bbwi-20230429

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 April 29, 2023


☐			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

☐

Smaller reporting company

☐

Non-accelerated filer

☐

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 May 26, 2023, the number of outstanding shares of the Registrant’s common stock was 228,911,583 shares.

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BATH & BODY WORKS, INC.

TABLE OF CONTENTS


			Page No.
Part I. Financial Information

Item 1. Financial Statements *

Consolidated Statements of Income (Unaudited)			3

Consolidated Statements of Comprehensive Income (Unaudited)			3

Consolidated Balance Sheets as of April 29, 2023 (Unaudited), January 2 8 , 202 3 and April 30, 2022 (Unaudited)			4

Consolidated Statements of Total Equity (Deficit) (Unaudited)			5

Consolidated Statements of Cash Flows (Unaudited)			6

Notes to Consolidated Financial Statements (Unaudited)			7

Report of Independent Registered Public Accounting Firm			13

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995			14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15

Item 3. Quantitative and Qualitative Disclosures About Market Risk			24

Item 4. Controls and Procedures			25

Part II. Other Information			26

Item 1. Legal Proceedings			26

Item 1A. Risk Factors			26

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			26

Item 3. Defaults Upon Senior Securities			26

Item 4. Mine Safety Disclosures			26

Item 5. Other Information			27

Item 6. Exhibits			27

Signature			28


*			The Company's fiscal year ends on the Saturday nearest to January 31. As used herein, “first quarter of 2023” and “first quarter of 2022” refer to the thirteen-week periods ended April 29, 2023 and April 30, 2022, respectively.

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PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

BATH & BODY WORKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)

(Unaudited)


	First Quarter
	2023		2022
Net Sales	$	1,396	$	1,450
Costs of Goods Sold, Buying and Occupancy	(800)		(781)
Gross Profit	596		669
General, Administrative and Store Operating Expenses	(415)		(389)
Operating Income	181		280
Interest Expense	(89)		(89)
Other Income	20		1
Income Before Income Taxes	112		192
Provision for Income Taxes	31		37
Net Income	$	81	$	155
Net Income per Basic Share	$	0.36	$	0.65
Net Income per Diluted Share	$	0.35	$	0.64

BATH & BODY WORKS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(Unaudited)


	First Quarter
	2023		2022
Net Income	$	81	$	155
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation	(2)		—
Unrealized Gain on Cash Flow Hedges	1		—

Total Other Comprehensive Loss, Net of Tax	(1)		—
Total Comprehensive Income	$	80	$	155

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

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BATH & BODY WORKS, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except par value amounts)


	April 29, 2023		January 28, 2023		April 30, 2022
	(Unaudited)				(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	1,046	$	1,232	$	651
Accounts Receivable, Net	145		226		167
Inventories	771		709		820
Other	118		99		114
Total Current Assets	2,080		2,266		1,752
Property and Equipment, Net	1,223		1,193		1,059
Operating Lease Assets	1,072		1,050		1,058
Goodwill	628		628		628
Trade Name	165		165		165
Deferred Income Taxes	37		37		44
Other Assets	158		155		154
Total Assets	$	5,363	$	5,494	$	4,860
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable	$	426	$	455	$	470
Accrued Expenses and Other	585		673		534

Current Operating Lease Liabilities	165		177		163
Income Taxes	101		74		73
Total Current Liabilities	1,277		1,379		1,240
Deferred Income Taxes	168		168		157
Long-term Debt	4,781		4,862		4,856
Long-term Operating Lease Liabilities	1,032		1,014		1,019
Other Long-term Liabilities	275		276		246
Shareholders’ Equity (Deficit):
Preferred Stock - $1.00 par value; 10 shares authorized; none issued	—		—		—
Common Stock - $0.50 par value; 1,000 shares authorized; 244, 244 and 251 shares issued; 229, 229 and 236 shares outstanding, respectively	122		122		126
Paid-in Capital	818		817		618
Accumulated Other Comprehensive Income	77		78		80
Retained Earnings (Accumulated Deficit)	(2,366)		(2,401)		(2,661)
Less: Treasury Stock, at Average Cost; 15, 15 and 15 shares, respectively	(822)		(822)		(822)
Total Shareholders’ Equity (Deficit)	(2,171)		(2,206)		(2,659)
Noncontrolling Interest	1		1		1
Total Equity (Deficit)	(2,170)		(2,205)		(2,658)
Total Liabilities and Equity (Deficit)	$	5,363	$	5,494	$	4,860

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

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BATH & BODY WORKS, INC.

CONSOLIDATED STATEMENTS OF TOTAL EQUITY (DEFICIT)

(in millions, except per share amounts)

(Unaudited)

First Quarter 2023


	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 28, 2023	229	$	122	$	817	$	78	$	(2,401)	$	(822)	$	1	$	(2,205)
Net Income	—	—		—		—		81		—		—		81
Other Comprehensive Loss	—	—		—		(1)		—		—		—		(1)
Total Comprehensive Income	—	—		—		(1)		81		—		—		80
Cash Dividends ($0.20 per share)	—	—		—		—		(46)		—		—		(46)



Share-based Compensation and Other	—	—		1		—		—		—		—		1
Balance, April 29, 2023	229	$	122	$	818	$	77	$	(2,366)	$	(822)	$	1	$	(2,170)

First 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, January 29, 2022	254	$	134	$	893	$	80	$	(1,803)	$	(822)	$	1	$	(1,517)


Net Income and Total Comprehensive Income	—	—		—		—		155		—		—		155

Cash Dividends ($0.20 per share)	—	—		—		—		(48)		—		—		(48)
Repurchases of Common Stock	(5)	—		—		—		—		(235)		—		(235)
Accelerated Share Repurchase Program	(14)	—		(200)		—		—		(800)		—		(1,000)
Treasury Share Retirement	—	(9)		(61)		—		(965)		1,035		—		—
Share-based Compensation and Other	1	1		(14)		—		—		—		—		(13)
Balance, April 30, 2022	236	$	126	$	618	$	80	$	(2,661)	$	(822)	$	1	$	(2,658)

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

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BATH & BODY WORKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)


	First Quarter
	2023		2022
Operating Activities:
Net Income	$	81	$	155
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation of Long-lived Assets	63		53
Gain on Extinguishment of Debt	(7)		—
Share-based Compensation Expense	7		12

Changes in Assets and Liabilities:
Accounts Receivable	81		72
Inventories	(63)		(111)
Accounts Payable, Accrued Expenses and Other	(113)		(97)
Income Taxes Payable	23		35
Other Assets and Liabilities	(28)		(53)
Net Cash Provided by Operating Activities	44		66
Investing Activities:
Capital Expenditures	(93)		(88)
Other Investing Activities	(1)		—
Net Cash Used for Investing Activities	(94)		(88)
Financing Activities:

Payments of Long-term Debt	(74)		—




Repurchases of Common Stock	—		(1,227)
Dividends Paid	(46)		(48)
Tax Payments Related to Share-based Awards	(8)		(26)

Other Financing Activities	(7)		(5)
Net Cash Used for Financing Activities	(135)		(1,306)
Effects of Exchange Rate Changes on Cash and Cash Equivalents	(1)		—
Net Decrease in Cash and Cash Equivalents	(186)		(1,328)
Cash and Cash Equivalents, Beginning of Year	1,232		1,979
Cash and Cash Equivalents, End of Period	$	1,046	$	651

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

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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. (the "Company") is a global omnichannel retailer focused on personal care and home fragrance. The Company sells merchandise through its 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 conducted through franchise, license and wholesale partners. The Company operates as and reports a single segment.

Fiscal Year

The Company’s fiscal year ends on the Saturday nearest to January 31. As used herein, “first quarter of 2023” and “first quarter of 2022” refer to the thirteen-week periods ended April 29, 2023 and April 30, 2022, 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.

Interim Financial Statements

The Consolidated Financial Statements as of and for the periods ended April 29, 2023 and April 30, 2022 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in the Company’s 2022 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

The Company's 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). Historically, the Company's sales are higher during the fourth quarter of the fiscal year due to seasonal and holiday-related sales patterns. 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.

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 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 composed 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.

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Easton Investments

The Company has land and other investments in Easton, a planned community in Columbus, Ohio, that integrates office, hotel, retail, residential and recreational space. These investments, totaling $126 million as of April 29, 2023, $124 million as of January 28, 2023 and $126 million as of April 30, 2022, are recorded in Other Assets on the Consolidated Balance Sheets.

Included in the Company’s Easton investments are equity interests in Easton Town Center, LLC (“ETC”) and Easton Gateway, LLC (“EG”), entities that own and develop commercial entertainment and shopping centers. The Company’s investments in ETC and EG are accounted for using the equity method of accounting. The Company has majority financial interests in ETC and EG, but another unaffiliated member manages them, and certain significant decisions regarding ETC and EG require the consent of unaffiliated members in addition to the Company.

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.

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 the first quarter of 2023 that had a material impact on its consolidated results of operations, financial position or cash flows. In addition, as of June 2, 2023, 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. Revenue Recognition

Accounts receivable, net from revenue-generating activities were $79 million as of April 29, 2023, $79 million as of January 28, 2023 and $77 million as of April 30, 2022. These 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 awards 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 $171 million as of April 29, 2023, $195 million as of January 28, 2023 and $133 million as of April 30, 2022. The Company recognized $77 million as revenue during the first quarter of 2023 from amounts recorded as deferred revenue at the beginning of the Company's fiscal year.

The following table provides a disaggregation of Net Sales for the first quarters of 2023 and 2022:


	First Quarter
	2023		2022
	(in millions)
Stores - U.S. and Canada	$	1,034	$	1,059
Direct - U.S. and Canada	280		318
International (a)	82		73
Total Net Sales	$	1,396	$	1,450

_______________

(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 $145 million and $137 million for the first quarters of 2023 and 2022, respectively.

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3. 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 includes 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 first quarters of 2023 and 2022:


	First Quarter
	2023	2022
	(in millions)

Common Shares	244	255
Treasury Shares	(15)	(15)
Basic Shares	229	240
Effect of Dilutive Awards	1	3
Diluted Shares	230	243
Anti-dilutive Awards (a)	1	—

_______________

(a)These awards were excluded from the calculation of Diluted Earnings per Share because their inclusion would have been anti-dilutive.

Common Stock Repurchases

2022 Share Repurchase Program

In February 2022, the Company's Board of Directors (the "Board") authorized a $1.5 billion share repurchase program (the "February 2022 Program"). The Company did not repurchase any shares of its common stock during the first quarter of 2023. The February 2022 Program had $188 million of remaining authority as of April 29, 2023. Subsequent to April 29, 2023 through June 2, 2023, the Company repurchased an additional 216 thousand shares of its common stock for $8 million under the February 2022 Program.

Dividends

The Company paid the following dividends during the first quarters of 2023 and 2022:


	Ordinary Dividends			Total Paid
	(per share)		(in millions)
2023
First Quarter	$	0.20		$	46



2022
First Quarter	$	0.20		$	48

In May 2023, the Board declared the second quarter 2023 ordinary dividend of $0.20 per share payable on June 16, 2023 to stockholders of record at the close of business on June 2, 2023.

4. Inventories

The following table provides details of Inventories as of April 29, 2023, January 28, 2023 and April 30, 2022:


	April 29, 2023		January 28, 2023		April 30, 2022
	(in millions)
Finished Goods Merchandise	$	611	$	538	$	627
Raw Materials and Merchandise Components	160		171		193
Total Inventories	$	771	$	709	$	820

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

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5. Long-Lived Assets

The following table provides details of Property and Equipment, Net as of April 29, 2023, January 28, 2023 and April 30, 2022:


	April 29, 2023		January 28, 2023		April 30, 2022
	(in millions)
Property and Equipment, at Cost	$	2,993	$	2,915	$	2,669
Accumulated Depreciation and Amortization	(1,770)		(1,722)		(1,610)
Property and Equipment, Net	$	1,223	$	1,193	$	1,059

Depreciation expense was $63 million and $53 million for the first quarters of 2023 and 2022, respectively.

6. Income Taxes

The provision for income taxes is based on the current estimate of the annual effective tax rate and is adjusted as necessary for quarterly events.

For the first quarter of 2023, the Company’s effective tax rate was 27.7% compared to 19.4% in the first quarter of 2022. The first quarter of 2023 rate was higher than the Company's combined estimated fe

SEC Form 10-Q filed by Bath & Body Works Inc.