BBWI 10-K & 10-Q changes, risk factors and insider trading

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

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

•new and current consumer acceptance of our products and our ability to manage the life cycle of our brand, develop new merchandisebrand and launch andour expandstrategic new product linestransformation successfully;

•duties, taxestaxes, tariffs and other charges;

•our ability to successfully complete environmental, social and governancesustainability initiatives, and associated costs thereof;

Our net sales, results of operations, cash flows and future growth may be affected by local, regional, national or international political or economic trends or developments that can reduce consumers’ ability or willingness to spend or alter consumer behavior and spending patterns. These trends and developments (including tariffs and government shutdowns), which can vary substantially by country, include political, financial or social instability or conditions, geopolitical events, corruption, anti-American sentiment, social and ethnic unrest, military conflicts and terrorism, as well as changes in general economic conditions (including unemployment levels, inflation and market volatility). For example, duringin 2022,recent 2023 and 2024,years, the global economy was negatively impacted by high inflation rates, which has resulted in higher prices that have negatively impacted and may continue to negatively impact consumer demand. In addition, market disruptions due to natural disasters, significant health hazards or pandemics or other major events or the prospect of these events could also impact or shift consumer spending and sentiment. Extreme weather conditions in the areas in which our stores are located, particularly in markets where we have multiple stores, or in the central Ohio region where most of our third-party manufacturers and our distribution centers are located, have adversely affected and could in the future adversely affect our business. During periods when economic or market conditions are unsettled or weak, or during events such as government shutdowns, which impact discretionary spending, purchases of our products have declined, and may in the future further decline. In such circumstances, we have increased, and may in the future continue to increase, the number of promotional sales which, when combined with inflationary cost pressures, have negatively affected our merchandise margin rates and, in the future, could have a material adverse effect on our results of operations, financial condition and cash flows.

In recent years, multiple retailers have faced unionization campaigns from their workers. If we are subject to a unionization campaign from our associates, we would incur significant expenses in the form of legal and consulting fees and potentially be subject to negative publicity that could significantly disrupt our operations and have an adverse effect on our results of operations, financial condition and cash flows.

We have in the past and may in future experience changes in key leadership or key positions in the future. The departure of key personnel can result in the loss of significant knowledge and experience. This loss of knowledge, expertise and experience can be mitigated through successful internal succession planning or external hiring and transition, but there can be no assurance that we will be successful in such efforts. Attracting and retaining qualified senior leadership may be more challenging during business transformations (including organizational changes or workforce reductions) or under adverse business conditions. Failure to attract and retain the right talent or to smoothly manage the transition of responsibilities resulting from such turnover could affect our ability to meet our goals and may cause us to miss performance objectives or financial targets or disrupt our relationships with our customers, vendors or other third parties.

More than half of our stores are located in off-mall retail shopping areas with the remainder located in malls and other types of retail centers. Sales at these stores are derived, in part, from the volume of consumer traffic in those retail areas. Our stores benefit from the ability of the retail center and other attractions in an area, including “destination” retail stores, to generate consumer traffic in the vicinity of our stores. Sales volume and retail traffic may be adversely affected by factors that we cannot control, such as economic downturns, including due to inflationary or tariff pressures, or changes in consumer demographics in a particular area, consumer trends away from brick-and-mortar retail toward online shopping, competition from internetdigital 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.

We intend to continue to operate internationally and further expand in our existing markets and into new international markets, including through franchise and other distribution-related partner arrangements. The risks associated with international markets include, among others, difficulties in attracting customers due to a lack of customer familiarity with our brand, our ability to comply with international laws and regulations, our lack of familiarity with local customer preferences, cultures or religious norms and seasonal differences in the international markets. Any of these difficulties may lead to disruption in the overall timing of our international expansion efforts, lower sales than we anticipate and increased costs. Further, entry into other markets may bring us into competition with new competitors or with existing competitors with an established presence in such markets. Such expansions will also have upfront investment costs, some of which may be significant, that may not be accompanied by sufficient revenues to achieve expected operational and financial performance. Other risks include general economic conditions in specific countries or markets, reliance on franchise partners, service providers and other distribution-related partners that we do not control, volatility in the geopolitical landscape (including social and ethnic unrest, military conflicts and terrorism), anti-American sentiment, foreign governmental regulation and enforcement (including the risks of local tariffs and operating in markets in which there are uncertainties regarding the interpretation and enforceability of legal requirements and the enforceability of contract rights and intellectual property rights), legal actions, disruptions or delays in shipments, restrictions on the repatriation of funds held internationally, occurrence of significant health hazards or pandemics, changes in diplomatic and trade relationships and political instability. For example, the conflict in the Middle East hashad resulted in unpredictable conditions in the region and around the world, and has affected, and may continue to affect, our business and operations as a result of, among other things, the economic consequences and disruptions from such conflict, supply chain availability, consumer boycotts of Western brands, and consumer reaction to perceived acts or failures to act by us or our franchise partners including commencing and/or maintaining operations in countries or regions that are linked to such conflicts.

Our results could be impacted by our relationships with our licensees, franchisees, wholesalers and other distribution-related partners, including by such partners could taketaking actions that could harm our business or brand images.

WeFurther, we have global brand exposure through digital sites and stores independently owned and/or operated by our franchise partnerspartners, wholesalers and other distribution-related partners. Although we have criteria to evaluate and select prospective partners, the level of control we can exercise over our partners is limited, and the quality and success of their operations may be diminished by any number of factors beyond our control. For example, despite our due diligence and vetting efforts, our partners may not have the business acumen or financial resources necessary to successfully operate stores in a manner consistent with our standards and may not hire and train qualified store managers and other personnel. Further, we primarily rely on our partners to comply with applicable laws and regulations in the international markets in which they operate. Our brand image and reputation may suffer materially, and our sales could decline, if our partners do not operate successfully, including operating in compliance with applicable laws and regulations. These risks could have an adverse effect on our results of operations, financial condition and cash flows.

Our direct channel (also referred to as digital or e-commerce) is subject to numerous risks that could have a material adverse effect on our results of operations, financial condition and cash flows. Such risks include, but are not limited to, the difficulty in recreating the in-store experience through our direct channels; domestic or international large scale buyers and resellers purchasing merchandise and reselling it outside our control; resellers competing against us on domestic or international platforms where we legitimately sell our goods, or competition on marketplaces; our other alternative distribution channels competing with our direct channel business; our ability to address unauthorized distributions and related impact on results; our ability to anticipate and implement innovations in technology and logistics in order to appeal to existing and potential customers who increasingly rely on multiple channels to meet their shopping needs; legal and regulatory developments associated with digital, data, analytics, artificial intelligence,intelligence (“AI”), communications and ad-targeting practices (including, without limitation, the use of technologies and third-party services to personalize or create concierge-like customer experiences); risks associated with increases in order fulfillment logistics costs; risks associated with the level of support provided by third party partners’ web infrastructure, websites and related support systems; and the failure of and risks related to the resources that underlay and support the operation of our and our third-party partners’ web infrastructure, websites and the related support systems, including computer viruses, malware (including, without limitation, ransomware), unauthorized access to and theft of customer information, privacy violations, fraudulent branded phishing sites impersonating our direct channel, ad scams causing customer confusion, information technology and vendor system failures, deepfakes and other malicious uses of artificial intelligence,AI, disruption of critical services caused by threat actors and similar disruptions.

Our failure to maintain efficient and uninterrupted order-taking and fulfillment operations could also have a material adverse effect on our results of operations, financial condition and cash flows. We utilize third-party service providers for order management and for a majority of our fulfillment services. If these third-party service providers do not maintain efficient and uninterrupted service, we have experienced, and may in the future experience, merchandise delivery delays, loss of sales, stranded inventory, cancellation charges or excessive promotional activity to clear inventory. Further, we may have difficulty replacing these third-party service providersproviders, or transitioning from one third-party service provider to another, and there can be no assurance we can do so in a timely mannermanner, without logistical difficulties or on terms favorable to us. The satisfaction of our direct channel customers also depends on their timely receipt of merchandise. If we encounter difficulties with the distribution and fulfillment facilities, or if the facilities were to shut down for any reason, including as a result of a pandemic, fire, severe weather, 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 scrutiny by regulators and litigants; and our customers may be dissatisfied.

Our ability to maintain our reputation is critical to our brand image. Our reputation could be jeopardized if we fail to maintain high standards for merchandise quality and integrity of the consumer’s experience in stores and online. If third parties with which we have a business relationship, including our influencer network, celebrity endorsements and collaboration partners, fail to represent our brand in a manner consistent with our brand image, it could harm our reputation. In addition, ineffective marketing, product diversion and unauthorized distribution channels, product defects, counterfeit products and failure to maintain, protect and enforce the intellectual property rights in our brand may threaten the strength of our brand, and those and other factors could diminish consumer confidence in us. Any negative publicity, including information publicized through traditional or social media platforms and similar venues such as websites, blogs and other forums, may affect our reputation and brand and, consequently, reduce demand for our merchandise and negatively impact our reputation, even if such publicity is unverified or inaccurate.

Customer traffic and demand for our merchandise are influenced by our advertising, marketing and promotional activities, the effectiveness of our loyalty program, the name recognition and reputation of our brand and the location of and service offered in our stores and through our direct business. Although we use marketing, advertising and promotional programs and our loyalty program to attract customers through various media, including social media, websites, mobile applications, email and print, and we continue to invest to improve the online and mobile user experience for our customers, some of our competitors may expend more for their programs than we do or use different or more efficient approaches than we do, which may provide them with a competitive advantage. Our financial forecasts are dependent on our marketing, advertising and promotional programs and our loyalty program enhancements driving customer acquisition and stronger customer retention. Our recent investment in a new brand strategy and 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 compete favorably in our highly competitive segments of the consumer goods and retail industry could impact our results of operations, financial condition and cash flows.

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

Our ability to manage the life cycles of our brand and to remain current with trends and launch andour expandstrategic new product linestransformation successfully could impact the image and relevance of our brand.

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. We are dependent on certain product categories and declines in customer demand in these product categories have negatively impacted, and may in the future impact, our results of operations, financial condition and cash flows. Our financial forecasts are dependent on our ability to drive growth through adjacentour Consumer First Formula by creating new and innovative products in our hero product categories, including men’s,body fragrantcare, haircare,home laundryfragrance and lip.soaps and sanitizers, while streamlining our product assortment and attracting new consumers. Customer demands and trends change rapidly. If we are unable to successfully anticipate, identify or react to changing preferences or trends, we misjudge the market for our products or any new product lines, or our launches or expansions of new product lines are unsuccessful, we may not be able to achieve the growth in our business that we currently anticipate. In response, we may be forced to increase our marketing, promotions or price markdowns and potentially discontinue a product line. These risks are particularly acute for us becauseas ofwe launch our reliancenew onConsumer innovationFirst andFormula thestrategic newness we offertransformation to engage new and existing customers and could have a material adverse effect on our brand image and reputation as well as our results of operations, financial condition and cash flows.

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

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

Our ability, or perceived inability, to complete environmental,sustainability, socialcommunity impact and governancehuman (“ESG”)capital initiatives may have a material adverse effect on our reputation.

Investors, other stakeholders, the general public and U.S. and foreign governmental and nongovernmental organizations have been focused on ESGsustainability initiatives, including with respect to climate change, greenhouse gas emissions, packaging and waste, diversity, equityculture and inclusion,belonging, worker pay and benefits, human rights, sustainable supply chain practices, animal health and welfare, deforestation and land, energy and water use. We maintain ana ESGsustainability function to provide direction and coordinate ESGsustainability work throughout the Company. Increased sustainability reporting requirements and scrutiny of ESGsustainability initiatives by public, regulatory, investor and other stakeholders, including U.S. and foreign governmental agencies, may put pressure on us to adjust our disclosures in these areas, and make adjustments to our commitments, targets, or goals and take actions to meet or address such adjustments, which could expose us to market, operational, regulatory, legal and execution costs or risks. Our business may also face increased scrutiny related to ESGsustainability activities, including from U.S. and foreign governmental agencies, and potentially lead to enforcement actions and litigation. Setting these targets and goals or expanding or adjusting our disclosure or our failure, or perceived failure, to meet or properly adjust such targets and goals could adversely affect our reputation and, as a result, our business, financial performance and growth.

Our assets are subject to loss, including those caused by illegal or unethical conduct by associates, customers, vendors, partners or unaffiliated third parties (including from organized retail crime). We experience events that cause inventory shrinkage. Our inventory shrinkage rates have increasedfluctuated in recent years and may continue to increase,fluctuate, and we cannot assure that incidences of loss and theft will decrease in the future or that the measures we are taking will effectively reduce these losses. Higher rates of loss or increased security costs to combat theft could have a material adverse effect on our results of operations, financial condition and cash flows.

We are self-insured for various types of insurable risks including associate medical benefits, workers’ compensation, property, general liability and automobile, up to certain stop-loss limits.limits in certain cases. Claims are difficult to predict and may be volatile.volatile, and recently we have seen an increase in healthcare and medical costs, as well as broader loss cost trends across certain property and casualty lines. Any adverse claims experience could have a material adverse effect on our results of operations, financial condition and cash flows.

Following the substantial completion of our information technology separation from Victoria’s Secret in 2023, weWe have undertaken the IT Transformation Project, a multi-year project to significantly upgrademodernize our digital and information technology systems and capabilities to, among other things, advance our data analytics capabilities, deploy AI applications, enhance our in-store and online customer experience, enable us to more effectively personalize our marketing, shopping and promotional experiences, enhance the security of and otherwise reduce risks associated with our IT systems, streamline our information technology operations and enable us to work more efficiently. We, together with our third-party service providers and vendors, maintain a complex ecosystem of information technology systems and environments that will be impacted by the IT Transformation Project. As with any significant information technology upgrade, the IT Transformation Project increases the risk of interruption of service, data loss and vulnerabilities, corruption of data, breach, failure and degradation of AI applications leading to unpredictability and untrustworthiness, failure of information technology systems to effectively communicate and other disruptions to our operations. Moreover, the IT Transformation Project could result in expenses and capital expenditures that substantially exceed the expenses and capital expenditures that we currently anticipate.

The success of our business depends, in part, on the secure and uninterrupted performance of our, and our third-party service providers’ and vendors’, information technology systems. Our information technology systems, as well as those of our service providers and vendors, are vulnerable to damage, interruption, degradation, “data poisoning,” service availability or breach from a variety of sources, including cyberattacks, cyber extortion, ransomware attacks, deepfakes and other malicious uses of artificial intelligence,AI, telecommunication and/or technology failures, malicious human acts, human errors and natural disasters. 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. Such incidents have disrupted, and could in the future further disrupt, our operations (whether directly or due to disruptions of our service providers’ and vendors’ operations) including our ability to timely ship and track product orders and project inventory requirements and lead to interruptions or delays in our supply chain. Additionally, these types of problems could result in an actual or perceived breach of confidential customer, merchandise, financial, associate or other important information (including personal information), which could result in damage to our reputation, costly litigation, customer complaints, negative publicity, breach and other notification obligations, regulatory or administrative sanctions, inquiries, orders or investigations, indemnity obligations, damages for contract breach or penalties for violations of applicable laws or regulations. The increased useproliferation of smartphones, tablets, mobile devices and data applications and services 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. 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), the risks of which may be heightened as we execute on the IT Transformation Project, could have a material adverse effect on our results of operations, financial condition and cash flows.

We use third-party service providers and vendors to store, transmit and otherwise process certain confidential customer, merchandise, financial, associate or other important information (including personal information) on our behalf, and our third-party service providers and vendors are subject to cybersecurity and privacy risks similar to us. Due to applicable laws and regulations or contractual obligations, we may be held responsible for any cybersecurity incidents or privacy violations attributed to our service providers or vendors as they relate to the information we share with them, information to which they are granted access, or information that they process for us to deliver services to our customers. Although we strive to contractually require these service providers and vendors to implement and maintain controls and a standard of security (such as implementing reasonable measuressafeguards) and to comply with applicable law, we cannot control third parties and cannot guarantee that a security breach or privacy violation will not occur in connection with their systems and practices.

While we train our associates, have implemented systems, processes and security measures to protect our physical facilities and information technology systems against unauthorized access and prevent data loss, and have vetted our third-party service providers’ systems, processes and security measures, there is no guarantee that these procedures are adequate to safeguard against all data security threats to us or our third-party service providers. 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, extortion, denial of service, vandalism, computer viruses, malware, ransomware, misplaced, corrupted or lost data, programming and/or human errors or similar events. Our systems and facilities (and the systems and facilities of our third-party service providers) are also subject to compromise from internal threats, such as theft, misuse, unauthorized access or other improper actions by associates, contractors and third-party service providers with otherwise legitimate access to our (or such third-party service providers’) systems, websites, mobile applications or facilities (which risks may be heightened as a result of our (or their) associates working from home). Furthermore, because the methods of cyberattack and deception change frequently, are increasingly complex and sophisticated (including through the use of AI and deepfakes to carry out cyber intrusions) and can originate from a wide variety of sources, including nation-state actors, despite our efforts to ensure the confidentiality, availability and integrity of our systems, websites and mobile applications, it is possible that we may not be able to anticipate, detect, appropriately react and respond to or implement effective preventative measures against all cybersecurity threats, and our third-party service providers may be subject to the same risks.

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

Quarterly cash dividends and share repurchase programs have historically been part of our capital allocation strategy. We are not required to declare dividends or make any share repurchases under our share repurchase programs in the future. For example, in 2020, we did not repurchase any of our shares, and we suspended our quarterly cash dividends due to the anticipated impact of the COVID-19 pandemic. 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, capital allocation strategy, 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. Any reduction, or failure, to pay dividends or repurchase our shares after we have announced our intention to do soso, or any change to our capital allocation strategy, may negatively impact our reputation, investor confidence in us and our stock price.

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

We are, and may increasingly become, subject to various laws, directives, industry standards, rules and regulations, as well as contractual obligations, relating to data privacy and cybersecurity (including the use of artificial intelligenceAI) in the jurisdictions in which we operate and may in the future operate. The legal and regulatory environment related to data privacy and cybersecurity is increasingly rigorous and rapidly evolving, with new requirements, constantly changing requirements, and new or novel interpretations of existing requirements applicable to our business, and enforcement actions and litigation are likely to remain uncertain for the foreseeable future. These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that 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.

In the U.S., data privacy and protection are regulated at federal, state and local levels, and the use of AI is now regulated at state and local levels. Various federal and state regulators, including governmental agencies like the SEC and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning data privacy and cybersecurity and have prioritized data privacy and cybersecurity-related violations for enforcement actions. Certain state laws are, and in the future may continue to be, more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal, international or other state laws, and such laws may differ from each other, all of which complicates compliance efforts and increases risks to our business.

ThesePrivacy 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.

In North America, we are subject to sectoral privacy laws that impose different enforcement regimes, whether enforced by government agencies or class action and/or mass arbitration litigants, with fines and statutory damages that can result in significant exposure when applied to large customer segments. 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).

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 third-party service providers, which are likely to increase over time. In addition, such requirements may require us to modify our data processing or cybersecurity 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. Any failure or perceived failure by us or our partners to comply with any applicable federal, state or similar foreign laws, regulations, standards or rules relating to data privacyprivacy, cybersecurity and cybersecurityAI 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-class action data-privacy and -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.

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. 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, increased research and development costs associated with product reformulations or new product lines, or additional labor costs, or other costs associated with readying merchandise for sale. We operate stores in all 50 states, Canada and Puerto Rico, which requires us to comply with a myriad of provincial, state and local laws pertaining to all aspects of our business, including our associates and consumers. The trend for states and localities in the U.S. to legislate in the absence of national laws passed by the U.S. Congress has greatly increased the complexity of legal compliance for us. In addition, future domestic and international legislative and regulatory efforts to combat climate change or other environmental considerations could result in increased regulation and additional taxes and other expenses in a manner that adversely affects our business, financial performance and growth. It may be difficult for us to comply with these laws, compliance may be costly and compliance and associated costs may negatively impact our operations.

For 2025, total Net Sales were $7,291 million, which decreased $16 million, or 0.2%, compared to 2024. Total North American Net Sales decreased $31 million compared to 2024, due to a decline in transactions mostly offset by increased order size, and International Net Sales increased $15 million. For 2025, Operating Income was $1,126 million, which decreased $19$140 million, or 1%, to $1.266 billion11%, compared to 2023,2024, and our Operating Income rate (expressed as a percentage of Net Sales) remaineddecreased flatto at15.4% from 17.3%. OurThe Operating Income results were impacted by an increase in our Gross Profit rate, primarily driven by improvement in our merchandise margin rate, offset by General, Administrative and Store Operating Expenses deleveraging, primarily due to marketing investments and wagea inflation.decline in our Gross Profit rate.

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 measures that present Operating Income, Net Income and Net Income per Diluted Share in 20242025 and 20232024 on an adjusted basis, which removes certain items. We believe that these items are not indicative of our ongoing operations due to their size and nature. We use adjusted financial information as key performance measures for the purpose of evaluating performance internally. These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP. Instead, we believe that the presentation of adjusted financial information provides additional information to investors to facilitate the comparison of past and present operations. Further, our definitions of adjusted financial information may differ from similarly titled measures used by other companies.

The tablestable below reconcilereconciles theour GAAP financial measures to theour non-GAAP financial measures:

(b)In 2023,2025, we recognized aaggregate pre-tax impairment chargecosts of $8$15 million (after-tax chargecosts of $6$14 million), included in OtherGeneral, Income,Administrative and Store Operating Expenses, due to the transition of certain members of the leadership team, primarily related to anseverance impairment charge on an equity method investment.benefits.

(c)In 2023,2025, we recognized a pre-tax gainsgain of $34$8 million (after-tax gainsgain of $26$6 million), included in Other Income, Net, related to the repurchase and extinguishmentsale of outstandinga notes.non-core For additional information, see Note 10 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.asset.

(d)In 2024, we recognizedsold aour $44investments in Easton Town Center and Easton Gateway, resulting in an aggregate pre-tax gain of $39 million tax(after-tax benefit related to the releasegain of a valuation allowance on a deferred tax asset. In 2023, we recognized a $112$25 million), taxincluded benefitin relatedOther toIncome, the partial release of a valuation allowance on a deferred tax asset.Net. For additional information, see Note 91 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

The following table compares U.S. Company-operated store data for 20242025 and 20232024:

(a)Results include fulfilled buy online, pickup in store (“BOPIS”) orders.

Total Net Sales were $7,291 million and decreased $16 million, or 0.2%, compared to 2024. Direct Net Sales decreased $108$79 million, or 6.8%,5.4%, due to a decline in fulfilled orders, which was primarily due to our customers continuing to select our BOPIS option (which is recognized as store Net Sales) and the 53rd week in 2023,, partially offset by an increased average order size. International Net Sales decreased $41 million, or 11.8%, primarily driven by a decline in wholesale shipments to our franchise partners affected by the war in the Middle East. Stores Net Sales increased $27$48 million, whichor was effectively flat,0.9%, primarily driven by an increase in transactions due to new store growth and the increase inhigher BOPIS fulfilled orders offset by a decline in average dollar sales and thenew 53rdstore weekgrowth. inInternational 2023.Net Sales increased $15 million, or 4.9%, compared to 2024.

For 2024, ourOur Gross Profit was $3,189 million, which decreased $2$45 million compared to $3.234 billion,2024, and our Gross Profit rate (expressed as a percentage of Net Sales) increasedwas to43.7%, which decreased from 44.3% from 43.6% in 2023. The2024. Gross Profit ratedollars increased primarilydecreased due to anthe increasedecline in the merchandise margin rate, primarily driven by cost saving initiatives, distribution productivity and international mix,tariffs, partially offset by strategicallylower planned promotional activitiesBuying and ourOccupancy continuedExpenses, investmentwhich inbenefited productfrom formulationsexiting anda packagingthird-party innovation.fulfillment Gross Profit dollars were effectively flat as the impact of lower Net Sales was offset by the increasecenter in the merchandisefirst marginquarter rate.of 2025.

For 2024, ourOur Interest Expense was $276 million, which decreased $33$36 million compared to $3122024. millionThe decrease was due to lower average daily borrowings,borrowings and borrowing rate, which were driven by the repurchase and early extinguishment of outstanding notes, and the 53rd weeknotes in 2023.2024.

For 2024, ourOur Other IncomeIncome, Net was $74$32 million compared to $81$74 million for 2023.2024. Included in 2025 is an $8 million pre-tax gain on the sale of a non-core asset. Included in 2024 is aan aggregate $39 million pre-tax gain on sales of certain Easton investments in the second quarter and the recognition of a $10 million pre-tax loss on the repurchase and early extinguishment of outstanding notes. Included in 2023 is a $34 million pre-tax gain on the repurchase and early extinguishments of outstanding notes and an $8 million pre-tax impairment charge related to an equity method investment. The remaining differencedecrease in Other Income between the periods wasis primarily due to lower average invested cash balances and lower interest ratesincome on invested cash in 2024.2025.

For 2024, ourOur effective tax rate was 22.4%26.4% compared to 13.9%22.4% in 2023.2024. The 2025 rate was higher than our combined estimated federal and state statutory rate primarily due to accrued interest expense related to unrecognized tax benefits. The 2024 rate was lower than our combined estimated federal and state statutory rate primarily due to the sales of Easton investments, which resulted in the release of a valuation allowance on a deferred tax asset. The 2023 rate was lower than our combined estimated federal and state statutory rate primarily due to the recognition of the tax benefit related to the partial release of a valuation allowance on a deferred tax asset.

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, future common stock and debt repurchases, and capital expenditures. 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 and product and market expansions, profit margins, income taxes and inflationary pressures. Our sales are typically highest 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 $171$210 million as of FebruaryJanuary 1,31, 2025.2026.

During 2024, weWe repurchased and extinguished $514 million principal amount of our outstanding senior notes for an aggregate price of $522 million. Additionally, we repurchased 10.42515.1 million shares of our common stock for $400 million. We may, from time to time, repurchase, or otherwise retire, additional debt or shares of our common stock, as applicable.

Our debt leverage ratio is defined as adjusted debt, which includes our short-term and long-term debt andas well as total operating lease liabilities, divided by earnings before interest, taxes, depreciation, amortization and rent (“EBITDAR”). EBITDAR is calculated as operatingTotal income,Company Adjusted Operating Income, or Operating Income in periods where there are no adjustments, which excludes interest and taxes, before depreciation, amortization and lease costs. 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.

The following table provides our debt leverage ratio as of, and for the years ended, January 31, 2026 and February 1, 2025 and February 3, 2024:

Net cash provided by operating activities in 20232025 was $954$1,102 million, including net income of $878$649 million. Net income included depreciation of $269$254 million, a deferred income tax benefitexpense of $128$63 million,million and share-based compensation expense of $43 million and pre-tax gains on extinguishment of debt of $34$31 million. 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 items in working capital were the $109cash millionflow decreasebenefit associated within Accounts Payable, Accrued Expenses and Other of $111 million due to our efforts to improve working capital and the $34$57 million increasecash flow detriment associated with Income Taxes Payable.

In 2025,2026, we expect to invest between $250 million andapproximately $270 million in capital expendituresexpenditures, with a continued focusfocused on high return real estateestate, Consumer First Formula investments, largely related to product assortment, and technology.logistics and fulfillment upgrades.

Net cash used for financing activities in 20242025 was $1.132$599 billion,million, primarily consisting of $522 million for debt repurchases, $401 million for share repurchases, dividend payments of $0.80 per share, or $177 million, $17$167 million forand payments on finance leases and tax payments of $16$14 million related to share-based awards.million.

Net cash used for financing activities in 20232024 was $815$1,132 million, primarily consisting of $447$522 million for debt repurchases, $401 million for share repurchases, dividend payments of $0.80 per share, or $182$177 million, $148 million for share repurchases, $15$17 million for payments on finance leases and tax payments of $11$16 million related to share-based awards.

In the firstsecond quarter of 2026, total Net Sales were $1,378$1,514 million, which decreased $46$35 million, or 3.2%,2.3%, compared to the firstsecond quarter of 2025. Total North American Net Sales decreased $52$57 million, primarily due to decrease in transactions,transactions partially offset by an increase inand average dollar sales, andwhile International and Other Net Sales increased $6$22 million. Our firstsecond quarter Operating Income was $231$216 million, which increased $22$59 million, or 10.4%,37.0%, compared to the firstsecond quarter of 2025, and our Operating Income rate (expressed as a percentage of Net Sales) increased to 16.8%14.2% from 14.7%.10.2%. The Operating Income results were primarily due to lowerthe General,increase Administrativein andthe Storemerchandise Operatingmargin Expensesrate, as a result of anapproximately $88$80 million pre-tax gain related to settlements of paymentInternational cardEmergency interchangeEconomic feePowers litigation,Act (“IEEPA”) tariff refunds, partially offset by declinesthe decline in both Net Sales and the Gross Profit rate.Sales.

For additional information related to our firstsecond quarter 2026 financial performance, see “Results of Operations.”

In 2025, we launched the Consumer First Formula, our multi-year, comprehensive transformation plan to revitalize Bath & Body Works across brand, product and marketplace. The Consumer First Formula invests behind our largest revenue driving opportunities to try to attract new, younger consumers to the brand, which we expect will help us unlock our next era of sustainable growth. EarlyDuring consumerthe responsesecond quarter of 2026, we delivered progress across innovation, brand building, digital and expanded distribution including sequential improvement in Body Care, a return to growth in Direct and continued momentum across our marketplace partnerships. While we are still in the early stages of our transformation, these proof points indicate that the Consumer First Formula is consistentgaining withtraction. ourWe roadmap,remain focused on disciplined execution and weinvesting expectin the impactcapabilities necessary to buildsupport throughsustainable, durable growth over the yearlong and become more visible to consumers and in our financials as we move throughout the remainder of 2026 and into 2027.term.

During the first quarter, theThe conflict between the U.S. and Iran escalated and expandedcontinues to includeimpact much of the Middle East region.region, Thisincluding transportation restrictions, which has led to transportation restrictions in the region, resultingresulted in volatility in global energy markets, commodities pricing, transportation costs and foreign currency exchange rates. These recent events have increased global economic uncertainty and may affect consumer demand in certain markets and contribute to higher global inflation and input costs.

In addition to our results provided in accordance with GAAP above and throughout this Quarterly Report on Form 10-Q, provided below are non-GAAP measures that present Operating Income, Net Income and Net Income per Diluted Share for the firstsecond quarterquarters of and year-to-date 2026 and 2025 on an adjusted basis, which removes certain items. We believe that these items are not indicative of our operations due to their size and nature. We did not make any adjustments to our reported results in the first quarter of 2025.

(b)In the firstsecond quarter of 2026, we recognized aggregate pre-tax costs of $8$9 million ($6$7 million after tax) and during year-to-date 2026, we recognized aggregate pre-tax costs of $17 million ($13 million after tax), primarily included in General, Administrative and Store Operating Expenses, resulting from business transformation activities in connection with the Consumer First Formula.

(dc)In the firstsecond quarter of 2026,2025, we recognized apre-tax $3costs of $15 million pre-tax gain ($3$14 million after tax) indue Otherto Income,the Net,transition of certain members of the leadership team, primarily related to theseverance sale of a non-core asset.benefits.

(ed)In the first quarter of 2026, we recognized aan $62$8 million pre-tax loss ($6 million after tax) benefitin associatedOther withIncome, Net, related to the resolutionrepurchase and early extinguishment of certainoutstanding tax matters.debt. For additional information, see Note 6,7, “IncomeLong-term TaxesDebt and Borrowing Facility” included in Part 1, Item 1. Financial Statements.

The following table compares Company-operated store data for the firstsecond quarters of and year-to-date 2026 and 2025:

The following table represents Company-operated store activity for the first quarter ofyear-to-date 2026:

The following table represents Partner-operated store activity for the first quarter ofyear-to-date 2026:

FirstSecond Quarter of 2026 Compared to the FirstSecond Quarter of 2025

The following table provides Net Sales for the firstsecond quarter of 2026 in comparison to the firstsecond quarter of 2025:

(a)Results include fulfilled buy online pick up in store (“BOPIS”) orders.

For the firstsecond quarter of 2026, total Net Sales were $1,378$1,514 million and decreased $46$35 million, or 3.2%,2.3%, compared to the firstsecond quarter of 2025. Stores Net Sales decreased $48$65 million, or 4.3%,5.4%, driven by a decrease in transactions partially offset by an increase inand average dollar sales. Direct Net Sales decreasedincreased $4$8 million, or 1.5%,3.0%, primarily driven by an increase in fulfilled orders, partially offset by average order size and lower shipping and handling revenue partially offset by an increase in orders and average order size.revenue. International and Other Net Sales increased $6$22 million, or 9.0%,24.9%, compared to the firstsecond quarter of 2025.2025 driven by expanded distribution of domestic wholesale, which includes Ulta and Amazon, and increased international product sales.

For the firstsecond quarter of 2026, our Gross Profit was $587$692 million, which decreasedincreased $59$52 million compared to the firstsecond quarter of 2025, and our Gross Profit rate (expressed as a percentage of Net Sales) was 42.6%,45.7%, which decreasedincreased from 45.4%41.3% in the firstsecond quarter of 2025. Gross Profit dollars decreasedincreased due to aan declineincrease in the merchandise margin rate, primarilypartially drivenoffset by tariffs, inflation and crude oil impacts as well as category mix, and the decline in Net Sales. The merchandise margin rate increase was driven by approximately $80 million of IEEPA tariff refunds, partially offset by the deleverage on lower Net Sales.

The Gross Profit rate decreasedincreased primarily due to the lowerincrease in the merchandise margin raterate, andpartially offset by Buying and Occupancy Expenses deleverage on lower Net Sales.

The following table provides detail for our General, Administrative and Store Operating Expenses for the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025:

For the firstsecond quarter of 2026, our total General, Administrative and Store Operating Expenses were $356$476 million, which decreased $81$7 million compared to the firstsecond quarter of 2025, and the rate (expressed as a percentage of Net Sales) was 25.9%,31.5%, which decreasedincreased from 30.7%31.1% in the firstsecond quarter of 2025. OurGeneral General,and Administrative and Store Operating Expenses and rate both decreased primarily driven by an $88$15 million pre-taxof gain, recorded as a reduction to Selling Expenses,costs related to cashthe proceeds received, nettransition of legalcertain fees, for favorable settlementsmembers of paymentthe cardleadership interchangeteam feein litigation.the The firstsecond quarter of 20262025 rateand alsolower reflectsshare-based deleveragecompensation dueexpense in the second quarter of 2026, partially offset by business transformation activities and other discrete items in the second quarter of 2026. Selling Expenses decreased primarily driven by lower store sales, partially offset by investments in associate wages. The increase in Marketing Expenses was driven by incremental spend and strategic investments to support the NetConsumer SalesFirst decline.Formula in 2026.

The following table provides the average daily borrowings and average borrowing rates for the firstsecond quarters of 2026 and 2025:

For the firstsecond quarter of 2026, our Interest Expense was $69$63 million, compared to $71$68 million in the firstsecond quarter of 2025. The decrease was primarily due to lower average daily borrowings and borrowing rate, which were driven by the early extinguishment of the outstanding 2027 Notes in the first quarter of fiscal year 2026.

For the firstsecond quarter of 2026, our Other Income, Net was $4$11 million, compared to $8$6 million in the firstsecond quarter of 2025. The decreaseincrease iswas primarily due to aninterest $8 million pre-tax loss related to the early extinguishment of the outstanding 2027 Notes partially offset by a $3 million pre-tax gain related to the sale of a non-core asset recognizedreceived in theconnection firstwith quarterIEEPA oftariff 2026.refunds.

For the firstsecond quarter of 2026, our effective tax rate was (10.1%)28.0% compared to 28.4%32.3% in the firstsecond quarter of 2025. The 2026 first quarter rate was lower than our combined estimated federal and state statutory rates primarily due to the resolution of certain tax matters. The 2025 firstsecond quarter rate was higher than our combined estimated federal and state statutory rates primarily due to accruedthe interestimpact expenseof non-U.S. operations. The 2025 second quarter rate was higher than our combined estimated federal and state statutory rates largely due to the transition of certain members of the leadership team, primarily related to unrecognized taxseverance benefits.

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, future common stock and debt repurchases and capital expenditures. 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 and product and market expansions, profit margins, income taxes and inflationary pressures. Typically, our sales are highest 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 $226$238 million as of MayAugust 2,1, 2026.

We did not repurchase any shares of our common stock during year-to-date 2026. During the first quarter of 2026, we repurchasedcompleted anda extinguishedmake-whole call to repurchase the remaining $284 million principal amount of our outstanding senior2027 notesNotes for a repurchase price of $289 million. In addition, subsequent to August 1, 2026, we completed a partial redemption for $250 million aggregate principal amount of our outstanding 2029 Notes for a repurchase price of $253 million. We may, from time to time, repurchase, or otherwise retire, additional debt or shares of our common stock, as applicable.

The following table provides a summary of our cash flow activity during the first quartersyear-to-date of 2026 and 2025:

Net cash provided by operating activities for the first quarter ofyear-to-date 2026 was $244$316 million, including net income of $183$301 million. Net income included depreciation expense of $120 million, $88 million received related to settlements of payment card interchange fee litigation, $85 million of IEEPA tariff refunds and related interest, a $62 million tax benefit related to the resolution of certain tax matters, depreciation expense of $61 million, share-based compensation expense of $8$10 million and loss on extinguishment of debt of $8 million. 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 items in working capital were the seasonal changes in Inventories and Accounts Receivable.Payable.

Net cash provided by operating activities infor the first quarter ofyear-to-date 2025 was $188$145 million, including net income of $105$169 million. Net income included depreciation expense of $64$128 million and share-based compensation expense of $10$18 million. 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 items in working capital were the seasonal changes in InventoriesInventories, Income Taxes Payable and Accounts Receivable.Receivable, with Inventories also impacted by the higher tariff levels during the year. Accounts Payable, Accrued Expenses and Other provided a cash flow benefit primarily due to our efforts to improve working capital.

Net cash used for investing activities for the first quarter ofyear-to-date 2026 was $42$89 million, primarily related to capital expenditures of $49$98 million partially offset by cash proceeds of $8 million related to the sale of a non-core asset. The capital expenditures included approximately $30$70 million related to new off-mall stores and remodels of existing stores, approximately $10 million for various technology projects primarily to support the growth and profitability of our business and approximately $10 million related to supply chain and logistics capabilities.capabilities and approximately $10 million for product assortment related to business transformation activities.

Net cash used for investing activities infor the first quarter ofyear-to-date 2025 was $39$95 million, primarily related to capital expenditures. The capital expenditures included approximately $25$60 million related to new off-mall stores and remodels of existing stores and approximately $10$20 million for various technology projects primarily to support the growth and profitability of our business.