Bath & Body Works(US:BBWI)2025-03-14 20:19Part I Business Bath & Body Works is a global leader in personal care and home fragrance, focusing on growth, efficiency, and financial strength - The company's strategic priorities are focused on accelerating top-line growth through product innovation and international expansion, enhancing operational excellence via cost management, and strengthening its financial position through strong cash flow and disciplined capital allocation1619 - The company's loyalty program is a significant driver of sales, with approximately 39 million active members who accounted for nearly 80% of U.S. sales in fiscal 202425 - A key real estate strategy is the transition to off-mall locations, which comprised 57% of the North American store fleet as of February 1, 2025, with a long-term target of 75%32 - The business is highly seasonal, with the fourth quarter, including the holiday season, typically accounting for about 40% of annual Net Sales42 Company-operated Store Count (as of Feb 1, 2025) | Region | Company-operated Stores | Partner-operated Stores | | :--- | :--- | :--- | | U.S. & Canada | 1,895 | N/A | | International | N/A | 529 | Workforce Demographics (as of Feb 1, 2025) | Work Status | Number of Associates | | :--- | :--- | | Full-time | 8,975 | | Part-time | 50,235 | | Total | 59,210 | Risk Factors The company faces numerous business, operational, technological, financial, and legal risks that could materially affect its performance - Business Risks: The company's performance is sensitive to general economic conditions, inflation, and consumer spending patterns, with high seasonality in the fourth quarter6768 - Operational Risks: The business depends on store traffic, international expansion, its direct-to-consumer channel, and a limited number of key vendors and concentrated facilities758083101102 - Technology & Security Risks: A multi-year IT Transformation Project carries implementation risks, and the company faces significant threats from cybersecurity incidents114118 - Financial Risks: The stock price may be volatile, dividend payments are not guaranteed, and the company must comply with restrictive debt covenants123125128 - Legal & Regulatory Risks: The company is subject to a complex and evolving landscape of laws, particularly regarding data privacy and cybersecurity like CCPA and GDPR130131135137 Unresolved Staff Comments The company reports no unresolved staff comments from the U.S. Securities and Exchange Commission - There are no unresolved staff comments146 Cybersecurity The company maintains an information security program integrated into its enterprise risk management, overseen by the Audit Committee - The company's cybersecurity program includes risk assessments, endpoint threat detection, identity and access management, multi-factor authentication, and vulnerability management147148 - Governance is managed by the Chief Information Security Officer (CISO), with oversight from the Audit Committee of the Board, which receives reports at least three times per year155 - The company has not identified any cybersecurity threats or incidents to date that have materially affected or are reasonably likely to materially affect its business154 Properties The company owns and leases significant office, distribution, and retail facilities, primarily concentrated in the Columbus, Ohio area - As of February 1, 2025, the company operated 1,782 stores in the U.S. and 113 in Canada, all in leased facilities with typical initial terms of five to ten years160 Company-operated Facilities (as of Feb 1, 2025) | Location | Use | Approx. Square Footage (thousands) | | :--- | :--- | :--- | | Columbus, Ohio area | Office, distribution, fulfillment | 5,000 | | Other North America | Office, product development | 70 | Legal Proceedings The company is involved in various routine lawsuits but does not expect them to have a material adverse effect on its financials - The company is involved in various lawsuits from the ordinary course of business but does not believe the outcome will have a material adverse effect on its financials164 Mine Safety Disclosures This item is not applicable to the company - Not applicable165 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE under "BBWI," with quarterly dividends paid and shares repurchased in fiscal 2024 - The company's common stock is traded on the NYSE under the symbol "BBWI"167 - A quarterly dividend of $0.20 per share was paid in each quarter of 2024168 Common Stock Repurchases (Q4 2024) | Fiscal Period | Total Shares Purchased (thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | November 2024 | 516 | $32.02 | | December 2024 | 552 | $38.26 | | January 2025 | 412 | $37.12 | | Total | 1,480 | | [Reserved] This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2024 saw a slight decrease in Net Sales and Operating Income, offset by significant cost savings and strong cash flow - The company delivered approximately $155 million of cost reductions in 2024, bringing the two-year total to over $300 million177 - Free cash flow remained stable at $660 million in 2024 compared to $656 million in 2023212 - In 2024, the company repurchased 10.425 million shares for $400 million and paid $177 million in dividends207219 Fiscal 2024 Financial Highlights vs. 2023 | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $7.307 billion | $7.429 billion | (1.6%) | | Operating Income | $1.266 billion | $1.285 billion | (1.0%) | | Operating Income Rate | 17.3% | 17.3% | 0.0% | Adjusted vs. Reported Net Income Per Diluted Share | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Reported Net Income Per Diluted Share | $3.61 | $3.84 | | Adjusted Net Income Per Diluted Share | $3.29 | $3.27 | Key Financial Ratios | Metric | Feb 1, 2025 | Feb 3, 2024 | | :--- | :--- | :--- | | Debt Leverage Ratio | 2.5 | 2.8 | Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from foreign currency exchange rates, while interest rate risk is considered low - The company is exposed to foreign currency exchange rate risk from its Canadian operations and international royalty arrangements272273 - Interest rate risk is considered low, as all long-term debt carries fixed interest rates and the investment portfolio is composed of short-term, high-quality instruments274275 Financial Statements and Supplementary Data This section presents the consolidated financial statements, which received an unqualified opinion from the independent auditor - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal controls290300301 Consolidated Statements of Income (in millions) | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net Sales | $7,307 | $7,429 | $7,560 | | Gross Profit | $3,234 | $3,236 | $3,255 | | Operating Income | $1,266 | $1,285 | $1,376 | | Net Income | $798 | $878 | $800 | Consolidated Balance Sheets (in millions) | Metric | Feb 1, 2025 | Feb 3, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,823 | $2,115 | | Total Assets | $4,872 | $5,463 | | Total Current Liabilities | $1,231 | $1,289 | | Long-term Debt | $3,884 | $4,388 | | Total Equity (Deficit) | $(1,383) | $(1,626) | Consolidated Statements of Cash Flows (in millions) | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $886 | $954 | $1,144 | | Net Cash Used for Investing Activities | $(162) | $(286) | $(328) | | Net Cash Used for Financing Activities | $(1,132) | $(815) | $(1,562) | | Net Decrease in Cash | $(410) | $(148) | $(747) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants - None reported426 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of the end of the fiscal year - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the fiscal year427 - No material changes in internal control over financial reporting occurred during the fourth quarter of 2024429 Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading arrangements during the fourth quarter of 2024 - No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the fourth quarter of 2024430 Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - None431 Part III Directors, Executive Officers and Corporate Governance Information regarding directors, officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement434 Executive Compensation Information regarding executive compensation is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement437 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement438 Certain Relationships and Related Transactions, and Director Independence Information regarding related transactions and director independence is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement440 Principal Accountant Fees and Services Information regarding accountant fees and services is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement441 Part IV Exhibits and Financial Statement Schedules This section lists the consolidated financial statements and all exhibits filed as part of the report - This section contains a list of all financial statements, schedules, and exhibits filed with the Form 10-K443444 Form 10-K Summary The company provides no summary under this item - None453