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What changed in Bath & Body Works, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Bath & Body Works, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+450 added−509 removedSource: 10-K (2023-03-17) vs 10-K (2022-03-18)

Top changes in Bath & Body Works, Inc.'s 2023 10-K

450 paragraphs added · 509 removed · 329 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

64 edited+46 added−33 removed5 unchanged
Biggest changeWe are planning approximately 150 total real estate projects in 2022, consisting of approximately 100 new off-mall stores and approximately 50 remodels to the White Barn store design, offset by about 40 to 50 mall closures, yielding expected square footage growth of approximately 6%. 3 Table of Contents The following table provides the number of our Company-operated retail stores in operation as of January 29, 2022 and January 30, 2021: January 29, 2022 January 30, 2021 United States 1,651 1,633 Canada 104 103 Total 1,755 1,736 The following table provides the changes in the number of our Company-operated retail stores for the past three fiscal years: Beginning of Year Opened Closed End of Year 2021 1,736 54 (35) 1,755 2020 1,739 27 (30) 1,736 2019 1,721 39 (21) 1,739 Franchise, License and Wholesale Arrangements In addition to our Company-operated stores, our products are sold at partner-operated locations and websites in more than 35 countries.
Biggest changeReal Estate Company-operated Stores The following table provides the number of our Company-operated retail stores as of January 28, 2023 and January 29, 2022: January 28, 2023 January 29, 2022 United States 1,693 1,651 Canada 109 104 Total 1,802 1,755 The following table provides the changes in the number of our Company-operated retail stores for the past three fiscal years: Beginning of Year Opened Closed End of Year 2022 1,755 95 (48) 1,802 2021 1,736 54 (35) 1,755 2020 1,739 27 (30) 1,736 We have a diversified store portfolio in the U.S. and Canada across venue tiers and types, with approximately half of our stores located off-mall as of January 28, 2023.
ITEM 1. BUSINESS. General The company, which was founded in 1963 in Columbus, Ohio, has evolved over time from an apparel-based specialty retailer to a segment leader focused on home fragrance, body care products and soaps and sanitizer products operating under the Bath & Body Works, White Barn and other brand names.
ITEM 1. BUSINESS. General The company, which was founded in 1963 in Columbus, Ohio, has evolved over time from an apparel-based specialty retailer to a segment leader focused on home fragrance, body care and soaps and sanitizer products operating under the Bath & Body Works, White Barn and other brand names.
We proactively evaluate our distribution channels to ensure we are able to provide the right product at the right place to meet or exceed our customers’ expectations. Our policy is to maintain sufficient quantities of inventories on hand in our retail stores, fulfillment and distribution centers to enable us to meet customer demand.
We proactively evaluate our distribution channels to ensure we are able to provide the right product at the right place to meet or exceed our customers’ expectations. Our policy is to maintain sufficient quantities of inventories on hand in our retail stores, fulfillment centers and distribution centers to enable us to meet customer demand.
The Company was recognized by The Human Rights Campaign's Corporate Equality Index as a 2022 "Best Place to Work for LGBTQIA+ Equality." For the fifth year in a row, the Company received a perfect - 100% - score on the index, which rates companies on detailed criteria in the following four areas: • Non-discrimination policies across business entities; • Equitable benefits for LGBTQIA+ workers and their families; • Supporting inclusive culture; and • Corporate social responsibility.
The Company was recognized by The Human Rights Campaign's Corporate Equality Index as a 2022 "Best Place to Work for LGBTQIA+ Equality." For the fifth year in a row, the Company received a perfect score on the index, which rates companies on detailed criteria in the following four areas: • Non-discrimination policies across business entities; • Equitable benefits for LGBTQIA+ workers and their families; • Supporting inclusive culture; and • Corporate social responsibility.
Human Capital Management Human Capital At Bath & Body Works, our purpose goes beyond selling product. We work to make a difference in our communities and foster a safe, welcoming and empowering workplace for our thousands of associates.
Human Capital Management Human Capital At Bath & Body Works, our purpose goes beyond selling product. We work to make a difference in our communities and foster a safe, welcoming, inclusive and empowering workplace for our thousands of associates.
All discussion within this Annual Report on Form 10-K, including amounts, percentages and disclosures for all periods presented, reflect only the continuing operations of the company unless otherwise noted. In connection with the spin-off of the Victoria's Secret business, the company changed its name from L Brands, Inc. to Bath & Body Works, Inc.
All discussion within this Annual Report on Form 10-K, including amounts, percentages and disclosures for all periods presented, reflect only the continuing operations of the company unless otherwise noted. In connection with the spin-off of the Victoria's Secret business, the company changed its name from L Brands, Inc. to Bath & Body Works, Inc. ("we" or the "Company").
By continuing to encourage a workplace environment where diversity, equity and inclusion are valued, we believe we can serve our customers better, as well as attract and retain highly talented associates, suppliers and vendors of different backgrounds and experiences.
By continuing to encourage and support a workplace environment where diversity, equity and inclusion ("DEI") are valued, we believe we can serve our customers better, as well as attract and retain highly talented associates, suppliers and vendors of different backgrounds and experiences.
Our Competitive Strengths We believe the following competitive strengths contribute to our leading market position, differentiate us from our competitors and will drive future growth: Industry Leading Brands and Products We have developed and operate a well-known, beloved and broadly appealing brand, which allows us to target markets across the economic spectrum, across demographics and across the world.
Our Competitive Strengths We believe the following competitive strengths contribute to our leading market position, differentiate us from our competitors and will drive future long-term sustainable growth: Industry Leading Brand and Products We have developed and operate a well-known, beloved and broadly appealing brand, which allows us to target markets across the economic spectrum, across demographics and across the world.
This designation recognizes our ongoing commitment to diversity, equity and inclusion. Commitment to Equitable and Competitive Wages We are committed to equal opportunity and treatment for all associates which includes equal career advancement opportunities and equitable and competitive wages. Our commitment to pay equity is evaluated by conducting periodic assessments of pay equity based on gender, race and ethnicity.
Commitment to Equitable and Competitive Wages We are committed to equal opportunity and treatment for all associates which includes equal career advancement opportunities and equitable and competitive wages. Our commitment to pay equity is evaluated by conducting periodic assessments of pay equity based on gender, race and ethnicity.
Our sales associates and managers are a central element in creating the atmosphere of the stores by providing a high level of customer service. 1 Table of Contents Digital Experience In addition to our in-store experience, we strive to create a customer-centric digital platform that integrates the digital and physical brand experience and enables convenience for the customer when desired.
Our sales associates and store managers are a central element in bringing our seasonal storytelling to life by providing a high level of customer service. 1 Table of Contents Digital Experience In addition to our in-store experience, we strive to create a customer-centric digital platform that integrates the digital and physical brand experience and enables convenience for the customer when desired.
In 2021, 89% of associates responded to the survey with an 85% favorable engagement rate. Leaders created action plans that were incorporated into their annual goals in response to input received via the survey. We provide diverse learning opportunities and challenging work experiences. We believe that associates can reach their career goals through multiple roles, career paths and locations.
Leaders created action plans that were incorporated into their annual goals in response to input received via the survey. We provide diverse learning opportunities and challenging work experiences. We believe that associates can reach their career goals through multiple roles, career paths and locations.
We are one of the world’s leading specialty retailers and home to America’s Favorite Fragrances® offering a breadth of exclusive fragrances for the body and home, including the number one selling collections for fine fragrance mist, body lotion and body cream, 3-wick candles, home fragrance diffusers and liquid hand soap.
We are home to America’s Favorite Fragrances® and offer a breadth of exclusive fragrances for the body and home, including top-selling collections for fine fragrance mist, body lotion and body cream, 3-wick candles, home fragrance diffusers and liquid hand soap.
The Exchange Act requires us to file reports, proxy statements and other information with the U.S. Securities and Exchange Commission ("SEC"). The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC's website at www.sec.gov .
The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC's website at www.sec.gov .
Additionally, we expect to continue growing the digital components of our international business, including through country-specific web platforms tailored to local languages and preferences and through additional regional expansion. As of January 29, 2022, our partners operated 27 international websites, an increase of 6 from January 30, 2021.
Additionally, we expect to continue growing the digital components of our international business, including through country-specific web platforms tailored to local languages and preferences and through additional regional expansion. As of January 28, 2023, our partners operated 31 international e-commerce sites, an increase of four from January 29, 2022.
As used herein, “2021,” “2020” and “2019” refer to the 52-week periods ended January 29, 2022, January 30, 2021 and February 1, 2020, respectively.
As used herein, “2022,” “2021” and “2020” refer to the 52-week periods ended January 28, 2023, January 29, 2022 and January 30, 2021, respectively.
We maintain an Ethics Hotline, operated by a third-party, 24 hours a day, 7 days a week where associates may anonymously report potential instances of unethical conduct and potential violations of law or Company policies. Executive Officers of Registrant At the end of 2021, our executive officers were as follows: • Andrew M.
We maintain an Ethics Hotline, operated by a third-party, 24 hours a day, seven days a week where associates may anonymously report potential instances of unethical conduct and potential violations of law or Company policies.
Experienced and Committed Management Team Our senior management team has a wealth of retail and business experience at Bath & Body Works, Inc. and other companies such as Ann Taylor and Loft, Banana Republic, Ross Stores, Abercrombie & Fitch, Madewell, Carter’s, Rosetta Stone, IBM, KPMG and Accenture.
Experienced and Committed Management Team Our senior management team has significant retail and business experience at Bath & Body Works, Inc. and other companies such as Unilever, Avon Products, The Estée Lauder Companies, Ann Taylor and Loft, Banana Republic, Ross Stores, Abercrombie & Fitch, Madewell, Carter’s, Rosetta Stone and KPMG. Our Board of Directors (the "Board") appointed Gina R.
Examples include: • Development Days: Dedicated time to advance technical, creative or business skills. • Leadership Development: Courses for associates in management positions to build critical skills and grow as effective leaders. • Merchant-in-Training Program: Immersive program to learn the profession both on the job and from experts in the classroom. • Onboarding: Dedicated time to learn the business and to form important relationships for mentoring and development. • Tuition Assistance: Reimbursement of 100% of eligible tuition expenses, up to $3,000 per calendar year.
Examples include: 7 Table of Contents • Leadership Development : Courses for associates in management positions to build critical skills and grow as effective leaders. • Merchant-in-Training Program : Immersive program to learn the profession both on the job and from experts in the classroom. • Onboarding : Dedicated time to learn the business and to form important relationships for mentoring and development. • Tuition Assistance : Reimbursement of 100% of eligible tuition expenses, up to $3,000 per calendar year. • English as a Second Language Classes: A new offering for our distribution center associates, many of whom have English as a second language. • Maintenance Technician Training: A new offering for our distribution center associates to build skills to aid in career advancement.
We display merchandise uniformly to ensure a consistent store experience, regardless of location. Store managers receive detailed plans designating fixture and merchandise placement to ensure coordinated execution of the Company-wide merchandising strategy.
The store design, visual marketing and storytelling, fixtures, scents, and music are all carefully planned and coordinated to create a unique shopping experience. We display merchandise uniformly to ensure a consistent store experience, regardless of location. Store managers receive detailed plans designating fixture and merchandise placement to ensure coordinated execution of the Company-wide merchandising strategy.
Our digital presence, including social media, our websites and our mobile applications, allows us to get to know our customers better and communicate with them anytime and anywhere. Product Development, Sourcing and Logistics Quality and innovation are at the core of our sourcing strategy.
Our digital presence, including social media, our websites and our loyalty application, allows us to get to know our customers better and communicate with them anytime and anywhere. Product Development Quality and innovation are at the core of our sourcing strategy. We seek to drive efficiencies and mitigate risk through our strong technical research and prolific product development.
Copies of any of the above-referenced documents will also be made available, free of charge, upon written request to: Bath & Body Works, Inc. Investor Relations Department Three Limited Parkway Columbus, Ohio 43230 8 Table of Contents
Our website and information included in or linked to our website are not part of this Annual Report on Form 10-K. Copies of any of the above-referenced documents will also be made available, free of charge, upon written request to: Bath & Body Works, Inc. Investor Relations Department Three Limited Parkway Columbus, Ohio 43230 8 Table of Contents
We are subject to a variety of tax and customs regulations and international trade arrangements. Trademarks and Patents Our trademarks and patents, which constitute our primary intellectual property, have been registered or are the subject of pending applications in the U.S. Patent and Trademark Office and with the registries of many foreign countries and/or are protected by common law.
Regulation We and our products are subject to regulation by various federal, state, local and foreign regulatory authorities. We are subject to a variety of tax and customs regulations and international trade arrangements. Intellectual Property Our trademarks, copyrights and patents, which constitute our primary intellectual property, have been registered or are the subject of pending applications in the U.S.
We're a team that cares about our customers and believes in giving them a reason to celebrate with fragrance every day. We remain committed to fostering a diverse, equitable and inclusive culture that is focused on delivering exceptional fragrances and experiences.
We strive to make the world a brighter, happier place through the power of fragrance. We care about our customers and believe in giving them a reason to celebrate with fragrance every day. We remain committed to improving our communities and fostering a diverse, equitable and inclusive culture that is focused on delivering exceptional fragrances and experiences.
As of January 29, 2022, our merchandise is sold through 1,755 company-operated stores and e-commerce sites in the United States of America ("U.S.") and Canada, and in 338 stores and 27 e-commerce sites in more than 35 other countries operating under franchise, license and wholesale arrangements. Fiscal Year Our fiscal year ends on the Saturday nearest to January 31.
As of January 28, 2023, our merchandise was sold through 1,802 company-operated stores and e-commerce sites in the United States of America ("U.S.") and Canada, and in 427 stores and 31 e-commerce sites in more than 45 other countries operating under franchise, license and wholesale arrangements.
Commitment to Providing Quality Benefits We offer competitive, performance-based compensation; a company-matched savings and retirement plan; and flexible and affordable health, wellness and lifestyle benefits.
The emphasis on overall Company performance is intended to align the associates’ financial interests with the interests of our stockholders. Commitment to Providing Quality Benefits We offer competitive, performance-based compensation; a company-matched savings and retirement plan; and flexible and affordable health, wellness and lifestyle benefits.
The following table provides the number of international stores operated by our partners as of January 29, 2022 and January 30, 2021: January 29, 2022 January 30, 2021 International 317 270 International - Travel Retail 21 18 Total 338 288 Our partners operated 27 websites as of January 29, 2022, compared to 21 websites as of January 30, 2021.
The following table provides the number of international stores operated by our partners as of January 28, 2023 and January 29, 2022: January 28, 2023 January 29, 2022 International 401 317 International - Travel Retail 26 21 Total 427 338 Additionally, our partners operated 31 international e-commerce sites as of January 28, 2023, compared to 27 as of January 29, 2022.
More than 97% of our associates at the director level and above have completed training on diversity, equity and inclusion which includes training on bias, equity and conscious inclusion. The training, which will be introduced to all associates throughout the Company in 2022, emphasizes both the Company’s and associates’ responsibility to build an inclusive culture and accountability for senior leaders.
More than 90% of our corporate associates at the director level and above had completed DEI training as of January 28, 2023, which includes training on unconscious bias, equity and conscious inclusion. The training emphasizes both the Company’s and associates’ responsibilities to build an inclusive culture at the Company and accountability for senior leaders.
We continue to actively manage our inventory to adjust for the impacts of the coronavirus ("COVID-19") pandemic, including channel shifts and product category shifts.
We continue to actively manage our inventory to adjust for anticipated channel shifts and product category shifts.
As a result of our strong brand and established retail presence, we have been able to lease high-traffic locations in most retail centers in which we operate. We proactively manage our stores and adjust our investment levels based on performance. Our White Barn store design has delivered increased sales and profitability, with increases in sales and traffic following remodel completion.
We are continuing our off-mall expansion to limit our exposure to vulnerable mall locations. As a result of our strong brand and established retail presence, we have been able to lease high-traffic locations in most retail centers in which we operate. We proactively manage our stores and adjust our investment levels based on individual store and fleet performance.
We also utilize third-party regional distribution centers located throughout North America that enable us to position inventory geographically closer to stores. Additionally, we utilize third-party operated direct channel fulfillment centers, and pop-up third-party operated fulfillment facilities throughout North America to support peak needs.
While our Company-owned distribution centers located in central Ohio are core to our operations, we also utilize third-party distribution centers located throughout North America to position inventory geographically closer to our customers. Third party-operated direct channel fulfillment centers and pop-up fulfillment facilities throughout North America are also used to support our peak needs.
During fiscal year 2021, we hosted 70 virtual events with approximately 10,000 attendees, and our associates have volunteered over 2,000 hours of time to non-profits in the communities where our associates are based.
During 2022, we hosted 58 events with approximately 8,800 attendees, and our associates volunteered more than 4,000 hours of time to non-profits in the communities where our associates are based.
The current environment requires unprecedented agility, and we believe we are leveraging the speed that we have in our supply chain, our close partnerships with our suppliers and the capabilities of our sourcing, production and logistics teams to respond quickly. 4 Table of Contents Information Systems Our management information systems consist of a full range of retail, financial and merchandising systems.
The current macroeconomic environment, including the impacts of continued inflationary cost pressure, requires agility, and we believe we are leveraging the speed that we have in our supply chain, our close partnerships with our suppliers and the capabilities of our sourcing, production and logistics teams to respond quickly.
Additional Information Merchandise Vendors During 2021, we purchased merchandise from approximately 125 vendors, primarily located in North America. Our largest vendor supplied approximately 12% of our total merchandise purchases, while no other single vendor provided more than 10% of our merchandise purchases. Our five largest vendors supplied approximately 35% of our total merchandise purchases on a combined basis during 2021.
Our largest vendor supplied approximately 13% of our total merchandise purchases during 2022, while no other single vendor provided more than 10% of our merchandise purchases. Our five largest vendors supplied approximately 38% of our total merchandise purchases on a combined basis during 2022.
Code of Conduct We have a written Code of Conduct that is based on our values and is a resource where associates can find information that defines behaviors that are acceptable and those that are not. We conduct an annual Code of Conduct compliance process which requires associates to complete a Code of Conduct disclosure and a separate training course.
Code of Conduct We have a written Code of Conduct that is based on our values and is a resource which establishes standards for employee conduct that reinforces the Company's commitment to integrity and ethical conduct. We conduct an annual Code of Conduct compliance process that requires associates to complete a Code of Conduct disclosure and a separate training course.
Our franchise partners are committed to greater expansion and opened 50 net new stores in 2021, bringing the total to 338 internationally as of January 29, 2022. Our partners plan to open 70 to 100 new international stores in 2022.
Our franchise partners are committed to greater expansion and opened 89 net new stores in 2022, bringing the total to 427 in over 45 countries (excluding our Company-operated stores in Canada) as of January 28, 2023. Our partners plan to open between 50 and 80 net new international stores in 2023.
Subject to certain eligibility requirements, associates can choose benefits and resources that fit their lifestyle, including, but not limited to, 14 weeks paid maternity leave, six weeks paid paternity leave, tuition reimbursement, free access to life planning services and a generous merchandise discount. 6 Table of Contents During 2021, we enhanced our benefits by extending mental health benefits to include both full-time and ongoing/non-seasonal part-time associates and their household members and dependents.
Subject to certain eligibility requirements, associates can choose benefits and resources that fit their lifestyle, including, but not limited to, 14 weeks paid maternity leave, six weeks paid paternity leave, mental health benefits, family planning benefits including fertility, adoption and surrogacy, expanded bereavement leave time, military leave, tuition assistance, free access to life planning services and a generous merchandise discount.
We have associates who are members of the six Inclusion Resource Groups designed for associates who identify as, or are allies of, the following groups: Hispanic and Latinx; LGBTQIA+; Black and African American; Asian and Pacific Islander; entry level and junior or early career professionals; and women.
The Inclusion Resource Group programming is open to all associates who identify with, or are allies of, the following groups: Hispanic and Latino; LGBTQIA+; Black and African American; Asian and Pacific Islander; entry level and early career professionals; associates with disabilities and caregivers; military and veteran community; and women.
We utilize visual presentation of merchandise, in-store marketing, music and our sales associates to reinforce the image represented by our brand. Our in-store marketing is designed to convey the principal elements and personality of our brand. The store design, visual marketing and storytelling, fixtures, scents, and music are all carefully planned and coordinated to create a unique shopping experience.
In-Store Experience and Store Operations We view our customers' in-store experience as an important vehicle for communicating the image of our brand. We utilize visual presentation of merchandise, fragrance, in-store marketing, music and our sales associates to reinforce the image represented by our brand. Our in-store marketing is designed to convey the principal elements and personality of our brand.
Our partner-based business model allows us to own assortment, pricing architecture, promotions, store designs and real estate approval while our partners make investments as experts in local real estate, people and practices. Revenue recognized under franchise and license arrangements generally consists of royalties earned and recognized upon sale of merchandise by franchise and license partners to retail customers.
Our partner-based, asset-light business model allows us to establish operating standards by owning assortment, pricing architecture, promotions, store designs and real estate approval while our partners make investments and contribute as experts in local real estate, people and practices.
Working Capital We fund our business operations through a combination of available cash and cash equivalents and cash flows generated from operations. In addition, our credit facility is available for additional working capital needs and investment opportunities. Regulation We and our products are subject to regulation by various federal, state, local and foreign regulatory authorities.
Accordingly, cash requirements are highest in the third quarter as our inventories build in advance of the holiday season. Working Capital We fund our business operations through a combination of available cash and cash equivalents and cash flows generated from operations. In addition, our credit facility is available for additional working capital needs and investment opportunities.
Our strategic vendor relationships provide deep capabilities across our product categories. Our supply base, which is predominantly located in North America, includes numerous long-standing vendor relationships. We also utilize the Beauty Park, a business park that includes several vendors in our vertically-integrated supply chain within close proximity of our Columbus, Ohio distribution centers.
Our supplier base includes long-standing vendor relationships, and the majority of our products are produced at Beauty Park, a business park that includes several key vendors within close proximity to our Columbus, Ohio distribution centers. These strategic vendor relationships provide deep capabilities across our product categories.
Our products are differentiated through a combination of fragrance, packaging and quality at an accessible price. We also sell products under our trusted sub brands, including White Barn and Aromatherapy. In-Store Experience and Store Operations We view our customers' in-store experience as an important vehicle for communicating the image of our brand.
We have also developed trusted and market leading products in the body care, home fragrance, and soap and sanitizer categories. Our products are differentiated through a combination of fragrance, packaging and quality at accessible prices. We also sell products under our trusted sub brands, including White Barn and Aromatherapy.
In addition, we have Inclusion Resource Groups that provide opportunities for associates to connect with one another around their shared passion for creating an inclusive workplace for all associates. These groups provide professional development for associates, support the needs of the business, help shape the culture of our Company and provide engagement and volunteerism in the community.
These groups provide professional development for associates, support the needs of the business, help shape the culture of our Company and provide engagement and volunteerism in the community.
The Human Capital and Compensation Committee of the Company's Board of Directors oversees, amongst other things, the Company’s programs, policies, practices and strategies relating to culture, talent, diversity, equity and inclusion, equal employment opportunities and the Company’s executive compensation and succession plans. Workforce Demographics As of January 29, 2022, we employed approximately 56,900 associates, 48,100 of whom were part-time.
The Human Capital and Compensation Committee (the “HCC Committee”) of our Board oversees, amongst other things, the Company’s programs, policies, practices and strategies relating to culture, talent, diversity, equity and inclusion, equal employment opportunities and the Company’s executive compensation programs. Our Board oversees the succession planning process for our Chief Executive Officer.
The fourth quarter, including the holiday season, typically accounts for approximately one-third of our net sales and is our most profitable quarter. Accordingly, cash requirements are highest in the third quarter as our inventories build in advance of the holiday season.
Seasonal Business Our operations are seasonal in nature and consist of two principal selling seasons: Spring (the first and second quarters) and Fall (the third and fourth quarters). The fourth quarter, including the holiday season, typically accounts for approximately one-third of our net sales and is our most profitable quarter.
Our pay for performance philosophy includes participation of all salaried associates in the home offices and distribution centers in our short-term cash incentive compensation program. The emphasis on overall Company performance is intended to align the associates’ financial interests with the interests of our stockholders.
Our pay for performance philosophy includes participation of our store leaders and all salaried associates in home office and distribution and fulfillment centers in our short-term cash incentive compensation program. In addition, our store leaders earn monthly bonuses based on performance.
For more than 30 years, customers have looked to Bath & Body Works for quality, on-trend products and the newest, freshest fragrances. We believe we benefit from global brand awareness, a wide and compelling product assortment and a deep connection with our customers.
For more than 30 years, customers have looked to Bath & Body Works for quality, on-trend products and the newest, freshest fragrances. We intend to build and transform an already strong foundation into a leading global omnichannel personal care and home fragrance brand.
We are continuously improving the online experience by enhancing graphics, video and the marketing/content mix, as well as making our websites and mobile application easier to navigate.
We seek to continuously improve the online experience for our direct channel by enhancing graphics, video and the marketing/content mix, as well as making our websites and loyalty application easier to navigate. We believe our increased focus on mobile and application interactions will continue to provide flexibility and convenience to our customers, while creating a seamless shopping experience.
Our products are designed to be used daily and replenished frequently. Our product pipeline is full and we expect to continue to launch new fragrances and products about every four to six weeks.
We believe we have a strong pipeline of products, and we expect to continue to launch new fragrances and products about every four to six weeks.
Competition The sale of home fragrance, body care products and soaps and sanitizer products is a highly competitive business with numerous competitors, including individual and chain specialty stores, department stores, online retailers and discount retailers. Brand image, presentation, marketing, design, price, service, fulfillment, assortment and quality are the principal competitive factors.
Accordingly, we intend to maintain our intellectual property and related registrations and vigorously protect our intellectual property assets against infringement. Competition The sale of home fragrance, body care and soap and sanitizer products is a highly competitive business with numerous competitors, including individual and chain specialty stores, department stores, online retailers and discount retailers.
The systems include applications related to point-of-sale, e-commerce, merchandising, planning, sourcing, logistics, inventory management, data security and support systems including human resources and finance. Victoria's Secret & Co. currently administers and maintains operations of existing technology and serves as the technology service provider to us under a transition services agreement we entered into in connection with the Separation ("TSA").
The systems include applications related to point-of-sale, e-commerce, merchandising, planning, sourcing, logistics, inventory management, data security and support systems, including human resources and finance systems.
We believe we have opportunity for growth in our existing categories through the constant flow of new product launches, formula upgrades and packaging refreshes, which drives traffic and repeat customers. In the near term, we plan on repackaging many of our best-selling fragrances, upgrading certain of our formulas and testing various new container and vessel concepts in candles and soaps.
Innovation and newness are key drivers of our business, and we believe we have opportunity for growth in our existing categories through new product launches, formula upgrades and packaging refreshes, which we believe drives traffic and repeat customers.
In addition, we expanded adoption to include surrogacy coverage, and expanded our bereavement leave time and tuition assistance benefits. Associate Engagement and Development We are committed to investing in all our associates. In 2021, we conducted a survey to assess associate engagement, culture, leadership communication and effectiveness, diversity and inclusion efforts, work-life balance and career development.
During 2022, we conducted a survey of our home office workforce to assess associate engagement, culture, leadership communication and effectiveness, diversity and inclusion efforts, work-life balance and career development. In 2022, 87% of associates responded to the survey with an 84% favorable engagement rate.
The Company supplements resources using temporary associates during peak periods, such as the Christmas holiday season. Approximately 88% of our associates work in our stores, 3% in distribution centers and the balance work in home offices. None of our associates in the U.S. are covered by a collective bargaining agreement.
Workforce Demographics As of January 28, 2023, we employed approximately 57,200 associates, 48,400 of whom were part-time. The Company supplements resources using temporary associates during peak periods, such as the end-of-the-year holiday season. Approximately 94% of our associates work in our stores, 3% in our distribution and fulfillment centers and the balance in our home office locations.
Our increased focus on mobile and application interactions will continue to provide flexibility and convenience to our customers, while creating a seamless shopping experience. Our shopping and services initiatives will continue to modernize the customer’s digital shopping experience through features like a loyalty program, shoppable mobile application and auto-replenishment.
Our shopping and services initiatives will continue to modernize the customer’s digital shopping experience through features like enhancing the loyalty program and a shoppable mobile application. 3 Table of Contents Technology is a key enabler to our growth and separating our information technology systems from Victoria's Secret & Co.
Approximately 60% of our stores were in the White Barn store design as of January 29, 2022, and we expect to remodel approximately 50% of the remaining core stores over the next two to four years. Over time, we expect low-single digit annual increases in North American square footage, with off-mall penetration increasing.
Approximately two-thirds of our stores were in the White Barn store design as of January 28, 2023, and we expect to prioritize the remaining higher performing core stores for conversion to the White Barn store design in viable locations over the next five years.
Our customer base is predominantly women, and we ensure that we reflect this in our associate population and in our Board room. As of January 29, 2022, women make up approximately 90% of our workforce and 44% of the members of our Board of Directors (the "Board"). Our Board is led by Sarah E.
None of our associates in the U.S. are covered by a collective bargaining agreement. Our customer base is predominantly women, and we ensure that we reflect this in our associate population and on our Board.
We will open new stores in emerging non-mall venues or as replacement stores for non-viable malls, while closing stores in non-viable or declining malls. During 2021, we increased our net square footage by 3% through 54 new off-mall stores and 79 remodels, partially offset by 35 store closures, principally in malls.
Over time, we expect low-single digit annual increases in North American square footage, with off-mall penetration steadily increasing. We will open new stores in emerging non-mall venues or as replacement stores for non-viable malls, while closing stores in non-viable or declining malls.
The program will also provide us with in-depth customer data that will enable us to market more effectively. Growth internationally We believe that there is substantial opportunity for international growth. Scaling opportunities in existing markets coupled with growth in new markets set the foundation for sustained growth. We believe our fragrance portfolio allows successful olfactive distortions to local preferences.
We believe we have scaling opportunities in existing markets and opportunities to enter into new markets to drive the growth of our international business. We believe our fragrance portfolio allows successful olfactive distortions to local preferences.
Customers look to us to celebrate the season, transport them to a time and place, decorate their home, and find the perfect gift. During 2021, we grew our active customer file to over 60 million customers, an increase of 13% compared to pre-coronavirus pandemic levels.
We are an affordable luxury brand with covetable offerings, and a key tenet of our strategy is offering products at all price points. Customers look to us to celebrate the season, transport them to another time and place, decorate their home and find the perfect gift.
Arlin as Executive Vice President and Chief Financial Officer, and Mr. Burgdoerfer retired from the Company on August 20, 2021. Available Information We are subject to the reporting requirements of the Exchange Act of 1934, as amended (the "Exchange Act"), and its rules and regulations.
Available Information We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and its rules and regulations. The Exchange Act requires us to file reports, proxy statements and other information with the U.S. Securities and Exchange Commission ("SEC").
Nash, who served as Chair of the Board from May 2020 until February 22, 2022, when she assumed the role of Executive Chair. 5 Table of Contents Focus on Inclusion We focus on recruiting, retaining and advancing diverse talent that reflects the customers we serve and the communities where we live and work.
In addition, as of the filing date of this Annual Report on Form 10-K, two of our six executive officers and four of our 13 members of the Board were people of color. Focus on Inclusion We focus on recruiting, retaining and advancing diverse talent that reflects the customers we serve and the communities where we live and work.
Revenue is generally recognized under wholesale and sourcing arrangements at the time the title passes to the partner. We continue to increase the number of locations under these types of arrangements as part of our international expansion.
Revenue is generally recognized under wholesale and sourcing arrangements at the time the title to the products passes to the partner. 4 Table of Contents Additional Information Merchandise Vendors During 2022, we purchased merchandise from approximately 120 vendors, primarily located in the U.S.
Other Information For additional information about our business, including our net sales and profits for the last three years, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Brand image, presentation, marketing, design, price, service, fulfillment, assortment and quality are the principal competitive factors. 5 Table of Contents Other Information For additional information about our business, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations," included under Item 7. of Part II of this Annual Report on Form 10-K.
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("we," the "Company" or "Bath & Body Works"). Additionally, starting August 3, 2021, our common stock began trading under the stock symbol "BBWI." We make the world a brighter, happier place through the power of fragrance. This idea is what we were founded on, and it's at the heart of everything we do.
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Additionally, starting on August 3, 2021, the Company's common stock began trading on the New York Stock Exchange (the "NYSE") under the stock symbol "BBWI." Fiscal Year Our fiscal year ends on the Saturday nearest to January 31.
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We work hard to improve our communities and our planet because we believe the world is a better place whenever everyone has access to the things that make them happy.
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Our merchant, design and sourcing teams have a long history of bringing innovative and covetable products to our customers. Our product offering and assortment strategy are key to elevating our brand, increasing our long-term pricing power and extending our reach.
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We benefit from a diverse range of customers who are loyal brand enthusiasts, with retention rates over 60% and increasing levels of average spend in 2021. We have developed trusted and market leading products in the body care, home fragrance, and soap and sanitizer categories.
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We believe a large part of our success comes from our ability to quickly assess and effectively adjust to changing consumer preferences. We leverage our differentiated product development capabilities to frequently deliver compelling new fragrances, packaging and other product launches.
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We seek to drive efficiencies and mitigate risk through our strong technical research and prolific product development. We believe a large part of our success comes from frequent new fragrances, packaging and other product launches. Our merchant, design and sourcing teams have a long history of bringing innovative and covetable products to our customers.
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We are dedicated to delivering a full product pipeline by launching new fragrances and products every four to six weeks, with new products launching nearly every week. Sourcing and Logistics Our predominantly domestic, vertically integrated supply chain enables us to successfully navigate a dynamic environment and to respond to changing consumer preferences with speed and agility.
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We believe the partnerships with our vendors help to deliver high-quality products to our customers and enable us to respond quickly to shifting consumer trends. We utilize Company-owned distribution centers located in the Columbus, Ohio area to support our operations.
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In addition, in the fall of 2022, we completed construction of our first Company-operated direct channel fulfillment center. Located near Columbus, Ohio, this facility has 1.1 million square feet of space and state-of-the-art fulfillment capabilities to support the future growth in our direct business (also referred to as digital or e-commerce) and enhanced fulfillment capabilities for our business.
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Finally, we are investing in a new Company-operated fulfillment center in Columbus, Ohio to support the anticipated future growth of our online business.
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Boswell as our Chief Executive Officer and as a member of our Board, effective December 1, 2022. Sarah E. Nash, who had served as Executive Chair of the Board since February 2022 and Interim Chief Executive Officer since May 2022, remained Executive Chair through January 28, 2023, at which time she transitioned back to independent Chair of the Board.
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We believe that we have one of the most experienced management teams in retail. Growth Strategy Growth in existing categories We believe that we are well positioned to capitalize on a growing market and will continue to innovate and drive the market through new forms, new fragrances and additional products.
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Growth Strategies Expanding our Customer Base and Customer Spend As a leading fragrance company, we deliver customers their favorite fragrances in multiple forms and categories with industry- leading speed and innovation. We manage every touchpoint throughout the customer journey to deliver a highly differentiated shopping experience.
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Growth in new or adjacent categories We are also focused on innovation into new categories and new forms, such as recent launches of spray sanitizers and bar soaps. We see growth opportunities by leveraging current strengths into new categories such as men's and wellness products, facial skincare, hair care, home care, and adjacent cleanser, moisturizing and candle categories.
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We have a large, loyal customer base that spans income levels, age groups and ethnicities. We believe we have significant opportunity to acquire new customers, increase spend and further diversify our customer base. We are continuing to prioritize investment in our customer experience. As part of this investment, we launched our loyalty program nationwide in the U.S. during August 2022.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks associated with the following factors, among others, in some cases have affected and in the future could affect our financial performance and actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this report or otherwise made by our Company or our management: • general economic conditions, inflation, consumer confidence, consumer spending patterns and market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises or other major events, or the prospect of these events; • the COVID-19 pandemic has had and may continue to have an adverse effect on our business and results of operations; • the seasonality of our business; • the anticipated benefits from the Victoria's Secret & Co. spin-off may not be realized; • the spin-off of Victoria’s Secret & Co. may not be tax-free for U.S. federal income tax purposes; • our dependence on Victoria's Secret & Co. for information technology services; • difficulties arising from turnover in Company leadership or other key positions; • our ability to attract, develop and retain qualified associates and manage labor-related costs; • the dependence on store traffic and the availability of suitable store locations on appropriate terms; • our continued growth in part through new store openings and existing store remodels and expansions; • our ability to successfully operate and expand internationally and related risks; • our independent franchise, license and wholesale partners; • our direct channel business; • our ability to protect our reputation and our brand image; • our ability to successfully complete environmental, social and governance initiatives, and associated costs thereof; • our ability to attract customers with marketing, advertising and promotional programs; • our ability to maintain, enforce and protect our trade names, trademarks and patents; • the highly competitive nature of the retail industry and the segments in which we operate; • consumer acceptance of our products and our ability to manage the life cycle of our brand, develop new merchandise and launch new product lines successfully; • our ability to source, distribute and sell goods and materials on a global basis, including risks related to: • political instability, environmental hazards or natural disasters; • significant health hazards or pandemics, which could result in closed factories and/or stores, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in impacted areas; • duties, taxes and other charges; • legal and regulatory matters; • volatility in currency exchange rates; • local business practices and political issues; • delays or disruptions in shipping and transportation and related pricing impacts; • disruption due to labor disputes; and • changing expectations regarding product safety due to new legislation; • our geographic concentration of vendor and distribution facilities in central Ohio; • our reliance on a limited number of suppliers to support a substantial portion of our inventory purchasing needs; • the ability of our vendors to deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations; • fluctuations in foreign currency exchange rates; • fluctuations in product input costs; 9 Table of Contents • fluctuations in energy costs; • our ability to adequately protect our assets from loss and theft; • increases in the costs of mailing, paper, printing or other order fulfillment logistics; • claims arising from our self-insurance; • our and our third-party service providers', including Victoria's Secret & Co. during the term of the Transition Services Agreement, ability to implement and maintain information technology systems and to protect associated data; • our ability to maintain the security of customer, associate, third-party and Company information; • stock price volatility; • our ability to pay dividends and make share repurchases under share repurchase authorizations; • shareholder activism matters; • our ability to maintain our credit ratings; • our ability to service or refinance our debt and maintain compliance with our restrictive covenants; • the impact of the transition from London Interbank Offered Rate (“LIBOR”) and our ability to adequately manage such transition; • our ability to comply with laws, regulations and technology platform rules or other obligations related to data privacy and security; • our ability to comply with regulatory requirements; • legal and compliance matters; and • tax, trade and other regulatory matters.
Biggest changeRisks associated with the following factors, among others, in some cases have affected and in the future could affect our financial performance and actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this report or otherwise made by our Company or our management: • general economic conditions, inflation, consumer confidence, consumer spending patterns and market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises or other major events, or the prospect of these events; • the seasonality of our business; • the anticipated benefits from the Victoria's Secret & Co. spin-off may not be realized; • the spin-off of Victoria’s Secret & Co. may not be tax-free for U.S. federal income tax purposes; • our dependence on Victoria's Secret & Co. for information technology services and the transition of such services to our own information technology systems or to those of third-party technology service providers; • our ability to attract, develop and retain qualified associates and manage labor-related costs; • difficulties arising from turnover in Company leadership or other key positions; • the dependence on store traffic and the availability of suitable store locations on appropriate terms; • our continued growth in part through new store openings and existing store remodels and expansions; • our ability to successfully operate and expand internationally and related risks; • our independent franchise, license and wholesale partners; • our direct channel business; • our ability to protect our reputation and our brand image; • our ability to successfully complete environmental, social and governance initiatives, and associated costs thereof; • our ability to successfully achieve expected annual cost savings in connection with our profit optimization efforts to reduce expenses and improve operating efficiency in the business; • our ability to attract customers with marketing, advertising and promotional programs; • our ability to maintain, enforce and protect our trade names, trademarks and patents; • the highly competitive nature of the retail industry and the segments in which we operate; • consumer acceptance of our products and our ability to manage the life cycle of our brand, develop new merchandise and launch new product lines successfully; • our ability to source, distribute and sell goods and materials on a global basis, including risks related to: ◦ political instability, wars and other armed conflicts, environmental hazards or natural disasters; ◦ significant health hazards or pandemics, such as the COVID-19 pandemic, which could result in closed factories and/or stores, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in impacted areas; ◦ duties, taxes and other charges; ◦ legal and regulatory matters; ◦ volatility in currency exchange rates; ◦ local business practices and political issues; ◦ delays or disruptions in shipping and transportation and related pricing impacts; ◦ disruption due to labor disputes; and ◦ changing expectations regarding product safety due to new legislation; • our geographic concentration of vendor and distribution facilities in central Ohio; • our reliance on a limited number of suppliers to support a substantial portion of our inventory purchasing needs; • the ability of our vendors to deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations; • fluctuations in foreign currency exchange rates; • fluctuations in product input costs; • fluctuations in energy costs; • our ability to adequately protect our assets from loss and theft; • increases in the costs of mailing, paper, printing or other order fulfillment logistics; • claims arising from our self-insurance; 9 Table of Contents • our and our third-party service providers’, including Victoria’s Secret & Co. during the term of the Transition Services Agreement between us and Victoria’s Secret & Co., ability to implement and maintain information technology systems and to protect associated data; • our ability to maintain the security of customer, associate, third-party and Company information; • stock price volatility; • our ability to pay dividends and make share repurchases under share repurchase authorizations; • shareholder activism matters; • our ability to maintain our credit ratings; • our ability to service or refinance our debt and maintain compliance with our restrictive covenants; • the impact of the transition from London Interbank Offered Rate ("LIBOR") and our ability to adequately manage such transition; • our ability to comply with laws, regulations and technology platform rules or other obligations related to data privacy and security; • our ability to comply with regulatory requirements; • legal and compliance matters; and • tax, trade and other regulatory matters.
In addition, if the spin-off is taxable, each holder of our common stock who received shares of Victoria's Secret & Co. in connection with the spin-off would generally be treated as receiving a taxable dividend in an amount equal to the fair market value of the shares received.
In addition, if the spin-off is taxable, each holder of our common stock who received shares of Victoria's Secret & Co. common stock in connection with the spin-off would generally be treated as receiving a taxable dividend in an amount equal to the fair market value of the shares received.
Although we may use foreign currency forward contracts to hedge certain foreign currency risks, these measures may not succeed in offsetting all of the short-term negative impacts of foreign currency rate movements on our business and results of operations, financial condition and cash flows.
Although we use foreign currency forward contracts to hedge certain foreign currency risks, these measures may not succeed in offsetting all of the short-term negative impacts of foreign currency rate movements on our business and results of operations, financial condition and cash flows.
Our Board will determine our future levels of dividend payments and share repurchase authorizations, if any, giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements, as well as financial and other conditions which may be beyond our control.
Our Board will determine our future levels of dividend payments and share repurchase authorizations, if any, giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity and the restrictions placed upon us by our borrowing arrangements, as well as financial and other conditions which may be beyond our control.
Risks related to law and regulation: Changes in laws, regulations or technology platform rules relating to data privacy and security, or any actual or perceived failure by us to comply with such laws and regulations, or contractual or other obligations relating to data privacy and security, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.
Risks related to law and regulation: Changes in laws, regulations or technology platform rules relating to privacy and data security, or any actual or perceived failure by us to comply with such laws and regulations, or contractual or other obligations relating to privacy and data security, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.
The legal and regulatory environment related to data privacy and security is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future.
The legal and regulatory environment related to privacy and data security is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future.
In addition, such requirements may require us to modify our data processing practices and policies, distract management or divert resources from other initiatives and projects, all of which could have a material adverse effect on our results of operations, financial condition and cash flows.
In addition, such requirements may require us to modify our data processing practices and policies and distract management or divert resources from other initiatives and projects, all of which could have a material adverse effect on our results of operations, financial condition and cash flows.
In addition, we may be impacted by litigation trends, including class action lawsuits involving consumers and stockholders, that could have a material adverse effect on our reputation, the market price of our common stock, results of operations, financial condition and cash flows. We may be impacted by changes in taxation, trade and other regulatory requirements.
In addition, we may be impacted by litigation trends, including class action lawsuits involving consumers and stockholders, that could have a material adverse effect on our reputation, the market price of our common stock and our results of operations, financial condition and cash flows. We may be impacted by changes in taxation, trade and other regulatory requirements.
Any failure or perceived failure by us to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security could result in damage to our reputation and our relationship with our customers, as well as proceedings or litigation by governmental agencies or customers, including class-action privacy and data-protection litigation in certain jurisdictions, which could subject us to significant fines, sanctions, awards, penalties or judgments, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.
Any failure or perceived failure by us or our partners to comply with any applicable federal, state or similar foreign laws and regulations relating to privacy and data security could result in damage to our reputation and our relationship with our customers, as well as proceedings or litigation by governmental agencies or customers, including class action privacy and data-protection litigation in certain jurisdictions, which could subject us to significant fines, sanctions, awards, penalties or judgments, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.
Risks related to our business: Our net sales, profit results and cash flows are sensitive to, have been affected by and may in the future be further impacted by, general economic conditions, inflation, consumer confidence, spending patterns, significant health hazards or pandemics, weather or other market disruptions.
Risks related to our business: Our net sales, profit results and cash flows are sensitive to, have been affected by and may in the future be further impacted by, general economic conditions, inflation, consumer confidence, customer spending patterns, significant health hazards or pandemics, weather or other market disruptions.
We may be impacted by our ability to comply with regulatory requirements. We are subject to numerous regulatory requirements. Our policies, procedures and internal controls are designed to comply with all applicable foreign and domestic laws and regulations, including those required by the Sarbanes-Oxley Act of 2002, the U.S. Foreign Corrupt Practices Act, the U.K.
We may be impacted by our ability to comply with legal and regulatory requirements. We are subject to numerous legal and regulatory requirements. Our policies, procedures and internal controls are designed to comply with all applicable foreign and domestic laws and regulations, including those required by the Sarbanes-Oxley Act of 2002, the U.S. Foreign Corrupt Practices Act, the U.K.
Failure to attract and retain the right talent, or to smoothly manage the transition of responsibilities resulting from such turnover, could affect our ability to meet our challenges and may cause us to miss performance objectives or financial targets or disrupt our relationships with our customers or other third-parties.
Failure to attract and retain the right talent or to smoothly manage the transition of responsibilities resulting from such turnover could affect our ability to meet our challenges and may cause us to miss performance objectives or financial targets or disrupt our relationships with our customers, vendors or other third parties.
As a result of geographic concentration of the vendor and distribution facilities that we rely upon, our operations are susceptible to local and regional factors, such as accidents, system failures, economic and weather conditions, natural disasters, demographic and population changes, and other unforeseen events and circumstances.
As a result of geographic concentration of many of the vendor and distribution facilities that we rely upon, our operations are susceptible to local and regional factors, such as accidents, system failures, economic and weather conditions, natural disasters, demographic and population changes and other unforeseen events and circumstances.
We purchase products from third-party vendors. Factors outside our control, such as production, shipping delays, quality problems or natural disasters, could disrupt merchandise deliveries and result in lost sales, cancellation charges or excessive markdowns.
We purchase products from third-party vendors. Factors outside our control, such as production issues, shipping delays, quality problems or natural disasters, could disrupt merchandise deliveries and result in lost sales, cancellation charges or excessive markdowns.
Our information technology systems, as well as those of our service providers and vendors, are vulnerable to damage, interruption or breach from a variety of sources, including cyberattacks, ransomware attacks, telecommunication failures, malicious human acts and natural disasters.
Our information technology systems, as well as those of our service providers and vendors, are vulnerable to damage, interruption, service availability or breach from a variety of sources, including cyberattacks, ransomware attacks, telecommunication failures, malicious human acts and natural disasters.
Our business depends on developing and maintaining close relationships with our vendors and on our vendors’ ability or willingness to sell quality products to us at favorable prices and terms. Many factors outside of our control may harm these relationships and the ability or willingness of these vendors to sell us products on favorable terms.
Our business depends on developing and maintaining close relationships with our vendors and on our vendors’ ability or willingness to sell quality products to us at favorable prices and on other favorable terms. Many factors outside of our control may harm these relationships and the ability or willingness of these vendors to sell us products on favorable terms.
Any of these issues could have a material adverse effect on our operations, financial condition and cash flows. Our ability to protect our reputation could have a material effect on our brand image. Our ability to maintain our reputation is critical to our brand image.
Any of these issues could have a material adverse effect on our results of operations, financial condition and cash flows. Our ability to protect our reputation could have a material adverse effect on our brand image. Our ability to maintain our reputation is critical to our brand image.
We are, and may increasingly become, subject to various laws, directives, industry standards and regulations, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate.
We are, and may increasingly become, subject to various laws, directives, industry standards and regulations, as well as contractual obligations, relating to privacy and data security in the jurisdictions in which we operate and may in the future operate.
Any violations of such laws or regulations could have an adverse effect on our reputation, market price of our common stock, results of operations, financial condition and cash flows. It can be difficult to comply with sometimes conflicting regulations in local, national or foreign jurisdictions as well as new or changing regulations.
Any violations of such laws or regulations could have an adverse effect on our reputation, the market price of our common stock and our results of operations, financial condition and cash flows. It can be difficult to comply with sometimes conflicting statutes or regulations in local, national or foreign jurisdictions as well as new or changing laws and regulations.
Such expansions will also have upfront investment costs that may not be accompanied by sufficient revenues to achieve typical or expected operational and financial performance. Further, our results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates. See “Fluctuations in foreign currency exchange rates could impact our financial condition and results of operations” below.
Such expansions will also have upfront investment costs that may not be accompanied by sufficient revenues to achieve expected operational and financial performance. Further, our results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates. See “Fluctuations in foreign currency exchange rates could impact our financial condition and results of operations” below.
Our programs may not be effective or could require increased expenditures, which could have a material adverse effect on our results of operations, financial condition and cash flows. Our ability to adequately maintain, enforce and protect our trade names, trademarks and patents could have an impact on our brand images and ability to penetrate new markets.
Our programs may not be effective or could require increased expenditures, which could have a material adverse effect on our results of operations, financial condition and cash flows. Our ability to adequately maintain, enforce and protect our trade names, trademarks and patents could have an impact on our brand image and ability to penetrate new markets.
We, along with third parties we do business with, are subject to complex compliance and litigation risks. Actions filed against us from time to time include commercial, tort, intellectual property, customer, employment, wage and hour, data privacy, securities, anti-corruption and other claims, including purported class action lawsuits.
We, along with third parties we do business with, are subject to complex compliance and litigation risks. Actions filed against us from time to time include commercial, tort, intellectual property, tax, customer, employment, wage and hour, privacy, securities, anti-corruption and other claims, including purported class action lawsuits.
Product input costs, including freight, labor and raw materials, fluctuate subject to price volatility caused by any fluctuation in aggregate supply and demand, or other external conditions, such as weather and climate conditions, energy costs or natural events or disasters, taxes and tariffs (including as a result of trade disputes), industry demand, inflationary conditions, labor shortages, transportation issues, fuel costs, product recalls, governmental regulation and other factors, all of which are beyond our control and in many instances are unpredictable.
Product input costs, including freight, labor and raw materials, fluctuate subject to price volatility caused by any fluctuation in aggregate supply and demand or other external conditions, such as inflationary conditions, weather and climate conditions, geopolitical conflicts and wars, energy costs, natural events or disasters, taxes and tariffs (including as a result of trade disputes), industry demand, labor shortages, transportation issues, fuel costs, product recalls, governmental regulation and other factors, all of which are beyond our control and in many instances are unpredictable.
The increased use of smartphones, tablets and other mobile devices may also heighten these and other operational risks. Despite the precautions we have taken, unanticipated problems or events may nevertheless cause failures in, or unauthorized access to, our and our third-party services providers’ and vendors' information technology systems.
The increased use of smartphones, tablets and other mobile devices may also heighten these and other operational risks. Despite the precautions we have taken, unanticipated problems or events may nevertheless cause failures in, or unauthorized access to, our and our third-party service providers’ and vendors' information technology systems.
Our asset-backed revolving credit facility contains a covenant and negative covenants that under certain circumstances require maintenance of a certain financial ratio and also, under certain conditions, restrict our ability to pay dividends, repurchase common shares and make other restricted payments as defined in the agreement.
Our asset-backed revolving credit facility (the "ABL Facility") contains a covenant and negative covenants that under certain circumstances require maintenance of a certain financial ratio and also, under certain conditions, restrict our ability to pay dividends, repurchase shares of our common stock and make other restricted payments as defined in the agreement.
In the U.S., privacy and data protection are regulated at federal, state, and local levels. Various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning personal information and data security and have prioritized privacy and information security violations for enforcement actions.
In the U.S., privacy and data protection are regulated at federal, state and local levels. Various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning privacy and data security and have prioritized privacy and data security violations for enforcement actions.
Accomplishing our new and existing store expansion goals will depend upon a number of factors, including the ability to partner with developers and landlords to obtain suitable sites for new and expanded stores at acceptable costs, the hiring and training of qualified personnel and the integration of new stores into existing operations.
Accomplishing our new and existing store expansion goals will depend upon a number of factors, including the ability to partner with developers and landlords to obtain suitable sites for new and expanded stores at acceptable costs and on acceptable timelines, the hiring and training of qualified personnel and the integration of new stores into existing operations.
If any third-party copies our products or our stores in a manner that projects lesser quality or carries a negative connotation, it could have a material adverse effect on our brand image and reputation as well as our results of operations, financial condition and cash flows.
If any third party copies our products, our or our partners' websites or our or our partners' stores in a manner that projects lesser quality or carries a negative connotation, it could have a material adverse effect on our brand image and reputation as well as our results of operations, financial condition and cash flows.
Any significant compromise or breach of our data security, media reports about such an incident, whether accurate or not, or our failure to make adequate or timely disclosures to the public or law enforcement agencies following any such event, whether due to delayed discovery or a failure to follow existing protocols, could significantly damage our reputation with our customers, associates, investors and other third parties, cause the disclosure of personal, confidential, proprietary or sensitive customer, associate, third-party or company information, cause interruptions to our operations and distraction to our management, cause our customers to stop shopping with us and result in significant legal, regulatory and financial liabilities and lost revenues.
Any significant compromise or breach of our data security, media reports about such an incident, whether accurate or not, or our failure to make adequate or timely disclosures to the public or law enforcement agencies following any such event, whether due to delayed discovery or a failure to follow existing protocols, could significantly damage our reputation with our customers, associates, investors and other third parties, cause the disclosure of personal, confidential, proprietary or sensitive customer, associate, third-party or Company information, cause interruptions to our operations and distraction to our management, cause our customers to stop shopping with us, inhibit our ability to attract new customers and result in significant legal, regulatory and financial liabilities and lost revenues.
The pandemic continues to have the potential to significantly impact our supply chain if the factories that manufacture our products, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers are disrupted, are temporarily closed or experience worker shortages.
The COVID-19 pandemic continues to have the potential to significantly impact our supply chain if the factories that manufacture our products, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers are disrupted, are temporarily closed or experience worker shortages.
The violation of labor, environmental or other laws by third-party vendors used by us, or the divergence of a third-party vendor’s or partner’s labor or environmental practices from those generally accepted as ethical or appropriate, could interrupt or otherwise disrupt the shipment of finished products to us or damage our reputation.
Violations of labor, environmental or other laws by third-party vendors used by us or the divergence of a third-party vendor’s or partner’s labor or environmental practices from those generally accepted as ethical or appropriate could interrupt or otherwise disrupt the shipment of finished products to us or damage our reputation.
If we fail to comply with any covenant, including our financial covenant, it could result in an event of default and our lenders could terminate the commitments under our asset-backed revolving credit facility and make the entire debt incurred thereunder immediately due and payable or we may be forced to sell assets, restructure our indebtedness or seek additional equity capital, which would dilute our stockholders’ interests. 20 Table of Contents The interest rates on our credit facilities may be impacted by the phase-out of LIBOR and the transition to the Secured Overnight Financing Rate (“SOFR”).
If we fail to comply with any covenant, including our financial covenant, it could result in an event of default and our lenders could terminate the commitments under our ABL Facility and make the entire debt incurred thereunder immediately due and payable, or we may be forced to sell assets, restructure our indebtedness or seek additional equity capital, which would dilute our stockholders’ interests. 20 Table of Contents The interest rates on our credit facilities may be impacted by the phase-out of LIBOR and the transition to the Secured Overnight Financing Rate (“SOFR”).
These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material adverse effect on our results of operations, financial condition and cash flows.
These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that the laws and regulations will be interpreted and applied in ways that may have a material adverse effect on our results of operations, financial condition and cash flows.
Failure to comply with local laws and regulations, to maintain an effective system of internal controls, to maintain the security of customer, associate, third-party and company information or to provide accurate and timely financial statement information could also hurt our reputation.
Failure to comply with applicable laws and regulations, to maintain an effective system of internal controls, to maintain the security of customer, associate, third-party and company information or to provide accurate and timely financial statement information could also hurt our reputation.
We may be unable to successfully resolve these types of conflicts to our satisfaction and may be required to enter into costly license agreements, be required to pay significant royalties, settlements costs or damages, be required to rebrand our products and/or be prevented from selling some of our products.
We may be unable to successfully resolve these types of conflicts to our satisfaction and may be required to enter into costly license agreements, be required to pay significant royalties, settlement costs or damages, be required to rebrand our products and/or be prevented from selling some of our products.
While we currently maintain cybersecurity insurance, such insurance may not be sufficient in type or amount to cover us against claims related to breaches, failures or other data security-related incidents, and we cannot be certain that cyber insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
While we currently maintain cybersecurity insurance, such insurance may not be sufficient in type or amount to cover us against claims related to breaches, violations of law, failures or other data security-related incidents, and we cannot be certain that cyber insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
In addition, quality problems could result in product liability judgments or widespread product recalls that may negatively impact our sales and profitability for a period of time depending on product availability, competition reaction and consumer attitudes.
In addition, quality problems could result in product liability judgments or widespread product recalls that may negatively impact our sales and profitability for a period of time depending on product availability, reaction of competitors and consumer attitudes.
A continual rise in energy costs could adversely affect consumer spending and demand for our products and increase our operating costs, both of which could have a material adverse effect on our results of operations, financial condition and cash flows. 17 Table of Contents Our results may be impacted by our ability to adequately protect our assets from loss and theft.
A continual rise in energy costs could adversely affect consumer spending and demand for our products and increase our operating costs, both of which could have a material adverse effect on our results of operations, financial condition and cash flows. Our results may be impacted by our ability to adequately protect our assets from loss and theft.
For example, financial or operational difficulties that our vendors may face could increase the cost of the products we purchase from them or our ability to source products from them. We may be impacted by our vendors’ ability to manufacture and deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations.
For example, financial or operational difficulties that our vendors may face could increase the cost of the products we purchase from them or our ability to source products from them. 16 Table of Contents We may be impacted by our vendors’ ability to manufacture and deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations.
Higher rates of loss or increased security costs to combat theft could have a material adverse effect on our results of operations, financial condition and cash flows. We may be impacted by increases in the cost of mailing, paper, printing or other order fulfillment logistics.
Higher rates of loss 17 Table of Contents or increased security costs to combat theft could have a material adverse effect on our results of operations, financial condition and cash flows. We may be impacted by increases in the cost of mailing, paper, printing or other order fulfillment logistics.
Despite these measures, we have been and may in the future be vulnerable to targeted or random attacks on our systems that could lead to security breaches, phishing attacks, denial of service attacks, acts of vandalism, computer viruses, malware, ransomware, misplaced or lost data, programming and/or human errors or similar events.
Despite these measures, we have been and may in the future be vulnerable to targeted or random attacks on our systems that could lead to security breaches, denial of service, vandalism, computer viruses, malware, ransomware, misplaced, corrupted or lost data, programming and/or human errors or similar events.
Sales volume and retail traffic may be adversely affected by factors that we cannot control, such as economic downturns or changes in consumer demographics in a particular area, consumer trends away from brick-and-mortar retail toward online shopping, competition from internet and other retailers and other retail areas where we do not have stores, significant health hazards or pandemics, the closing of other stores or the decline in popularity or safety in the shopping areas where our stores are located and the deterioration in the financial condition of the operators or developers of the shopping areas in which our stores are located.
Sales volume and retail traffic may be adversely affected by factors that we cannot control, such as economic downturns, including due to inflationary pressures, or changes in consumer demographics in a particular area, consumer trends away from brick-and-mortar retail toward online shopping, competition from internet and other retailers and other retail areas where we do not have stores, significant health hazards or pandemics, the closing of other stores or the decline in popularity or safety in the shopping areas where our stores are located and the deterioration in the financial condition of the operators or developers of the shopping areas in which our stores are located.
Sustained or repeated system disruptions that interrupt our ability to process orders and deliver products to the stores, impact our customers’ ability to access our websites and mobile applications in a timely manner, or expose confidential customer information, merchandise, financial or other important information (including personal information) could have a material adverse effect on our results of operations, financial condition and cash flows.
Sustained or repeated system disruptions that interrupt our ability to process orders and deliver products to the stores or directly to our customers, impact our ability to process transactions in our stores, impact our customers’ ability to access our websites and mobile applications in a timely manner or expose confidential customer, merchandise, financial, associate or other important information (including personal information) could have a material adverse effect on our results of operations, financial condition and cash flows.
In North America, we are subject to sectoral laws that impose different enforcement regimes, whether via government agencies or class-action litigants, with fines and statutory damages that can result in significant exposure when applied to large customer segments.
In North America, we are subject to sectoral laws that impose different enforcement regimes, whether enforced by government agencies or class action litigants, with fines and statutory damages that can result in significant exposure when applied to large customer segments.
Our ability to manage the life cycle of our brand and to remain current with trends and launch new product lines successfully could impact the image and relevance of our brand.
Our ability to manage the life cycles of our brand and to remain current with trends and launch new product lines successfully could impact the image and relevance of our brand.
If we fail to achieve some or all of the benefits expected to result from the Separation, or if such benefits are delayed, our business could be harmed. 11 Table of Contents The Separation could result in substantial tax liability to us and our stockholders.
If we fail to achieve some or all of the benefits expected to result from the Separation, or if such benefits are delayed, our business could be harmed. The Separation could result in substantial tax liability to us and our stockholders.
These factors may result in an increase in our production costs. We may not be able to, or may elect not to, pass these increases on to our customers which may adversely impact our profit margins. These risks could have a material adverse effect on our results of operations, financial condition and cash flows.
These factors may result in an increase in our product input costs. We may not be able to, or may elect not to, fully pass these increases on to our customers which may adversely impact our profit margins. These risks could have a material adverse effect on our results of operations, financial condition and cash flows.
Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain data sharing arrangements of personal information, and the ability to access and delete personal information.
Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers data protection and privacy rights, including the ability to opt-out of certain disclosures of their personal information and the ability to access and delete personal information.
Bribery Act, the SEC and the New York Stock Exchange ("NYSE"), among others. Although we have put in place policies and procedures aimed at ensuring legal and regulatory compliance, our associates, subcontractors, vendors, licensees, franchisees and other third parties could take actions that violate these laws and regulations.
Bribery Act, the SEC and the NYSE, among others. Although we have put in place policies and procedures aimed at ensuring legal and regulatory compliance, our associates, subcontractors, vendors, licensees, franchisees and other third parties could take actions that violate these laws and regulations.
Energy costs have fluctuated in the past and may fluctuate in the future due to changes in factors beyond our control, such as weather and climate conditions or natural events or disasters, taxes and tariffs (including as a result of trade disputes), industry demand, inflationary conditions, labor shortages, transportation issues, fuel costs, political conflicts and wars, governmental regulation and other factors.
Energy costs have fluctuated in the past and may fluctuate in the future due to changes in factors beyond our control, such as weather and climate conditions or natural events or disasters, taxes and tariffs (including as a result of trade disputes), industry demand, high demand for renewable energy, inflationary conditions, labor shortages, transportation issues, fuel costs, geopolitical conflicts and wars, governmental regulation and other factors.
Our ability, or perceived inability, to complete environmental, social and governance initiatives may have a material effect on our reputation.
Our ability, or perceived inability, to complete environmental, social and governance ("ESG") initiatives may have a material adverse effect on our reputation.
Our success depends, in part, on the secure and uninterrupted performance of our and our third-party services providers' and vendors' information technology systems.
Our success depends, in part, on the secure and uninterrupted performance of our and our third-party service providers' and vendors' information technology systems.
There can be no assurance that we will obtain such applied for registrations or that the registrations we obtain will prevent the imitation of our products or infringement or other violation of our intellectual property rights by others.
There can be no assurance that we will obtain such applied for registrations or that the registrations we obtain will prevent the imitation of our products or infringement or other violation of our intellectual property 14 Table of Contents rights by others.
We are dependent on certain product categories, and a decline in consumer demand in these product categories could negatively effect on our results of operations, financial condition and cash flows. Customer demands and trends change rapidly.
We are dependent on certain product categories, and a decline in customer demand in these product categories could negatively impact our results of operations, financial condition and cash flows. Customer demands and trends change rapidly.
Increased competition, combined with declines in store and/or online website traffic, could result in price reductions, increased marketing expenditures and loss of pricing power and market share, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.
Increased competition, combined with declines in store and/or direct channel traffic, could result in price reductions, increased marketing expenditures and loss of pricing power and market share, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.
Any significant interruption in the operations of these facilities could lead to inventory issues or increased costs, which could have a material adverse effect on our results of operations, financial condition and cash flows. 16 Table of Contents A change in the relationship with our key vendors could have a material effect on our business.
Any significant interruption in the operations of these facilities could lead to inventory issues, increased costs or interruptions to our operations, which could have a material adverse effect on our results of operations, financial condition and cash flows. A change in the relationship with our key vendors could have a material effect on our business.
Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “planned,” “potential” and any similar expressions may identify forward-looking statements.
Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “planned,” “potential,” "target," "goal" and any similar expressions may identify forward-looking statements.
We rely heavily on applications related to point-of-sale, e-commerce, merchandising, planning, sourcing, logistics, inventory management, data security and support systems including human resources and finance currently supplied to us by Victoria’s Secret & Co. pursuant to the TSA that we entered into in connection with the Separation.
We rely heavily on applications related to point-of-sale, e-commerce, merchandising, planning, sourcing, logistics, inventory management, data security and support systems including human resources and finance currently supplied to us by Victoria’s Secret & Co. pursuant to our Transition Services Agreement with Victoria’s Secret & Co. that we entered into in connection with the Separation.
Our success depends in part on management’s ability to effectively manage the life cycle of our brand and to anticipate and respond to changing preferences and consumer demands and to translate market trends into appropriate, salable product offerings in advance of the actual time of sale to the customer.
Our success depends in part on management’s ability to effectively manage the life cycles of our brand, to anticipate and respond to changing preferences and consumer demands and to translate market trends into appropriate, saleable product offerings in advance of the actual time of sale to the customer.
Interest rates on U.S. borrowings under our asset-backed revolving credit facility ("ABL Facility") are based on LIBOR. On July 27, 2017, the U.K.’s Financial Conduct Authority (the authority that administers LIBOR) announced that it intends to phase out LIBOR by the end of 2023.
Interest rates on U.S. borrowings under our ABL Facility are based on LIBOR. On July 27, 2017, the U.K.’s Financial Conduct Authority (the authority that administers LIBOR) announced that it intends to phase out LIBOR by the end of 2023.
Information technology system disruptions or data corruption, if not anticipated and appropriately mitigated, could have a material adverse effect on our operations, financial condition and cash flows.
Information technology system disruptions or data corruption, if not appropriately mitigated, could have a material adverse effect on our results of operations, financial condition and cash flows.
Our continued growth and success depends in part on our ability to open and operate new stores and expand and remodel existing stores on a timely and profitable basis.
Our continued growth and success depends in part on our ability to open and operate new, primarily off-mall stores and expand and remodel existing stores on a timely and profitable basis.
Breaches or failures of security involving our information systems, including those provided, managed and supported by Victoria's Secret & Co., or those of any of our external service providers have occurred, and in the future may occur.
Breaches or failures of security involving our information systems, including those provided, managed and supported by Victoria's Secret & Co., or those of any of our other third-party service providers have occurred, and in the future may occur.
Our ability to compete favorably in our highly competitive segments of the retail industry could impact our results. The retail industry is highly competitive. We compete for sales with a broad range of other retailers, including individual and chain specialty stores, department stores and discount retailers.
Our ability to compete favorably in our highly competitive segments of the retail industry could impact our results of operations, financial condition and cash flows. The retail industry is highly competitive. We compete for sales with a broad range of other retailers, including individual and chain specialty stores, department stores and discount retailers.
These risks could have a material adverse effect on our results of operations, financial condition and cash flows. 13 Table of Contents Our licensees, franchisees and wholesalers could take actions that could harm our business or brand images. We have global representation through independently owned stores operated by our partners.
These risks could have a material adverse effect on our results of operations, financial condition and cash flows. Our licensees, franchisees and wholesalers could take actions that could harm our business or brand images. We have global representation through digital sites and stores independently owned and/or operated by our franchise partners.
Any reduction, or failure, to pay dividends or repurchase our shares after we have announced our intention to do so may negatively impact our reputation, investor confidence in us and our stock price. Shareholder activism could cause us to incur significant expense, hinder execution of our business strategy and impact our stock price.
Any reduction, or failure, to pay dividends or repurchase our shares after we have announced our intention to do so may negatively impact our reputation, investor confidence in us and our stock price. Shareholder activism could cause us to incur significant expense, impact the execution of our business strategy and have an adverse effect on our business.
Also, changes in such laws could make operating our business more expensive or require us to change the way we do business. For example, changes in product safety or other consumer protection laws could lead to increased costs for certain merchandise, or additional labor costs associated with readying merchandise for sale.
Also, changes in such laws and regulations could make operating our business more expensive or require us to change the way we do business. For example, changes in product safety or other consumer protection laws could lead to increased costs for certain merchandise or additional labor costs associated with readying merchandise for 22 Table of Contents sale.
For example: • political instability, environmental hazards or natural disasters which could negatively affect international economies, financial markets and business activity; • significant health hazards or pandemics, which could result in closed factories and/or stores, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in infected areas; • imposition of new or retaliatory trade duties, sanctions or taxes and other charges on imports or exports; • evolving, new or complex legal and regulatory matters; • volatility in currency exchange rates; • local business practice and political issues (including issues relating to compliance with domestic or international labor standards) which may result in adverse publicity or threatened or actual adverse consumer actions, including boycotts; • delays or disruptions in shipping and transportation and related pricing impacts; • disruption due to labor disputes; and • changing expectations regarding product safety due to new legislation or other factors.
For example: • political instability, geopolitical conflict, including the war between Russia and Ukraine, environmental hazards or natural disasters which could negatively affect international economies, financial markets and business activity; • significant health hazards or pandemics, including the COVID-19 pandemic, which could result in closed factories, distribution centers and/or stores, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas; • imposition of new or retaliatory trade duties, sanctions or taxes and other charges on imports or exports; • evolving, new or complex legal and regulatory matters; • volatility in currency exchange rates; 15 Table of Contents • local business practice and political issues (including issues relating to compliance with domestic or international labor standards) which may result in adverse publicity or threatened or actual adverse consumer actions, including boycotts; • delays or disruptions in shipping and transportation and related pricing impacts; • disruption due to labor disputes; and • changing expectations regarding product safety due to new legislation or other factors.
The GDPR, together with national legislation, regulations and guidelines of the EU member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data, and other international jurisdictions are expected to pass similar laws that may include even more stringent requirements.
The GDPR, together with national legislation, regulations and guidelines of the EEA states and the U.K. governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data, and other international jurisdictions are expected to pass similar laws that may include even more stringent requirements.
Moreover, despite maintaining comprehensive measures, some of our systems, e-commerce environments, servers and those of our service providers and vendors are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems.
Moreover, despite maintaining comprehensive measures, some of our systems, e-commerce environments and servers and those of our service providers and vendors are potentially vulnerable to physical or electronic break-ins, malware (including, without limitation, ransomware), computer viruses and similar disruptive problems.
As part of our ongoing efforts, we established an ESG function to provide direction and help coordinate ESG work throughout the Company.
As part of our ongoing efforts, we maintain an ESG function to provide direction and coordinate ESG work throughout the Company.
All of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational changes, implementing additional protection technologies, and training associates and engaging consultants, which are likely to increase over time.
All of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational changes, investing in and implementing additional data protection technologies and other safeguards and training associates and engaging consultants, which are likely to increase over time.
EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and, depending on the extent and degree to which we conduct business in the European Economic Area (“EEA”) and United Kingdom, potentially extends our obligations and potential liability for failing to meet such obligations.
Under the GDPR, EU member states have enacted certain implementing legislation that adds to and/or further interprets the GDPR requirements and, depending on the extent and degree to which we conduct business in the European Economic Area (“EEA”) and U.K., potentially extends our obligations and potential liability for failing to meet such obligations.
If we encounter difficulties with the distribution facilities, or if the facilities were to shut down for any reason, including as a result of fire, natural disaster or work stoppage, we could face shortages of inventory; incur significantly higher costs and longer lead times associated with distributing our products to our customers; and cause customer dissatisfaction.
If we encounter difficulties with the distribution facilities, or if the facilities were to shut down for any reason, including as a result of a pandemic, fire, natural disaster or work stoppage, we could face shortages of inventory; we could incur significantly higher costs and longer lead times associated with distributing our products to our customers; we could face regulatory scrutiny; and our customer may be dissatisfied.
Laws range from the “sectoral” variety (i.e. laws that govern specific practices, services, or technologies) to omnibus laws (i.e. laws that comprehensively seek to govern all aspects of data processing practices). As an online and brick-and-mortar retailer, we are subject to both.
These laws and regulations range from the “sectoral” variety (i.e., laws that govern specific practices, services or technologies) to omnibus laws (i.e., laws that comprehensively seek to govern all aspects of data processing practices). As an omnichannel retailer, we are subject to both.
These fluctuations may result in an increase in our transportation costs for distribution, utility costs for our retail stores and costs to purchase products from our manufacturers.
These fluctuations may result in an increase in our transportation costs for distribution, utility costs for our retail stores, distribution centers and other Company locations and costs to purchase products from our manufacturers.
Our assets are subject to loss, including those caused by illegal or unethical conduct by associates, customers, vendors or unaffiliated third parties. We have experienced events such as inventory shrinkage in the past, and we cannot assure that incidences of loss and theft will decrease in the future or that the measures we are taking will effectively reduce these losses.
Our assets are subject to loss, including those caused by illegal or unethical conduct by associates, customers, vendors, partners or unaffiliated third parties. We experience events that cause inventory shrinkage, and we cannot assure that incidences of loss and theft will decrease in the future or that the measures we are taking will effectively reduce these losses.
Illustrative of the sectoral variety are laws that govern telephonic communications (e.g., the Federal Telephone Consumer Protection Act), email communications (e.g., the Federal Controlling the Assault of Non-Solicited Pornography and Marketing Act, and Canada’s Anti-Spam Legislation), the use of biometric technology (e.g., the Illinois Biometric Information Privacy Act), the printing of payment card digits on a store receipt (e.g., the Federal Fair and Accurate Credit Transactions Act), the use of call recordings (e.g., Federal and state laws governing consent for recordings), the collection of consumer information at retail point of sale (e.g., the California Song-Beverly Act), and the collection of driver’s license information (e.g., state laws governing the scanning of government ID’s).
Illustrative of the sectoral variety are laws that govern telephonic communications (e.g., the Federal Telephone Consumer Protection Act), email communications (e.g., the Federal Controlling the Assault of Non-Solicited Pornography and Marketing Act and Canada’s Anti-Spam Legislation), the use of biometric technology (e.g., the Illinois Biometric Information Privacy Act), the printing of payment card numbers on certain transaction receipts (e.g., the Federal Fair and Accurate Credit Transactions Act), the use of call recordings (e.g., federal and state laws governing unlawful surveillance and consent for recordings), the collection of consumer information at retail point of sale (e.g., the California Song-Beverly Act), and the collection of driver’s license information (e.g., state laws governing the scanning of government identification).
Over time, we will transition the information technology capabilities from Victoria's Secret & Co. to implement point-of-sale, mobile applications, merchandising, planning, sourcing, logistics, inventory management, human resources and financial systems on to our own platforms, some of which are yet to be established.
Over time, we will transition these information technology capabilities from Victoria's Secret & Co. to implement point-of-sale, mobile applications, merchandising, planning, sourcing, logistics, inventory management, human resources and financial systems to the platforms of our other third-party service providers and vendors or on to our own platforms, some of which are yet to be established.
We must carry a significant amount of inventory, especially before the holiday season selling period.
We must carry a significant amount of 10 Table of Contents inventory, especially before the holiday season selling period.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeA substantial portion of these lease commitments consists of store leases generally with an initial term of 10 years. These store leases expire at various dates between 2022 and 2034. As of January 29, 2022, we also operate 104 retail stores located in leased facilities throughout the Canadian provinces.
Biggest changeAs of January 28, 2023, we operated 1,693 and 109 retail stores located in leased facilities throughout the U.S. and Canada, respectively. A substantial portion of our U.S. store leases generally have an initial term of 10 years, while our Canadian store leases generally have initial terms of 5 to 10 years.
The following table provides the location, use and size of our Company-operated distribution, corporate and product development facilities as of January 29, 2022: Location Use Approximate Square Footage Columbus, Ohio area Office, distribution center and shipping facilities 3,928,000 Other North America Office and product development/design 69,000 We own five office, distribution center and shipping facilities located in the Columbus, Ohio area.
Company-operated The following table provides the location, use and size of our Company-operated distribution, fulfillment, office and product development facilities as of January 28, 2023: Location Use Approximate Square Footage Columbus, Ohio area Office, distribution and fulfillment centers and shipping facilities 4,951,000 Other North America Office and product development/design 69,000 We own five office, distribution center and shipping facilities located in the Columbus, Ohio area comprising approximately 3.9 million square feet.
We also utilize six third-party operated regional distribution centers in North America, comprising approximately 1.0 million square feet, that enable us to position inventory geographically closer to our stores. Company-operated Stores As of January 29, 2022, we operate 1,651 retail stores located in leased facilities throughout the U.S.
We also utilize six third-party operated regional distribution centers in North America, comprising approximately 1.1 million square feet, that enable us to position inventory geographically closer to our customers. International Partner-operated Stores As of January 28, 2023, our partners operated 427 retail stores in more than 45 international countries.
We lease various other office and product development/design locations in North America, primarily in New York. 23 Table of Contents Third-party Operated Fulfillment and Distribution Centers We utilize six permanent third-party operated direct channel fulfillment centers in North America, comprising approximately 3.2 million square feet, that allow us to reduce in transit times for our direct channel orders.
Our store leases expire at various dates between 2023 and 2034. 23 Table of Contents Third-party Operated Fulfillment and Distribution Centers We utilize six permanent third-party operated direct channel fulfillment centers in North America, comprising approximately 3.2 million square feet.
Removed
These buildings comprise approximately 3.9 million square feet. We are also investing in a new 1.0 million square foot Company-operated leased direct channel fulfillment center in Columbus, Ohio which we expect to be operational in Fall 2022, and at full capacity in Fall 2023.
Added
In addition, during Fall of 2022, we completed construction of a new 1.1 million square foot leased direct channel fulfillment center located near Columbus, Ohio. We also lease various other office and product development/design locations in North America, primarily in New York.
Removed
These lease commitments consist of store leases generally with initial terms of 5 to 10 years. These store leases expire at various dates between 2022 and 2031. International Partner-operated Stores As of January 29, 2022, our partners operate 338 retail stores in more than 35 countries.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, our current legal proceedings are not expected to have a material adverse effect on our financial position or results of operations.
Biggest changeAlthough it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, our current legal proceedings are not expected to have a material adverse effect on our results of operations, financial condition and cash flows.
ITEM 3. LEGAL PROCEEDINGS. We are a defendant in a variety of lawsuits arising in the ordinary course of business. Actions filed against our Company from time to time include commercial, tort, intellectual property, customer, employment, data privacy, securities and other claims, including purported class action lawsuits.
ITEM 3. LEGAL PROCEEDINGS. We are a defendant in a variety of lawsuits arising in the ordinary course of business. Actions filed against our Company from time to time include commercial, tort, intellectual property, tax, customer, employment, wage and hour, data privacy, securities, anti-corruption and other claims, including purported class action lawsuits.
Removed
On May 19, 2020 and January 12, 2021, certain of our stockholders filed derivative lawsuits in the Court of Common Pleas for Franklin County, Ohio (subsequently removed to the United States District Court for the Southern District of Ohio) and the Delaware Court of Chancery, respectively, naming as defendants certain current and former directors and officers of ours and alleging, among other things, breaches of fiduciary duty through asserted violations of law and failures to monitor workplace conduct (the "Lawsuits").
Added
Fair and Accurate Credit Transactions Act Cases We were named as a defendant in three putative class actions: Smidga, et al. v. Bath & Body Works, LLC in the Allegheny County, Pennsylvania Court of Common Pleas; Dahlin v. Bath & Body Works, LLC in the Santa Barbara County, California Superior Court; and Blanco v.
Removed
In addition, we also received litigation and books-and-records demands from certain other stockholders related to the same matters (together with the Lawsuits, the "Actions"). In July 2021, we announced the global settlement resolving the Actions.
Added
Bath & Body Works, LLC in the Cook County, Illinois Circuit Court. The complaints each allege that we violated the Fair and Accurate Credit Transactions Act by printing more than the last five digits of credit or debit card numbers on customers’ receipts and, among other things, seek statutory damages, attorneys’ fees and costs.
Removed
The settlement resolves all derivative claims that have been or could have been asserted in the Actions or that involve in any way the allegations referred to in the Actions and releases all such claims against us and our past and present employees, officers and directors, among others.
Added
Each of these cases are in the preliminary stages of litigation.
Removed
As part of the settlement, we have agreed to implement certain management and governance measures, including the maintenance of a Diversity, Equity, and Inclusion Council. Following the August 2, 2021 spin-off of Victoria’s Secret & Co., the settlement terms will apply to both us and Victoria’s Secret & Co.
Added
We believe that we have strong defenses to the claims and intend to continue to vigorously defend ourself against the allegations and do not believe that the resolution of the cases, individually or in the aggregate, will have a material adverse effect on our results of operations, financial condition or cash flows. ITEM 4. MINE SAFETY DISCLOSURES.
Removed
Each company has committed to invest $45 million over at least five years to fund the management and governance measures. The settlement is subject to approval of the United States District Court of the Southern District of Ohio.
Added
Not applicable. 24 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table provides our repurchases of our common stock during the fourth quarter of 2021: Period Total Number of Shares Purchased (a) Average Price Paid per Share (b) Total Number of Shares Purchased as Part of Publicly Announced Programs (c) Maximum Dollar Value of Shares that May Yet be Purchased Under the Programs (c) (in thousands) (in thousands) November 2021 1,907 $ 75.11 1,905 $ 262,004 December 2021 2,628 71.99 2,621 73,273 January 2022 1,199 61.18 1,198 — Total 5,734 5,724 ________________ (a) The total number of shares repurchased includes shares repurchased in connection with tax payments due upon vesting of associate restricted stock awards and the use of our stock to pay the exercise price on associate stock options.
Biggest change(b) Stock prices prior to August 3, 2021 have been adjusted to give effect to the Victoria's Secret & Co. spin-off. 25 Table of Contents Common Stock Repurchases The following table provides our repurchases of our common stock during the fourth quarter of 2022: Fiscal Period Total Number of Shares Purchased (a) Average Price Paid per Share (b) Total Number of Shares Purchased as Part of Publicly Announced Programs (c) Maximum Dollar Value of Shares that May Yet be Purchased Under the Programs (c) (in thousands) (in thousands) November 2022 5 $ 33.07 — $ 187,775 December 2022 7 41.27 — 187,775 January 2023 2 43.72 — 187,775 Total 14 — ________________ (a) The total number of shares repurchased represent shares in connection with tax payments due upon vesting of associate restricted stock and performance share unit awards and the use of our stock to pay the exercise price on associate stock options.
(b) The average price paid per share includes any broker commissions. (c) For additional share repurchase program information, see Note 18 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.
(b) The average price paid per share includes any broker commissions. (c) For additional share repurchase program information, see Note 15 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data. ITEM 6. [Reserved]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (a)(b) AMONG BATH & BODY WORKS, INC., THE S&P 500 INDEX AND THE S&P 500 RETAIL COMPOSITE INDEX _______________ (a) This table represents $100 invested in stock or in index at the closing price on January 28, 2017, including reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (a)(b) AMONG BATH & BODY WORKS, INC., THE S&P 500 INDEX AND THE S&P 500 RETAIL COMPOSITE INDEX _______________ (a) This table represents $100 invested in stock or in index at the closing price on February 3, 2018, including reinvestment of dividends.
However, including active associates who participate in our stock purchase plan, associates who own shares through our sponsored retirement plans and others holding shares in broker accounts under street names, we estimate the shareholder base to be approximately 177,000.
However, including active associates who participate in our associate stock purchase plan, associates who own shares through our sponsored retirement plan and others holding shares in broker accounts under street names, we estimate the shareholder base as of January 28, 2023 to be approximately 222,000.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is traded on the New York Stock Exchange. As of January 29, 2022, there were approximately 31,000 stockholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock is traded on the NYSE. As of January 28, 2023, the Company had approximately 30,000 stockholders of record.
In February 2022, our Board increased the annual dividend to $0.80 per share and declared the quarterly dividend of $0.20 per share, paid on March 4, 2022, to stockholders of record as of February 18, 2022. 25 Table of Contents The following graph shows the changes, over the past five-year period, in the value of $100 invested in our common stock, the Standard & Poor’s ("S&P") 500 Composite Stock Price Index and the Standard & Poor’s 500 Retail Composite Index.
Performance Graph The following graph shows the changes, over the past five-year period, in the value of $100 invested in our common stock, the Standard & Poor’s ("S&P") 500 Composite Stock Price Index and the Standard & Poor’s 500 Retail Composite Index.
Removed
The following table provides our quarterly market prices and cash dividends per share for 2021 and 2020: Market Price (a) Cash Dividend per Share (b) High Low 2021 Fourth quarter $ 82.00 $ 50.94 $ 0.15 Third quarter 72.56 58.28 0.15 Second quarter 65.47 49.73 0.15 First quarter 55.21 32.47 — 2020 Fourth quarter $ 39.05 $ 26.02 $ — Third quarter 28.63 19.23 — Second quarter 21.55 8.11 — First quarter 20.42 6.47 0.30 _______________ (a) Market prices prior to August 3, 2021 have been adjusted to give effect to the Victoria's Secret & Co. spin-off.
Added
Dividend Policy We paid a quarterly dividend of $0.20 per share during each quarter of 2022.
Removed
(b) Our Board suspended our quarterly cash dividend beginning in the second quarter of 2020. In March 2021, our Board reinstated our annual dividend at $0.60 per share, beginning with the quarterly dividend paid in June 2021.
Added
Our Board will determine future dividends after giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements, the macroeconomic environment as well as financial and other conditions existing at the time. We use cash flow generated from operating and financing activities to fund our dividends.
Removed
(b) Stock prices prior to August 3, 2021 have been adjusted to give effect to the Victoria's Secret & Co. spin-off.
Added
For additional discussion regarding our dividends, see "Liquidity and Capital Resources" included under Item 7. of Part II of this Annual Report on Form 10-K.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

99 edited+37 added−108 removed33 unchanged
Biggest changeIn February 2022, our Board increased the annual dividend to $0.80 per share and declared the quarterly dividend of $0.20 per share, paid on March 4, 2022, to stockholders of record as of February 18, 2022. 41 Table of Contents Under the authority and declaration of our Board, we paid the following dividends during 2021, 2020 and 2019: Ordinary Dividends Total Paid (per share) (in millions) 2021 First Quarter $ — $ — Second Quarter 0.15 42 Third Quarter 0.15 39 Fourth Quarter 0.15 39 2021 Total $ 0.45 $ 120 2020 First Quarter $ 0.30 $ 83 Second Quarter — — Third Quarter — — Fourth Quarter — — 2020 Total $ 0.30 $ 83 2019 First Quarter $ 0.30 $ 83 Second Quarter 0.30 83 Third Quarter 0.30 83 Fourth Quarter 0.30 83 2019 Total $ 1.20 $ 332 42 Table of Contents Long-term Debt and Borrowing Facilities The following table provides our outstanding debt balance, net of unamortized debt issuance costs and discounts, as of January 29, 2022 and January 30, 2021: January 29, 2022 January 30, 2021 (in millions) Senior Secured Debt with Subsidiary Guarantee $750 million, 6.875% Fixed Interest Rate Secured Notes due July 2025 ("2025 Secured Notes") $ — $ 740 Senior Debt with Subsidiary Guarantee $1 billion, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”) — 284 $500 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”) — 319 $320 million, 9.375% Fixed Interest Rate Notes due July 2025 ("2025 Notes") 316 493 $297 million, 6.694% Fixed Interest Rate Notes due January 2027 ("2027 Notes") 281 278 $500 million, 5.25% Fixed Interest Rate Notes due February 2028 (“2028 Notes”) 497 497 $500 million, 7.50% Fixed Interest Rate Notes due June 2029 ("2029 Notes") 489 488 $1 billion, 6.625% Fixed Interest Rate Notes due October 2030 ("2030 Notes") 990 988 $1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”) 992 991 $700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”) 694 694 Total Senior Debt with Subsidiary Guarantee $ 4,259 $ 5,032 Senior Debt $350 million, 6.95% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”) $ 349 $ 348 $247 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”) 246 246 Total Senior Debt $ 595 $ 594 Total Long-term Debt $ 4,854 $ 6,366 Issuance of Notes In September 2020, we issued $1 billion of 6.625% senior notes due October 2030.
Biggest changeLong-term Debt and Borrowing Facilities The following table provides our outstanding Long-term Debt balance, net of unamortized debt issuance costs and discounts, as of January 28, 2023 and January 29, 2022: January 28, 2023 January 29, 2022 (in millions) Senior Debt with Subsidiary Guarantee $320 million, 9.375% Fixed Interest Rate Notes due July 2025 ("2025 Notes") $ 317 $ 316 $297 million, 6.694% Fixed Interest Rate Notes due January 2027 ("2027 Notes") 283 281 $500 million, 5.25% Fixed Interest Rate Notes due February 2028 (“2028 Notes”) 498 497 $500 million, 7.50% Fixed Interest Rate Notes due June 2029 ("2029 Notes") 491 489 $1 billion, 6.625% Fixed Interest Rate Notes due October 2030 ("2030 Notes") 991 990 $1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”) 993 992 $700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”) 694 694 Total Senior Debt with Subsidiary Guarantee $ 4,267 $ 4,259 Senior Debt $350 million, 6.95% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”) $ 349 $ 349 $247 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”) 246 246 Total Senior Debt $ 595 $ 595 Total Long-term Debt $ 4,862 $ 4,854 36 Table of Contents Repurchases of Notes In April 2021, we redeemed the remaining $285 million of our outstanding 5.625% senior notes due February 2022 and $750 million of our outstanding 6.875% senior secured notes due July 2025.
In addition, the interest rate on outstanding U.S. dollar borrowings was LIBOR plus 1.25% per annum. The interest rate on outstanding Canadian dollar-denominated borrowings was Canadian Dollar Offered Rate plus 1.25% per annum.
In addition, the interest rate on outstanding U.S. dollar borrowings was LIBOR plus 1.25% per annum. The interest rate on outstanding Canadian dollar-denominated borrowings was the Canadian Dollar Offered Rate plus 1.25% per annum.
The remaining portion totaling $40 million is included in the “Other” category as it is not reasonably possible that the amounts could change in the next 12 months. In addition, we have a remaining liability of $40 million related to the deemed repatriation tax on our undistributed foreign earnings resulting from the Tax Cuts and Jobs Act.
The remaining portion totaling $40 million is included in the “Other” category as it is not reasonably possible that the amounts could change in the next 12 months. In addition, we have a remaining liability of $30 million related to the deemed repatriation tax on our undistributed foreign earnings resulting from the Tax Cuts and Jobs Act.
Our shipping and handling revenues are included in Net Sales with the related costs included in Costs of Goods Sold, Buying and Occupancy in our Consolidated Statements of Income (Loss). We also provide a reserve for projected merchandise returns based on historical experience. Net Sales exclude sales and other similar taxes collected from customers.
Our shipping and handling revenues are included in Net Sales with the related costs included in Costs of Goods Sold, Buying and Occupancy in our Consolidated Statements of Income. We also provide a reserve for projected merchandise returns based on historical experience. Net Sales exclude sales and other similar taxes collected from customers.
The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in our Consolidated Statements of Income (Loss) in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized.
The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in our Consolidated Statements of Income in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized.
Pursuant to the terms of the ASR, the Initial Shares represented 80% of the number of shares determined by dividing our $1 billion payment by the closing price of our common stock on February 2, 2022.
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 our common stock on February 2, 2022.
(d) Other liabilities includes future estimated payments associated with unrecognized tax benefits. The “Less Than 1 Year” category includes $104 million of these tax items because it is reasonably possible that the amounts could change in the next 12 months due to audit settlements or resolution of uncertainties.
(d) Other liabilities include future estimated payments associated with unrecognized tax benefits. The “Less Than 1 Year” category includes $112 million of these tax items because it is reasonably possible that the amounts could change in the next 12 months due to audit settlements or resolution of uncertainties.
We repurchased the following shares of our common stock during 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 July 2021 (b) 11,234 770 68.53 _______________ (a) Reflects repurchases of L Brands, Inc. common stock prior to the August 2, 2021 spin-off of Victoria's Secret & Co.
We repurchased the following shares of our common stock during 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 July 2021 (b) 11,234 770 68.53 Total 28,230 $ 1,964 _______________ (a) Reflects repurchases of L Brands, Inc. common stock prior to the August 2, 2021 spin-off of Victoria's Secret & Co.
The ABL Facility requires us to maintain a fixed charge coverage ratio of not less than 1.00 to 1.00 during an event of default or any period commencing on any day when specified excess availability is less than the greater of (1) $70 million or (2) 10% of the maximum borrowing amount.
The ABL Facility requires us to maintain a fixed charge coverage ratio of not less than 1.00 to 1.00 during an event of default or any period commencing on any day when specified excess availability is less than the greater of (i) $70 million or (ii) 10% of the maximum borrowing amount.
The tax liability will be paid over the next three years. For additional information, see Note 12 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.
The tax liability will be paid over the next three years. For additional information, see Note 10 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.
The first step is to evaluate the tax position for recognition by determining if the available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals 47 Table of Contents or litigation processes, if any.
The first step is to evaluate the tax position for recognition by determining if the available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.
Financing Activities Net cash used for financing activities in 2021 was $3.188 billion primarily consisting of $1.964 billion in repurchases of our common stock, $1.716 billion in payments for the early extinguishment of outstanding notes, transfers and payments to Victoria's Secret & Co. related to the spin-off of $376 million, dividend payments of $0.45 per share, or $120 million, and $59 million of tax payments related to share-based awards.
Net cash used for financing activities in 2021 was $3.188 billion consisting of $1.964 billion in repurchases of our common stock, $1.716 billion in payments for the early extinguishment of outstanding notes, transfers and payments of $376 million to Victoria's Secret & Co. related to the Separation, dividend payments of $0.45 per share, or $120 million, and tax payments of $59 million related to share-based awards.
The timing and amount of any repurchases will be made at our discretion, taking into account a number of factors, including market conditions. 40 Table of Contents In March 2021, our Board authorized a $500 million share repurchase plan (the "March 2021 Plan"), which replaced the $79 million remaining under a March 2018 repurchase program.
The timing and amount of any repurchases will be made at our discretion, taking into account a number of factors, including market conditions. 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 share repurchase program.
Credit Ratings The following table provides our credit ratings as of January 29, 2022: Moody’s S&P Corporate Ba2 BB Senior Unsecured Debt with Subsidiary Guarantee Ba2 BB Senior Unsecured Debt B1 B+ Outlook Positive Positive Guarantor Summarized Financial Information Certain of our subsidiaries, which are listed on Exhibit 22 to this Annual Report on Form 10-K, have guaranteed our obligations under the 2025 Notes, 2027 Notes, 2028 Notes, 2029 Notes, 2030 Notes, 2035 Notes and 2036 Notes (collectively, the "Notes").
Credit Ratings The following table provides our credit ratings as of January 28, 2023: Moody’s S&P Corporate Ba2 BB Senior Unsecured Debt with Subsidiary Guarantee Ba2 BB Senior Unsecured Debt B1 B+ Outlook Stable Stable Guarantor Summarized Financial Information Certain of our subsidiaries, which are listed on Exhibit 22 to this Annual Report on Form 10-K, have guaranteed our obligations under the 2025 Notes, 2027 Notes, 2028 Notes, 2029 Notes, 2030 Notes, 2035 Notes and 2036 Notes (collectively, the "Notes").
If the estimated undiscounted future cash flows related to the asset group are less than the carrying value, we recognize a loss equal to the difference between the carrying value and the estimated fair value, determined by the estimated discounted future cash flows of the asset group.
If the estimated undiscounted future cash flows related to the asset group are less than the carrying value, we recognize a loss 39 Table of Contents equal to the difference between the carrying value and the estimated fair value, determined by the estimated discounted future cash flows of the asset group.
A 10% increase or decrease in the inventory valuation adjustment would have impacted net income from continuing operations by approximately $2 million for 2021. A 10% increase or decrease in the estimated physical inventory loss adjustment would have impacted net income from continuing operations by approximately $1 million for 2021.
A 10% increase or decrease in the inventory valuation adjustment would have impacted net income from continuing operations by approximately $2 million for 2022. A 10% increase or decrease in the estimated physical inventory loss adjustment would have impacted net income from continuing operations by approximately $2 million for 2022.
Interest payments have been estimated based on the coupon rate for fixed rate obligations. Interest obligations exclude amounts which have been accrued through January 29, 2022. For additional information, see Note 13 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data. (b) Future lease obligations primarily represent minimum payments due under store lease agreements.
Interest payments have been estimated based on the coupon rate for fixed rate obligations. Interest obligations exclude amounts which have been accrued through January 28, 2023. For additional information, see Note 11 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data. (b) Future lease obligations primarily represent minimum payments due under store lease agreements.
On an ongoing basis, management evaluates its accounting policies, estimates and judgments, including those related to inventories, valuation of long-lived store assets, claims and contingencies, income taxes and revenue recognition. Management bases our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances.
On an ongoing basis, management evaluates its accounting policies, estimates and judgments, including those related to inventories, valuation of long-lived store assets, claims and contingencies, income taxes and revenue recognition. Management bases our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
Recently Issued Accounting Pronouncements We did not adopt any new accounting standards during 2021 that had a material impact on our consolidated results of operations, financial position or cash flows.
Recently Issued Accounting Pronouncements We did not adopt any new accounting standards in 2022 that had a material impact on our consolidated results of operations, financial position or cash flows.
In July 2021, our Board authorized a new $1.5 billion share repurchase program (the "July 2021 Program"), which replaced the $36 million remaining under the March 2021 Plan.
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.
In addition, as of March 18, 2022, there are no new accounting standards not yet adopted that are expected to have a material impact on our consolidated results of operations, financial position or cash flows.
In addition, as of March 17, 2023, there are no new accounting standards that we have not yet adopted that are expected to have a material impact on our consolidated results of operations, financial position or cash flows.
We recognized a pre-tax loss related to this extinguishment of debt of $89 million (after-tax loss of $68 million), which includes the write-off of unamortized issuance costs. This loss is included in Other Loss in the 2021 Consolidated Statement of Income.
We recognized a pre-tax loss related to this extinguishment of debt of $105 million (after-tax loss of $80 million), which included the write-off of unamortized issuance costs. This loss is included in Other Income (Loss) in the 2021 Consolidated Statement of Income.
Instead, we believe that the presentation of adjusted financial information provides additional information to investors to facilitate the comparison of past and present operations. Further, our definitions of adjusted financial information may differ from similarly titled measures used by other companies. The table below reconciles the GAAP financial measures to the non-GAAP financial measures.
Instead, we believe that the presentation of adjusted financial information provides additional information to 27 Table of Contents investors to facilitate the comparison of past and present operations. Further, our definitions of adjusted financial information may differ from similarly titled measures used by other companies.
(c) Purchase obligations primarily include purchase orders for merchandise inventory and other agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transactions.
Financial Statements and Supplementary Data. 38 Table of Contents (c) Purchase obligations primarily include purchase orders for merchandise inventory and other agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transactions.
(b) Reflects repurchases of Bath & Body Works, Inc. common stock subsequent to the August 2, 2021 spin-off of Victoria's Secret & Co. On February 2, 2022, we announced that our Board authorized a new $1.5 billion share repurchase program.
(b) Reflects repurchases of Bath & Body Works, Inc. common stock subsequent to the August 2, 2021 spin-off of Victoria's Secret & Co. 2022 Repurchase Program In February 2022, the Board authorized a new $1.5 billion share repurchase program (the "February 2022 Program").
As of January 29, 2022, our borrowing base was $495 million and we had no borrowings outstanding under the ABL Facility. The ABL Facility supports our letter of credit program. We had $16 million of outstanding letters of credit as of January 29, 2022 that reduced our availability under the ABL Facility.
As of January 28, 2023, our borrowing base was $525 million, and we had no borrowings outstanding under the ABL Facility. The ABL Facility supports our letter of credit program. We had $16 million of outstanding letters of credit as of January 28, 2023 that reduced our availability under the ABL Facility.
The aggregate number of shares of common stock to be delivered under the ASR will be based generally upon a discount to the Rule 10b-18 volume-weighted average price at which the shares of common stock trade during the regular trading sessions on the NYSE during the term of repurchase period.
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.
These obligations include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate to leases that commenced prior to the disposition of these businesses. Our reserves related to these obligations were not significant as of January 29, 2022.
These obligations include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate to leases that commenced prior to the disposition of these businesses. Our reserves related to these obligations were not significant for any period presented.
As of January 29, 2022, our availability under the ABL Facility was $479 million. As of January 29, 2022, the ABL Facility fees related to committed and unutilized amounts were 0.25% per annum, and the fees related to outstanding letters of credit were 1.25% per annum.
As of January 28, 2023, our availability under the ABL Facility was $509 million. As of January 28, 2023, the ABL Facility fees related to committed and unutilized amounts were 0.30% per annum, and the fees related to outstanding letters of credit were 1.25% per annum.
Under the authorization of this program, in July 2021 we entered into a stock repurchase agreement with our former CEO and certain of his affiliated entities pursuant to which we repurchased 10 million shares of our common stock for an aggregate purchase price of $730 million. We did not repurchase any shares of our common stock in 2019 or 2020.
Under the authorization of this program, in July 2021 we entered into a stock repurchase agreement with our former Chief Executive Officer and certain of his affiliated entities pursuant to which we repurchased 10 million shares of our common stock for an aggregate purchase price of $730 million.
Our debt leverage ratio is a non-GAAP financial measure which we believe is useful to analyze our capital structure. Our debt leverage ratio calculation may not be comparable to similarly-titled measures reported by other companies.
Our debt leverage ratio is a non-GAAP financial measure which we believe is useful to analyze our capital structure. Our debt leverage ratio calculation may not be comparable to similarly-titled measures reported by other companies. Our debt leverage ratio should be evaluated in addition to, and not considered a substitute for, other GAAP financial measures.
Actual results may 46 Table of Contents differ from these estimates. Management has discussed the development and selection of our critical accounting policies and estimates with the Audit Committee of our Board of Directors and believes the following assumptions and estimates are most significant to reporting our results of operations and financial position.
Management has discussed the development and selection of our critical accounting policies and estimates with the Audit Committee of our Board of Directors and believes the following assumptions and estimates are most significant to reporting our results of operations and financial position.
For additional information, see Note 8 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.
For additional information, see Note 7 to the Consolidated Financial Statements included in Item 8.
Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. The most significant item in working capital was an increase in operating cash flow of $379 million associated with the increase in Accounts Payables, Accrued Expenses and Other and Other Assets and Liabilities.
Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. The most significant item in working capital was a decrease in operating cash flow of $177 million associated with the increase in Inventories.
The Notes are fully and unconditionally guaranteed on a joint and several basis by certain of our wholly-owned subsidiaries, including each subsidiary that also guarantees our obligations under certain of our senior secured credit facilities (such guarantees, the “Guarantees”; and, such guaranteeing subsidiaries, the “Subsidiary Guarantors”).
The Notes are fully and unconditionally guaranteed on a joint and several basis by certain of our wholly-owned subsidiaries, including certain subsidiaries that also guarantee our obligations under our ABL Facility (such guarantees, the “Guarantees”; and, such guaranteeing subsidiaries, the “Subsidiary Guarantors”).
Gift card breakage revenue is recognized in proportion, and over the same period, as actual gift card redemptions. We determine the gift card breakage rate based on historical redemption patterns. Gift card breakage is included in Net Sales in our Consolidated Statements of Income (Loss). We also recognize revenues associated with franchise, license, wholesale and sourcing arrangements.
We determine the gift card breakage rate based on historical redemption patterns. Gift card breakage is included in Net Sales in our Consolidated Statements of Income. We also recognize revenues associated with franchise, license, wholesale and sourcing arrangements.
Net Sales The following table provides net sales for the fourth quarter of 2021 in comparison to the fourth quarter of 2020: 2021 2020 % Change (in millions) Stores - U.S. and Canada $ 2,191 $ 1,903 15.1 % Direct - U.S. and Canada 764 750 1.9 % International (a) 72 66 11.5 % Total Net Sales $ 3,027 $ 2,719 11.4 % ________________ (a) Results include royalties associated with franchised store and wholesale sales.
Net Sales The following table provides Net Sales for the fourth quarter of 2022 in comparison to the fourth quarter of 2021: 2022 2021 % Change (in millions) Stores - U.S. and Canada $ 2,078 $ 2,191 (5.1 %) Direct - U.S. and Canada 716 764 (6.3 %) International (a) 95 72 29.9 % Total Net Sales $ 2,889 $ 3,027 (4.6 %) ________________ (a) Results include royalties associated with franchised store and wholesale sales.
Net income included depreciation of $363 million, loss on extinguishment of debt of $195 million, share-based compensation expense of $46 million, and deferred income tax expense of $45 million. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital.
Net income included depreciation of $221 million, share-based compensation expense of $38 million and deferred income tax expense of $17 million. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital.
As of January 29, 2022, we were not required to maintain this ratio.
As of January 28, 2023, we were not required to maintain this ratio.
Other Income (Loss) and Expenses Interest Expense The following table provides the average daily borrowings and average borrowing rates for the fourth quarter of 2021 and 2020: 2021 2020 Average daily borrowings (in millions) $ 4,915 $ 6,449 Average borrowing rate 7.1 % 7.2 % For the fourth quarter of 2021, our interest expense decreased $29 million to $87 million due to both lower average daily borrowings and average borrowing rate.
Other Income (Loss) and Expenses Interest Expense The following table provides the average daily borrowings and average borrowing rates for the fourth quarter of 2022 and 2021: 2022 2021 Average daily borrowings (in millions) $ 4,915 $ 4,915 Average borrowing rate 7.1 % 7.1 % For the fourth quarter of 2022, our Interest Expense was $87 million and flat to 2021.
Net Sales The following table provides net sales for 2021 in comparison to 2020: 2021 2020 % Change (in millions) Stores - U.S. and Canada $ 5,709 $ 4,207 35.7 % Direct - U.S. and Canada 1,890 2,003 (5.7 %) International (a) 283 224 26.7 % Total Net Sales $ 7,882 $ 6,434 22.5 % ________________ (a) Results include royalties associated with franchised store and wholesale sales.
Net Sales The following table provides Net Sales for 2022 in comparison to 2021: 2022 2021 % Change (in millions) Stores - U.S. and Canada $ 5,476 $ 5,709 (4.1 %) Direct - U.S. and Canada 1,745 1,890 (7.6 %) International (a) 339 283 19.6 % Total Net Sales $ 7,560 $ 7,882 (4.1 %) ________________ (a) Results include royalties associated with franchised store and wholesale sales.
Repurchases of Notes In September 2021, we completed tender offers to purchase $270 million of our outstanding 2023 Notes and $180 million of our outstanding 2025 Notes for an aggregate purchase price of $532 million. Additionally, in October 2021, we redeemed the remaining $50 million of our outstanding 2023 Notes for $54 million.
In September 2021, we completed the tender offers to purchase $270 million of our outstanding 5.625% senior notes due October 2023 (the "2023 Notes") and $180 million of our outstanding 2025 Notes for an aggregate purchase price of $532 million.
Common Stock Share Repurchases Our Board will determine share repurchase authorizations, giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements as well as financial and other conditions existing at the time.
These uses were partially offset by proceeds of $976 million from the Separation and proceeds of $83 million from stock option exercises. 34 Table of Contents Common Stock Share Repurchases Our Board will determine share repurchase authorizations, giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements as well as financial and other conditions existing at the time.
Lease Guarantees In connection with the spin-off of Victoria's Secret & Co., we have remaining contingent obligations of approximately $265 million as of January 29, 2022 related to lease payments under the current terms of noncancelable leases, primarily related to office space, expiring at various dates through 2037.
Lease Guarantees In connection with the spin-off of Victoria's Secret & Co. and the disposal of a certain other business, we had remaining contingent obligations of $283 million as of January 28, 2023 related to lease payments under the current terms of noncancelable leases, primarily related to office space, expiring at various dates through 2037.
Capital expenditures related to our continuing operations totaled $205 million, approximately 60% of which related to real estate investments with the remaining investment principally in technology and fulfillment center capabilities. Capital expenditures related to discontinued operations were $66 million. Net cash used for investing activities in 2020 was $219 million consisting primarily of $228 million of capital expenditures.
Net cash used for investing activities in 2021 was $259 million consisting primarily of $270 million of capital expenditures, partially offset by proceeds from other investing activities of $11 million. Capital expenditures related to our continuing operations were $205 million, approximately 60% of which related to real estate investments with the remaining investment principally in technology and fulfillment center capabilities.
Company-operated store data for 2021, 2020 and 2019: % Change 2021 2020 2019 2021 2020 Sales per Average Selling Square Foot (a) $ 1,220 $ 916 $ 931 33 % (2 %) Sales per Average Store (in thousands) (a) $ 3,279 $ 2,424 $ 2,428 35 % — % Average Store Size (selling square feet) 2,716 2,660 2,631 2 % 1 % Total Selling Square Feet (in thousands) 4,485 4,343 4,306 3 % 1 % ________________ (a) Sales per average selling square foot and sales per average store, which are indicators of store productivity, are calculated based on store sales for the period divided by the average, including the beginning and end of period, of total square footage and store count, respectively.
Company-operated store data for 2022 and 2021: 2022 2021 % Change Sales per Average Selling Square Foot (a) $ 1,120 $ 1,220 (8 %) Sales per Average Store (in thousands) (a) $ 3,079 $ 3,279 (6 %) Average Store Size (selling square feet) 2,783 2,716 2 % Total Selling Square Feet (in thousands) 4,712 4,485 5 % ________________ (a) Sales per average selling square foot and sales per average store, which are indicators of store productivity, are calculated based on store sales for the period divided by the average, including the beginning and end of period, of total square footage and store count, respectively.
The Guarantees of the Subsidiary Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions. Each Guarantee is limited, by its terms, to an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor subject to avoidance under applicable fraudulent conveyance provisions of U.S. and non-U.S. law.
Each Guarantee is limited, by its 37 Table of Contents terms, to an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor subject to avoidance under applicable fraudulent conveyance provisions of U.S. and non-U.S. law.
Gross Profit For the fourth quarter of 2021, our gross profit increased $39 million to $1.446 billion, and our gross profit rate (expressed as a percentage of net sales) decreased to 47.8% from 51.7%.
Gross Profit For the fourth quarter of 2022, our Gross Profit decreased $196 million to $1.250 billion, and our Gross Profit rate (expressed as a percentage of Net Sales) decreased to 43.3% from 47.8%.
We are also investing in a new Company-operated fulfillment center to complement our existing third-party network. 28 Table of Contents Adjusted Financial Information from Continuing Operations In addition to our results provided in accordance with GAAP above and throughout this Annual Report on Form 10-K, provided below are non-GAAP measurements which present operating income, net income from continuing operations and earnings from continuing operations per share in 2021, 2020 and 2019 on an adjusted basis, which remove certain special items.
Adjusted Financial Information from Continuing Operations In addition to our results provided in accordance with GAAP above and throughout this Annual Report on Form 10-K, provided below are non-GAAP measurements which present Operating Income, Net Income from Continuing Operations and Earnings from Continuing Operations Per Diluted Share in 2022 and 2021 on an adjusted basis, which remove certain special items.
We recognize revenue from gift cards when they are redeemed by the customer. In addition, we recognize revenue on unredeemed gift cards where the likelihood of the gift card being redeemed is remote and there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions (gift card breakage).
In addition, we recognize revenue on unredeemed gift cards where the likelihood of the gift card being redeemed is remote and there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions (gift card breakage). Gift card breakage revenue is recognized in proportion, and over the same period, as actual gift card redemptions.
Debt Leverage Ratio Our debt leverage ratio is defined as adjusted debt, which includes our long-term debt and total operating lease liabilities, divided by adjusted earnings before interest, taxes, depreciation, amortization and rent ("EBITDAR").
As of January 29, 2022, our borrowing base was $495 million and we had outstanding letters of credit of $16 million. Debt Leverage Ratio Our debt leverage ratio is defined as adjusted debt, which includes our long-term debt and total operating lease liabilities, divided by adjusted earnings before interest, taxes, depreciation, amortization and rent ("EBITDAR").
(in millions, except per share amounts) 2021 2020 2019 Reconciliation of Reported Operating Income to Adjusted Operating Income Reported Operating Income $ 2,009 $ 1,604 $ 1,040 Write-off of Inventory due to Tornado (a) 9 — — Restructuring Charges (b) — 30 — Adjusted Operating Income $ 2,019 $ 1,634 $ 1,040 Reconciliation of Reported Net Income from Continuing Operations to Adjusted Net Income from Continuing Operations Reported Net Income from Continuing Operations $ 1,075 $ 865 $ 460 Write-off of Inventory due to Tornado (a) 9 — — Restructuring Charges (b) — 30 — Loss on Extinguishment of Debt (c) 195 53 40 La Senza Charges (d) — — 37 Tax Benefit from the Resolution of Certain Tax Matters (e) — (50) — Tax Benefit of Special Items in Operating Income and Other Loss (49) (18) (19) Adjusted Net Income from Continuing Operations $ 1,230 $ 878 $ 517 Reconciliation of Reported Earnings from Continuing Operations Per Diluted Share to Adjusted Earnings from Continuing Operations Per Diluted Share Reported Earnings from Continuing Operations Per Diluted Share $ 3.94 $ 3.07 $ 1.65 Write-off of Inventory due to Tornado (a) 0.03 — — Restructuring Charges (b) — 0.08 — Loss on Extinguishment of Debt (c) 0.54 0.14 0.11 La Senza Charges (d) — — 0.10 Tax Benefit from the Resolution of Certain Tax Matters (e) — (0.18) — Adjusted Earnings from Continuing Operations Per Diluted Share $ 4.51 $ 3.12 $ 1.86 ________________ (a) In the fourth quarter of 2021, we recognized a pre-tax loss of $9 million ($7 million after tax) related to the write-off of inventory that was destroyed by a tornado at a vendor's facility.
The table below reconciles the GAAP financial measures to the non-GAAP financial measures: (in millions, except per share amounts) 2022 2021 Reconciliation of Reported Operating Income to Adjusted Operating Income Reported Operating Income $ 1,376 $ 2,009 Write-off of Inventory due to Tornado (a) — 9 Adjusted Operating Income $ 1,376 $ 2,019 Reconciliation of Reported Net Income from Continuing Operations to Adjusted Net Income from Continuing Operations Reported Net Income from Continuing Operations $ 794 $ 1,075 Write-off of Inventory due to Tornado (a) — 9 Loss on Extinguishment of Debt (b) — 195 Tax Benefit of Special Items in Operating Income and Other Income (Loss) — (49) Adjusted Net Income from Continuing Operations $ 794 $ 1,230 Reconciliation of Reported Earnings from Continuing Operations Per Diluted Share to Adjusted Earnings from Continuing Operations Per Diluted Share Reported Earnings from Continuing Operations Per Diluted Share $ 3.40 $ 3.94 Write-off of Inventory due to Tornado (a) — 0.03 Loss on Extinguishment of Debt (b) — 0.54 Adjusted Earnings from Continuing Operations Per Diluted Share $ 3.40 $ 4.51 ________________ (a) In the fourth quarter of 2021, we recognized a pre-tax loss of $9 million ($7 million after tax) related to the write-off of inventory that was destroyed by a tornado at a vendor's facility.
Results of Operations—Fourth Quarter of 2021 Compared to Fourth Quarter of 2020 For the fourth quarter of 2021, operating income increased $9 million to $879 million, and the operating income rate decreased to 29.0% from 32.0%. The drivers of the operating income results are discussed in the following sections.
Results of Operations—Fourth Quarter of 2022 Compared to Fourth Quarter of 2021 For the fourth quarter of 2022, Operating Income decreased $226 million to $653 million, and the Operating Income rate (expressed as a percentage of Net Sales) decreased to 22.6% from 29.0% in 2021. The drivers of the Operating Income results are discussed in the following sections.
We offer a loyalty program that allows customers to earn points based on purchasing activity. As customers accumulate points and reach point thresholds, they can use the points to purchase merchandise in stores or online. We allocate revenue to points earned on qualifying purchases and defer recognition until the points are redeemed.
We offer a loyalty program that allows customers to earn points based on purchasing activity. As customers accumulate points and reach point thresholds, points are converted to awards that may be used to purchase merchandise in stores or online.
Our debt leverage ratio should be evaluated in addition to, and not considered a substitute for, other GAAP financial measures. 38 Table of Contents The following table provides our debt leverage ratio as of, and for the years ended, January 29, 2022 and January 30, 2021: January 29, 2022 January 30, 2021 (dollars in millions) Long-term Debt $ 4,854 $ 6,366 Total Operating Lease Liabilities 1,159 1,115 Adjusted Debt $ 6,013 $ 7,481 Adjusted Operating Income $ 2,019 $ 1,634 Depreciation and Amortization 205 195 Total Lease Costs 358 311 Adjusted EBITDAR $ 2,582 $ 2,140 Debt Leverage Ratio 2.33 3.50 Cash Flow The cash flows related to discontinued operations have not been segregated in our Consolidated Statements of Cash Flows.
The following table provides our debt leverage ratio as of, and for the years ended, January 28, 2023 and January 29, 2022: January 28, 2023 January 29, 2022 (dollars in millions) Long-term Debt $ 4,862 $ 4,854 Total Operating Lease Liabilities 1,191 1,159 Adjusted Debt $ 6,053 $ 6,013 Adjusted Operating Income $ 1,376 $ 2,019 Depreciation and Amortization 221 205 Total Lease Costs 382 358 Adjusted EBITDAR $ 1,979 $ 2,582 Debt Leverage Ratio 3.1 2.3 Cash Flows The cash flows related to discontinued operations have not been segregated.
On February 4, 2022, we delivered $1 billion to the ASR bank, and the bank delivered approximately 14 million shares of our common stock to us (the "Initial Shares").
Pursuant to the Board's authorization, we made other share repurchases in the open market under the February 2022 Program during 2022. On February 4, 2022, we delivered $1 billion to the ASR bank, and the bank delivered 14 million shares of common stock to us (the "Initial Shares").
In March 2021, our Board reinstated our annual dividend at $0.60 per share, beginning with the quarterly dividend paid in June 2021.
In February 2022, our Board increased the annual dividend to $0.80 per share, beginning with the quarterly dividend paid in March 2022.
The following table provides a reconciliation of net sales for the fourth quarter of 2020 to the fourth quarter of 2021: (in millions) 2020 Net Sales $ 2,719 Comparable Store Sales 199 Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net 87 Direct Channels 14 International, Wholesale, Royalty and Other 6 Foreign Currency Translation 2 2021 Net Sales $ 3,027 The following table compares fourth quarter of 2021 comparable sales to fourth quarter of 2020: 2021 2020 Comparable Sales (Stores and Direct) (a) 7 % 22 % Comparable Store Sales (a) 11 % 9 % ________________ (a) The percentage change in comparable sales represents direct and comparable store sales.
The following table provides a reconciliation of Net Sales for the fourth quarter of 2021 to the fourth quarter of 2022: (in millions) 2021 Net Sales $ 3,027 Comparable Store Sales (130) Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net 25 Direct Channel (48) International, Wholesale, Royalty and Other 23 Foreign Currency Translation (8) 2022 Net Sales $ 2,889 For the fourth quarter of 2022, Net Sales decreased $138 million to $2.889 billion.
SUMMARIZED BALANCE SHEET January 29, 2022 (in millions) ASSETS Current Assets (a) $ 3,365 Noncurrent Assets 2,481 LIABILITIES Current Liabilities (b) $ 2,956 Noncurrent Liabilities (c) 6,155 _______________ (a) Includes amounts due from non-Guarantor subsidiaries of $530 million as of January 29, 2022. (b) Includes amounts due to non-Guarantor subsidiaries of $1.927 billion as of January 29, 2022.
JANUARY 28, 2023 SUMMARIZED BALANCE SHEET (in millions) ASSETS Current Assets (a) $ 2,642 Noncurrent Assets (b) 2,561 LIABILITIES Current Liabilities (c) $ 3,084 Noncurrent Liabilities 6,143 _______________ (a) Includes amounts due from non-Guarantor subsidiaries of $589 million as of January 28, 2023. (b) Includes amounts due from non-Guarantor subsidiaries of $40 million as of January 28, 2023.
For 2020, our other loss was $50 million, consisting primarily of a $53 million pre-tax loss associated with the early extinguishment of outstanding notes. Provision for Income Taxes For 2021, our effective tax rate was 24.5% compared to 22.9% in 2020. The 2021 rate is in line with our combined estimated federal and state statutory rate.
Other Income (Loss) For 2021, our Other Loss was $198 million, consisting primarily of $195 million of pre-tax losses associated with the early extinguishments of outstanding notes. Provision for Income Taxes For 2022, our effective tax rate was 24.0% compared to 24.5% in 2021.
Additionally, we evaluate a number of key performance indicators including comparable sales, gross profit, operating income and other performance metrics such as sales per average selling square foot in assessing our performance.
Additionally, we evaluate a number of key performance indicators including comparable sales, gross profit, operating income and other performance metrics such as sales per average selling square foot in assessing our performance. On August 2, 2021, we completed the tax-free spin-off of our Victoria's Secret business, which included the Victoria's Secret and PINK brands, into an independent publicly traded company.
Accordingly, the cash flows discussed below include the results of continuing and discontinued operations.
Accordingly, the 2021 Consolidated Statement of Cash Flows includes the results from continuing and discontinued operations.
We use cash flow generated from operating and financing activities to fund our dividends. Our Board suspended our quarterly cash dividend beginning in the second quarter of 2020 as a proactive measure to strengthen our financial flexibility and manage through the COVID-19 pandemic.
We use cash flow generated from operating and financing activities to fund our dividends. In connection with the onset of the COVID-19 pandemic, our Board suspended our quarterly cash dividend beginning in the second quarter of 2020. In March 2021, our Board reinstated the annual dividend at $0.60 per share, beginning with the quarterly dividend paid in June 2021.
In April 2021, we redeemed the remaining $285 million of our outstanding 2022 Notes and the $750 million of our outstanding 2025 Secured Notes. We recognized a pre-tax loss related to this extinguishment of debt of $105 million (after-tax loss of $80 million), which includes the write-off of unamortized issuance costs.
Additionally, in October 2021, we redeemed the remaining $50 million of our outstanding 2023 Notes for an aggregate purchase price of $54 million. We recognized a pre-tax loss related to this extinguishment of debt of $89 million (after-tax loss of $68 million), which included the write-off of unamortized issuance costs.
The following table represents Company-operated store data for 2021: Stores Stores January 30, 2021 Opened Closed January 29, 2022 United States 1,633 53 (35) 1,651 Canada 103 1 — 104 Total Bath & Body Works 1,736 54 (35) 1,755 The following table represents Company-operated store data for 2020: Stores Stores February 1, 2020 Opened Closed January 30, 2021 United States 1,637 26 (30) 1,633 Canada 102 1 — 103 Total Bath & Body Works 1,739 27 (30) 1,736 The following table represents Company-operated store data for 2019: Stores Stores February 2, 2019 Opened Closed February 1, 2020 United States 1,619 38 (20) 1,637 Canada 102 1 (1) 102 Total Bath & Body Works 1,721 39 (21) 1,739 30 Table of Contents Partner-Operated Store Data The following table represents partner-operated store data for 2021: Stores Stores January 30, 2021 Opened Closed January 29, 2022 International 270 55 (8) 317 International - Travel Retail 18 3 — 21 Total International 288 58 (8) 338 The following table represents partner-operated store data for 2020: Stores Stores February 1, 2020 Opened Closed January 30, 2021 International 262 12 (4) 270 International - Travel Retail 16 2 — 18 Total International 278 14 (4) 288 The following table represents partner-operated store data for 2019: Stores Stores February 2, 2019 Opened Closed February 1, 2020 International 223 43 (4) 262 International - Travel Retail 12 4 — 16 Total International 235 47 (4) 278 Results of Operations—2021 Compared to 2020 For 2021, operating income increased $405 million to $2.009 billion, and the operating income rate increased to 25.5% from 24.9%.
The following table represents Company-operated store data for 2022: Stores Stores January 29, 2022 Opened Closed January 28, 2023 United States 1,651 90 (48) 1,693 Canada 104 5 — 109 Total 1,755 95 (48) 1,802 28 Table of Contents The following table represents Company-operated store data for 2021: Stores Stores January 30, 2021 Opened Closed January 29, 2022 United States 1,633 53 (35) 1,651 Canada 103 1 — 104 Total 1,736 54 (35) 1,755 Partner-Operated Store Data The following table represents partner-operated store data for 2022: Stores Stores January 29, 2022 Opened Closed January 28, 2023 International 317 89 (5) 401 International - Travel Retail 21 6 (1) 26 Total International 338 95 (6) 427 The following table represents partner-operated store data for 2021: Stores Stores January 30, 2021 Opened Closed January 29, 2022 International 270 55 (8) 317 International - Travel Retail 18 3 — 21 Total International 288 58 (8) 338 Results of Operations—2022 Compared to 2021 For 2022, Operating Income decreased $633 million to $1.376 billion, and the Operating Income rate (expressed as a percentage of Net Sales) decreased to 18.2% from 25.5% in 2021.
(c) Includes amounts due to non-Guarantor subsidiaries of $5 million as of January 29, 2022. SUMMARIZED STATEMENT OF INCOME 2021 (in millions) Net Sales (a) $ 10,699 Gross Profit 4,907 Operating Income 2,307 Income Before Income Taxes 1,689 Net Income (b) 1,274 _______________ (a) Includes net sales of $199 million to non-Guarantor subsidiaries.
(c) Includes amounts due to non-Guarantor subsidiaries of $1.987 billion as of January 28, 2023. 2022 SUMMARIZED STATEMENT OF INCOME (in millions) Net Sales (a) $ 7,336 Gross Profit 3,012 Operating Income 1,245 Income Before Income Taxes 921 Net Income (b) 726 _______________ (a) Includes Net Sales of $291 million to non-Guarantor subsidiaries.
(c) In the third and first quarters of 2021, we recognized pre-tax losses of $89 million and $105 million (after-tax losses of $68 million and $80 million), respectively, due to the early extinguishment of outstanding notes.
(b) In the third and first quarters of 2021, we recognized pre-tax losses of $89 million and $105 million (after-tax losses of $68 million and $80 million), respectively, due to the early extinguishments of outstanding notes. For additional information, see Note 11, "Long-term Debt and Borrowing Facilities" included in Item 8. Financial Statements and Supplementary Data.
Other Income (Loss) and Expenses Interest Expense The following table provides the average daily borrowings and average borrowing rates for 2020 and 2019: 2020 2019 Average daily borrowings (in millions) $ 6,317 $ 5,568 Average borrowing rate 6.8 % 6.7 % For 2020, our interest expense increased $62 million to $432 million due to both higher average daily borrowings and average borrowing rate.
Other Income (Loss) and Expenses Interest Expense The following table provides the average daily borrowings and average borrowing rates for 2022 and 2021: 2022 2021 Average daily borrowings (in millions) $ 4,915 $ 5,409 Average borrowing rate 7.1 % 7.2 % For 2022, our Interest Expense decreased $40 million to $348 million due to lower average daily borrowings and a lower average borrowing rate.
Generally, our need for working capital peaks during the summer and fall months as inventory builds in anticipation of the holiday period. Our cash and cash equivalents held by foreign subsidiaries were $81 million as of January 29, 2022. We believe that our available short-term and long-term capital resources are sufficient to fund foreseeable requirements.
Historically, our sales are higher during the fourth quarter of the fiscal year due to seasonal and holiday-related sales patterns. Generally, our need for working capital peaks during the summer and fall months as inventory builds in anticipation of the holiday period. Our cash and cash equivalents held by foreign subsidiaries were $126 million as of January 28, 2023.
The amount of revenue deferred is based on the relative stand-alone selling price method, which includes an estimate for points not expected to be redeemed based on historical experience. We sell gift cards with no expiration dates to customers. We do not charge administrative fees on unused gift cards.
We allocate revenue to points earned on qualifying purchases and defer recognition until the awards are redeemed. 40 Table of Contents The amount of revenue deferred is based on the relative stand-alone selling price method, which includes an estimate for points and awards not expected to be redeemed based on historical experience.
The following table provides a reconciliation of net sales for 2020 to 2021: (in millions) 2020 Net Sales $ 6,434 Comparable Store Sales 76 Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net (a) 1,414 Direct Channels (113) International Wholesale, Royalty and Other 59 Foreign Currency Translation 12 2021 Net Sales $ 7,882 ________________ 31 Table of Contents (a) Includes the increased sales period over period due to the 2020 COVID-19-related stores closures.
The following table provides a reconciliation of Net Sales for 2021 to 2022: (in millions) 2021 Net Sales $ 7,882 Comparable Store Sales (338) Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net 119 Direct Channel (145) International Wholesale, Royalty and Other 56 Foreign Currency Translation (14) 2022 Net Sales $ 7,560 29 Table of Contents For 2022, Net Sales decreased $322 million to $7.560 billion.
(b) Includes net loss of $74 million related to transactions with non-Guarantor subsidiaries. 45 Table of Contents Contingent Liabilities and Contractual Obligations The following table provides our contractual obligations, aggregated by type, including the maturity profile as of January 29, 2022: Payments Due by Period Total Less Than 1 Year 1-3 Years 4-5 Years More than 5 Years Other (in millions) Long-term Debt (a) $ 8,386 $ 339 $ 678 $ 1,250 $ 6,119 $ — Future Lease Obligations (b) 1,466 242 443 375 406 — Purchase Obligations (c) 747 582 91 41 33 — Other Liabilities (d) 185 105 23 17 — 40 Total $ 10,784 $ 1,268 $ 1,235 $ 1,683 $ 6,558 $ 40 ________________ (a) Long-term debt obligations relate to our principal and interest payments for outstanding notes and debentures.
Contingent Liabilities and Contractual Obligations The following table provides our contractual obligations, aggregated by type, including the maturity profile as of January 28, 2023: Payments Due by Period Total Less Than 1 Year 1-3 Years 4-5 Years More Than 5 Years Other (in millions) Long-term Debt (a) $ 8,047 $ 339 $ 983 $ 895 $ 5,830 $ — Future Lease Obligations (b) 1,562 260 497 386 419 — Purchase Obligations (c) 682 543 91 38 10 — Other Liabilities (d) 182 112 30 — — 40 Total $ 10,473 $ 1,254 $ 1,601 $ 1,319 $ 6,259 $ 40 ________________ (a) Long-term Debt obligations relate to our principal and interest payments for outstanding notes and debentures.
As a result, the operating results of, and costs to separate, the Victoria's Secret business 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.
Accordingly, the operating results of, and fees to separate, the Victoria's Secret business are reported in Income (Loss) from Discontinued Operations, Net of Tax in the Consolidated Statements of Income for all periods presented. Unless otherwise noted, all amounts, percentages and discussions reflect only the results of operations and financial condition of our continuing operations.
Our net income is impacted by, among other things, sales volume, seasonal sales patterns, success of new product introductions, profit margins and income taxes. Historically, sales are higher during the fourth quarter of the fiscal year due to seasonal and holiday-related sales patterns.
Our cash provided from operations is impacted by our net income and working capital changes. Our net income is impacted by, among other things, sales volume, seasonal sales patterns, success of new product introductions, profit margins, income taxes and inflationary pressures.
The following table provides a summary of our cash flow activity for the fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020: 2021 2020 2019 (in millions) Cash and Cash Equivalents and Restricted Cash, Beginning of Year $ 3,933 $ 1,499 $ 1,413 Net Cash Flows Provided by Operating Activities 1,492 2,039 1,236 Net Cash Flows Used for Investing Activities (259) (219) (480) Net Cash Flows Provided by (Used for) Financing Activities (3,188) 610 (666) Effects of Exchange Rate Changes on Cash and Cash Equivalents and Restricted Cash 1 4 (4) Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash (1,954) 2,434 86 Cash and Cash Equivalents and Restricted Cash, End of Year $ 1,979 $ 3,933 $ 1,499 Operating Activities Net cash provided by operating activities in 2021 was $1.492 billion, including net income of $1.333 billion.
We did not report any cash flows from discontinued operations in 2022. 33 Table of Contents The following table provides a summary of our Consolidated Statements of Cash Flows for 2022 and 2021: 2022 2021 (in millions) Cash and Cash Equivalents, Beginning of Year $ 1,979 $ 3,933 Net Cash Flows Provided by Operating Activities 1,144 1,492 Net Cash Flows Used for Investing Activities (328) (259) Net Cash Flows Used for Financing Activities (1,562) (3,188) Effects of Exchange Rate Changes on Cash and Cash Equivalents (1) 1 Net Decrease in Cash and Cash Equivalents (747) (1,954) Cash and Cash Equivalents, End of Year $ 1,232 $ 1,979 Operating Activities Net cash provided by operating activities in 2022 was $1.144 billion, including net income of $800 million (which included Income from Discontinued Operations, Net of Tax of $6 million).
The gross profit rate increased due to buying and occupancy leverage on higher net sales, partially offset by a decline in the merchandise margin rate as a result of increased inflationary costs.
The Gross Profit rate decreased due to the significant decline in the merchandise margin rate, the increase in Buying and Occupancy Expenses and deleverage on lower Net Sales.
Dividend Policy and Procedures Our Board will determine future dividends after giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements, as well as financial and other conditions existing at the time.
We repurchased the following shares of our common stock during 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 January 28, 2023. 35 Table of Contents Dividend Policy and Procedures Our Board will determine future dividends after giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements as well as financial and other conditions existing at the time.
Cash generated from our operating activities provides the primary resources to support current operations, growth initiatives, seasonal funding requirements, capital expenditures, the payment of dividends and our share repurchases. Our cash provided from operations is impacted by our net income and working capital changes.
Liquidity and Capital Resources Liquidity, or access to cash, is an important factor in determining our financial stability. We are committed to maintaining adequate liquidity. Cash generated from our operating activities provides the primary resources to support current operations, growth initiatives, seasonal funding requirements and capital expenditures.
Also on February 2, 2022, as part of the February 2022 Program, we entered into an accelerated share repurchase agreement ("ASR") under which we will repurchase $1 billion of our own outstanding common stock.
As part of the February 2022 Program, we entered into the ASR under which we repurchased $1 billion of our own outstanding common stock. The delivery of shares under the ASR resulted in an immediate reduction of the shares used to calculate the weighted-average common shares outstanding for net income per basic and diluted share.
General, Administrative and Store Operating Expenses For 2021, our general, administrative and store operating expenses increased $354 million to $1.846 billion, and the rate increased to 23.4% from 23.2%.
For 2022, our General, Administrative and Store Operating Expenses increased $33 million, or 2%, to $1.879 billion compared to 2021, and our General, Administrative and Store Operating Expenses rate (expressed as a percentage of Net Sales) increased 150 basis points.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−4 removed4 unchanged
Biggest changeFair Value of Financial Instruments As of January 29, 2022, we believe that the carrying values of accounts receivable, accounts payable and accrued expenses approximate fair value because of their short maturity.
Biggest changeFair Value of Financial Instruments As of January 28, 2023, we believe that the carrying values of Accounts Receivable, Accounts Payable and Accrued Expenses approximate fair value because of their short maturity. 41 Table of Contents The following table provides a summary of the principal value and estimated fair value of outstanding Long-term Debt as of January 28, 2023 and January 29, 2022: January 28, 2023 January 29, 2022 (in millions) Principal Value $ 4,915 $ 4,915 Fair Value, Estimated (a) 4,707 5,493 ________________ (a) The estimated fair values are based on reported transaction prices and are not necessarily indicative of the amounts that we could realize in a current market exchange. 42 Table of Contents
Further, although our royalty arrangements with our international partners are denominated in U.S. dollars, the royalties we receive in U.S. dollars are calculated based on sales in the local currency.
Further, although our royalty arrangements with our international partners are denominated in U.S. dollars, the royalties we receive in U.S. dollars are calculated based on sales in the local currency. As a result, our royalties in these arrangements are exposed to foreign currency exchange rate fluctuations.
Our exposure to interest rate changes is limited to the fair value of the debt issued, which would not have a material impact on our earnings or cash flows.
We will from time to time adjust our exposure to interest rate risk by entering into interest rate swap arrangements. Our exposure to interest rate changes is limited to the fair value of the debt issued, which would not have a material impact on our earnings or cash flows.
We also periodically review the relative credit standing of franchise, license and wholesale partners and other entities to which we grant credit terms in the normal course of business. 49 Table of Contents
Treasury and AAA-rated money market funds, commercial paper and bank deposits. We also periodically review the relative credit standing of franchise, license and wholesale partners and other entities to which we grant credit terms in the normal course of business.
We monitor the relative credit standing of financial institutions with whom we transact and limit the amount of credit exposure with any one entity. Our investment portfolio is primarily comprised of U.S. government obligations, U.S. Treasury and AAA-rated money market funds, commercial paper and bank deposits.
Concentration of Credit Risk We maintain cash and cash equivalents and derivative contracts with various major financial institutions. We monitor the relative credit standing of financial institutions with whom we transact and limit the amount of credit exposure with any one entity. Our investment portfolio is primarily composed of U.S. government obligations, U.S.
Our investment portfolio is primarily comprised of U.S. government obligations, U.S. Treasury and AAA-rated money market funds, commercial paper and bank deposits. Given the short-term nature and quality of investments in our portfolio, we do not believe there is any material risk to principal associated with increases or decreases in interest rates.
Given the short-term nature and quality of investments in our portfolio, we do not believe there is any material risk to principal associated with increases or decreases in interest rates. All of our Long-term Debt as of January 28, 2023 has fixed interest rates.
Our investment portfolio is maintained in accordance with our investment policy, which specifies permitted types of investments, specifies credit quality standards and maturity profiles and limits credit exposure to any single issuer. The primary objective of our investment activities is the preservation of principal, the maintenance of liquidity and the maximization of interest income while minimizing risk.
Interest Rate Risk Our investment portfolio primarily consists of interest-bearing instruments that are classified as cash and cash equivalents based on their original maturities. Our investment portfolio is maintained in accordance with our investment policy, which specifies permitted types of investments, specifies credit quality standards and maturity profiles and limits credit exposure to any single issuer.
Removed
As a result, our royalties in these arrangements are exposed to foreign currency exchange rate fluctuations. 48 Table of Contents Interest Rate Risk Our investment portfolio primarily consists of interest-bearing instruments that are classified as cash and cash equivalents based on their original maturities.
Added
The primary objective of our investment activities is the preservation of principal, the maintenance of liquidity and the maximization of interest income while minimizing risk. Our investment portfolio is primarily composed of U.S. government obligations, U.S. Treasury and AAA-rated money market funds, commercial paper and bank deposits.
Removed
All our long-term debt as of January 29, 2022 has fixed interest rates. We will from time to time adjust our exposure to interest rate risk by entering into interest rate swap arrangements.
Removed
The following table provides a summary of the principal value and estimated fair value of outstanding publicly traded debt as of January 29, 2022 and January 30, 2021: January 29, 2022 January 30, 2021 (in millions) Principal Value $ 4,915 $ 6,449 Fair Value, Estimated (a) 5,493 7,243 ________________ (a) The estimated fair value is based on reported transaction prices.
Removed
The estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange. Concentration of Credit Risk We maintain cash and cash equivalents and derivative contracts with various major financial institutions.

Other BBWI 10-K year-over-year comparisons