Bath & Body Works(BBWI) - 2024 Q1 - Quarterly Report

Financial Performance - In Q1 2023, Net Sales decreased by $54 million, or 4$1.396 billion compared to Q1 2022, with U.S. store sales down 2% and direct channel sales down 12%[57]. - Operating Income fell by $99 million, or 35$181 million, with the Operating Income rate decreasing to 12.9% from 19.3%[57]. - Gross Profit decreased by $73 million to$596 million, with the Gross Profit rate declining to 42.7% from 46.1% due to inflationary pressures and increased expenses[72]. - General, Administrative and Store Operating Expenses increased by $26 million to$415 million, with the rate increasing to 29.7% from 26.8%[73]. - Net cash provided by operating activities in Q1 2023 was $44 million, down from$66 million in Q1 2022, with net income of $81 million[82]. - The company reported net sales of$1,352 million for the first quarter of 2023, with a gross profit of $556 million and net income of$63 million[98]. Cost Management - The company anticipates continued macroeconomic uncertainty and expects modest cost deflation benefits in Q2 2023, partially offset by investments in product formulation and packaging innovation[58]. - The company is targeting $200 million in annual cost savings, expecting to achieve over$100 million in 2023, with increased savings anticipated as the year progresses[59]. Store Operations - The company completed the rollout of Buy Online-Pick Up In Store (BOPIS) capabilities to U.S. stores in Q1 2023[70]. - The company opened 16 new stores and closed 8, resulting in a total of 1,810 stores as of April 29, 2023[64]. - International Net Sales increased by $9 million, or 13$4.896 billion, with an average borrowing rate of 7.3%[75]. - Net cash used for financing activities in Q1 2023 was $135 million, significantly lower than$1.306 billion in Q1 2022[84]. - The company repurchased $84 million principal amount of senior notes for an aggregate price of$76 million in Q1 2023, resulting in a pre-tax gain of $7 million[91]. - The company repurchased$50 million principal amount of senior notes for an aggregate price of $46 million between April 29, 2023, and June 2, 2023[93]. - Total long-term debt as of April 29, 2023, was$4.781 billion, a decrease from $4.862 billion as of January 28, 2023[90]. - The estimated fair value of the company's outstanding debt was$4,589 million as of April 29, 2023, compared to a principal value of $4,831 million[105]. Cash and Liquidity - Cash and cash equivalents at the end of Q1 2023 were$1.046 billion, compared to $651 million at the end of Q1 2022[80]. - The company had$607 million available under its asset-backed revolving credit facility as of April 29, 2023[79]. - The Asset-backed Revolving Credit Facility has aggregate commitments of $750 million, with a borrowing base of$623 million as of April 29, 2023, and no outstanding borrowings[93]. - As of April 29, 2023, the company had $607 million available under the ABL Facility after accounting for$16 million in outstanding letters of credit[93]. Tax and Obligations - The effective tax rate for Q1 2023 was 27.7%, up from 19.4% in Q1 2022, primarily due to accrued interest expense related to unrecognized tax benefits[77]. - The company has contingent obligations of $278 million related to lease payments as of April 29, 2023[98]. - The company maintains a fixed charge coverage ratio requirement of 1.00 to 1.00 under the ABL Facility, but was not required to maintain this ratio as of April 29, 2023[93]. Capital Expenditures - Capital expenditures in Q1 2023 totaled$93 million, with plans for $300 million to$350 million in capital expenditures for the full year[83]. Credit Ratings - The company has a stable outlook for its credit ratings, with Moody's rating at Ba2 and S&P rating at BB as of April 29, 2023[94].