, the Company retired the 10 million shares repurchased under the July 2021 Program in the second quarter of 2021, which resulted in reductions of $5 million in the par value of Common Stock, $32 million in Paid-in Capital and $693 million in Retained Earnings (Accumulated Deficit).

Shares of common stock repurchased under the February 2022 Program were retired and cancelled upon repurchase, including shares repurchased under the ASR. As a result, the Company retired the 27 million shares repurchased under the February 2022 Program during 2022, which resulted in reductions of $13 million in the par value of Common Stock, $87 million in Paid-in Capital and $1.212 billion in Retained Earnings (Accumulated Deficit).

Dividends

The Board suspended the Company's quarterly cash dividend beginning in the second quarter of 2020. In March 2021, the Board reinstated the annual dividend at $0.60 per share, beginning with the quarterly dividend paid in June 2021. In February 2022, the Board increased the annual dividend to $0.80 per share, beginning with the quarterly dividend paid in March 2022.

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The Company paid the following dividends during 2022 and 2021:

	Ordinary Dividends		Total Paid
	(per share)		(in millions)
2022
First Quarter	$	0.20	$	48
Second Quarter	0.20		46
Total	$	0.40	$	94
2021
First Quarter	$	—	$	—
Second Quarter	0.15		42
Total	$	0.15	$	42

On September 2, 2022, the Company paid the third quarter 2022 ordinary dividend of $0.20 per share to shareholders of record at the close of business on August 19, 2022.

5. Inventories

The following table provides details of Inventories as of July 30, 2022, January 29, 2022 and July 31, 2021:

	July 30, 2022		January 29, 2022		July 31, 2021
	(in millions)
Finished Goods Merchandise	$	739	$	521	$	551
Raw Materials and Merchandise Components	232		188		177
Total Inventories	$	971	$	709	$	728

Inventories are principally valued at the lower of cost or net realizable value, on an average cost basis.

6. Long-Lived Assets

The following table provides details of Property and Equipment, Net as of July 30, 2022, January 29, 2022 and July 31, 2021:

	July 30, 2022		January 29, 2022		July 31, 2021
	(in millions)
Property and Equipment, at Cost	$	2,721	$	2,583	$	2,519
Accumulated Depreciation and Amortization	(1,650)		(1,574)		(1,517)
Property and Equipment, Net	$	1,071	$	1,009