Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _________________________________
FORM 10-Q
 _________________________________
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 1, 2020July 31, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 1-8344
 _________________________________
L BRANDS,BATH & BODY WORKS, INC.
(Exact name of registrant as specified in its charter)
 _______________________________
Delaware31-1029810
(State or other jurisdiction of

incorporation or organization)
(IRS Employer Identification No.)
Three Limited Parkway
Columbus,Ohio43230
(Address of principal executive offices)(Zip Code)
(614)415-7000
(Registrant's Telephone Number, Including Area Code)
L BRANDS, INC.
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒   No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒   No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer
☐  (Do not check if a smaller reporting company)
Smaller reporting company☐
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ☐    No  ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.50 Par ValueLBBBWIThe New York Stock Exchange
As of August 28, 2020,27, 2021, the number of outstanding shares of the Registrant’s common stock, was 277,889,018264,372,947 shares.


L BRANDS,
Table of Contents
BATH & BODY WORKS, INC.
TABLE OF CONTENTS
 
Page No.
Page No.
Part I. Financial Information
Item 1. Financial Statements *
Consolidated Statements of Income (Loss) for the Thirteen-Weeks and Twenty-Six-Weeks Ended July 31, 2021 and August 1, 2020 and August 3, 2019 (Unaudited)
3
Consolidated Statements of Comprehensive Income (Loss) for the Thirteen-Weeks and Twenty-Six-Weeks Ended July 31, 2021 and August 1, 2020 and August 3, 2019 (Unaudited)
3
Consolidated Balance Sheets as of July 31, 2021 (Unaudited), January 30, 2021 and August 1, 2020 (Unaudited), February 1, 2020 and August 3, 2019 (Unaudited)
4
Consolidated Statements of Total Equity (Deficit) for the Thirteen-Weeks and Twenty-Six-Weeks Ended July 31, 2021 and August 1, 2020 and August 3, 2019 (Unaudited)
5
Consolidated Statements of Cash Flows for the Twenty-Six-Weeks Ended July 31, 2021 and August 1, 2020 and August 3, 2019 (Unaudited)
7
Notes to Consolidated Financial Statements (Unaudited)
8
Report of Independent Registered Public Accounting Firm
2120
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
2221
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
2322
Item 3. Quantitative and Qualitative Disclosures About Market Risk
4240
Item 4. Controls and Procedures
4341
4442
Item 1. Legal Proceedings
4442
Item 1A. Risk Factors
4442
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
4543
Item 3. Defaults Upon Senior Securities
4543
Item 4. Mine Safety Disclosures
4543
Item 5. Other Information
4543
Item 6. Exhibits
4644
Signature
47
*
45
*The Company's fiscal year ends on the Saturday nearest to January 31. As used herein, “second quarter of 2020”2021” and “second quarter of 2019”2020” refer to the thirteen-week periods ended July 31, 2021 and August 1, 2020, and August 3, 2019, respectively. “Year-to-date 2020”2021” and “year-to-date 2019”2020” refer to the twenty-six-week periods ending July 31, 2021 and August 1, 2020, and August 3, 2019, respectively.


2
Table of Contents
PART I—FINANCIAL INFORMATION
 
Item 1.
Item 1.    FINANCIAL STATEMENTS


L BRANDS,
BATH & BODY WORKS, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in millions except per share amounts)
(Unaudited)
 
Second Quarter Year-to-Date Second QuarterYear-to-Date
2020 2019 2020 2019 2021202020212020
Net Sales$2,319
 $2,902
 $3,974
 $5,530
Net Sales$3,318 $2,319 $6,341 $3,974 
Costs of Goods Sold, Buying and Occupancy(1,608) (1,919) (2,974) (3,614)Costs of Goods Sold, Buying and Occupancy(1,820)(1,608)(3,429)(2,974)
Gross Profit711
 983

1,000

1,916
Gross Profit1,498 711 2,912 1,000 
General, Administrative and Store Operating Expenses(667) (808) (1,274) (1,588)General, Administrative and Store Operating Expenses(899)(667)(1,741)(1,274)
Operating Income (Loss)44
 175

(274)
328
Operating Income (Loss)599 44 1,171 (274)
Interest Expense(104) (95) (201) (194)Interest Expense(99)(104)(212)(201)
Other Income (Loss)0
 (38) 3
 (31)Other Income (Loss)(1)— (106)3 
Income (Loss) Before Income Taxes(60) 42

(472)
103
Income (Loss) Before Income Taxes499 (60)853 (472)
Provision (Benefit) for Income Taxes(11) 4
 (126) 25
Provision (Benefit) for Income Taxes125 (11)202 (126)
Net Income (Loss)$(49) $38
 $(346) $78
Net Income (Loss)$374 $(49)$651 $(346)
Net Income (Loss) Per Basic Share$(0.18) $0.14
 $(1.25) $0.28
Net Income (Loss) Per Basic Share$1.36 $(0.18)$2.35 $(1.25)
Net Income (Loss) Per Dilutive Share$(0.18) $0.14
 $(1.25) $0.28
Net Income (Loss) Per Dilutive Share$1.34 $(0.18)$2.31 $(1.25)
Dividends Per Share$0
 $0.30
 $0.30
 $0.60
Dividends Per Share$0.15 $— $0.15 $0.30 


L BRANDS,BATH & BODY WORKS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(Unaudited)
Second QuarterYear-to-Date
2021202020212020
Net Income (Loss)$374 $(49)$651 $(346)
Other Comprehensive Income (Loss), Net of Tax:
   Foreign Currency Translation(2)2 4 (4)
   Unrealized Gain (Loss) on Cash Flow Hedges2 (3)(1)2 
   Reclassification of Cash Flow Hedges to Earnings1 (1)1 (1)
Total Other Comprehensive Income (Loss), Net of Tax1 (2)4 (3)
Total Comprehensive Income (Loss)$375 $(51)$655 $(349)
 Second Quarter Year-to-Date
 2020 2019 2020 2019
Net Income (Loss)$(49) $38
 $(346) $78
Other Comprehensive Income (Loss), Net of Tax:       
   Foreign Currency Translation2
 (7) (4) (11)
   Unrealized Gain (Loss) on Cash Flow Hedges(3) 2
 2
 4
   Reclassification of Cash Flow Hedges to Earnings(1) (1) (1) (3)
Total Other Comprehensive Loss, Net of Tax(2) (6)
(3)
(10)
Total Comprehensive Income (Loss)$(51) $32
 $(349) $68



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

3
L BRANDS,
Table of Contents
BATH & BODY WORKS, INC.
CONSOLIDATED BALANCE SHEETS
(in millions except par value amounts)

 August 1,
2020		 February 1,
2020		 August 3,
2019
 (Unaudited)   (Unaudited)
ASSETS     
Current Assets:     
Cash and Cash Equivalents$2,611
 $1,499
 $853
Accounts Receivable, Net268
 306
 283
Inventories1,476
 1,287
 1,329
Other150
 153
 188
Total Current Assets4,505
 3,245
 2,653
Property and Equipment, Net2,292
 2,486
 2,756
Operating Lease Assets2,635
 3,053
 3,209
Goodwill628
 628
 1,348
Trade Names411
 411
 411
Deferred Income Taxes74
 84
 62
Other Assets335
 218
 179
Total Assets$10,880
 $10,125
 $10,618
LIABILITIES AND EQUITY (DEFICIT)     
Current Liabilities:     
Accounts Payable$957
 $647
 $763
Accrued Expenses and Other1,340
 1,052
 919
Current Debt460
 61
 75
Current Operating Lease Liabilities624
 478
 456
Income Taxes52
 134
 3
Total Current Liabilities3,433
 2,372
 2,216
Deferred Income Taxes191
 219
 241
Long-term Debt6,269
 5,487
 5,475
Long-term Operating Lease Liabilities2,698
 3,052
 3,165
Other Long-term Liabilities193
 490
 450
Shareholders’ Equity (Deficit):     
Preferred Stock - $1.00 par value; 10 shares authorized; none issued0
 0
 0
Common Stock - $0.50 par value; 1,000 shares authorized; 286, 285 and 284 shares issued; 278, 277 and 276 shares outstanding, respectively143
 142
 142
Paid-in Capital869
 847
 806
Accumulated Other Comprehensive Income49
 52
 49
Retained Earnings (Deficit)(2,611) (2,182) (1,572)
Less: Treasury Stock, at Average Cost; 8, 8 and 8 shares, respectively(358) (358) (358)
Total L Brands, Inc. Shareholders’ Equity (Deficit)(1,908) (1,499) (933)
Noncontrolling Interest4
 4
 4
Total Equity (Accumulated Deficit)(1,904) (1,495) (929)
Total Liabilities and Equity (Deficit)$10,880
 $10,125
 $10,618
July 31,
2021		January 30,
2021		August 1,
2020
 (Unaudited) (Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents$1,988 $3,903 $2,611 
Cash in Escrow related to Victoria's Secret & Co. Spin-Off600 — — 
Accounts Receivable, Net230 269 268 
Inventories1,473 1,273 1,476 
Other223 134 150 
Total Current Assets4,514 5,579 4,505 
Property and Equipment, Net2,001 2,095 2,292 
Operating Lease Assets2,564 2,558 2,635 
Goodwill628 628 628 
Trade Names411 411 411 
Deferred Income Taxes70 69 74 
Other Assets204 231 335 
Total Assets$10,392 $11,571 $10,880 
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable$838 $683 $957 
Accrued Expenses and Other1,305 1,457 1,340 
Current Debt— — 460 
Current Operating Lease Liabilities480 594 624 
Income Taxes2 92 52 
Total Current Liabilities2,625 2,826 3,433 
Deferred Income Taxes250 234 191 
Long-term Debt5,938 6,366 6,269 
Long-term Operating Lease Liabilities2,476 2,495 2,698 
Other Long-term Liabilities291 311 193 
Shareholders’ Equity (Deficit):
Preferred Stock - $1.00 par value; 10 shares authorized; none issued— — — 
Common Stock - $0.50 par value; 1,000 shares authorized; 280, 286 and 286 shares issued; 265, 278 and 278 shares outstanding, respectively140 143 143 
Paid-in Capital911 891 869 
Accumulated Other Comprehensive Income87 83 49 
Retained Earnings (Accumulated Deficit)(1,505)(1,421)(2,611)
Less: Treasury Stock, at Average Cost; 15, 8 and 8 shares, respectively(822)(358)(358)
Total Shareholders’ Equity (Deficit)(1,189)(662)(1,908)
Noncontrolling Interest1 1 4 
Total Equity (Deficit)(1,188)(661)(1,904)
Total Liabilities and Equity (Deficit)$10,392 $11,571 $10,880 

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

4
L BRANDS,
Table of Contents
BATH & BODY WORKS, INC.
CONSOLIDATED STATEMENTS OF TOTAL EQUITY (DEFICIT)
(in millions except per share amounts)
(Unaudited)

Second Quarter 2021
 Common StockPaid-In
Capital		Accumulated
Other
Comprehensive
Income		Retained
Earnings (Accumulated Deficit)		Treasury
Stock, at
Average
Cost		Noncontrolling InterestTotal Equity (Deficit)
Shares
Outstanding		Par
Value
Balance, May 1, 2021277 $144 $903 $86 $(1,144)$(523)$1 $(533)
Net Income— — — — 374 — — 374 
Other Comprehensive Income— — — 1 — — — 1 
Total Comprehensive Income— — — 1 374 — — 375 
Cash Dividends ($0.15 per share)— — — — (42)— — (42)
Repurchases of Common Stock(14)— — — — (1,029)— (1,029)
Treasury Share Retirement— (5)(32)— (693)730 — — 
Share-based Compensation and Other2 1 40 — — — — 41 
Balance, July 31, 2021265 $140 $911 $87 $(1,505)$(822)$1 $(1,188)

Second Quarter 2020
 Common Stock 
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income
 
Retained
Earnings (Accumulated Deficit)
 
Treasury
Stock, at
Average
Cost
 Noncontrolling Interest Total Equity (Deficit)
Shares
Outstanding
 
Par
Value
Balance, May 2, 2020278
 $143
 $865
 $51
 $(2,562) $(358) $3
 $(1,858)
Net Loss—
 0
 0
 0
 (49) 0
 0
 (49)
Other Comprehensive Loss—
 0
 0
 (2) 0
 0
 0
 (2)
Total Comprehensive Loss—
 0
 0
 (2) (49) 0
 0
 (51)
Share-based Compensation and Other0
 0
 4
 0
 0
 0
 1
 5
Balance, August 1, 2020278
 $143
 $869
 $49
 $(2,611) $(358) $4
 $(1,904)

 Common StockPaid-In
Capital		Accumulated
Other
Comprehensive
Income		Retained
Earnings (Accumulated Deficit)		Treasury
Stock, at
Average
Cost		Noncontrolling InterestTotal Equity (Deficit)
Shares
Outstanding		Par
Value
Balance, May 2, 2020278 $143 $865 $51 $(2,562)$(358)$3 $(1,858)
Net Loss— — — — (49)— — (49)
Other Comprehensive Loss— — — (2)— — — (2)
Total Comprehensive Loss— — — (2)(49)— — (51)
Share-based Compensation and Other— — 4 — — — 1 5 
Balance, August 1, 2020278 $143 $869 $49 $(2,611)$(358)$4 $(1,904)
Second Quarter 2019
 Common Stock 
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income
 
Retained
Earnings (Accumulated Deficit)
 
Treasury
Stock, at
Average
Cost
 Noncontrolling Interest Total Equity (Deficit)
Shares
Outstanding
 
Par
Value
Balance, May 4, 2019276
 $142
 $786
 $55
 $(1,527) $(358) $4
 $(898)
Net Income—
 0
 0
 0
 38
 0
 0
 38
Other Comprehensive Loss—
 0
 0
 (6) 0
 0
 0
 (6)
Total Comprehensive Income (Loss)—
 0
 0
 (6) 38
 0
 0
 32
Cash Dividends ($0.30 per share)—
 0
 0
 0
 (83) 0
 0
 (83)
Share-based Compensation and Other0
 0
 20
 0
 0
 0
 0
 20
Balance, August 3, 2019276
 $142
 $806
 $49
 $(1,572) $(358) $4
 $(929)

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

5
L BRANDS,
Table of Contents
BATH & BODY WORKS, INC.
CONSOLIDATED STATEMENTS OF TOTAL EQUITY (DEFICIT)
(in millions except per share amounts)
(Unaudited)

Year-to-Date 2021
 Common StockPaid-In
Capital		Accumulated
Other
Comprehensive
Income		Retained
Earnings (Accumulated Deficit)		Treasury
Stock, at
Average
Cost		Noncontrolling InterestTotal Equity (Deficit)
Shares
Outstanding		Par
Value
Balance, January 30, 2021278 $143 $891 $83 $(1,421)$(358)$1 $(661)
Net Loss— — — — 651 — — 651 
Other Comprehensive Income— — — 4 — — — 4 
Total Comprehensive Income— — — 4 651 — — 655 
Cash Dividends ($0.15 per share)— — — — (42)— — (42)
Repurchases of Common Stock(17)— — — — (1,194)— (1,194)
Treasury Share Retirement— (5)(32)— (693)730 — — 
Share-based Compensation and Other4 2 52 — — — — 54 
Balance, July 31, 2021265 $140 $911 $87 $(1,505)$(822)$1 $(1,188)

Year-to-Date 2020
 Common Stock 
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income
 
Retained
Earnings (Accumulated Deficit)
 
Treasury
Stock, at
Average
Cost
 Noncontrolling Interest Total Equity (Deficit)
Shares
Outstanding
 
Par
Value
Balance, February 1, 2020277
 $142
 $847
 $52
 $(2,182) $(358) $4
 $(1,495)
Net Loss—
 0
 0
 0
 (346) 0
 0
 (346)
Other Comprehensive Loss—
 0
 0
 (3) 0
 0
 0
 (3)
Total Comprehensive Loss—
 0
 0
 (3) (346) 0
 0
 (349)
Cash Dividends ($0.30 per share)—
 0
 0
 0
 (83) 0
 0
 (83)
Share-based Compensation and Other1
 1
 22
 0
 0
 0
 0
 23
Balance, August 1, 2020278
 $143
 $869
 $49
 $(2,611) $(358) $4
 $(1,904)

 Common StockPaid-In
Capital		Accumulated
Other
Comprehensive
Income		Retained
Earnings (Accumulated Deficit)		Treasury
Stock, at
Average
Cost		Noncontrolling InterestTotal Equity (Deficit)
Shares
Outstanding		Par
Value
Balance, February 1, 2020277 $142 $847 $52 $(2,182)$(358)$4 $(1,495)
Net Loss— — — — (346)— — (346)
Other Comprehensive Loss— — — (3)— — — (3)
Total Comprehensive Loss— — — (3)(346)— — (349)
Cash Dividends ($0.30 per share)— — — — (83)— — (83)
Share-based Compensation and Other1 1 22 — — — — 23 
Balance, August 1, 2020278 $143 $869 $49 $(2,611)$(358)$4 $(1,904)
Year-to-Date 2019
 Common Stock 
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income
 
Retained
Earnings (Accumulated Deficit)
 
Treasury
Stock, at
Average
Cost
 Noncontrolling Interest Total Equity (Deficit)
Shares
Outstanding
 
Par
Value
Balance, February 2, 2019275
 $141
 $771
 $59
 $(1,482) $(358) $4
 $(865)
Cumulative Effect of Accounting Change—
 0
 0
 0
 (2) 0
 0
 (2)
Balance, February 3, 2019275
 141
 771
 59
 (1,484) (358) 4
 (867)
Net Income—
 0
 0
 0
 78
 0
 0
 78
Other Comprehensive Loss—
 0
 0
 (10) 0
 0
 0
 (10)
Total Comprehensive Income (Loss)—
 0
 0
 (10) 78
 0
 0
 68
Cash Dividends ($0.60 per share)—
 0
 0
 0
 (166) 0
 0
 (166)
Share-based Compensation and Other1
 1
 35
 0
 0
 0
 0
 36
Balance, August 3, 2019276
 $142
 $806
 $49
 $(1,572) $(358) $4
 $(929)

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


6
L BRANDS,
Table of Contents
BATH & BODY WORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
 Year-to-Date
 20212020
Operating Activities:
Net Income (Loss)$651 $(346)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Depreciation of Long-lived Assets258 266 
Loss on Extinguishment of Debt105 — 
Victoria's Secret Asset Impairment Charges— 214 
Share-based Compensation Expense30 28 
Deferred Income Taxes16 (19)
Gain from Hong Kong Store Closure and Lease Termination— (39)
Changes in Assets and Liabilities:
Accounts Receivable39 37 
Inventories(200)(191)
Accounts Payable, Accrued Expenses and Other(42)304 
Income Taxes Payable(144)(92)
Other Assets and Liabilities(140)124 
Net Cash Provided by Operating Activities573 286 
Investing Activities:
Capital Expenditures(178)(124)
Other Investing Activities10 8 
Net Cash Used for Investing Activities(168)(116)
Financing Activities:
Proceeds from Issuance of Long-Term Debt, Net of Issuance Costs— 1,231 
Proceeds from Victoria's Secret & Co. Notes600 — 
Payments of Long-term Debt(1,130)— 
Borrowing from Credit Agreement— 950 
Repayment of Credit Agreement— (950)
Borrowings from Foreign Facilities— 33 
Repayments of Foreign Facilities— (85)
Repurchases of Common Stock(1,194)— 
Dividends Paid(42)(83)
Tax Payments related to Share-based Awards(56)(6)
Proceeds from Stock Option Exercises76 — 
Other Financing Activities(6)(19)
Net Cash Provided by (Used for) Financing Activities(1,752)1,071 
Effects of Exchange Rate Changes on Cash and Cash Equivalents and Restricted Cash2 (1)
Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash(1,345)1,240 
Cash and Cash Equivalents and Restricted Cash, Beginning of Period3,933 1,499 
Cash and Cash Equivalents and Restricted Cash, End of Period$2,588 $2,739 
 Year-to-Date
 2020 2019
Operating Activities:   
Net Income (Loss)$(346) $78
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:   
Depreciation of Long-lived Assets266
 295
Long-lived Store and Lease Asset Impairment Charges214
 0
Share-based Compensation Expense28
 44
Deferred Income Taxes(19) 15
Gain from Hong Kong Store Closure and Lease Termination(39) 0
Loss on Extinguishment of Debt0
 40
Gains on Distributions from Easton Investments0
 (2)
Changes in Assets and Liabilities:   
Accounts Receivable37
 55
Inventories(191) (83)
Accounts Payable, Accrued Expenses and Other304
 (107)
Income Taxes Payable(92) (138)
Other Assets and Liabilities124
 (35)
Net Cash Provided by Operating Activities286
 162
Investing Activities:   
Capital Expenditures(124) (244)
Other Investing Activities8
 7
Net Cash Used for Investing Activities(116) (237)
Financing Activities:   
Proceeds from Issuance of Long-Term Debt, Net of Issuance Costs1,231
 486
Payments of Long-term Debt0
 (799)
Borrowing from Credit Agreement950
 0
Repayment of Credit Agreement(950) 0
Borrowings from Foreign Facilities33
 25
Repayments of Foreign Facilities(85) (14)
Dividends Paid(83) (166)
Tax Payments related to Share-based Awards(6) (11)
Other Financing Activities(19) (4)
Net Cash Provided by (Used for) Financing Activities1,071
 (483)
Effects of Exchange Rate Changes on Cash and Cash Equivalents and Restricted Cash(1) (2)
Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash1,240
 (560)
Cash and Cash Equivalents and Restricted Cash, Beginning of Period1,499
 1,413
Cash and Cash Equivalents and Restricted Cash, End of Period$2,739
 $853

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

7
L BRANDS,
Table of Contents
BATH & BODY WORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Description of Business and Basis of Presentation
Description of Business
As of July 31, 2021, L Brands, Inc. (the "Company”("L Brands" or the "Company") operates in the highly competitive specialty retail business. The Company iswas a specialty retailer of home fragrance products, body care, soaps and sanitizers, women’s intimate and other apparel, and personal and beauty care products. TheThrough the Bath & Body Works, Victoria's Secret and PINK retail brands, the Company sells itssold merchandise through company-ownedcompany-operated specialty retail stores in the U.S., Canada U.K., Ireland and Greater China, and through its websites and other channels. The Company's other international operations are primarily through franchise, license, wholesale and wholesalejoint venture partners. The Company currently operates the following retail brands:
Bath & Body Works
Victoria’s Secret
PINK
On February 20, 2020,August 2, 2021, in connection with the separation of the Victoria's Secret business discussed below, the Company and an affiliate of Sycamore Partners Management, L.P. ("Sycamore"), entered into a Transaction Agreement (the "Transaction Agreement") pursuantchanged its name from L Brands, Inc. to which, among other things, the Company would have sold a 55% interest in the Company's Victoria's Secret and PINK businesses (collectively, "Victoria's Secret"). On May 4, 2020, the Company and Sycamore mutually agreed to terminate the Transaction Agreement.
The Company remains committed to establishing Bath & Body Works, as a pure-play public company and is takingInc. Additionally, starting August 3, 2021, the necessary steps to prepare Company's common stock began trading under the stock symbol "BBWI."
Victoria's Secret & Co. Spin-Off
On July 9, 2021, the Company announced that its Board of Directors approved the previously announced separation of the Victoria’s Secret business, including PINK (the "Separation"), into an independent, publicly traded company ("Victoria's Secret & Co."). On August 2, 2021 (the “Distribution Date”), after the New York Stock Exchange ("NYSE") market closing, the Separation was completed and the Company transferred certain assets and liabilities associated with its Victoria's Secret business to operateVictoria's Secret & Co. The Separation was achieved through the Company's distribution (the "Distribution") of 100% of the shares of Victoria's Secret & Co. common stock to holders of L Brands' common stock as a separate standalone company. Management is actively engagedof the close of business on the record date of July 22, 2021. The Company's stockholders of record received one share of Victoria’s Secret & Co. common stock for every three shares of the Company's common stock. On August 3, 2021, Victoria’s Secret & Co. became an independent, publicly-traded company trading on the NYSE under the stock symbol "VSCO." The Company retained no ownership interest in implementing a comprehensive profit improvement plan that will enable more effective and faster decision making and set each business up independently, allowing for a more efficient future separation.
DuringVictoria’s Secret & Co. following the secondSeparation. Beginning in the third quarter of 2020,fiscal 2021, the historical financial results of the Victoria's Secret business for periods prior to the Distribution Date will be reflected in the Company’s consolidated financial statements as discontinued operations. On August 2, 2021, Victoria's Secret & Co. made cash payments of approximately $976 million to the Company completed its comprehensive review ofin connection with the home office organizations in order to achieve meaningful reductions in overhead expenses and decentralize significant shared functions and services to support the creation of standalone companies. This resulted in a reduction of the home office headcount by approximately 15%, or about 850 associates. For additional information, see Note 4, “Restructuring."Separation.
Impacts of COVID-19
In March 2020, theThe coronavirus pandemic ("COVID-19") was declared a global pandemic by the World Health Organization. This pandemic has negatively affected the U.S.created significant public health concerns as well as economic disruption, uncertainty and global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions, including mandatory closures and orders to “shelter-in-place.” The situation and preventative or protective actions that governments around the world have taken to contain the spread of COVID-19 have resulted in a period of disruption, including closure of the Company's stores, limited store operating hours, reduced customer traffic and consumer spending and delays in manufacturing and shipping of products and raw materials. During this period, the Company is focused on protecting the health and safety of its customers, employees, contractors, suppliers, and other business partners. The Company is also working with its suppliers to minimize potential disruptions, while managing the Company's business in response to a changing dynamic.
volatility. The Company's business operations and financial performance for 2020 have been materially impacted by the COVID-19 pandemic. AllIn the first quarter of 2020, all the Company's stores in North America were closed on March 17th and almost all remained closed17, 2020, but the Company was able to re-open the majority of its stores as of the beginningend of the second quarter. Operationsquarter of 2020. Additionally, operations for Victoria’s Secret Direct were temporarily suspended for approximately one week in late March 2020, while Bath & Body Works Direct has remained open for the duration of 2020. The Company has re-opened approximately 1,600 Bath & Body Works stores and approximately 690 Victoria’s Secret stores in North America, representing the majority of its stores, as of August 1, 2020. On average, Bath & Body Works stores were closed for about half of the second quarter and Victoria’s Secret stores were closed for about 70% of the second quarter (including the impact of the approximately 250 stores which
During 2020, the Company plans to close). Additionally, the Company has dedicated resources to maximize capacity in its direct fulfillment centers to meet increased customer demand, while focusing on distribution, fulfillment and call center safety.
Since the global COVID-19 crisis began, the Company has takentook prudent actions to manage expenses and to maintain its solid cash position and financial flexibility through the pandemic, including:
Furloughing most store associates as of April 5 during their temporary store closure, while continuing to provide healthcare benefits for eligible associates;
Suspending associate merit increases;
Temporarily reducing salaries for senior vice presidents and above by 20%;

Temporarily suspending cash compensation for all members of the Board of Directors;
Reducing 2020 forecasted capital expenditures from $550 million to approximately $250 million;
Reducing Spring (first and second quarter) inventory receipts versus last year by approximately 45% at Victoria's Secret and PINK, and by approximately 20% at Bath & Body Works;
Suspending the quarterly cash dividend beginning in the second quarter of fiscal 2020;
Suspending most store and select office rent payments during the temporary closures.flexibility. The Company is in active discussions withalso has adopted new operating models focused on providing a safe store environment for its landlords to negotiate with respect to these rent paymentscustomers and go-forward occupancy costs;
Converting the revolving credit facility toassociates, while also delivering an asset-backed loan facility and issuing $1.25 billion in new notes; and
Extending payment terms to vendors.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which, among other things, provides employer payroll tax credits for wages paid to employees who are unable to work during the coronavirus outbreak and options to defer payroll tax payments. Basedengaging shopping experience. The Company remains focused on the Company's evaluation of the CARES Act, it qualifies for certain employer payroll tax credits, which will offset store operating expenses. Year-to-date the Company has recognized $54 million of qualified payroll tax credits.
For most stores and select office locations, rent from April through July was not paid, or only partially paid, due to the temporary closures during the COVID-19 pandemic. The Company is in active discussions with its landlords to negotiate with respect to these rent payments and go-forward occupancy costs. The Financial Accounting Standards Board (“FASB”) issued guidance in April, which allows COVID-19-related rent concessions to be treated as variable rent. The Company has not yet finalized negotiations with respect to the majoritysafe operations of its leases.distribution, fulfillment and call centers while maximizing its direct businesses. There remains the potential for COVID-related risks of closure or operating restrictions, which could materially impact the Company's operations and financial performance in future periods.
Fiscal Year
The Company’s fiscal year ends on the Saturday nearest to January 31. As used herein, “second“second quarter of 2021” and “second quarter of 2020” and “second quarter of 2019” refer to the thirteen-weekthirteen-week periods ended July 31, 2021 and August 1, 2020, and August 3, 2019, respectively. “Year-to-Date 2020”2021” and “year-to-date 2019”2020” refer to the twenty-six-week periods ending July 31, 2021 and August 1, 2020, and August 3, 2019, respectively.
Basis of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The Company accounts for investments in unconsolidated entities where it exercises significant influence, but does not have control, using the equity method. Under the equity method of accounting, the Company recognizes its share of the investee's net income or loss. Losses are only recognized to the extent the Company has positive carrying value related to the investee. Carrying values are only reduced below zero if the Company has an obligation to provide funding to the investee. The Company’s share of net income or loss of unconsolidated entities from which the Company purchases merchandise or
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merchandise components is included in Costs of Goods Sold, Buying and Occupancy in the Consolidated Statements of Income (Loss). The Company’s share of net income or loss from its investment in the Victoria's Secret U.K. joint venture with Next PLC is included in General, Administrative and Store Operating Expenses in the Consolidated Statements of Income (Loss). The Company’s share of net income or loss of all other unconsolidated entities is included in Other Income (Loss) in the Consolidated Statements of Income (Loss). The Company’s equity method investments are required to be reviewed for impairment when it is determined there may be an other-than-temporary loss in value.
Interim Financial Statements
The Consolidated Financial Statements as of and for the periods ended July 31, 2021 and August 1, 2020 and August 3, 2019 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in the Company’s 20192020 Annual Report on Form 10-K.
In the opinion of management, the accompanying Consolidated Financial Statements reflect all adjustments, which are of a normal recurring nature and necessary for a fair presentation of the results for the interim periods.
Seasonality of Business
Due to the impacts of COVID-19 and seasonal variations in the retail industry, the results of operations for the interim period is not necessarily indicative of the results expected for the full fiscal year.
Restricted Cash
In July 2021, Victoria’s Secret & Co., prior to the Separation and while a subsidiary of the Company, issued $600 million of 4.625% notes due in July 2029 (the "Victoria's Secret & Co. Notes"). As of July 31, 2021, the initial proceeds were held in escrow for release to Victoria's Secret & Co. upon satisfaction of certain conditions, including completion of the Separation. If the conditions for the release from escrow of the proceeds were not satisfied, the Victoria's Secret & Co. Notes would have been subject to mandatory redemption. The $600 million initial proceeds are included in Cash in Escrow related to Victoria's Secret & Co. Spin-Off on the July 31, 2021 Consolidated Balance Sheet. For additional information, see Note 9, “Long-term Debt and Borrowing Facilities.”
During the second quarter,2020, the Company placed cash on deposit with certain financial institutions as collateral for their lending commitments. The amount of collateral required reduces over time as the Company makes certain paydowns. For additional information see Note 10, "Long-term Debt and Borrowing Facilities."
These deposits totalingtotaled $30 million and $128 million areas of January 30, 2021 and August 1, 2020, respectively, and were recorded in Other Assets on the August 1, 2020 Consolidated Balance Sheet. TheSheets. During the second quarter of 2021, the Company terminated these lending commitments which released the restrictions on this cash. Accordingly, the balance was reclassified to Cash and Cash Equivalents during the second quarter of 2021.
As of July 31, 2021, the Company's total Cash and Cash Equivalents and Restricted Cash was $2.739 billion as of August 1, 2020.

restricted cash totaled $2.588 billion.
Derivative Financial Instruments
The Company uses derivative financial instruments to manage exposure to foreign currency exchange rates. The Company does not use derivative instruments for trading purposes. All derivative instruments are recorded on the Consolidated Balance Sheets at fair value.
The earnings of the Company's wholly owned foreign businessesoperations are subject to exchange rate risk as substantially all the merchandise is sourced through U.S. dollar transactions. The Company uses foreign currency forward contracts designated as cash flow hedges to mitigate this foreign currency exposure for its Canadian and U.K. businesses.operations. Amounts are reclassified from accumulated other comprehensive income (loss) upon sale of the hedged merchandise to the customer. These gains and losses are recognized in Costs of Goods Sold, Buying and Occupancy in the Consolidated Statements of Income (Loss). The fair value of designated cash flow hedges is not significant as of August 1, 2020.for any period presented.
Concentration of Credit Risk
The Company maintains cash and cash equivalents, restricted cash and derivative contracts with various major financial institutions. The Company monitors the relative credit standing of financial institutions with whom the Company transacts and limits the amount of credit exposure with any one entity. Typically, theThe Company’s investment portfolio is primarily comprised of U.S. government obligations, U.S. Treasury and AAA-rated money market funds, commercial paper and bank deposits.
The Company also periodically reviews the relative credit standing of franchise, license and wholesale partners and other entities to which the Company grants credit terms in the normal course of business. The Company records andetermines the required allowance for uncollectable accountsexpected credit losses using information such as customer credit history and financial condition. Amounts are recorded to the allowance when it becomes probableis determined that the counterparty will be unable to pay.expected credit losses may occur.
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Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from those estimates, and the Company revises its estimates and assumptions as new information becomes available.
2. NewRecently Issued Accounting Pronouncements
Credit Losses
In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses, which requires the use of a forward-looking expected loss impairment model for accounts receivable and certain other financial instruments. The Company adopteddid not adopt any new accounting standards during the standard in the firstsecond quarter of 2020. The adoption2021 that had a material impact on the Company's consolidated results of this standard didoperations, financial position or cash flows. In addition, there are no new accounting standards not yet adopted that are expected to have a material impact on the Company's consolidated results of operations, financial position or cash flows.
Guarantor Reporting
In March 2020, the SEC issued a final rule, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities, that simplifies the disclosure requirements related to registered securities under Rule 3-10 of Regulation S-X. The rule replaces the requirement to provide condensed consolidating financial information with a requirement to present summarized financial information of the issuers and guarantors. It also requires qualitative disclosures with respect to information about guarantors, the terms and conditions of guarantees and the factors that may affect payment. These disclosures may be provided outside the footnotes to the Company’s consolidated financial statements. The Company early adopted the reporting requirements of the rule in the first quarter of 2020 and elected to provide these disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
3.2. Revenue Recognition
Accounts receivable, net from revenue-generating activities were $129 million as of July 31, 2021, $125 million as of January 30, 2021 and $186 million as of August 1, 2020, $152 million as of February 1, 2020 and $174 million as of August 3, 2019.2020. Accounts receivable primarily relate to amounts due from the Company's franchise, license and wholesale partners. Under these arrangements, payment terms are typically 60 to 90 days. As a result of the COVID-19 pandemic, the Company has extended the payment terms for certain partners.
The Company records deferred revenue when cash payments are received in advance of transfer of control of goods or services. Deferred revenue primarily relates to gift cards, loyalty and private label credit card programs and direct channel shipments, which are all impacted by seasonal and holiday-related sales patterns. Deferred revenue was $325 million as of July 31, 2021, $371 million as of January 30, 2021 and $316 million as of August 1, 2020, $342 million as of February 1, 2020 and $276 million as of August 3, 2019.2020. The Company recognized $132$167 million as revenue year-to-date 20202021 from amounts recorded as deferred revenue at the beginning of the year. As of August 1, 2020,July 31, 2021, the Company recorded deferred revenue of $304$316 million within Accrued Expenses and Other, and $12$9 million within Other Long-term Liabilities on the Consolidated Balance Sheet.

The following table provides a disaggregation of Net Sales for the second quarter and year-to-date 20202021 and 2019:2020:
Second QuarterYear-to-Date
Second Quarter Year-to-Date2021202020212020
2020 2019 2020 2019(in millions)
Bath & Body Works Stores - U.S. and CanadaBath & Body Works Stores - U.S. and Canada$1,230 $678 $2,280 $1,102 
Bath & Body Works DirectBath & Body Works Direct407 519 756 807 
Bath & Body Works International (a)Bath & Body Works International (a)67 56 137 105 
Total Bath & Body WorksTotal Bath & Body Works1,704 1,253 3,173 2,014 
Victoria’s Secret Stores - U.S. and CanadaVictoria’s Secret Stores - U.S. and Canada1,037 364 1,970 877 
Victoria’s Secret DirectVictoria’s Secret Direct469 614 990 922 
Victoria’s Secret International (b)Victoria’s Secret International (b)108 88 208 161 
Total Victoria’s SecretTotal Victoria’s Secret1,614 1,066 3,168 1,960 
(in millions)
Bath & Body Works Stores (a)$678
 $883
 $1,102
 $1,597
Bath & Body Works Direct519
 178
 807
 335
Total Bath & Body Works1,197
 1,061
 1,909
 1,932
Victoria’s Secret Stores (a)364
 1,233
 877
 2,381
Victoria’s Secret Direct614
 373
 922
 735
Total Victoria’s Secret978
 1,606
 1,799
 3,116
Victoria's Secret and Bath & Body Works International (b)80
 155
 146
 289
Other (c)64
 80
 120
 193
Total Net Sales$2,319
 $2,902
 $3,974
 $5,530
Total Net Sales$3,318 $2,319 $6,341 $3,974 
 _______________
(a)Includes company-owned stores in the U.S. and Canada.
(b)Includes company-owned stores in the U.K., Ireland and Greater China, direct sales in Greater China and wholesale sales, royalties and other fees associated with non-company owned stores.
(c)Includes wholesale revenues from the Company's sourcing function.
(a)Results include royalties associated with franchised store and wholesale sales.
4.(b)Results include company-operated stores in the U.K. (pre-joint venture) and Greater China, and royalties associated with franchised stores and wholesale sales.

3. Restructuring Activities
The Company remains committed to establishing Bath & Body Works as a pure-play public company and is taking the necessary steps to prepare Victoria's Secret to operate as a separate standalone company. Management of the Company is actively engaged in implementing a comprehensive profit improvement plan that will better position the Company to evaluate the next steps for the separation of the Victoria's Secret business. During the second quarter of 2020, the Company completed itsa comprehensive review of its home office organizations in order to achieve meaningful reductions in overhead expenses and decentralize significant shared functions and services to support the creationseparation of standalone companies.the Bath & Body Works and Victoria's Secret businesses. This resulted in a reduction of the home office headcount by approximately 15%, or about 850 associates. Pre-tax severance and related costs associated with these reductions, totaling $81 million, are included in General, Administrative and Store Operating Expenses in the 2020 Consolidated Statements of Loss. Costs of $26$51 million and $5$12 million are recorded within the Victoria's Secret and Bath & Body Works segments, respectively, while the remaining $50$18 million is recorded within Other.
During year-to-date 2021, the Company made payments of $22 million related to severance and related costs associated with these reductions. As of August 1, 2020,July 31, 2021, a liability of $79$14 million related to these costsreductions is included in Accrued Expenses and Other on the Consolidated Balance Sheet.
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Victoria's Secret U.K.
TheDue to challenging business results for Victoria's Secret in the U.K., the Company is actively workingentered into Administration in June 2020 to restructure store lease agreements and reduce operating losses in the Victoria's Secret U.K. business. TheIn October 2020, the Company entered into "Light Administration" in June to restructure store lease agreements and explore the sale of the business to a joint venture or franchise partner.with Next PLC for the Victoria’s Secret business in the United Kingdom and Ireland. Under this agreement, the Company owns 49% of the joint venture, and Next owns 51% and is responsible for operations. The Company subsequently signed a non-binding term sheet with a major fashion retailer and isaccounts for its investment in an exclusive periodthe joint venture under the equity method of negotiation.accounting.
5.4. Earnings (Loss) Per Share and Shareholders’ Equity (Deficit)
Earnings (Loss) Per Share
Earnings (Loss)(loss) per basic share is computed based on the weighted-average number of outstanding common shares. Earnings (Loss)(loss) per diluted share include the weighted-average effect of dilutive optionsrestricted stock and restricted stockoptions on the weighted-average shares outstanding.

The following table provides the weighted-average shares utilized for the calculation of basic and diluted earnings (loss) per share for the second quarter and year-to-date 20202021 and 2019:2020:
Second QuarterYear-to-Date
Second Quarter Year-to-Date2021202020212020
2020 2019 2020 2019(in millions)
(in millions)
Weighted-average Common Shares:       
Issued Shares286
 284
 285
 284
Common SharesCommon Shares288 286 288 285 
Treasury Shares(8) (8) (8) (8)Treasury Shares(13)(8)(11)(8)
Basic Shares278
 276

277

276
Basic Shares275 278 277 277 
Effect of Dilutive Options and Restricted Stock (a)0
 2
 0
 2
Effect of Dilutive Restricted Stock and OptionsEffect of Dilutive Restricted Stock and Options5 — 5 — 
Diluted Shares278
 278

277

278
Diluted Shares280 278 282 277 
Anti-dilutive Options and Awards (a)11
 6
 12
 5
Anti-dilutive Options and Awards (a)1 11 1 12 
 _______________
(a)These options and awards were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. For 2020, the dilutive impact of outstanding options and awards were excluded from dilutive shares as a result of the Company's net loss for the periods.
(a)These options and awards were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. For 2020, the dilutive impact of all outstanding options and awards were excluded from dilutive shares as a result of the Company's net loss for the period.
Shareholders’ Equity (Deficit)
Common Stock Share Repurchases
In March 2018,2021, the Company's Board of Directors approvedauthorized a new $500 million share repurchase plan, which replaced the $79 million remaining under the March 2018 repurchase program. Pursuant to the Board's authorization, the Company entered into a Rule 10b5-1 purchase plan to effectuate share repurchases for the first $250 million. In May 2021, the Company initiated a second $250 million Rule 10b5-1 purchase plan to effectuate the remaining share repurchases under the March 2021 repurchase plan.
In July 2021, the Company's Board of Directors authorized a new $1.5 billion share repurchase program, which replaced the $36 million remaining under the March 2021 repurchase program. Under the authorization of this program, the Company entered into a stock repurchase agreement with its former Chief Executive Officer and certain of his affiliated entities pursuant to which the Company repurchased 10 million shares of its common stock for an aggregate purchase price of $730 million in July 2021.
The Company repurchased the following shares of its common stock during year-to-date 2021:
Repurchase ProgramAmount
Authorized		Shares
Repurchased		Amount
Repurchased		Average Stock Price
(in millions)(in thousands)(in millions)
March 2021$500 6,996 $464 $66.30 
July 2021$1,500 10,000 $730 $73.01 
The July 2021 Program had $79$770 million remaining as of August 1, 2020.July 31, 2021.
TheSubsequent to July 31, 2021, the Company did not repurchase anyrepurchased an additional 1.0 million shares during 2020 or 2019.of its common stock for $65 million under the July 2021 Program.
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Common Stock Retirement
In accordance with the Company's Board of Directors' resolution, shares of common stock repurchased under the July 2021 Program will be automatically retired and cancelled upon repurchase. As a result, the Company retired the 10 million shares repurchased under the July 2021 Program in the second quarter of 2021, which resulted in a reduction of $5 million in the par value of Common Stock, $32 million in Paid-in Capital and $693 million in Retained Earnings.
Dividends
Under the authority and declaration of the Board of Directors, the Company paid the following dividends during year-to-date 20202021 and 2019:2020:
  Ordinary Dividends Total Paid
  (per share) (in millions)
2020    
Second Quarter $0
 $0
First Quarter 0.30
 83
Total $0.30
 $83
2019    
Second Quarter $0.30
 $83
First Quarter 0.30
 83
Total $0.60
 $166

Ordinary DividendsTotal Paid
(per share)(in millions)
2021
Second Quarter$0.15 $42 
First Quarter— — 
Total$0.15 $42 
2020
Second Quarter$— $— 
First Quarter0.30 83 
Total$0.30 $83 
The Board of Directors suspended the quarterly cash dividend beginning in the second quarter of 2020.2020 as a proactive measure to strengthen the Company's financial flexibility and manage through the COVID-19 pandemic. In March 2021, the Company's Board of Directors reinstated the annual dividend at $0.60 per share, beginning with the quarterly dividend paid in June 2021. In August 2021, the Company's Board of Directors declared the third quarter of 2021 ordinary dividend of $0.15 per share.

6.
5. Inventories
The following table provides details of inventories as of July 31, 2021, January 30, 2021 and August 1, 2020, February 1, 2020 and August 3, 2019:2020:
 August 1,
2020		 February 1,
2020		 August 3,
2019
 (in millions)
Finished Goods Merchandise$1,259
 $1,152
 $1,132
Raw Materials and Merchandise Components217
 135
 197
Total Inventories$1,476
 $1,287
 $1,329

July 31,
2021		January 30,
2021		August 1,
2020
(in millions)
Finished Goods Merchandise$1,245 $1,073 $1,259 
Raw Materials and Merchandise Components228 200 217 
Total Inventories$1,473 $1,273 $1,476 
Inventories are principally valued at the lower of cost on a weighted-average cost basis, or net realizable value.value, on an average cost basis.

7.6. Long-Lived Assets
The following table provides details of property and equipment, net as of July 31, 2021, January 30, 2021 and August 1, 2020, February 1, 2020 and August 3, 2019:2020:
July 31,
2021		January 30,
2021		August 1,
2020
(in millions)
Property and Equipment, at Cost$6,274 $6,204 $6,276 
Accumulated Depreciation and Amortization(4,273)(4,109)(3,984)
Property and Equipment, Net$2,001 $2,095 $2,292 
 August 1,
2020		 February 1,
2020		 August 3,
2019
 (in millions)
Property and Equipment, at Cost$6,276
 $6,613
 $6,808
Accumulated Depreciation and Amortization(3,984) (4,127) (4,052)
Property and Equipment, Net$2,292
 $2,486
 $2,756


Depreciation expense was $127$129 million and $150$127 million for the second quarter of 20202021 and 2019,2020, respectively. Depreciation expense was $266$258 million and $295$266 million for year-to-date 20202021 and 2019,2020, respectively.
Long-lived store assets, which include leasehold improvements, store related assets and operating lease assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Store assets are grouped at the lowest level for which they are largely independent of other assets or asset groups. If the estimated undiscounted future cash flows related to the asset group are less than the carrying value, the Company recognizes a loss equal to the difference between the carrying value and the estimated fair value, determined by the estimated
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discounted future cash flows of the asset group. For operating lease assets, the Company determines the fair value of the assets by comparing the contractual rent payments to estimated market rental rates. An individual asset within an asset group is not impaired below its estimated fair value. The fair value of long-lived store assets are determined using Level 3 inputs within the fair value hierarchy.
The Company remains committed to taking the necessary steps to prepare the Victoria's Secret business to operate asAs a separate, standalone company. Management is actively working on implementing a comprehensive profit improvement plan that will better position the Company to evaluate the next steps for the separationresult of the Victoria's Secret business. A component of the profit improvement plan includes afleet rationalization of the Victoria’s Secret company-owned store footprint. The Company expects that it will close approximately 250 stores in North America in 2020. Given the closures as well asexecuted during 2020 and the negative operating results of certain Victoria's Secret stores, the Company determined that the estimated undiscounted future cash flows were less than the carrying values for certain Victoria's Secret asset groups and, as a result, determined the estimated fair values of the store asset groups using estimated discounted future cash flows and estimated market rental rates. Long-lived store asset impairment charges are included within the Victoria's Secret segment, in Costs of Goods Sold, Buying and Occupancy in the 2020 Consolidated Statements of Loss.
The following table provides pre-tax long-lived store asset impairment charges included in the 2020 Consolidated Statements of Loss:
2020
Second QuarterYear-to-Date
(in millions)
Store Asset Impairment$14 $111 
Operating Lease Asset Impairment103 103 
Total Impairment$117 $214 
 Second Quarter Year-to-Date
 
Store Asset
Impairment
 Operating Lease Asset Impairment 
Total
Impairment
 
Store Asset
Impairment
 Operating Lease Asset Impairment 
Total
Impairment
 (in millions)
Victoria's Secret (a)$14
 $61
 $75
 $111
 $61
 $172
Victoria's Secret and Bath & Body Works International (b)0
 42
 42
 0
 42
 42
Total$14
 $103
 $117
 $111
 $103
 $214
 ________________
(a)Includes stores in the U.S. and Canada.
(b)Includes stores in the U.K., Ireland and Greater China.
Victoria's Secret Hong Kong
During the second quarter of 2020, the Company closed its unprofitable Victoria's Secret flagship store in Hong Kong. As a result of the store closure, the Company recognized a non-cash pre-tax gain of $39 million, primarily due to terminating the store lease and the related write-off of the operating lease liability in excess of the operating lease asset, which was partially impaired in fiscal 2019. This gain is included in Costs of Goods Sold, Buying and Occupancy in the 2020 Consolidated Statements of Loss. The Company also recorded $3 million of severance and related costs, included in General, Administrative and Store Operating Expenses in the 2020 Consolidated Statements of Loss.

8.7. Equity Investments
Easton
The Company has land and other investments in Easton, a planned community in Columbus, Ohio, that integrates office, hotel, retail, residential and recreational space. These investments, totaling $119 million as of July 31, 2021, $119 million as of January 30, 2021 and $124 million as of August 1, 2020, $118 million as of February 1, 2020 and $102 million as of August 3, 2019, are recorded in Other Assets on the Consolidated Balance Sheets.
Included in the Company’s Easton investments are equity interests in Easton Town Center, LLC (“ETC”) and Easton Gateway, LLC (“EG”), entities that own and develop commercial entertainment and shopping centers. The Company’s investments in ETC and EG are accounted for using the equity method of accounting. The Company has a majority financial interest in ETC and EG, but another unaffiliated member manages them, and certain significant decisions regarding ETC and EG require the consent of unaffiliated members in addition to the Company.
9.8. Income Taxes
TheFor the second quarter of 2021, the Company has historically calculated the provision for income taxes on the current estimate of the annual effective tax rate and adjusted as necessary for quarterly events. Due to the impacts of the COVID-19 pandemic, the income tax expense for the twenty-six-weeks ended August 1,second quarter of 2020 was computed on a year-to-date effective tax rate.
For the second quarter of 2020,2021, the Company’s effective tax rate was 17.7%25.1% compared to 10.1%17.7% in the second quarter of 2019.2020. The second quarter of 20202021 rate was lower than the Company's combined estimated federal and state statutory rate primarily due to the recognition of excess tax benefits recorded through the Consolidated Statements of Income on share-based awards that vested in the quarter. In the second quarter of 2020, the Company recognized a benefit for income taxes of $11 million on a loss before income taxes of $60 million. The second quarter of 2020 rate was lower than the Company's combined federal and state statutory rate primarily due to losses related to certain foreign subsidiaries, which generategenerated no tax benefit, partially offset by recent changes in tax legislation included in the CARES Act, which resulted in a $21 million tax benefit.
For year-to-date 2021, the Company's effective tax rate was 23.6% compared to 26.7% year-to-date 2020. The second quarter of 2019year-to-date 2021 rate was lower than the Company's combined estimated federal and state statutory rate primarily due to the resolutionrecognition of certainexcess tax matters.
For year-to-date 2020,benefits recorded through the Company's effective tax rate was 26.7% compared to 24.0% year-to-date 2019.Consolidated Statements of Income on share-based awards that vested year-to-date. The year-to-date 2020 rate was generally consistent with the Company's combined estimated federal and state statutory rate due
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to the resolution of certain tax matters, which resulted in a $50 million tax benefit and recent changes in tax legislation included in the CARES Act, which resulted in a $21 million tax benefit, offset by losses related to certain foreign subsidiaries, which generate no tax benefit. The year-to-date 2019 rate was lower than the Company's combined estimated federal and state statutory rate primarily due to the resolution of certain tax matters.
Income taxes paid were $13$320 million and $169$13 million for the second quarter of 20202021 and 2019,2020, respectively. Income taxes paid were $22$330 million and $181$22 million for year-to-date 20202021 and 2019,2020, respectively.
Uncertain Tax Positions
The Company had unrecognized tax benefits of $88 million as of February 1, 2020, of which $81 million, if recognized, would reduce the effective income tax rate. Through August 1, 2020, the Company had a net decrease to gross unrecognized tax benefits of $31 million, primarily due to the resolution of certain tax matters. The changes to the unrecognized tax benefits resulted in a $30 million benefit to the Company’s Provision for Income Taxes year-to-date.
Of the total unrecognized tax benefits as of August 1, 2020, it is reasonably possible that $28 million could change in the next 12 months due to audit settlements, expiration of statute of limitations or other resolution of uncertainties. Due to the uncertain and complex application of tax regulations, it is possible that the ultimate resolution of audits may result in amounts which could be different from this estimate. In such case, the Company will record additional tax expense or tax benefit in the period in which such matters are effectively settled.

10.9. Long-term Debt and Borrowing Facilities
The following table provides the Company’s outstanding debt balance, net of unamortized debt issuance costs and discounts, as of July 31, 2021, January 30, 2021 and August 1, 2020, February 1, 2020 and August 3, 2019:2020:
 August 1,
2020		 February 1,
2020		 August 3,
2019
 (in millions)
Senior Secured Debt with Subsidiary Guarantee     
$750 million, 6.875% Fixed Interest Rate Secured Notes due July 2025 ("2025 Secured Notes")$739
 $0
 $0
Secured Foreign Facilities101
 103
 95
Total Senior Secured Debt with Subsidiary Guarantee$840
 $103
 $95
Senior Debt with Subsidiary Guarantee     
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)$991

$991

$990
$860 million, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)858

858

857
$700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”)693

693

693
$500 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”)498

498

498
$500 million, 5.25% Fixed Interest Rate Notes due February 2028 (“2028 Notes”)496
 496
 496
$500 million, 9.375% Fixed Interest Rate Notes due July 2025 ("2025 Notes")492
 0
 0
$500 million, 7.50% Fixed Interest Rate Notes due June 2029 ("2029 Notes")488
 487
 486
$450 million, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)450
 450
 449
$297 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”)277
 276
 274
Total Senior Debt with Subsidiary Guarantee$5,243

$4,749

$4,743
Senior Debt     
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”)$348

$348

$348
$300 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”)298

298

297
Unsecured Foreign Facilities0

50

67
Total Senior Debt$646

$696

$712
Total$6,729

$5,548

$5,550
Current Debt(460)
(61)
(75)
Total Long-term Debt, Net of Current Portion$6,269

$5,487

$5,475

Issuance of Notes
In June 2020, the Company issued $750 million of 6.875% senior secured notes due July 2025 (the “2025 Secured Notes”). The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by the Company and certain of the Company's 100% owned subsidiaries. The 2025 Secured Notes are secured on a first-priority lien basis by substantially all of the assets of the Company and the guarantors, and on a second-priority lien basis by certain collateral securing the asset-backed revolving credit facility (“ABL Facility”), in each case, subject to certain exceptions. The proceeds from the issuance were $739 million, which were net of issuance costs of $11 million. The issuance costs are being amortized through the maturity date and are included within Long-term Debt on the August 1, 2020 Consolidated Balance Sheet.

In June 2020, the Company also issued $500 million of 9.375% notes due in July 2025 (the "2025 Notes"). The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by the Company and certain of the Company's 100% owned subsidiaries. The proceeds from the issuance were $492 million, which were net of issuance costs of $8 million. The issuance costs are being amortized through the maturity date and are included within Long-term Debt on the August 1, 2020 Consolidated Balance Sheet.
July 31,
2021		January 30,
2021		August 1,
2020
(in millions)
Senior Secured Debt with Subsidiary Guarantee
$750 million, 6.875% Fixed Interest Rate Secured Notes due July 2025 ("2025 Secured Notes")$— $740 $739 
Foreign Facilities— — 101 
Total Senior Secured Debt with Subsidiary Guarantee$— $740 $840 
Senior Debt with Subsidiary Guarantee
$1 billion, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)$— $— $450 
$1 billion, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)— 284 858 
$320 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”)319 319 498 
$500 million, 9.375% Fixed Interest Rate Notes due July 2025 ("2025 Notes")494 493 492 
$297 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”)279 278 277 
$500 million, 5.250% Fixed Interest Rate Notes due February 2028 (“2028 Notes”)497 497 496 
$500 million, 7.500% Fixed Interest Rate Notes due June 2029 ("2029 Notes")489 488 488 
$1 billion, 6.625% Fixed Interest Rate Notes due October 2030 ("2030 Notes")989 988 — 
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)991 991 991 
$700 million, 6.750% Fixed Interest Rate Notes due July 2036 (“2036 Notes”)694 694 693 
Total Senior Debt with Subsidiary Guarantee$4,752 $5,032 $5,243 
Senior Debt
$350 million, 6.950% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”)$348 $348 $348 
$247 million, 7.600% Fixed Interest Rate Notes due July 2037 (“2037 Notes”)246 246 298 
Total Senior Debt$594 $594 $646 
Victoria's Secret & Co. Notes
Victoria's Secret & Co. $600 million, 4.625% Fixed Interest Rate Notes due July 2029 ("Victoria's Secret & Co. Notes")592 — — 
Total$5,938 $6,366 $6,729 
Current Debt— — (460)
Total Long-term Debt, Net of Current Portion$5,938 $6,366 $6,269 
Repurchases of Notes
In June 2019,April 2021, the Company completed the early settlement of tender offersa make-whole call to repurchase $212 million of outstanding 2020 Notes, $330 million of outstanding 2021 Notes and $96the remaining $285 million of outstanding 2022 Notes for $669 million. The Company usedand the proceeds from the 2029 Notes, together with cash on hand, to fund the purchase price for the tender offers. Additionally, in July 2019, the Company redeemed the remaining $126$750 million of outstanding 2020 Notes for $130 million.

In the second quarter of 2019, the2025 Secured Notes. The Company recognized a pre-tax loss onrelated to this extinguishment of debt of $40$105 million (after-tax loss of $30$80 million), which includes redemption fees and the write-offs of unamortized issuance costs. This loss is included in Other Income (Loss) in the 2019year-to-date 2021 Consolidated StatementsStatement of Income.
Subsequent to July 31, 2021, the Company announced that it had commenced tender offers to purchase for cash its outstanding 2023 Notes, 2025 Notes and 2027 Notes up to a maximum aggregate principal amount of $500 million. The maximum aggregate amount to be purchased by the Company for the 2025 Notes and 2027 Notes is limited to $180 million. On September 2, 2021, the Company announced that it had accepted for early settlement tender offers to purchase $270 million of outstanding 2023 Notes and $180 million of outstanding 2025 Notes for an aggregate purchase price of $532 million. The
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Company intends to make payment for these accepted notes on September 3, 2021, and expects to recognize a pre-tax loss of approximately $84 million in the third quarter of 2021 related to these purchases. The tender offers will expire on September 16, 2021, unless extended or earlier terminated by the Company.
Victoria's Secret & Co. Notes
In July 2021, Victoria’s Secret & Co., prior to the Separation and while a subsidiary of the Company, issued $600 million of 4.625% notes due in July 2029 in a transaction exempt from registration under the Securities Act of 1933, as amended. As of July 31, 2021, the initial proceeds were held in escrow for release to Victoria's Secret & Co. upon satisfaction of certain conditions, including completion of the Separation. If the conditions for the release from escrow of the proceeds were not satisfied, the Victoria's Secret & Co. Notes would have been subject to mandatory redemption. The $600 million initial proceeds are included in Cash in Escrow related to Victoria's Secret & Co. Spin-Off on the July 31, 2021 Consolidated Balance Sheet. The Victoria's Secret & Co. Notes were not guaranteed at issuance by any guarantors or by Bath & Body Works, Inc. or any of its subsidiaries following the Separation.
On August 2, 2021, the Victoria's Secret & Co. Notes became the obligations of Victoria's Secret & Co. concurrent with the Separation. Victoria's Secret & Co. received cash proceeds of $592 million, which were net of issuance costs of $8 million, which it used to partially fund the approximately $976 million cash payments to the Company in connection with the Separation.
Asset-Backed Revolving Credit Facility
The Company and certain of the Company's 100% owned subsidiaries guarantee and pledge collateral to secure a revolving credit facility ("Credit Agreement"). In April 2020, the Company entered into an amendment and restatement (“Amendment”) of the Credit Agreement to convert the Company’s credit facility into an asset-backed revolving credit facility (“ABL Facility”). During the first quarter of 2020, in an abundance of caution and as a proactive measure in response to the COVID-19 pandemic, the Company elected to borrow $950 million from its revolving facility. The Amendment maintainsThis borrowing was repaid during the aggregate commitments at $1 billion, and maintainsfirst quarter of 2020 upon completion of the expiration date in AugustApril amendment.
As of 2024. TheJuly 31, 2021, the ABL Facility, allowswhich allowed borrowings and letters of credit in U.S. dollars or Canadian dollars.dollars, had aggregate commitments at $1 billion and an expiration date in August 2024.
AvailabilityAs of July 31, 2021, the availability under the ABL Facility iswas the lesser of (i) the borrowing base, determined primarily based on the Company's eligible U.S. and Canadian credit card receivables, accounts receivable, inventory and eligible real property, or (ii) the aggregate commitment. If at any time, the outstanding amount under the ABL Facility exceedsexceeded the lesser of (i) the borrowing base and (ii) the aggregate commitment, the Company will bewould have been required to prepay the outstanding amounts under the ABL Facility to the extent of such excess. In addition, at any time that the Company's consolidated cash balance exceedsexceeded $350 million, it will bewould have been required to prepay outstanding amounts under the ABL Facility to the extent of such excess. As of August 1, 2020,July 31, 2021, the Company's borrowing base was $844 million$1.045 billion, but it was unable to draw upon the ABL Facility as its consolidated cash balance exceeded $350 million.
The ABL Facility supports the Company’s letter of credit program. The Company had $58 million of outstanding letters of credit as of July 31, 2021 that reduced its availability under the ABL Facility.
As of August 1, 2020,July 31, 2021, 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 1.75% per annum. In addition, the interest rate on outstanding U.S. dollar borrowings was the London Interbank Offered Rate plus 1.75% per annum. The interest rate on outstanding Canadian dollar-denominated borrowings was the Canadian Dollar Offered Rate plus 1.75% per annum. 
The ABL Facility requiresrequired the Company 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) $100 million or (2) 15% of the maximum borrowing amount. As of August 1, 2020,July 31, 2021, the Company was not required to maintain this ratio.
In March 2020, in an abundance of caution and as a proactive measure in response to the COVID-19 pandemic, the Company elected to borrow $950 million from its revolving facility, which was prepaid upon the completion of the Amendment. As of August 1, 2020,July 31, 2021, there were 0no borrowings outstanding under the ABL Facility.
Subsequent to July 31, 2021, the Company entered into an amendment and restatement (“Amendment”) of the ABL Facility. The ABL Facility supportsAmendment reduced the Company’s letter of credit program. The Company had $61 million of outstanding letters of credit as of August 1, 2020 that reduced its availabilityaggregate commitments under the ABL Facility.Facility to $750 million, reduced the interest rates on outstanding borrowings by 50 basis points, removed the requirement to prepay outstanding amounts under the ABL Facility should the Company's consolidated cash balance exceed $350 million, extended the expiration date from August 2024 to August 2026 and released Victoria's Secret & Co. subsidiaries as guarantors, among other things.
Foreign Facilities
Certain of the Company's Victoria's Secret subsidiaries in China subsidiaries utilizepreviously utilized revolving and term loan bank facilities to support their operations ("Foreign Facilities"). The Foreign Facilities allow borrowings in U.S. dollars and Chinese Yuan, and interest rates on outstanding borrowings are based upon the applicable benchmark rate for the currency of each borrowing. Certain of these facilities are guaranteed by the Company and certain of the Company's 100% owned subsidiaries ("Secured Foreign Facilities"), and certain of these facilities were guaranteed by the Company only ("Unsecured Foreign Facilities").
The Secured Foreign Facilities have availability totaling $128 million. During 2020, the Company borrowed $20 million and made payments of $22 million under the Secured Foreign Facilities. As of August 1, 2020, there were borrowings of $101 million outstanding under the Secured Foreign Facilities, of which $10 million is included within Current Debt on the Consolidated Balance Sheet. Borrowings on the Secured Foreign Facilities mature between September 2020 and August 2024.
During the second quarter, the Company placed cash on deposit with certain financial institutions as collateral for their lending commitments under the Secured Foreign Facilities. The amount of collateral required reduces over time as the Company makes certain paydowns. These deposits, totaling $128 million, are recorded in Other Assets on the August 1, 2020 Consolidated Balance Sheet.
During 2020, the Company borrowed $13 million and made payments of $63 million under the Unsecured Foreign Facilities. During the second quarter of 2020,2021, with 0no borrowings outstanding, the Company terminated the Unsecured Foreign Facilities.
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10. Fair Value Measurements
Cash and Cash Equivalents and Restricted Cashrestricted cash include cash on hand, deposits with financial institutions and highly liquid investments with original maturities of less than 90 days. The Company's Cash and Cash Equivalents and Restricted Cashrestricted cash are considered Level 1 fair value measurements as they are valued using unadjusted quoted prices in active markets for identical assets.

The following table provides a summary of the principal value and estimated fair value of outstanding publicly traded debt as of July 31, 2021, January 30, 2021 and August 1, 2020, February 1, 2020 and August 3, 2019:2020:
 August 1,
2020		 February 1,
2020		 August 3,
2019
 (in millions)
Principal Value$6,708
 $5,458
 $5,458
Fair Value, Estimated (a)6,692
 5,555
 5,215

July 31,
2021		January 30,
2021		August 1,
2020
(in millions)
Principal Value$5,414 $6,449 $6,708 
Fair Value, Estimated (a)6,581 7,243 6,692 
  _______________
(a)
(a)The estimated fair value of the Company’s publicly traded debt is based on reported transaction prices, which are considered Level 2 inputs in accordance with ASC 820, Fair Value Measurement. The estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
As of July 31, 2021, the fair value of the Victoria's Secret & Co. Notes approximated its principal value. The estimated fair value is based on reported transaction prices, which are considered Level 2 inputs in accordance with ASC 820. This estimate is not necessarily indicative of the amount that the Company could realize in a current market exchange.
Management believes that the carrying values of accounts receivable, accounts payable and accrued expenses approximate fair value because of their short maturity.
12.11. Comprehensive Income
The following table provides the rollforward of accumulated other comprehensive income for year-to-date 2020:2021:
 Foreign Currency Translation Cash Flow Hedges Accumulated Other Comprehensive Income
 (in millions)
Balance as of February 1, 2020$52
 $0
 $52
Other Comprehensive Income (Loss) Before Reclassifications(4) 2
 (2)
Amounts Reclassified from Accumulated Other Comprehensive Income0
 (1) (1)
Tax Effect0
 0
 0
Current-period Other Comprehensive Income (Loss)(4) 1
 (3)
Balance as of August 1, 2020$48
 $1
 $49

Foreign Currency TranslationCash Flow HedgesAccumulated Other Comprehensive Income
(in millions)
Balance as of January 30, 2021$85 $(2)$83 
Other Comprehensive Income (Loss) Before Reclassifications4 (1)3 
Amounts Reclassified from Accumulated Other Comprehensive Income— 2 2 
Tax Effect— (1)(1)
Current-period Other Comprehensive Income4 — 4 
Balance as of July 31, 2021$89 $(2)$87 
The following table provides the rollforward of accumulated other comprehensive income for year-to-date 2019:2020:
Foreign Currency TranslationCash Flow HedgesAccumulated Other Comprehensive Income
(in millions)
Balance as of February 1, 2020$52 $— $52 
Other Comprehensive Income (Loss) Before Reclassifications(4)2 (2)
Amounts Reclassified from Accumulated Other Comprehensive Income— (1)(1)
Tax Effect— — — 
Current-period Other Comprehensive Income (Loss)(4)1 (3)
Balance as of August 1, 2020$48 $1 $49 
 Foreign Currency Translation Cash Flow Hedges Accumulated Other Comprehensive Income
 (in millions)
Balance as of February 2, 2019$57
 $2
 $59
Other Comprehensive Income (Loss) Before Reclassifications(11) 4
 (7)
Amounts Reclassified from Accumulated Other Comprehensive Income0
 (3) (3)
Tax Effect0
 0
 0
Current-period Other Comprehensive Income (Loss)(11) 1
 (10)
Balance as of August 3, 2019$46
 $3
 $49


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13.12. Commitments and Contingencies
The Company is subject to various claims and contingencies related to lawsuits, taxes, insurance, regulatory and other matters arising out of the normal course of business. Actions filed against the Company from time to time include commercial, tort, intellectual property, customer, employment, data privacy, securities and other claims, including purported class action lawsuits. Management believes that the ultimate liability arising from such claims and contingencies, if any, is not likely to have a material adverse effect on the Company’s results of operations, financial condition or cash flows.
In July 2019, a plaintiff shareholder filed a putative class action complaint in the U.S. District Court for the Southern District of Ohio alleging that the Company made false and/or misleading statements relating to the November 2018 announcement that the Company was reducing its quarterly dividend. In September 2019, a different plaintiff shareholder filed a second putative class action complaint in the U.S. District Court for the Southern District of Ohio containing substantially the same allegations and seeking substantially the same relief.  In October 2019, the Court issued an order consolidating the two putative class actions, appointing a lead plaintiff, and approving that lead plaintiff’s selection of lead counsel.  The lead plaintiff filed a consolidated

amended complaint on December 20, 2019 that asserted substantially the same allegations and sought substantially the same relief as the initial complaint.  The Company filed a motion to dismiss the consolidated amended complaint on February 18, 2020, the lead plaintiff filed an opposition to the Company's motion to dismiss on May 4, 2020, and the Company filed a reply brief in further support of its motion to dismiss on June 3, 2020.  The Company's motion to dismiss the consolidated amended complaint is now fully briefed and pending before the court.  The court will hear oral argument on the motion to dismiss on September 23, 2020. The Company views this lawsuit as meritless and intends to defend against this lawsuit vigorously. 
On February 19, 2020, a plaintiff shareholder filed a complaint in the U.S. District Court for the Southern District of Ohio alleging derivative claims on behalf of the Company against certain of its current and former directors and officers.  The Company was named as nominal defendant.  The lawsuit asserts claims for breach of fiduciary duty, corporate waste and unjust enrichment in connection with alleged misstatements about the Company's quarterly dividend prior to the announced reduction of the dividend in November 2018. On July 21, 2020, the court so-ordered a stipulation staying all proceedings in this lawsuit, pending resolution of the motion to dismiss that the Company filed on February 18, 2020 in the putative class action lawsuit described above.  The Company intends to seek dismissal of the lawsuit at the appropriate time.
On May 19, 2020 a purported shareholderand January 12, 2021, certain shareholders of the Company filed a derivative lawsuit on behalf of L Brands, Inc.lawsuits in the Court of Common Pleas for Franklin County, Ohio.  The complaint names as defendants certain current and former directors and officers of L Brands, Inc. and alleges, among other things, that these defendants breached their fiduciary duties by violating law and/or company policies relating to workplace conduct.  The Company was named as nominal defendant only, and there are no claims asserted against it.  On June 16, 2020, the lawsuit wasOhio (subsequently removed to the United States District Court for the Southern District of Ohio.  On July 6, 2020,Ohio) and the court so-ordered a stipulation stayingDelaware Court of Chancery, respectively, naming as defendants certain current and former directors and officers of the lawsuit until December 29, 2020.  The Company is currently evaluating potential options for respondingand alleging, among other things, breaches of fiduciary duty through asserted violations of law and failures to monitor workplace conduct (the “Lawsuits”). In addition, the Company also received litigation and books-and-records demands from certain other shareholders related to the lawsuit.same matters (together with the Lawsuits, the “Actions”).
In July 2021, the Company announced the global settlement resolving the Actions. 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 the Company and past and present Company employees, officers and directors, among others. As part of the settlement, the Company has 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 the Company and Victoria’s Secret & Co. Each company has committed to invest $45 million over at least five years to fund the management and governance measures.
La Senza
In connection with the sale of La Senza in the fourth quarter of 2018, certain of the Company's subsidiaries have remaining contingent obligations of $36approximately $30 million related to lease payments under the current terms of noncancelable leases expiring at various dates through 2028. 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 the business. As of August 1, 2020, the Company has recorded reserves of $37 million related to these lease-related obligations and certain other obligations related to the La Senza business. As of August 1, 2020, reserves of $6 million are included within Accrued Expenses and Other on the Consolidated Balance Sheet and the remaining reserves are included within Other Long-term Liabilities.
Other
In connection with the noncancelable operating lease of an operating asset, the Company provides a residual value guarantee to the lessor if the leased asset cannot be sold for an amount in excess of a specified minimum value at the conclusion of the lease term. The lease expires in 2021, and the total amount of the guarantee is $28 million. The Company did not record a liability as of August 1, 2020.
14.13. Retirement Benefits
The Company sponsors a tax-qualified defined contribution retirement plan for substantially all its associates within the U.S. Participation is available to associates who meet certain age and service requirements. The qualified plan permits participating associates to elect contributions up to the maximum limits allowable under the Internal Revenue Code. The Company matches associate contributions according to a predetermined formula and contributes additional amounts based on a percentage of the associates’ eligible annual compensation and years of service. Associate contributions and Company matching contributions vest immediately. Additional Company contributions and the related investment earnings are subject to vesting based on years of service. Total expense recognized related to the qualified plan was $19 million and $18 million for the second quarter of 2021 and 2020, and $20 million for the second quarter of 2019.respectively. Total expense recognized related to the qualified plan was $40 million and $39 million for both year-to-date 2021 and 2020, and 2019.respectively.
The Company sponsorspreviously sponsored a non-qualified supplemental retirement plan. The non-qualified plan iswas an unfunded plan, which providesprovided benefits beyond the Internal Revenue Code limits for qualified defined contribution plans. On June 27, 2020, (the “Termination Date”), the Human Capital and Compensation Committee of the Board of Directors authorized the termination of the non-qualified plan. Subsequent toIn July 2021, the Termination Date, no additional employee contributions may beCompany made topayments of $143 million for the final settlement of all its obligations and benefits payable under the non-qualified plan. The remaining benefits and obligations are expected to be paid out in full approximately one year following the Termination Date. Accordingly, the liability of $258 million related to the non-qualified plan is included within Accrued Expenses and Other on the August 1, 2020 Consolidated Balance Sheet. Total expense recognized related to the non-qualified plan was $3 millionnot significant for any period presented.
14. Segment Information
In the secondthird quarter of 2020, the Company changed its segment reporting as a result of leadership changes and $6 million forrestructuring actions taken to facilitate the second quarterongoing efforts to separate Bath & Body Works and Victoria’s Secret into separate businesses. As of 2019. Total expense recognized related toJuly 31, 2021, the non-qualified plan was $9 million for year-to-date 2020 and $12 million for year-to-date 2019.

15. Segment Information
The Company has 3had 2 reportable segments: Bath & Body Works Victoria's Secret and Victoria's Secret and Bath & Body Works International.Secret. While this reporting change did not impact the Company's consolidated results, historical segment data has been recast to be consistent for all periods presented.
The Bath & Body Works segment sells body care, home fragrance products, soaps and sanitizers under the Bath & Body Works, White Barn C.O. Bigelow and other brand names. Bath & Body Works merchandise is sold online and at retail stores located in the U.S. and Canada.Canada, and international stores operated by partners under franchise, license and wholesale arrangements. Additionally, this segment includes the Bath & Body Works merchandise sourcing and production function serving the Company and its international partners.
The Victoria’s Secret segment sells women’s intimate and other apparel, personal care and beauty products under the Victoria’s Secret and PINK brand names. Victoria’s Secret and PINK merchandise is sold online and through retail stores located in the U.S. and Canada.
The Victoria's Secret and Bath & Body Works International segment includes the Victoria's Secret and Bath & Body Works company-owned and partner-operated stores located outside
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Table of the U.S. and Canada, as well as the online business in Greater China. This segment includes the following:Contents
Victoria's Secret International, comprised of company-owned stores in the U.K.U.S., IrelandCanada and Greater China, as well as stores operated by partners under franchise and license arrangements;
Victoria's Secret Beauty and Accessories, comprised of company-owned stores in Greater China, as well asinternational stores operated by partners under franchise, license, wholesale and wholesale arrangements, which featurejoint venture arrangements. Additionally, this segment includes the Victoria's Secret branded beauty and accessories products in travel retail and other locations; and
Bath & Body Works International, comprised of stores operated by partners under franchise, license and wholesale arrangements.
Other includes Mast Global, aPINK merchandise sourcing and production function serving the Company and its international partners,partners. As discussed in Note 1, the Company completed the spin-off of its Victoria's Secret business into an independent, publicly traded company on August 2, 2021.
Other includes corporate infrastructure and Corporategovernance functions including non-core real estate, equity investments and other governance functions such as treasury and tax.non-recurring items that are deemed to be corporate in nature.
The following table provides the Company’s segment information for the second quarter and year-to-date of 2021 and 2020:
Bath & Body
Works		Victoria’s
Secret		OtherTotal
(in millions)
2021
Second Quarter:
Net Sales$1,704 $1,614 $— $3,318 
Operating Income (Loss)431 233 (65)599 
Year-to-Date:
Net Sales$3,173 $3,168 $— $6,341 
Operating Income (Loss)811 477 (117)1,171 
2020
Second Quarter:
Net Sales$1,253 $1,066 $— $2,319 
Operating Income (Loss) (a)337 (219)(74)44 
Year-to-Date:
Net Sales$2,014 $1,960 $— $3,974 
Operating Income (Loss) (a)413 (573)(114)(274)
 _______________
(a)Victoria's Secret includes store and lease asset impairment charges of $117 million and $214 million for the second quarter and year-to-date 2020, respectively. Additionally, Victoria's Secret includes a $36 million net gain related to the closure and 2019:
 
Bath & Body
Works
 
Victoria’s
Secret
 
Victoria’s Secret
and
Bath &
Body Works
International
 Other Total
 (in millions)
2020         
Second Quarter:         
Net Sales$1,197
 $978
 $80
 $64
 $2,319
Operating Income (Loss) (a)326
 (140) (19) (123) 44
Year-to-Date:         
Net Sales$1,909
 $1,799
 $146
 $120
 $3,974
Operating Income (Loss) (a)395
 (440) (54) (175) (274)
2019         
Second Quarter:         
Net Sales$1,061
 $1,606
 $155
 $80
 $2,902
Operating Income (Loss)180
 17
 (1) (21) 175
Year-to-Date:        

Net Sales$1,932
 $3,116
 $289
 $193
 $5,530
Operating Income (Loss)335
 49
 (5) (51) 328

 _______________
(a)
Victoria's Secret includes store and lease asset impairment charges of $75 million and $172 million for the second quarter and year-to-date 2020, respectively. Victoria's Secret and Bath & Body Works International includes lease asset impairment charges of $42 million. Additionally, Victoria's Secret and Bath & Body Works International includes a $36 million net gain related to the closure and lease termination of the Hong Kong flagship store. For additional information, see Note 7, “Long-Lived Assets." Bath & Body Works, Victoria's Secret and Other includes severance and related charges of $5 million, $26 million and $50 million, respectively. For additional information, see Note 4, “Restructuring.lease termination of the Hong Kong flagship store. For additional information, see Note 6, “Long-Lived Assets." Bath & Body Works, Victoria's Secret and Other includes severance and related charges of $12 million, $51 million and $18 million, respectively, in the second quarter of 2020. For additional information, see Note 3, “Restructuring Activities."

The Company’s international net sales include sales from company-ownedcompany-operated stores, royalty revenue from franchise and license arrangements, wholesale revenues and direct sales shipped internationally. Certain of these sales are subject to the impact of fluctuations in foreign currency. The Company’s international net sales totaled $238$289 million and $357$238 million for the second quarter of 20202021 and 2019,2020, respectively. The Company's international net sales across all segments totaled $418$568 million and $706$418 million for year-to-date 20202021 and 2019,2020, respectively.

15. Subsequent Events
Victoria's Secret & Co. Spin-Off
On August 2, 2021, after the NYSE market closing, the Separation of Victoria's Secret & Co. into an independent publicly-traded company was completed and the Company transferred certain assets and liabilities associated with its Victoria's Secret business to Victoria's Secret & Co. The Separation was achieved through the Company's distribution of 100% of the shares of Victoria's Secret & Co. common stock to holders of L Brands' common stock as of the close of business on the record date of July 22, 2021. The Company's stockholders of record received one share of Victoria’s Secret & Co. common stock for every three shares of the Company's common stock. On August 3, 2021, Victoria’s Secret & Co. began trading on the NYSE under the stock symbol "VSCO." The Company retained no ownership interest in Victoria’s Secret & Co. following the Separation. Beginning in the third quarter of fiscal 2021, the historical financial results of the Victoria's Secret business for periods prior to the Distribution Date will be reflected in the Company’s consolidated financial statements as discontinued operations. On August 2, 2021, Victoria's Secret & Co. made cash payments of approximately $976 million to the Company in connection with the Separation. Additionally, the Victoria's Secret & Co. Notes became the obligations of Victoria's Secret & Co. concurrent with the Separation.
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Corporate Name Change
On August 2, 2021, in connection with the Separation of the Victoria's Secret business discussed above, the Company changed its name from L Brands, Inc. to Bath & Body Works, Inc. Starting August 3, 2021, the Company's common stock began trading under the stock symbol "BBWI."
Leadership Changes
As previously announced, the Company appointed Wendy C. Arlin as Executive Vice President and Chief Financial Officer effective August 2, 2021. Stuart B. Burgdoerfer retired and ceased serving as Executive Vice President and Chief Financial Officer effective August 2, 2021.
ABL Facility
Subsequent to July 31, 2021, the Company entered into an amendment and restatement of the ABL Facility. For additional information, see Note 9, “Long-term Debt and Borrowing Facilities.”
Repurchase of Notes
Subsequent to July 31, 2021, the Company announced that it had commenced tender offers to purchase for cash its outstanding 2023 Notes, 2025 Notes and 2027 Notes up to a maximum aggregate principal amount of $500 million. The maximum aggregate amount to be purchased by the Company for the 2025 Notes and 2027 Notes is limited to $180 million. On September 2, 2021, the Company announced that it had accepted for early settlement tender offers to purchase $270 million of outstanding 2023 Notes and $180 million of outstanding 2025 Notes for an aggregate purchase price of $532 million. The Company intends to make payment for these accepted notes on September 3, 2021, and expects to recognize a pre-tax loss of approximately $84 million in the third quarter of 2021 related to these purchases. The tender offers will expire on September 16, 2021, unless extended or earlier terminated by the Company.

Common Stock Share Repurchases
Subsequent to July 31, 2021, the Company repurchased an additional 1.0 million shares of its common stock for $65 million under the July 2021 Program.
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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of L Brands,Bath & Body Works, Inc.

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheets of L Brands,Bath & Body Works, Inc. (the Company) as of July 31, 2021 and August 1, 2020, and August 3, 2019, and the related consolidated statements of income (loss), comprehensive income (loss), and total equity (deficit) for the thirteen and twenty-six week periods ended July 31, 2021 and August 1, 2020, and August 3, 2019, and the consolidated statements of cash flows for the twenty-six week periods ended July 31, 2021 and August 1, 2020, and August 3, 2019, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of February 1, 2020,January 30, 2021, and the related consolidated statements of income (loss), comprehensive income (loss), total equity (deficit), and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated March 27, 2020,19, 2021, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of February 1, 2020,January 30, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Ernst & Young LLP
Grandview Heights, Ohio
September 3, 20202, 2021


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SAFE HARBOR STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION ACT OF 1995
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
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” 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 our company or our management:
•the spin-off of Victoria’s Secret may not be tax-free for U.S. federal income tax purposes;
•a loss of synergies from separating the businesses that could negatively impact the balance sheet, profit margins or earnings of Bath & Body Works or that Bath & Body Works does not realize all of the expected benefits of the spin-off;
•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 novel coronavirus (COVID-19) global pandemic has had and is expected to continue to have an adverse effect on our business and results of operations;
•the seasonality of our business;
•divestitures or other dispositions including any divestiture of Victoria’s Secret and related operations could negatively impact our business, and contingent liabilities from businesses that we have sold could adversely affect our financial statements;divested;
the seasonality of our business;
•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;
liabilities arising from divested businesses;
•the dependence on mall traffic and the availability of suitable store locations on appropriate terms;
•our ability to grow 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 businesses;
•our ability to protect our reputation and our brand images;
•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 brands, keep up with fashion trends, 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, closed stores, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in infectedimpacted areas;
▪duties, taxes and other charges;
▪legal and regulatory matters;
▪volatility in currency exchange rates;
▪local business practices and political issues;
▪potential 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;
•fluctuations in foreign currency exchange rates;
stock price volatility;
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our ability to pay dividends and related effects;
our ability to maintain our credit rating;
our ability to service or refinance our debt;

shareholder activism matters;
•the ability of our vendors to deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations;
•fluctuations in product input costs;costs, including those caused by inflation;
•our ability to adequately protect our assets from loss and theft;
•fluctuations in energy costs;costs, including those caused by inflation;
•increases in the costs of mailing, paper, and printing;printing or other order fulfillment logistics;
•claims arising from our self-insurance;self-insurance
•our and our third-party service providers' ability to implement and maintain information technology systems and to protect associated data;
•our ability to maintain the security of customer, associate, third-party orand company information;
•stock price volatility;
•our ability to pay dividends and related effects;
•shareholder activism matters;
•our ability to maintain our credit rating;
•our ability to service or refinance our debt and maintain compliance with our restrictive covenants;
•our ability to comply with laws, regulations and regulationstechnology 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.
We are not under any obligation and do not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this report to reflect circumstances existing after the date of this report or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Additional information regarding these and other factors can be found in “Item 1A. Risk Factors” in this Form 10-Q and in our 20192020 Annual Report on Form 10-K.
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The following information should be read in conjunction with our financial statements and the related notes included in Item 1. Financial Statements.
Executive Overview
In the second quarter of 2020,2021, our operating income decreased $131increased to $599 million as compared to $44 million in 2020, and our operating income rate decreasedincreased to 1.9%18.1% from 6.0%1.9%. These results were primarily driven by increases in net sales at both Bath & Body Works and Victoria’s Secret, the increase in merchandise margin rate at Victoria's Secret and $117 million of Victoria's Secret store asset impairment charges in the prior year. Net sales decreased $583increased $999 million, or 43%, to $2.319$3.318 billion. Sales were strong throughout the second quarter of 2021 as customers responded positively to the merchandise assortments. Second quarter 2020 sales and operating results were negatively impacted by the COVID-19 related store closures for roughly half the quarter.
At Bath & Body Works, net sales increased $136$451 million, or 13%36%, to $1.704 billion and operating income increased $146$94 million, or 81%28%, to $326$431 million. At Victoria's Secret, netWe delivered record sales decreased $628 million, or 39%, and operating income decreased to a loss of $140 million, including store and lease asset impairment charges of $75 million. At Victoria's Secret and Bath & Body Works International, net sales decreased $75 million, or 48%, and the operating loss increased by $18 million, including lease asset impairment charges of $42 million partially offset by a $36 million net gain related to the closure and lease termination of the Hong Kong flagship store.
For additional information related to our second quarter 2020 financial performance, see “Results of Operations.”
Go-forward Plan for Victoria's Secret
During the second quarter, we took a number of important steps to prepare Victoria’s Secret and Bath & Body Works to operate as standalone separate companies, including:
Completed our comprehensive review of our home office organizations in order to achieve meaningful reductions in overhead expenses and decentralize significant shared functions and services to support the creation of standalone companies. This resulted in a reduction of our home office headcount by approximately 15%, or about 850 associates;
Managed inventories with discipline, including working with suppliers to identify opportunities to reduce merchandise costs in order to increase merchandise margin rates at Victoria’s Secret. As a result of this effort already underway, Spring inventory receipts for Victoria’s Secret were down approximately 45% compared to last year, and Fall receipts are expected to be down approximately 50% compared to last year;
Began taking action to reduce Victoria’s Secret store selling costs through changes in the management structure and labor model;
Continued to execute our previously announced plan to close approximately 250 Victoria’s Secret stores in 2020 while also negotiating with landlords for ongoing rent relief;
Worked to reduce operating losses in the Victoria's Secret U.K. business. We entered into "Light Administration" in June to restructure store lease agreements and explore the sale of the business to a joint venture or franchise partner.

We subsequently signed a non-binding term sheet with a major fashion retailer and are in an exclusive period of negotiation;
We closed our unprofitable Victoria's Secret flagship store in Hong Kong and in China are restructuring lease terms on other unprofitable stores and have implemented a significant overhead expense reduction plan; and,
Subsequent to the end of the quarter, we retained financial advisors on the separation of Bath & Body Works and Victoria’s Secret.
We expect these actions will result in approximately $400 million of annualized cost reductions, about $175 million of which we expect to achieve in the remainder of 2020. Importantly, these actions will enable more efficient and faster decision making and set each business up independently, allowing for an easier future separation.
Impacts of COVID-19
In March 2020, COVID-19 was declared a global pandemic by the World Health Organization. This pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions, including mandatory closures and orders to “shelter-in-place.” The situation and preventative or protective actions that governments around the world have taken to contain the spread of COVID-19 have resulted in a period of disruption, including closure of our stores, limited store operating hours, reduced customer traffic and consumer spending and delays in manufacturing and shipping of products and raw materials. During this period, we are focused on protecting the health and safety of our customers, employees, contractors, suppliers, and other business partners. We are also working with our suppliers to minimize potential disruptions, while managing our business in response to a changing dynamic.
Our business operations and financial performance for 2020 have been materially impacted by the COVID-19 pandemic. All of our stores in North America were closed on March 17th, and almost all remained closed as of the beginning of the second quarter. We have re-opened approximately 1,600 Bath & Body Works stores and approximately 690 Victoria’s Secret stores in North America, representing the majority of our stores, as of August 1, 2020. On average, Bath & Body Works stores were closed for about half of the second quarter and Victoria’s Secret stores were closed for about 70% of the second quarter (including the impact of the approximately 250 stores which we plan to close).
We adopted new operating models in our stores that focused on providing a safe shopping experience. At Bath & Body Works, we launched Buy Online Pick Up In Store ("BOPIS") capabilities in some locations and are able to operate stores as BOPIS only in jurisdictions that do not permit open shopping. Additionally, we have dedicated resources to maximize capacity in our direct fulfillment centers to meet increased customer demand, while focusing on distribution, fulfillment and call center safety. We will continue to follow local laws, to ensure a safe environment.
Since the global COVID-19 crisis began, we have taken prudent actions to manage expenses and to maintain our solid cash position and financial flexibility through the pandemic, including:
Furloughing most store associates as of April 5 during their temporary store closure, while continuing to provide healthcare benefits for eligible associates;
Suspending associate merit increases;
Temporarily reducing salaries for senior vice presidents and above by 20%;
Temporarily suspending cash compensation for all members of the Board of Directors;
Reducing 2020 forecasted capital expenditures from $550 million to approximately $250 million;
Reducing Spring (first and second quarter) inventory receipts versus last year by approximately 45% at Victoria's Secret and PINK, and by approximately 20% at Bath & Body Works;
Suspending the quarterly cash dividend beginningprofitability in the second quarter of fiscal 2020;
Suspending most store and select office rent payments duringas sales trends remained strong at continued healthy margin rates. Similar to the temporary closures.first quarter, we were able to be selective on promotional activity. We are optimistic about our Fall and Holiday product assortments and our continued ability to execute against our long-term growth strategy in active discussions with our landlordsstores and online. Risks related to negotiate with respectCOVID-19 persist, and we plan to these rent payments and go-forward occupancy costs;
Converting the revolving credit facility to an asset-backed loan facility and issuing $1.25 billion in new notes; and
Extending payment terms to vendors.
Looking toward the second half of the year, we will remain disciplined in expense and inventory management, and focused on staying close to our customer while delivering compelling products. In accordance with continuously changing local regulatory requirements and guidelines, we will continue to operate both of our channels in a safe manner for our customers and associates.
GivenAt Victoria's Secret, net sales increased $548 million, or 51%, to $1.614 billion and operating income increased to $233 million as compared to a loss of $219 million in the traffic constraints imposedsecond quarter of 2020. Sales improved as second quarter of 2020 sales were negatively impacted by social distancing protocolsthe closure of stores for approximately 70% of the quarter. Margin results improved during the second quarter of 2021 as we were able to reduce promotional activity, which drove significant improvement to the merchandise margin rate. Additionally, we recognized $117 million of store asset impairment charges in stores and capacity restraints inthe prior year.
For additional information related to our direct channel distribution centers, we have a very cautious outlook about our abilitysecond quarter 2021 financial performance, see “Results of Operations.”
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Impacts of Victoria's Secret Spin-Off
The spin-off of the Victoria’s Secret business into an independent public company was completed on August 2, 2021 subsequent to manage our typical Holiday volumes, which

historically are about three times larger per week than the average week inend of the second quarter. We are evaluatingbelieve the spin-off will enable us to maximize management focus and testing ideasfinancial flexibility to spread our Holiday volume out over a broader time period.
We are forecasting meaningful expense pressure driven by increased store costs, including payrollthrive in an evolving retail environment and supplies, as a resultdeliver long-term profitable growth. Beginning in the third quarter of fiscal 2021, the historical financial results of the Victoria's Secret business for periods prior to the spin-off will be reflected in our consolidated financial statements as discontinued operations.
In connection with the Separation, we expect future capital and expense related to the implementation of new labor model imposed by social distancing protocols, wage rate inflationinformation technology platforms. Although our work is in the domestic supply chainearly stages and increased direct channelour estimates are preliminary, we currently estimate that our total expenditures could be $100 million to $150 million over the next several years. Such estimates are subject to change as our work continues. Victoria’s Secret & Co. will provide technology services to us under a Transition Services Agreement while we create independent system environments, which we believe will help to minimize dis-synergies. The above estimates are preliminary in nature, are based solely on information available to us as of the date of this quarterly report and are inherently uncertain and subject to change.
Impacts of COVID-19
The coronavirus pandemic has created significant public health concerns as well as economic disruption, uncertainty and volatility. Our operations and financial performance have been materially impacted by the COVID-19 pandemic. In the first quarter of 2020, all of our stores in North America were closed on March 17, 2020, but we were able to re-open the majority of our stores as of the end of the second quarter of 2020. Additionally, operations for Victoria’s Secret Direct were temporarily suspended for approximately one week in late March 2020, while Bath & Body Works Direct remained open for the duration of 2020.
During 2020, we took prudent actions to manage expenses and to maintain our cash position and financial flexibility. We also have adopted new operating models focused on providing a safe store environment for our customers and associates, while also delivering an engaging shopping experience. We remain focused on the safe operations of our distribution, fulfillment and shipping costs.call centers while maximizing our direct businesses. There remains the potential for COVID-related risks of closure or operating restrictions, which could materially impact our operations and financial performance in future periods.
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Adjusted Financial Information
In addition to our results provided in accordance with GAAP above and throughout this Form 10-Q, provided below are non-GAAP measurements which present net income (loss) and earnings (loss) per share in 20202021 and 20192020 on an adjusted basis, which remove certain special items. We believe that these special items are not indicative of our ongoing operations due to their size and nature. We use adjusted financial information as key performance measures of results of operations for the purpose of evaluating performance internally. These non-GAAP measurements 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 definition 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.
Second Quarter Year-to-DateSecond QuarterYear-to-Date
(in millions, except per share amounts)2020 2019 2020 2019(in millions, except per share amounts)2021202020212020
Detail of Special Items - Income (Expense)       Detail of Special Items - Income (Expense)
Victoria's Secret Store and Lease Asset Impairment (a)$(117) $—
 $(214) $—
Victoria's Secret Asset Impairment (a)Victoria's Secret Asset Impairment (a)$— $(117)$— $(214)
Restructuring Charges (b)(81) —
 (81) —
Restructuring Charges (b)— (81)— (81)
Hong Kong Store Closure and Lease Termination (c)36
 —
 36
 —
Hong Kong Store Closure (c)Hong Kong Store Closure (c)— 36 — 36 
Special Items included in Operating Income (Loss)(162) —
 (258) —
Special Items included in Operating Income (Loss)— (162)— (258)
Loss on Extinguishment of Debt (d)—
 (40) —
 (40)Loss on Extinguishment of Debt (d)— — (105)— 
Special Items included in Other Income (Loss)—
 (40) —
 (40)Special Items included in Other Income (Loss)— — (105)— 
Tax Benefit from the Resolution of Certain Tax Matters and Changes in Tax Legislation (e)21
 —
 71
 —
Tax Benefit from the Resolution of Certain Tax Matters (e)Tax Benefit from the Resolution of Certain Tax Matters (e)— 21 — 71 
Tax Effect of Special Items included in Operating Income (Loss) and Other Income (Loss)22
 10
 47
 10
Tax Effect of Special Items included in Operating Income (Loss) and Other Income (Loss)— 22 25 47 
Special Items included in Net Income (Loss)$(119) $(30) $(140) $(30)Special Items included in Net Income (Loss)$— $(119)$(80)$(140)
       
Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income (Loss)Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income (Loss)Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income (Loss)
Reported Operating Income (Loss)$44
 $175
 $(274) $328
Reported Operating Income (Loss)$599 $44 $1,171 $(274)
Special Items included in Operating Income (Loss)162
 —
 258
 —
Special Items included in Operating Income (Loss)— 162 — 258 
Adjusted Operating Income (Loss)$206
 $175
 $(15) $328
Adjusted Operating Income (Loss)$599 $206 $1,171 $(15)
       
Reconciliation of Reported Net Income (Loss) to Adjusted Net Income (Loss)       Reconciliation of Reported Net Income (Loss) to Adjusted Net Income (Loss)
Reported Net Income (Loss)$(49) $38
 $(346) $78
Reported Net Income (Loss)$374 $(49)$651 $(346)
Special Items included in Net Income (Loss)119
 30
 140
 30
Special Items included in Net Income (Loss)— 119 80 140 
Adjusted Net Income (Loss)$69
 $68
 $(206) $108
Adjusted Net Income (Loss)$374 $69 $731 $(206)
       
Reconciliation of Reported Earnings (Loss) Per Diluted Share to Adjusted Earnings (Loss) Per Diluted ShareReconciliation of Reported Earnings (Loss) Per Diluted Share to Adjusted Earnings (Loss) Per Diluted ShareReconciliation of Reported Earnings (Loss) Per Diluted Share to Adjusted Earnings (Loss) Per Diluted Share
Reported Earnings (Loss) Per Diluted Share$(0.18) $0.14
 $(1.25) $0.28
Reported Earnings (Loss) Per Diluted Share$1.34 $(0.18)$2.31 $(1.25)
Special Items included in Earnings (Loss) Per Diluted Share0.42
 0.11
 0.50
 0.11
Special Items included in Earnings (Loss) Per Diluted Share— 0.42 0.28 0.50 
Adjusted Earnings (Loss) Per Diluted Share$0.25
 $0.24
 $(0.74) $0.39
Adjusted Earnings (Loss) Per Diluted Share$1.34 $0.25 $2.59 $(0.74)
 ________________
(a)We recognized pre-tax impairment charges of $117 million ($99 million after tax) and $97 million ($72 million after tax) related to certain Victoria's Secret store and lease assets in the second and first quarter of 2020, respectively. For additional information see Note 7, "Long-Lived Assets" included in Item 1. Financial Statements.
(b)In the second quarter of 2020, we recognized pre-tax severance charges of $81 million ($65 million after tax) related to headcount reductions as a result of restructuring activities. For additional information, see Note 4, “Restructuring" included in Item 1. Financial Statements.

(a)We recognized pre-tax impairment charges of $117 million ($99 million after tax) and $97 million ($72 million after tax) related to certain Victoria's Secret store and lease assets in the second and first quarter of 2020, respectively. For additional information see Note 6, "Long-Lived Assets" included in Item 1. Financial Statements.
(c)In the second quarter of 2020, we recognized a net pre-tax gain of $36 million ($25 million after tax) related to the closure and termination of our lease for the Victoria’s Secret Hong Kong flagship store. For additional information, see Note 7, "Long-Lived Assets" included in Item 1. Financial Statements.
(d)In the second quarter of 2019, we redeemed $764 million of outstanding notes maturing between 2020 and 2022, resulting in a pre-tax loss on extinguishment of $40 million (after-tax loss of $30 million). For additional information see Note 10, "Long-term Debt and Borrowing Facilities" included in Item 1. Financial Statements.
(e)In the second quarter of 2020, we recognized a $21 million income tax benefit related to recent changes in tax legislation included in the CARES Act. In the first quarter of 2020, we recognized a $50 million tax benefit related to the resolution of certain tax matters. For additional information see Note 9, "Income Taxes" included in Item 1. Financial Statements.
Company-Owned(b)In the second quarter of 2020, we recognized pre-tax severance charges of $81 million ($65 million after tax) related to headcount reductions as a result of restructuring activities. For additional information, see Note 3, “Restructuring Activities" included in Item 1. Financial Statements.
(c)In the second quarter of 2020, we recognized a net pre-tax gain of $36 million ($25 million after tax) related to the closure of the Victoria’s Secret Hong Kong flagship store. For additional information see Note 6, "Long-Lived Assets" included in Item 1. Financial Statements.
(d)In the first quarter of 2021, we recognized a pre-tax loss of $105 million (after-tax loss of $80 million) due to the early extinguishment of outstanding notes. For additional information see Note 9, "Long-term Debt and Borrowing Facilities" included in Item 1. Financial Statements.
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(e)In the second quarter of 2020, we recognized a $21 million income tax benefit related to recent changes in tax legislation included in the CARES Act. In the first quarter of 2020, we recognized a $50 million tax benefit related to the resolution of certain tax matters. For additional information see Note 8, "Income Taxes" included in Item 1. Financial Statements.
Company-Operated Store Data
The following table compares the second quarter of 2020 company-owned2021 company-operated store data to the second quarter of 20192020 and year-to-date 20202021 store data to year-to-date 2019:2020:
Second Quarter Year-to-DateSecond QuarterYear-to-Date
2020 2019 % Change 2020 2019 % Change20212020% Change20212020% Change
Sales per Average Selling Square Foot (a)           Sales per Average Selling Square Foot (a)
Bath & Body Works U.S.$148
 $196
 (24%) $240
 $356
 (33%)Bath & Body Works U.S.$265 $148 79 %$493 $240 105 %
Victoria’s Secret U.S.54
 166
 (67%) 129
 317
 (59%)Victoria’s Secret U.S.172 54 219 %325 129 152 %
Sales per Average Store (in thousands) (a)           Sales per Average Store (in thousands) (a)
Bath & Body Works U.S.$389
 $510
 (24%) $634
 $925
 (32%)Bath & Body Works U.S.$709 $389 82 %$1,320 $634 108 %
Victoria’s Secret U.S.364
 1,083
 (66%) 867
 2,066
 (58%)Victoria’s Secret U.S.1,183 364 225 %2,245 867 159 %
Average Store Size (selling square feet)           Average Store Size (selling square feet)
Bath & Body Works U.S.2,638
 2,606
 1%      Bath & Body Works U.S.2,689 2,638 2 %
Victoria’s Secret U.S.6,937
 6,543
 6%      Victoria’s Secret U.S.6,888 6,937 (1 %)
Total Selling Square Feet (in thousands)           Total Selling Square Feet (in thousands)
Bath & Body Works U.S.4,308
 4,253
 1%      Bath & Body Works U.S.4,472 4,308 4 %
Victoria’s Secret U.S.5,952
 6,961
 (14%)      Victoria’s Secret U.S.5,772 5,952 (3 %)
 ________________
(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. As a result of the COVID-19 pandemic, all our stores in the U.S. were closed on March 17, and almost all remained closed as of the beginning of the second quarter. As of August 1, 2020 we have reopened the majority of our U.S. stores for both businesses. As a result, comparisons of year-over-year trends are not a meaningful way to discuss our operating results this quarter.
(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. As a result of the COVID-19 pandemic, all our stores in the U.S. were closed on March 17, 2020 and almost all remained closed as of the beginning of the second quarter of 2020. The COVID-19 related store closures impacted our store operations for roughly half of the second quarter of 2020. As a result, comparisons of year-over-year trends are not a meaningful way to discuss our operating results in the current year.

The following table represents company-ownedcompany-operated store data for year-to-date 2020:2021:
Stores atStores at
January 30, 2021OpenedClosedJuly 31, 2021
Bath & Body Works U.S.1,633 41 (11)1,663 
Bath & Body Works Canada103 — — 103 
Total Bath & Body Works1,736 41 (11)1,766 
Victoria’s Secret U.S.846 — (8)838 
Victoria’s Secret Canada25 1 — 26 
Victoria's Secret Beauty and Accessories Greater China36 1 (1)36 
Victoria's Secret Greater China26 — — 26 
Total Victoria's Secret933 2 (9)926 
Total Stores2,669 43 (20)2,692 

25
 Stores at     Stores at
 February 1, 2020 Opened Closed August 1, 2020
Bath & Body Works U.S.1,637
 10
 (14) 1,633
Bath & Body Works Canada102
 —
 —
 102
Total Bath & Body Works1,739
 10
 (14) 1,735
Victoria’s Secret U.S.1,053
 3
 (198) 858
Victoria’s Secret Canada38
 —
 (12) 26
Total Victoria's Secret1,091
 3
 (210) 884
Victoria's Secret U.K. / Ireland26
 —
 —
 26
Victoria's Secret Beauty and Accessories41
 1
 (3) 39
Victoria's Secret Greater China23
 3
 (1) 25
Total Victoria's Secret and Bath & Body Works International90
 4
 (4) 90
Total L Brands Stores2,920
 17
 (228) 2,709
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The following table represents company-ownedcompany-operated store data for year-to-date 2019:2020:
Stores atStores at
February 1, 2020OpenedClosedAugust 1, 2020
Bath & Body Works U.S.1,637 10 (14)1,633 
Bath & Body Works Canada102 — — 102 
Total Bath & Body Works1,739 10 (14)1,735 
Victoria’s Secret U.S.1,053 3 (198)858 
Victoria’s Secret Canada38 — (12)26 
Victoria's Secret U.K. / Ireland26 — — 26 
Victoria's Secret Beauty and Accessories Greater China41 1 (3)39 
Victoria's Secret Greater China23 3 (1)25 
Total Victoria's Secret1,181 7 (214)974 
Total Stores2,920 17 (228)2,709 
 Stores at     Stores at
 February 2, 2019 Opened Closed August 3, 2019
Bath & Body Works U.S.1,619
 23
 (10) 1,632
Bath & Body Works Canada102
 1
 —
 103
Total Bath & Body Works1,721
 24
 (10) 1,735
Victoria’s Secret U.S.1,098
 3
 (37) 1,064
Victoria’s Secret Canada45
 —
 —
 45
Total Victoria's Secret1,143
 3
 (37) 1,109
Victoria's Secret U.K. / Ireland26
 —
 —
 26
Victoria's Secret Beauty and Accessories38
 6
 (5) 39
Victoria's Secret Greater China15
 3
 —
 18
Total Victoria's Secret and Bath & Body Works International79

9

(5)
83
Total L Brands Stores2,943
 36
 (52) 2,927
Noncompany-OwnedPartner-Operated Store Data
The following table represents noncompany-ownedpartner-operated store data for year-to-date 2021:
Stores atStores at
January 30, 2021OpenedClosedJuly 31, 2021
Bath & Body Works288 22 (5)305 
Victoria’s Secret Beauty & Accessories338 7 (6)339 
Victoria's Secret120 3 — 123 
Total746 32 (11)767 
The following table represents partner-operated store data for year-to-date 2020:
Stores atStores at
February 1, 2020OpenedClosedAugust 1, 2020
Bath & Body Works278 7 (1)284 
Victoria’s Secret Beauty & Accessories360 2 (13)349 
Victoria's Secret84 4 — 88 
Total722 13 (14)721 
 Stores at     Stores at
 February 1, 2020 Opened Closed August 1, 2020
Bath & Body Works278
 7
 (1) 284
Victoria’s Secret Beauty & Accessories360
 2
 (13) 349
Victoria's Secret84
 4
 —
 88
Total722
 13
 (14) 721

The following table represents noncompany-owned store data for year-to-date 2019:
 Stores at     Stores at
 February 2, 2019 Opened Closed August 3, 2019
Bath & Body Works235
 14
 (2) 247
Victoria’s Secret Beauty & Accessories383
 15
 (21) 377
Victoria's Secret56
 7
 —
 63
Total674
 36
 (23) 687


Results of Operations
Second Quarter of 20202021 Compared to Second Quarter of 20192020
Operating Income (Loss)
The following table provides our segment operating income (loss) and operating income (loss) rates (expressed as a percentage of net sales) for the second quarter of 20202021 in comparison to the second quarter of 2019:2020:
    Operating Income (Loss) Rate   Operating Income (Loss) Rate
2020 2019 2020 2019 2021202020212020
Second Quarter(in millions)    Second Quarter(in millions)  
Bath & Body Works$326
 $180
 27.2% 17.0%Bath & Body Works$431 $337 25.3 %26.9 %
Victoria’s Secret(140) 17
 (14.4%) 1.0 %Victoria’s Secret233 (219)14.4 %(20.5 %)
Victoria's Secret and Bath & Body Works International(19) (1) (23.3%) (0.8%)
Other (a)(123) (21) (187.6%) (26.0%)Other (a)(65)(74)— %— %
Total Operating Income (Loss)$44
 $175
 1.9% 6.0 %Total Operating Income (Loss)$599 $44 18.1 %1.9 %
  _______________
(a)Includes sourcing and corporate functions.
(a)Includes corporate infrastructure and governance functions, and other non-recurring items that are deemed to be corporate in nature.
For the second quarter of 2021, operating income increased $555 million, to $599 million, from $44 million in the second quarter of 2020, operating income decreased $131 million, to $44 million, and the operating income rate decreasedincreased to 1.9%18.1% from 6.0%1.9%. The drivers of the operating income (loss) results are discussed in the following sections.
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Net Sales
The following table provides net sales for the second quarter of 20202021 in comparison to the second quarter of 2020:
20212020% Change
Second Quarter(in millions) 
Bath & Body Works Stores - U.S. and Canada$1,230 $678 81 %
Bath & Body Works Direct407 519 (22 %)
Bath & Body Works International (a)67 56 19 %
Total Bath & Body Works1,704 1,253 36 %
Victoria’s Secret Stores - U.S. and Canada1,037 364 185 %
Victoria’s Secret Direct469 614 (24 %)
Victoria’s Secret International (b)108 88 22 %
Total Victoria’s Secret1,614 1,066 51 %
Total Net Sales$3,318 $2,319 43 %
 _______________
(a)2019:Results include royalties associated with franchised store and wholesale sales.
(b)Results include company-operated stores in the U.K. (pre-joint venture) and Greater China, and royalties associated with franchised stores and wholesale sales.
 2020 2019 % Change
Second Quarter(in millions)  
Bath & Body Works Stores (a)$678
 $883
 (23%)
Bath & Body Works Direct519
 178
 191%
Total Bath & Body Works1,197
 1,061
 13%
Victoria’s Secret Stores (a)364
 1,233
 (70%)
Victoria’s Secret Direct614
 373
 65%
Total Victoria’s Secret978
 1,606
 (39%)
Victoria's Secret and Bath & Body Works International (b)80
 155
 (48%)
Other (c)64
 80
 (19%)
Total Net Sales$2,319
 $2,902
 (20%)
________________
(a)Includes company-owned stores in the U.S. and Canada.
(b)Includes company-owned stores in the U.K., Ireland and Greater China, direct sales in Greater China and wholesale sales, royalties and other fees associated with non-company owned stores.
(c)Includes wholesale revenues from our sourcing function.


The following table provides a reconciliation of net sales for the second quarter of 20202021 to the second quarter of 2019:2020:
Bath &
Body Works		Victoria’s
Secret		Total
(in millions)
2020 Net Sales$1,253 $1,066 $2,319 
Comparable Store Sales(150)58 (92)
Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net (a)698 593 1,291 
Direct Channels(112)(142)(254)
Private Label Credit Card— 3 3 
International Wholesale, Royalty and Other11 31 42 
Foreign Currency Translation4 5 9 
2021 Net Sales$1,704 $1,614 $3,318 
 
Bath &
Body Works
 
Victoria’s
Secret
 
Victoria’s Secret
and
Bath & Body
Works
International
 Other Total
Second Quarter(in millions)
2019 Net Sales$1,061
 $1,606
 $155
 $80
 $2,902
Comparable Store Sales294
 (37) (13) —
 244
Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net(497) (810) (27) —
 (1,334)
Foreign Currency Translation(1) (1) (1) —
 (3)
Direct Channels340
 238
 (1) —
 577
Private Label Credit Card—
 (18) —
 —
 (18)
International Wholesale, Royalty and Other—
 —
 (33) (16) (49)
2020 Net Sales$1,197
 $978
 $80
 $64
 $2,319
 _______________
(a)Includes the increased sales from period over period due to the 2020 COVID-19 related stores closures.

The following table compares the second quarter of 20202021 comparable sales to the second quarter of 2019:2020:
20212020
Comparable Sales (Stores and Direct) (a)
Bath & Body Works (b)(22 %)123 %
Victoria's Secret (c)(9 %)24 %
Total Comparable Sales(16 %)63 %
Comparable Store Sales (a)
Bath & Body Works (b)(23 %)87 %
Victoria's Secret (c)16 %(12 %)
Total Comparable Store Sales(9 %)33 %
27
Second Quarter2020 2019
Comparable Sales (Stores and Direct) (a)   
Bath & Body Works (b)123% 8%
Victoria's Secret (b)28% (6%)
Total Comparable Sales63% (1%)
    
Comparable Store Sales (a)   
Bath & Body Works (b)87% 4%
Victoria’s Secret (b)(10%) (9%)
Total Comparable Store Sales33% (4%)
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________
(a)The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more. Therefore, comparable sales results for the second quarter of 2020 exclude stores that were closed for four consecutive days or more as a result of the COVID-19 pandemic. Additionally, stores of a given brand are excluded if total selling square footage for the brand in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.
(b)Includes company-owned stores in the U.S. and Canada.
(a)The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. The change in comparable sales provides an indication of period over period growth (decline). A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Closed stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more. Upon re-opening, the stores are included in the calculation. Therefore, comparable sales results for the second quarter of 2021 and 2020 exclude the closure period of stores that were closed for four consecutive days or more as a result of the COVID-19 pandemic. Additionally, stores of a given brand are excluded if total selling square footage for the brand in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.
(b)Includes company-operated stores in the U.S. and Canada.
(c)Includes company-operated stores in the U.S., Canada, the U.K. (pre-joint venture) and Greater China.
The results by segment are as follows:
Bath & Body Works
For the second quarter of 2020,2021, net sales increased $136$451 million to $1.197 billion, comparable sales increased 123% and comparable store sales increased 87% (during the period the stores were open).$1.704 billion. Net sales increased in the stores channel by $552 million, or 81%, primarily due to the COVID-19 related store closures in the second quarter of 2020. Direct net sales decreased $112 million, or 22%, primarily due to the reopening of stores this year, as a result ofcompared to the prior year when stores were closed which drove an increase in oursales in the direct channel, which increased 191% to $519 million. Duringchannel.
Performance was strong throughout the quarter as we focused on increasingsaw positive customer response to our direct fulfillment capacity to meet themerchandise. We experienced significant increasegrowth in demandfragrant body care, home fragrance and as a result, are achieving strong productivity and maintaining standard delivery times for our customers after experiencing delays earlier in the year. In both channels, sales were strong across all regions, store types and merchandise categories, driven by continued high demand forgifting. As expected, soaps and sanitizers and also strong comparable sales performance in body care and home fragrance. These increases were partially offset by the COVID-19-related store closures as, on average, Bath & Body Works stores were closed for about half of the quarter.declined versus last year’s significant growth.
The increasedecrease in comparable sales was driven by increasesa decrease in digitalaverage dollar sales in the stores channel and a decline in direct traffic, conversion and average unit retail.

given the impact from the store closures last year.
Victoria's Secret
For the second quarter of 2020,2021, net sales decreased $628increased $548 million to $978 million, comparable$1.614 billion. Net sales increased 28%in U.S. and comparable store sales decreased 10% (duringCanada stores by $673 million, or 185%, primarily due to the period stores were open). Net sales decreased primarily as a result of the COVID-19-relatedCOVID-19 related store closures as, on average, Victoria’s Secret stores were closed for about 70%in the second quarter of the quarter (including2020, partially offset by the impact of the approximately 250permanent closure of 241 stores in North America in 2020. Direct net sales decreased $145 million, or 24%, primarily due to the reopening of stores this year, as compared to the prior year when stores were closed which we plan to close). Thisdrove an increase in sales in the direct channel.
The decrease in comparable sales was driven by a decline in direct traffic, given the impact from the store closures last year, partially offset by an increase in Victoria's Secret Direct channel sales, which increased 65% to $614 million, reflecting significant growth in the Lingerie, PINK and Beauty businesses.
The increase in comparable sales was driven by increases in digitalstore traffic conversion and average unit retail.
Victoria's Secret and Bath & Body Works International
For the second quarter of 2020, net sales decreased $75 million to $80 million primarily due to the significant number of COVID-19-related store closures impacting Company-owned and partner-operated stores.
Other
For the second quarter of 2020, net sales decreased $16 million to $64 million due a decrease in wholesale sales to our international partners, impacted significantly by COVID-19-related store closures.
Gross Profit
For the second quarter of 2020,2021, our gross profit decreased $272increased $787 million to $711 million,$1.498 billion, and our gross profit rate (expressed as a percentage of net sales) decreasedincreased to 30.7%45.2% from 33.9%30.7%, primarily driven by the following:
Bath & Body Works
For the second quarter of 2020,2021, the gross profit increase was due to increasedthe increase in merchandise margin dollars related to the increase in net sales, partially offset by a decrease in the merchandise margin rate in the direct business as we returned to a normalized semi-annual sale in June, and higher occupancy expenses due to the increase in net sales.
The gross profit rate increase was driven by buying and occupancy leverage on higher net sales partially offset by a decrease in the merchandise margin rate, reflecting a return to a normalized semi-annual sale and higher supply chain costs due to market constraints and inflation.
Victoria's Secret
For the second quarter of 2021, the gross profit increase was due to the increase in merchandise margin dollars related to the increase in net sales and a decreasean increase in the merchandise margin rate driven by improved response to our merchandise assortments, disciplined management of inventory, as well as strong selling execution in stores and online, all of which enabled us to reduce promotional activity during the quarter. Occupancy expenses were lower, driven by store asset impairment charges of $117 million in the prior year and permanent store closures, partially offset by higher occupancy expenses duea $39 million gain related to increased direct channel fulfillment and shipping costs.the closure of our Hong Kong flagship store in the prior year.
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The gross profit rate increase was driven by buying and occupancy leverage on higher net sales, an increase in the merchandise margin rate due to a more profitable semi-annual sale period and less promotional activity.
Victoria's Secret
For the second quarter of 2020, the gross profit decrease was due to lower merchandise margin dollars related to the decrease in net sales due to the COVID-19-related store closures and store and lease asset impairment charges of $75 million. These decreases were partially offset by a meaningful pullback in promotional activity, better pricing during semi-annual sale and reduced occupancy expenses due to the store closures.
The gross profit rate decrease was primarily driven by the store and lease asset impairment charges and buying and occupancy deleverage on lower net sales, partially offset by a higher merchandise margin rate reflecting a meaningful pullback in promotional activity and better pricing during semi-annual sale.
Victoria's Secret and Bath & Body Works International
For the second quarter of 2020, the gross profit decrease was due to lower merchandise margin dollars related to the decrease in net sales due to the COVID-19-related store closures and lease asset impairment charges of $42 million, partially offset by a $36 million net gain related toin the closure and termination of our lease for the Victoria’s Secret Hong Kong flagship store and reduced depreciation expense due to store and lease asset impairments recognized in prior periods.
The gross profit rate decrease was driven by the lease asset impairment charges and buying and occupancy deleverage on lower net sales.year.
General, Administrative and Store Operating Expenses
For the second quarter of 2020,2021, our general, administrative and store operating expenses decreased $141increased $232 million to $667$899 million due to declinesan increase in store selling payroll, supplies, credit card fees and marketing expenses as a result of the COVID-19-relatedincrease in net sales, an increase in marketing investments due to brand repositioning at Victoria's Secret and the store closures in the prior year, and costs related to legal and separation fees. These increases were partially offset by severance and related costs associated with headcount reductions totaling $81 million in the prior year and increased credit card fees in our direct businesses.savings realized as a result of cost reductions and the impact of the permanent store closures.
The general, administrative and store operating expense rate increaseddecreased to 28.8%27.1% from 27.8%28.8% due to leverage on the severance and related costs.

increase in net sales.
Other Income and Expense
Interest Expense
The following table provides the average daily borrowings and average borrowing rates for the second quarter of 20202021 and 2019:2020:
Second Quarter2020 2019Second Quarter20212020
Average daily borrowings (in millions)$6,173
 $5,792
Average daily borrowings (in millions)$5,528 $6,173 
Average borrowing rate (in percentages)6.8% 6.6%Average borrowing rate (in percentages)7.2 %6.8 %
For the second quarter of 2020,2021, our interest expense increased $9decreased $5 million to $104$99 million due to both higherlower average daily borrowings andpartially offset by a higher average borrowing rate.
Other Income (Loss)
For the second quarter of 2020, our other loss decreased $38 million primarily due to a $40 million loss associated with the early extinguishment of outstanding notes recognized in the second quarter of 2019.
Provision (Benefit) for Income Taxes
For the second quarter of 2020,2021, our effective tax rate was 17.7%25.1% compared to 10.1%17.7% in the second quarter of 2019.2020. The second quarter of 2021 rate was lower than our combined estimated federal and state statutory rate primarily due to the recognition of excess tax benefits recorded through the Consolidated Statement of Income on share-based awards that vested in the quarter. In the second quarter of 2020, we recognized a benefit for income taxes of $11 million on a loss before income taxes of $60 million. The second quarter of 2020 rate was lower than our combined estimated federal and state statutory rate primarily due to losses related to certain foreign subsidiaries, which generategenerated no tax benefit, partially offset by recent changes in tax legislation included in the CARES Act, which resulted in a $21 million tax benefit. The second quarter of 2019 rate was lower than our combined federal and state statutory rate primarily due to the resolution of certain tax matters.
Results of Operations
Year-to-Date 20202021 Compared to Year-to-Date 20192020
Operating Income (Loss)
The following table provides our segment operating income (loss) and operating income (loss) rates (expressed as a percentage of net sales) for year-to-date 20202021 in comparison to year-to-date 2019:2020:
    Operating Income (Loss) Rate   Operating Income (Loss) Rate
2020 2019 2020 2019 2021202020212020
Year-to-Date(in millions)    Year-to-Date(in millions)  
Bath & Body Works$395
 $335
 20.7 % 17.3 %Bath & Body Works$811 $413 25.6 %20.5 %
Victoria’s Secret(440) 49
 (24.5%) 1.6 %Victoria’s Secret477 (573)15.1 %(29.2 %)
Victoria’s Secret and Bath & Body Works International(54) (5) (37.1%) (1.8%)
Other (a)(175) (51) (145.2%) (26.5%)Other (a)(117)(114)— %— %
Total Operating Income (Loss)$(274) $328
 (6.9%) 5.9 %Total Operating Income (Loss)$1,171 $(274)18.5 %(6.9 %)
  _______________
(a)Includes sourcing and corporate functions.
(a)Includes corporate infrastructure and governance functions, and other non-recurring items that are deemed to be corporate in nature.
For year-to-date 2020,2021, operating income (loss) decreased $602 million, or 184%,increased $1.445 billion to a lossoperating income of $274 million,$1.171 billion, and the operating income (loss) rate decreasedincreased to 18.5% from (6.9%) from 5.9%. The drivers of the operating income results are discussed in the following sections.

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Net Sales
The following table provides net sales for year-to-date 20202021 in comparison to year-to-date 2019:2020:
2020 2019 % Change20212020% Change
Year-to-Date(in millions)  Year-to-Date(in millions) 
Bath & Body Works Stores (a)$1,102
 $1,597
 (31%)
Bath & Body Works Stores - U.S. and CanadaBath & Body Works Stores - U.S. and Canada$2,280 $1,102 107 %
Bath & Body Works Direct807
 335
 141%Bath & Body Works Direct756 807 (6 %)
Bath & Body Works International (a)Bath & Body Works International (a)137 105 31 %
Total Bath & Body Works1,909
 1,932
 (1%)Total Bath & Body Works3,173 2,014 58 %
Victoria’s Secret Stores (a)877
 2,381
 (63%)
Victoria’s Secret Stores - U.S. and CanadaVictoria’s Secret Stores - U.S. and Canada1,970 877 124 %
Victoria’s Secret Direct922
 735
 25%Victoria’s Secret Direct990 922 7 %
Victoria’s Secret International (b)Victoria’s Secret International (b)208 161 30 %
Total Victoria’s Secret1,799
 3,116
 (42%)Total Victoria’s Secret3,168 1,960 62 %
Victoria’s Secret and Bath & Body Works International (b)146
 289
 (50%)
Other (c)120
 193
 (38%)
Total Net Sales$3,974
 $5,530
 (28%)Total Net Sales$6,341 $3,974 60 %
 _______________
(a)Includes company-owned stores in the U.S. and Canada.
(b)Includes company-owned stores in the U.K., Ireland and Greater China, direct sales in Greater China and wholesale sales, royalties and other fees associated with non-company owned stores.
(c)Includes wholesale revenues from our sourcing function.
(a)Results include royalties associated with franchised store and wholesale sales.
(b)Results include company-operated stores in the U.K. (pre-joint venture) and Greater China, and royalties associated with franchised stores and wholesale sales.

The following table provides a reconciliation of net sales for year-to-date 20202021 to year-to-date 2019:2020:
Bath &
Body Works		Victoria's
Secret		Total
(in millions)
2020 Net Sales$2,014 $1,960 $3,974 
Comparable Store Sales(102)70 (32)
Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net (a)1,274 994 2,268 
Direct Channels(52)70 18 
Private Label Credit Card— 6 6 
International Wholesale, Royalty and Other33 60 93 
Foreign Currency Translation6 8 14 
2021 Net Sales$3,173 $3,168 $6,341 
 _______________
(a)Includes the increased sales from period over period due to the 2020 COVID-19 related stores closures.
30
 
Bath &
Body Works
 Victoria's Secret 
Victoria’s Secret
and
Bath & Body Works International
 Other Total
Year-to-Date(in millions)
2019 Net Sales$1,932
 $3,116
 $289
 $193
 $5,530
Comparable Store Sales359
 (121) (39) —
 199
Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net(848) (1,342) (40) —
 (2,230)
Foreign Currency Translation(7) (4) (8) —
 (19)
Direct Channels473
 185
 (2) —
 656
Private Label Credit Card—
 (35) —
 —
 (35)
International Wholesale, Royalty and Other—
 —
 (54) (73) (127)
2020 Net Sales$1,909
 $1,799
 $146
 $120
 $3,974
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The following table compares year-to-date 20202021 comparable sales to year-to-date 2019:2020:
20212020
Year-to-Date2020 2019
Comparable Sales (Stores and Direct) (a)   Comparable Sales (Stores and Direct) (a)
Bath & Body Works (b)84% 10%Bath & Body Works (b)(8 %)84 %
Victoria's Secret (b)6% (6%)
Victoria's Secret (c)Victoria's Secret (c)6 %3 %
Total Comparable Sales32% (1%)Total Comparable Sales(1 %)32 %
   
Comparable Store Sales (a)   Comparable Store Sales (a)
Bath & Body Works (b)54% 6%Bath & Body Works (b)(10 %)54 %
Victoria’s Secret (b)(13%) (8%)
Victoria's Secret (c)Victoria's Secret (c)9 %(16 %)
Total Comparable Store Sales12% (3%)Total Comparable Store Sales(2 %)12 %
________
(a)The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more. Therefore, comparable sales results for 2020 exclude stores that were closed for four consecutive days or more as a result of the COVID-19 pandemic. Additionally, stores of a given brand are excluded if total selling square footage for the brand in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.
(b)Includes company-owned stores in the U.S. and Canada.
(a)The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. The change in comparable sales provides an indication of period over period growth (decline). A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Closed stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more. Upon re-opening, the stores are included in the calculation. Therefore, comparable sales results for 2021 and 2020 exclude the closure period of stores that were closed for four consecutive days or more as a result of the COVID-19 pandemic. Additionally, stores of a given brand are excluded if total selling square footage for the brand in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.
(b)Includes company-operated stores in the U.S. and Canada.
(c)Includes company-operated stores in the U.S., Canada, the U.K. (pre-joint venture) and Greater China.
The results by segment are as follows:
Bath & Body Works
For year-to-date 2020,2021, net sales increased $1.159 billion to $3.173 billion. Net sales increased in the stores channel by $1.178 billion, or 107%, primarily due to the COVID-19 related store closures in 2020. Direct net sales decreased $23$51 million, or 6%, primarily due to $1.909 billion, comparable sales increased 84% and comparable store sales increased 54% (during the periodreopening of stores this year, as compared to the prior year when stores were open). Netclosed which drove an increase in sales decreased as a result ofin the COVID-19-related store closures. The Bath & Body Works Direct channel, which remained opendirect channel.
Performance was strong throughout the period grew sales by 141% to $807 million as we focused on increasingsaw positive customer response to our fulfillment capacity to meet themerchandise. We experienced significant increasegrowth in demand. In both channels, sales were strong across all regions, store typesfragrant body care, home fragrance and merchandise categories, driven by continued high demand forgifting. As expected, soaps and sanitizers and also strongdeclined versus last year’s significant growth.
The decrease in comparable sales performancewas driven by a decline in home fragrancestore traffic and body care.direct traffic, given the impact from store closures last year, partially offset by a higher average unit retail in the stores channel.
Victoria's Secret
For year-to-date 2021, net sales increased $1.208 billion to $3.168 billion. Net sales increased in U.S. and Canada stores by $1.093 billion, or 124%, primarily due to the COVID-19 related store closures in 2020, partially offset by the impact of the permanent closure of 241 stores in North America in 2020. Direct net sales increased $68 million, or 7%, due to improved customer response to our merchandise assortment as well as the temporary suspension of operations for approximately one week in March 2020. Direct sales last year were positively impacted by the COVID-19 related store closures.
The increase in comparable sales was driven by increasesan increase in digital traffic, conversion and average unit retail.
Victoria's Secret
For year-to-date 2020, net sales decreased $1.317 billion to $1.799 billion, comparable sales increased 6%retail and comparable store sales decreased 13% (during the period the stores were open). Net sales decreased primarily as a result of the COVID-19-related store closures. This decline wasconversion, partially offset by an increasea decline in Victoria's Secret Direct channel sales, which increased 25% to $922 million despite a temporary suspension of operations in March, reflecting significant growth in the Lingerie, PINKstore and Beauty businesses.
The increase in comparable sales was driven by increases in digital traffic, conversion and average unit retail.
Victoria's Secret and Bath & Body Works International
For year-to-date 2020, net sales decreased $143 million to $146 million due to the significant number of COVID-19-related store closures impacting Company-owned and partner-operated stores.
Other
For year-to-date 2020, net sales decreased $73 million to $120 million due a decrease in wholesale sales to our international partners, impacted significantly by COVID-19-related store closures.direct traffic.
Gross Profit
For year-to-date 2020,2021, our gross profit decreased $916 millionincreased $1.912 billion to $1.000$2.912 billion, and our gross profit rate (expressed as a percentage of net sales) decreasedincreased to 25.2%45.9% from 34.6%25.2%, primarily driven by the following:

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Bath & Body Works
For year-to-date 2020,2021, the gross profit decreaseincrease was due to lowerthe increase in merchandise margin dollars related to the decreaseincrease in net sales dueand an increase in the merchandise margin rate driven by strong customer response to the COVID-19-related store closures.our merchandise assortment which allowed us to reduce our promotional activity. This decrease was partially offset by a decreasehigher occupancy expenses due to the increase in promotional activity.net sales.
The gross profit rate remained about flat as a meaningful reduction in promotional activityincrease was offsetdriven by buying and occupancy deleverageleverage on higher net sales and an increase in the stores channel on lower net sales.merchandise margin rate.
Victoria's Secret
For year-to-date 2020,2021, the gross profit decreaseincrease was due to lowerthe increase in merchandise margin dollars related to the decreaseincrease in net sales dueand an increase in the merchandise margin rate driven by improved response to our merchandise assortments, disciplined management of inventory, as well as strong selling execution in stores and online, all of which enabled us to reduce promotional activity during the COVID-19-relatedperiod. Occupancy expenses were lower, driven by store closures and store and lease asset impairment charges of $172 million. These decreases were$214 million in the prior year and permanent store closures, partially offset by reduced occupancy expenses duea $39 million gain related to the closure of our Hong Kong flagship store closures,in the prior year.
The gross profit rate increase was driven by buying and occupancy leverage on higher net sales, an increase in the merchandise margin rate reflecting a meaningful pullback in promotional activity and better pricing during semi-annual sale.
The gross profit rate decrease was driven by the store and lease asset impairment charges and buying and occupancy deleverage on lower net sales.
Victoria's Secret and Bath & Body Works International
For year-to-date 2020,in the gross profit decrease was due to lower merchandise margin dollars related to the decrease in net sales due to the COVID-19-related store closures and lease asset impairment charges of $42 million, partially offset by a $36 million net gain related to the closure and termination of our lease for the Victoria’s Secret Hong Kong flagship store and reduced depreciation expense due to store and lease asset impairments recognized in prior periods.
The gross profit rate decrease was driven by the lease asset impairment charges and buying and occupancy deleverage on lower net sales.year.
General, Administrative and Store Operating Expenses
For year-to-date 2020,2021, our general, administrative and store operating expenses decreased $314increased $467 million to $1.274$1.741 billion due to declinesan increase in store selling payroll, supplies, credit card fees and marketing expenses as a result of the COVID-19-related store closures,increase in net sales, an increase in marketing investments, costs related to legal and separation fees, a $35 million charitable contribution to support philanthropic funds and an increase in incentive compensation given company performance. These increases were partially offset by severance and related costs associated with headcount reductions totaling $81 million in the prior year, and increased credit card fees in our direct businesses.savings realized as a result of cost reductions and the impact of the permanent store closures.
The general, administrative and store operating expense rate increaseddecreased to 32.1%27.4% from 28.7%32.1% due to deleverageleverage on lowerthe increase in net sales and the severance and related costs.sales.
Other Income and Expense
Interest Expense
The following table provides the average daily borrowings and average borrowing rates for year-to-date 20202021 and 2019:2020:
Year-to-Date2020 2019Year-to-Date20212020
Average daily borrowings (in millions)$6,125
 $5,835
Average daily borrowings (in millions)$5,859 $6,125 
Average borrowing rate (in percentages)6.5% 6.6%Average borrowing rate (in percentages)7.2 %6.5 %
For year-to-date 2020,2021, our interest expense increased $7$11 million to $201$212 million due to a higher average borrowing rate partially offset by lower average daily borrowings.
Other Income (Loss)Loss
For year-to-date 2020,2021, our other income (loss) increased $34 million to income of $3loss was $106 million primarily due to a $40$105 million pre-tax loss associated with the early extinguishment of outstanding notes recognized in the secondfirst quarter of 2019.2021.
Provision (Benefit) for Income Taxes
For year-to-date 2020,2021, our effective tax rate was 26.7%23.6% compared to 24.0%26.7% year-to-date 2019.2020. The year-to-date 2021 rate was lower than the Company's combined estimated federal and state statutory rate primarily due to the recognition of excess tax benefits recorded through the Consolidated Statements of Income on share-based awards that vested year-to-date. The second quarter of 2020 rate was generally consistent with ourthe Company's combined estimated federal and state statutory rate due to the resolution of certain tax matters, which resulted in a $50 million tax benefit and recent changes in tax legislation included in the CARES Act, which resulted in a $21 million tax benefit, offset by losses related to certain foreign subsidiaries, which generate no tax benefit. The year-to-date 2019 rate was lower than our combined estimated federal and state statutory rate primarily due to the resolution

32
Table of certain tax matters.Contents


FINANCIAL CONDITION

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. Our cash provided from operations is impacted by our net income (loss) and working capital changes. Our net income (loss) 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. 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 $149$286 million as of August 1, 2020.
COVID-19 Response
Since the global COVID-19 crisis began, we have taken prudent actions to manage expenses and to maintain our solid cash position and financial flexibility through the pandemic, including:
Furloughing most store associates as of April 5 during their temporary store closure, while continuing to provide healthcare benefits for eligible associates;
Suspending associate merit increases;
Temporarily reducing salaries for senior vice presidents and above by 20%;
Temporarily suspending cash compensation for all members of the Board of Directors;
Reducing 2020 forecasted capital expenditures from $550 million to approximately $250 million;
Reducing Spring (first and second quarter) inventory receipts versus last year by approximately 45% at Victoria's Secret and PINK, and by approximately 20% at Bath & Body Works;
Suspending the quarterly cash dividend beginning in the second quarter of fiscal 2020;
Suspending most store and select office rent payments during the temporary closures. We are in active discussions with our landlords to negotiate with respect to these rent payments and go-forward occupancy costs;
Converting the revolving credit facility to an asset-backed loan facility and issuing $1.25 billion in new notes; and
Extending payment terms to vendors.
Working Capital and CapitalizationJuly 31, 2021.
We believe that our available short-term and long-term capital resources are sufficient to fund foreseeable requirements.

Working Capital and Capitalization
The following table provides a summary of our working capital position and capitalization as of July 31, 2021, January 30, 2021 and August 1, 2020:
July 31,
2021		January 30,
2021		August 1,
2020
(in millions)
Net Cash Provided by Operating Activities (a)$573 $2,039 $286 
Capital Expenditures (a)178 228 124 
Working Capital (b)1,889 2,753 1,072 
Capitalization:
Long-term Debt (b)5,938 6,366 6,269 
Shareholders’ Equity (Deficit)(1,189)(662)(1,908)
Total Capitalization$4,749 $5,704 $4,361 
Amounts Available Under the ABL Facility (c)$— $— $— 
 _______________
(a)The January 30, 2021 amounts represent a fifty-two-week period, and the July 31, 2021 and August 1, 2020 Februaryamounts represent twenty-six-week periods.
(b)As of July 31, 2021, our Working Capital included $600 million associated with Cash in Escrow related to the Victoria's Secret & Co. Spin-off and our Long-term Debt included $592 million related to the Victoria's Secret & Co. Notes.
(c)As of July 31, 2021, our borrowing base was $1.045 billion but we were unable to draw upon the ABL Facility as our consolidated cash balance exceeded $350 million. We had outstanding letters of credit, which reduce our availability under the ABL Facility, of $58 million as of July 31, 2021, $63 million as of January 30, 2021, and $61 million as of August 1, 2020 and August 3, 2019:
 August 1,
2020		 February 1,
2020		 August 3,
2019
 (in millions)
Net Cash Provided by Operating Activities (a)$286
 $1,236
 $162
Capital Expenditures (a)124
 458
 244
Working Capital1,072
 873
 437
Capitalization:     
Long-term Debt6,269
 5,487
 5,475
Shareholders’ Equity (Deficit)(1,908) (1,499) (933)
Total Capitalization$4,361
 $3,988
 $4,542
Amounts Available Under the Credit Agreement (b)$—
 $981
 $990
 _______________2020.
(a)The February 1, 2020 amounts represent a fifty-two-week period, and the August 1, 2020 and August 3, 2019 amounts represent twenty-six-week periods.
(b)As of August 1, 2020, our borrowing base was $844 million but we were unable to draw upon the Credit Agreement as our consolidated cash balance exceeded $350 million. We had outstanding letters of credit, which reduce our availability under the Credit Agreement, of $61 million as of August 1, 2020, $19 million as of February 1, 2020 and $10 million as of August 3, 2019.

Cash Flow
The following table provides a summary of our cash flow activity for year-to-date 20202021 and 2019:2020:
 Year-to-Date
20212020
(in millions)
Cash and Cash Equivalents and Restricted Cash, Beginning of Period$3,933 $1,499 
Net Cash Flows Provided by Operating Activities573 286 
Net Cash Flows Used for Investing Activities(168)(116)
Net Cash Flows Provided by (Used for) Financing Activities(1,752)1,071 
Effects of Exchange Rate Changes on Cash and Cash Equivalents and Restricted Cash2 (1)
Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash(1,345)1,240 
Cash and Cash Equivalents and Restricted Cash, End of Period$2,588 $2,739 
33
 Year-to-Date
 2020 2019
 (in millions)
Cash and Cash Equivalents and Restricted Cash, Beginning of Period$1,499
 $1,413
Net Cash Flows Provided by Operating Activities286
 162
Net Cash Flows Used for Investing Activities(116) (237)
Net Cash Flows Provided by (Used for) Financing Activities1,071
 (483)
Effects of Exchange Rate Changes on Cash and Cash Equivalents and Restricted Cash(1) (2)
Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash1,240
 (560)
Cash and Cash Equivalents and Restricted Cash, End of Period$2,739
 $853
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Operating Activities
Net cash provided by operating activities in 2021 was $573 million, including net income of $651 million. Net income included depreciation of $258 million, loss on extinguishment of debt of $105 million, share-based compensation expense of $30 million and deferred tax expense of $16 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 Income Taxes Payable, and the change in Other Assets and Liabilities.
Net cash provided by operating activities in 2020 was $286 million, including a net loss of $346 million. Net loss included depreciation of $266 million, store and lease asset impairment charges of $214 million, gain from Victoria's Secret Hong Kong store closure and lease termination of $39 million and share-based compensation expense of $28 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 and COVID-19-relatedCOVID-19 related changes in Accounts Payable, Accrued Expenses and Other, Inventories, Income Taxes Payable and Accounts Receivable.
Investing Activities
Net cash provided by operatingused for investing activities in 20192021 was $162$168 million consisting primarily of capital expenditures of $178 million, partially offset by proceeds from other investing activities of $10 million. The capital expenditures included $75 million related to the completion of 76 North American Bath & Body Works real estate projects including net income of $78 million. Net income included depreciation of $295 million, share-based compensation expense of $44 million41 new non-mall stores and loss on extinguishment of debt of $40 million. Other changes in assets35 remodels. Remaining capital expenditures were primarily related to technology 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 Income Taxes Payablelogistics to support growth and Inventories, and the changes in Accounts Payable, Accrued Expenses and Other and Accounts Receivable.

Investing Activitiescapabilities.
Net cash used for investing activities in 2020 was $116 million consisting primarily of capital expenditures of $124 million. The capital expenditures were primarily related to spending on technology and logistics to support our digital businesses and other retail capabilities. Capital expenditures of $45 million related to the opening of new stores or the remodeling and improving of existing stores, primarily for Bath & Body Works.
We are estimating 2021 capital expenditures to be between $345 million and $370 million for the total Company, or between $275 million and $300 million for the Bath & Body Works business. We are continuing our investment in the remodeling and opening of new stores, and we are investing in technology, distribution and logistics capabilities to support our growth.
Financing Activities
Net cash used for investingfinancing activities in 20192021 was $237 million$1.752 billion consisting primarily of capital expenditurespayments of $244$1.194 billion for share repurchases, $1.130 billion in payments for the early extinguishment of outstanding notes, $56 million of tax payments related to share-based awards and dividend payments of $0.15 per share, or $42 million. These decreases were partially offset by the initial $600 million of proceeds from the Victoria's Secret & Co. Notes held in escrow for release upon completion of $12 million related to our divestiturethe Separation, and proceeds from stock option exercises of La Senza. The capital expenditures included $169 million for opening new stores and remodeling and improving existing stores. Remaining capital expenditures were primarily related to spending on technology and logistics to support our digital businesses and other retail capabilities.
Financing Activities$76 million.
Net cash provided by financing activities in 2020 was $1.071 billion consisting primarily of net proceeds of $1.231 billion from the issuance of new notes, partially offset by dividend payments of $0.30 per share, or $83 million, and $52 million of net repayments under our Foreign Facilities. We also borrowed and repaid $950 million under our Credit Agreement during 2020.
NetOn August 2, 2021, we completed the Separation of Victoria's Secret & Co. In connection with the Separation, Victoria's Secret & Co. made cash usedpayments of approximately $976 million to us, which we intend to use to fund future share repurchases or dividends, or principal pay downs of debt. Additionally, the Victoria's Secret & Co. Notes became the obligations of Victoria's Secret & Co. concurrent with the Separation.
Subsequent to July 31, 2021, we announced that we had commenced tender offers to purchase for financing activities in 2019 was $483 million consisting primarilycash our outstanding 2023 Notes, 2025 Notes and 2027 Notes up to a maximum aggregate principal amount of $799 million in payments$500 million. The maximum aggregate amount to be purchased by us for the 2025 Notes and 2027 Notes is limited to $180 million. On September 2, 2021, we announced that we had accepted for early extinguishmentsettlement tender offers to purchase $270 million of outstanding notes maturing between 2020 and 2022, quarterly dividend payments of $0.60 per share, or $166 million, and tax payments related to share-based awards of $11 million, partially offset by the net proceeds of $486 million from the issuance of the 20292023 Notes and $11$180 million of net new borrowings under our Foreign Facilities.outstanding 2025 Notes for an aggregate purchase price of $532 million. We intend to make payment for these accepted notes on September 3, 2021. The tender offers will expire on September 16, 2021, unless extended or earlier terminated by us.
Common Stock Share Repurchases
Our Board of Directors 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. We use cash flow generated from operating and financing activities to fund our share repurchase programs. The timing and amount of any repurchases will be made at our discretion, taking into account a number of factors, including market conditions.
We did not repurchase any shares during 2020 or 2019.
In March 2018,2021, our Board of Directors approvedauthorized a new $500 million share repurchase plan, which replaced the $79 million remaining under the March 2018 repurchase program. Pursuant to the Board's authorization, we entered into a Rule 10b5-1
34
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purchase plan to effectuate share repurchases for the first $250 million. In May 2021, we initiated a second $250 million Rule 10b5-1 purchase plan to effectuate the remaining share repurchases under the March 2021 repurchase plan.
In July 2021, our Board of Directors authorized a new $1.5 billion share repurchase program, which replaced the $36 million remaining under the March 2021 repurchase program. Under the authorization of this program, 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 in July 2021.
We repurchased the following shares of our common stock during year-to-date 2021:
Repurchase ProgramAmount
Authorized		Shares
Repurchased		Amount
Repurchased		Average Stock Price
(in millions)(in thousands)(in millions)
March 2021$500 6,996 $464 $66.30 
July 2021$1,500 10,000 $730 $73.01 
The July 2021 Program had $79$770 million remaining as of August 1, 2020.July 31, 2021.
Subsequent to July 31, 2021, we repurchased an additional 1.0 million shares of our common stock for $65 million under the July 2021 Program.
Common Stock Retirement
In accordance with our Board of Directors' resolution, shares of common stock repurchased under the July 2021 Program will be automatically retired and cancelled upon repurchase. As a result, we retired the 10 million shares repurchased under the July 2021 Program in the second quarter of 2021, which resulted in a reduction of $5 million in the par value of Common Stock, $32 million in Paid-in Capital and $693 million in Retained Earnings.
Dividend Policy and Procedures
Our Board of Directors 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 use cash flow generated from operating and financing activities to fund our dividends.
Our Board of Directors suspended our quarterly cash dividend beginning in the second quarter of fiscal 2020 as a proactive measure to strengthen our financial flexibility and manage through the COVID-19 pandemic. In March 2021, our Board of Directors reinstated our annual dividend at $0.60 per share, beginning with the quarterly dividend paid in June 2021.
Under the authority and declaration of our Board of Directors, we paid the following dividends during year-to-date 20202021 and 2019:2020:
Ordinary DividendsTotal Paid
(per share)(in millions)
2021
Second Quarter$0.15 $42 
First Quarter— — 
Total$0.15 $42 
2020
Second Quarter$— $— 
First Quarter0.30 83 
Total$0.30 $83 
In August 2021, our Board of Directors declared the third quarter of 2021 ordinary dividend of $0.15 per share.
35
  Ordinary Dividends Total Paid
  (per share) (in millions)
2020    
Second Quarter $—
 $—
First Quarter 0.30
 83
Total $0.30
 $83
2019    
Second Quarter $0.30
 $83
First Quarter 0.30
 83
Total $0.60
 $166
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Long-term Debt and Borrowing Facilities
The following table provides our outstanding debt balance, net of unamortized debt issuance costs and discounts, as of July 31, 2021, January 30, 2021 and August 1, 2020, February 1, 2020 and August 3, 2019:
2020:
 August 1,
2020		 February 1,
2020		 August 3,
2019
 (in millions)
Senior Secured Debt with Subsidiary Guarantee     
$750 million, 6.875% Fixed Interest Rate Secured Notes due July 2025 ("2025 Secured Notes")$739
 $—
 $—
Secured Foreign Facilities101
 103
 95
Total Senior Secured Debt with Subsidiary Guarantee$840
 $103
 $95
Senior Debt with Subsidiary Guarantee     
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)$991
 $991
 $990
$860 million, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)858
 858
 857
$700 million, 6.75% Fixed Interest Rate Notes due July 2036 (“2036 Notes”)693
 693
 693
$500 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”)498
 498
 498
$500 million, 5.25% Fixed Interest Rate Notes due February 2028 (“2028 Notes”)496
 496
 496
$500 million, 9.375% Fixed Interest Rate Notes due July 2025 ("2025 Notes")492
 —
 —
$500 million, 7.50% Fixed Interest Rate Notes due June 2029 ("2029 Notes")488
 487
 486
$450 million, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)450
 450
 449
$297 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”)277
 276
 274
Total Senior Debt with Subsidiary Guarantee$5,243
 $4,749
 $4,743
Senior Debt     
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”)$348
 $348
 $348
$300 million, 7.60% Fixed Interest Rate Notes due July 2037 (“2037 Notes”)298
 298
 297
Unsecured Foreign Facilities—
 50
 67
Total Senior Debt$646
 $696
 $712
Total$6,729
 $5,548
 $5,550
Current Debt(460) (61) (75)
Total Long-term Debt, Net of Current Portion$6,269
 $5,487
 $5,475
Issuance of Notes
In June 2020, we issued $750 million of 6.875% senior secured notes due July 2025. The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by us and certain of our 100% owned subsidiaries. The 2025 Secured Notes are secured on a first-priority lien basis by substantially all of our and the guarantors' assets, and on a second-priority lien basis by certain collateral securing the ABL Facility, in each case, subject to certain exceptions. The proceeds from the issuance were $739 million, which were net of issuance costs of $11 million. The issuance costs are being amortized through the maturity date and are included within Long-term Debt on the August 1, 2020 Consolidated Balance Sheet.

In June 2020, we also issued $500 million of 9.375% notes due in July 2025 (the "2025 Notes"). The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by us and certain of our 100% owned subsidiaries. The proceeds from the issuance were $492 million, which were net of issuance costs of $8 million. The issuance costs are being amortized through the maturity date and are included within Long-term Debt on the August 1, 2020 Consolidated Balance Sheet.
July 31,
2021		January 30,
2021		August 1,
2020
(in millions)
Senior Secured Debt with Subsidiary Guarantee
$750 million, 6.875% Fixed Interest Rate Secured Notes due July 2025 ("2025 Secured Notes")$— $740 $739 
Foreign Facilities— — 101 
Total Senior Secured Debt with Subsidiary Guarantee$— $740 $840 
Senior Debt with Subsidiary Guarantee
$1 billion, 6.625% Fixed Interest Rate Notes due April 2021 (“2021 Notes”)$— $— $450 
$1 billion, 5.625% Fixed Interest Rate Notes due February 2022 (“2022 Notes”)— 284 858 
$320 million, 5.625% Fixed Interest Rate Notes due October 2023 (“2023 Notes”)319 319 498 
$500 million, 9.375% Fixed Interest Rate Notes due July 2025 ("2025 Notes")494 493 492 
$297 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”)279 278 277 
$500 million, 5.250% Fixed Interest Rate Notes due February 2028 (“2028 Notes”)497 497 496 
$500 million, 7.500% Fixed Interest Rate Notes due June 2029 ("2029 Notes")489 488 488 
$1 billion, 6.625% Fixed Interest Rate Notes due October 2030 ("2030 Notes")989 988 — 
$1 billion, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”)991 991 991 
$700 million, 6.750% Fixed Interest Rate Notes due July 2036 (“2036 Notes”)694 694 693 
Total Senior Debt with Subsidiary Guarantee$4,752 $5,032 $5,243 
Senior Debt
$350 million, 6.950% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”)$348 $348 $348 
$247 million, 7.600% Fixed Interest Rate Notes due July 2037 (“2037 Notes”)246 246 298 
Total Senior Debt$594 $594 $646 
Victoria's Secret & Co. Notes
Victoria's Secret & Co. $600 million, 4.625% Fixed Interest Rate Notes due July 2029 ("Victoria's Secret & Co. Notes")592 — — 
Total$5,938 $6,366 $6,729 
Current Debt— — (460)
Total Long-term Debt, Net of Current Portion$5,938 $6,366 $6,269 
Repurchases of Notes
In June 2019,April 2021, we completed the early settlement of tender offersa make-whole call to repurchase $212 million of outstanding 2020 Notes, $330 million of outstanding 2021 Notes and $96the remaining $285 million of outstanding 2022 Notes for $669 million. We usedand the proceeds from the 2029 Notes, together with cash on hand, to fund the purchase price for the tender offers. Additionally, in July 2019, we redeemed the remaining $126$750 million of outstanding 2020 Notes for $130 million.

In the second quarter of 2019, we2025 Secured Notes. We recognized a pre-tax loss onrelated to this extinguishment of debt of $40$105 million (after-tax loss of $30$80 million), which includes redemption fees and the write-offs of unamortized issuance costs. This loss is included in Other Income (Loss) in the 2019year-to-date 2021 Consolidated StatementsStatement of Income.
Subsequent to July 31, 2021, we announced that we had commenced tender offers to purchase for cash our outstanding 2023 Notes, 2025 Notes and 2027 Notes up to a maximum aggregate principal amount of $500 million. The maximum aggregate amount to be purchased by us for the 2025 Notes and 2027 Notes is limited to $180 million. On September 2, 2021, we announced that we had accepted for early settlement tender offers to purchase $270 million of outstanding 2023 Notes and $180 million of outstanding 2025 Notes for an aggregate purchase price of $532 million. We intend to make payment for these accepted notes on September 3, 2021, and expect to recognize a pre-tax loss of approximately $84 million in the third quarter of 2021 related to these purchases. The tender offers will expire on September 16, 2021, unless extended or earlier terminated by us.
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Victoria's Secret & Co. Notes
In July 2021, Victoria’s Secret & Co., prior to the Separation and while a subsidiary of ours, issued $600 million of 4.625% notes due in July 2029 in a transaction exempt from registration under the Securities Act of 1933, as amended. As of July 31, 2021, the initial proceeds were held in escrow for release to Victoria's Secret & Co. upon satisfaction of certain conditions, including completion of the Separation. If the conditions for the release from escrow of the proceeds were not satisfied, the Victoria's Secret & Co. Notes would have been subject to mandatory redemption. The $600 million initial proceeds are included in Cash in Escrow related to Victoria's Secret & Co. Spin-Off on the July 31, 2021 Consolidated Balance Sheet. The Victoria's Secret & Co. Notes were not guaranteed at issuance by any guarantors or by Bath & Body Works, Inc. or any of our subsidiaries following the Separation.
On August 2, 2021, the Victoria's Secret & Co. Notes became the obligations of Victoria's Secret & Co. concurrent with the Separation. Victoria's Secret & Co. received cash proceeds of $592 million, which were net of issuance costs of $8 million, which it used to partially fund the approximately $976 million cash payments to us in connection with the Separation.
Asset-Backed Revolving Credit Facility
We and certain of our 100% owned subsidiaries guarantee and pledge collateral to secure a revolving credit facility. In April 2020, we entered into an amendment and restatement of the Credit Agreement to convert our credit facility into an asset-backed revolving credit facility. The Amendment maintainsDuring the aggregate commitments at $1 billion,first quarter of 2020, in an abundance of caution and maintainsas a proactive measure in response to the expiration date in AugustCOVID-19 pandemic, we elected to borrow $950 million from its revolving facility. This borrowing was repaid during the first quarter of 2024. The2020 upon completion of the April amendment.
As of July 31, 2021, the ABL Facility, allowswhich allowed borrowings and letters of credit in U.S. dollars or Canadian dollars.dollars, had aggregate commitments at $1 billion and an expiration date in August 2024.
AvailabilityAs of July 31, 2021, the availability under the ABL Facility iswas the lesser of (i) the borrowing base, determined primarily based on our eligible U.S. and Canadian credit card receivables, accounts receivable, inventory and eligible real property, or (ii) the aggregate commitment. If at any time, the outstanding amount under the ABL Facility exceedsexceeded the lesser of (i) the borrowing base and (ii) the aggregate commitment, we will bewould have been required to prepay the outstanding amounts under the ABL Facility to the extent of such excess. In addition, at any time that our consolidated cash balance exceedsexceeded $350 million, we will bewould have been required to prepay outstanding amounts under the ABL Facility to the extent of such excess. As of August 1, 2020,July 31, 2021, our borrowing base was $844 million$1.045 billion, but we were unable to draw upon the ABL Facility as our consolidated cash balance exceeded $350 million.
The ABL Facility supports our letter of credit program. We had $58 million of outstanding letters of credit as of July 31, 2021 that reduced our availability under the ABL Facility.
As of August 1, 2020,July 31, 2021, 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 1.75% per annum. In addition, the interest rate on outstanding U.S. dollar borrowings was the London Interbank Offered Rate plus 1.75% per annum. The interest rate on outstanding Canadian dollar-denominated borrowings was the Canadian Dollar Offered Rate plus 1.75% per annum. 
The ABL Facility requiresrequired 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) $100 million or (2) 15% of the maximum borrowing amount. As of August 1, 2020,July 31, 2021, we were not required to maintain this ratio.
In March 2020, in an abundance of caution and as a proactive measure in response to the COVID-19 pandemic, we elected to borrow $950 million from our revolving facility, which was prepaid upon the completion of the Amendment. As of August 1, 2020,July 31, 2021, there were no borrowings outstanding under the ABL Facility.
Subsequent to July 31, 2021, we entered into an amendment and restatement of the ABL Facility. The ABL Facility supports our letter of credit program. We had $61 million of outstanding letters of credit as of August 1, 2020 thatAmendment reduced our availabilitythe aggregate commitments under the ABL Facility.Facility to $750 million, reduced the interest rates on outstanding borrowings by 50 basis points, removed the requirement to prepay outstanding amounts under the ABL Facility should our consolidated cash balance exceed $350 million, extended the expiration date from August 2024 to August 2026 and released Victoria's Secret & Co. subsidiaries as guarantors, among other things.
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Foreign Facilities
Certain of our Victoria's Secret subsidiaries in China subsidiaries utilizepreviously utilized revolving and term loan bank facilities to support their operations. The Foreign Facilities allow borrowings in U.S. dollars and Chinese Yuan, and interest rates on outstanding borrowings are based upon the applicable benchmark rate for the currency of each borrowing. Certain of these facilities are guaranteed by us and certain of our 100% owned subsidiaries, and certain of these facilities were guaranteed by us only.
The Secured Foreign Facilities have availability totaling $128 million. During 2020, we borrowed $20 million and made payments of $22 million under the Secured Foreign Facilities. As of August 1, 2020, there were borrowings of $101 million outstanding under the Secured Foreign Facilities, of which $10 million is included within Current Debt on the Consolidated Balance Sheet. Borrowings on the Secured Foreign Facilities mature between September 2020 and August 2024.
During the second quarter, we placed cash on deposit with certain financial institutions as collateral for their lending commitments under the Secured Foreign Facilities. The amount of collateral required reduces over time as we make certain paydowns. These deposits, totaling $128 million, are recorded in Other Assets on the August 1, 2020 Consolidated Balance Sheet.
During 2020, we borrowed $13 million and made payments of $63 million under the Unsecured Foreign Facilities. During the second quarter of 2020,2021, with no borrowings outstanding, we terminated the Unsecured Foreign Facilities.
Credit Ratings
The following table provides our credit ratings as of August 1, 2020:
July 31, 2021:
Moody’sS&P
Senior Secured DebtCorporateBa2Ba3BBBB-
CorporateB2B+
Senior Unsecured Debt with Subsidiary GuaranteeB2Ba3B+BB-
Senior Unsecured DebtCaa1B2B-B
OutlookNegativeStableNegativeStable

Subsequent to August 1, 2020, S&P updatedJuly 31, 2021, Moody's upgraded our Corporate and Senior Unsecured Debt with Subsidiary Guarantee ratings to Ba2 and our Senior Unsecured Debt rating to B1 and changed our outlook to Stable.Positive. Additionally, S&P upgraded our Corporate and Senior Unsecured Debt with Subsidiary Guarantee ratings to BB and our Senior Unsecured Debt rating to B+ and changed our outlook to Positive.
Guarantor Summarized Financial Information
CertainAs of July 31, 2021 certain of our subsidiaries, which are listed on Exhibit 22 to this Quarterly Report on Form 10-Q, have guaranteed our obligations under the 2021 Notes, 2022 Notes, 2023 Notes, 2025 Notes, 2027 Notes, 2028 Notes, 2029 Notes, 2030 Notes, 2035 Notes and the 2036 Notes (collectively, the "Unsecured Notes""Notes") and. On August 2, 2021, the 2025 Secured Notes (the “Secured Notes” and togetherguarantees provided by subsidiaries which became subsidiaries of Victoria's Secret & Co. were released concurrently with the Unsecured Notes, the “Notes”).Separation.
The Notes have been issued by L Brands,Bath & Body Works, Inc. (the “Parent Company”). The Unsecured Notes are its senior unsecured obligations and the Secured Notes are its senior secured obligations. The Unsecured Notes rank equally in right of payment with all of our existing and future senior unsecured obligations, senior to any of our future subordinated indebtedness, are effectively subordinated to all of our existing and future indebtedness that is secured by a lien and are structurally subordinated to all existing and future obligations of each of our subsidiaries that do not guarantee the Unsecured Notes. The Secured Notes rank equally in right of payment with all of our existing and future senior obligations, senior to any of our future subordinated indebtedness, are effectively senior to all of our existing and future indebtedness that is secured by a lien on collateral that ranks junior to the lien on such collateral securing the Secured Notes, are effectively senior to all of our existing and future unsecured indebtedness to the extent of the value of the assets securing the Secured Notes, are effectively subordinated to all of our existing and future indebtedness that is secured by a lien on assets that do not constitute collateral or that is secured by a first-priority lien on certain collateral, in each case to the extent of the value of such assets, and structurally subordinated to all existing and future obligations of each of our subsidiaries that do not guarantee the Unsecured Notes.
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 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.
The following tables set forth summarized financial information for the Parent Company and the Subsidiary Guarantors on a combined basis after elimination of (i) intercompany transactions and balances among the Parent Company and the Subsidiary Guarantors and (ii) investments in and equity in the earnings of non-Guarantor subsidiaries:
SUMMARIZED BALANCE SHEETSAugust 1,
2020		 February 1,
2020		SUMMARIZED BALANCE SHEETSJuly 31,
2021		January 30,
2021
(in millions)(in millions)
ASSETS   ASSETS
Current Assets (a)$5,202
 $3,728
Current Assets (a)$5,004 $6,813 
Noncurrent Assets5,007
 5,357
Noncurrent Assets (b)Noncurrent Assets (b)4,550 4,795 
   
LIABILITIES   LIABILITIES
Current Liabilities (b)$4,923
 $4,163
Noncurrent Liabilities (c)9,293
 8,772
Current Liabilities (c)Current Liabilities (c)$4,716 $5,038 
Noncurrent Liabilities (d)Noncurrent Liabilities (d)7,861 9,433 
 _______________
(a)Includes amounts due from non-Guarantor subsidiaries of $1.812 billion and $1.933 billion as of July 31, 2021 and January 30, 2021, respectively.
(b)Includes amounts due from non-Guarantor subsidiaries of $117 million and $141 million as of July 31, 2021 and January 30, 2021, respectively.
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(c)Includes amounts due to non-Guarantor subsidiaries of $2.949 billion and $3.096 billion as of July 31, 2021 and January 30, 2021, respectively.
(d)Includes amounts due to non-Guarantor subsidiaries of $5 million and $476 million as of July 31, 2021 and January 30, 2021, respectively.
(a)SUMMARIZED STATEMENT OF INCOMEIncludes amounts due from non-Guarantor subsidiaries of $1.255 billion and $1.091 billion as of August 1, 2020 and February 1, 2020, respectively.Year-to-Date
2021
(in millions)
Net Sales (a)$6,123 
(b)Gross ProfitIncludes amounts due to non-Guarantor subsidiaries of $2.269 billion and $2.684 billion as of August 1, 2020 and February 1, 2020, respectively.
2,775 
(c)Operating IncomeIncludes amounts due to non-Guarantor subsidiaries of $476 million as of both August 1, 2020 and February 1, 2020.

SUMMARIZED STATEMENT OF LOSSYear-to-Date
 2020
 (in millions)
Net Sales (a)$3,802
Gross Profit970
Operating Loss(173)
Loss Before Income Taxes(407)
Net Loss (b)(263)
 _______________
1,198 
(a)Income Before Income TaxesIncludes net sales of $101 million to non-Guarantor subsidiaries.
852 
Net Income (b)Includes net loss of $7 million related to transactions with non-Guarantor subsidiaries.656 
 _______________
(a)Includes net sales of $42 million to non-Guarantor subsidiaries.
(b)Includes net loss of $62 million related to transactions with non-Guarantor subsidiaries.
In addition to the Subsidiary Guarantors, a certain subsidiary, which is listed on Exhibit 22 to this Quarterly Report on Form 10-Q, has only guaranteed our obligations under the 2025 Notes and the 2025 Secured2030 Notes. This subsidiary had current assets of $15 million and noncurrent assets of $190 million, which included $18 million due from the Subsidiary Guarantors, as of July 31, 2021. Additionally, this subsidiary had assets, all of which were noncurrent, of $239 million and $244$235 million as of August 1, 2020 and February 1, 2020, respectively. In addition,January 30, 2021. Liabilities for this subsidiary had current liabilities of $2 million as of August 1, 2020 and $119 million as of February 1, 2020, which included $93 million due to the Subsidiary Guarantors. Year-to-date 2020were not material for either July 31, 2021 or January 30, 2021. Further, 2021 Statement of LossIncome activity for this subsidiary is immaterial.was not material.
Contingent Liabilities and Contractual Obligations
La Senza
In connection with the sale of La Senza in the fourth quarter of 2018, certain of our subsidiaries have remaining contingent obligations of $36approximately $30 million related to lease payments under the current terms of noncancelable leases expiring at various dates through 2028. 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 the business. As of August 1, 2020, we have recorded reserves of $37 million related to these lease-related obligations and certain other obligations related to the La Senza business. As of August 1, 2020, reserves of $6 million are included within Accrued Expenses and Other on the Consolidated Balance Sheet and the remaining reserves are included within Other Long-term Liabilities.
Other
In connection with the noncancelable operating lease of an operating asset, we provide a residual value guarantee to the lessor if the leased asset cannot be sold for an amount in excess of a specified minimum value at the conclusion of the lease term. The lease expires in 2021, and the total amount of the guarantee is $28 million. We did not record a liability as of August 1, 2020.
Contractual Obligations
Our contractual obligations primarily consist of long-term debt and the related interest payments, operating leases, purchase orders for merchandise inventory and other long-term obligations. These contractual obligations impact our short-term and long-term liquidity and capital resource needs. There have been no material changes in our contractual obligations since February 1, 2020,January 30, 2021, as discussed in ��Contingent“Contingent Liabilities and Contractual Obligations” in our 20192020 Annual Report on Form 10-K, other than the newly issued 2025 Securedissuance of the Victoria's Secret & Co. Notes, which became the obligations of Victoria's Secret & Co. concurrent with the Separation on August 2, 2021, and the repurchase of the 2022 Notes and 2025 Secured Notes. Certain of our contractual obligations may fluctuate during the normal course of business (primarily changes in our merchandise inventory-related purchase obligations, which fluctuate throughout the year as a result of the seasonal nature of our operations).
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Credit Losses
In June 2016,We did not adopt any new accounting standards during the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which requires the use of a forward-looking expected loss impairment model for accounts receivable and certain other financial instruments. We adopted the standard in the firstsecond quarter of 2020. The adoption2021 that had a material impact on our consolidated results of this standard didoperations, financial position or cash flows. In addition, 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.

Guarantor Reporting
In March 2020, the SEC issued a final rule, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities, that simplifies the disclosure requirements related to registered securities under Rule 3-10 of Regulation S-X. The rule replaces the requirement to provide condensed consolidating financial information with a requirement to present summarized financial information of the issuers and guarantors. It also requires qualitative disclosures with respect to information about guarantors, the terms and conditions of guarantees and the factors that may affect payment. These disclosures may be provided outside the footnotes to our consolidated financial statements. We early adopted the reporting requirements of the rule in the first quarter of 2020 and elected to provide these disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
IMPACT OF INFLATION
While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on the results of operations and financial condition have been minor.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies related to estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, management evaluates its accounting policies, estimates and judgments, including those related to inventories, long-lived 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.
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There have been no material changes to the critical accounting policies and estimates disclosed in our 20192020 Annual Report on Form 10-K.
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk
The market risk inherent in our financial instruments represents the potential loss in fair value, earnings or cash flows arising from adverse changes in foreign currency exchange rates or interest rates. We may use derivative financial instruments like foreign currency forward contracts, cross-currency swaps and interest rate swap arrangements to manage exposure to market risks. We do not use derivative financial instruments for trading purposes.
Foreign Exchange Rate Risk
We have operations in foreign countries which expose us to market risk associated with foreign currency exchange rate fluctuations. Our Canadian dollar British pound,and Chinese Yuan and Euro denominated earnings are subject to exchange rate risk as substantially all our merchandise sold in Canada the U.K., Ireland and Greater China is sourced through U.S. dollar transactions. Although we utilize foreign currency forward contracts to partially offset risks associated with our operations in Canada, and the U.K., these measures may not succeed in offsetting all the short-term impact of foreign currency rate movements and generally may not be effective in offsetting the long-term impact of sustained shifts in foreign currency rates.
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.
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. 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. Typically, ourOur investment portfolio is 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.

ExcludingAll of our Foreign Facilities, all of ourlong-term debt as of August 1, 2020July 31, 2021 has fixed interest rates. 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.
Fair Value of Financial Instruments
As of August 1, 2020,July 31, 2021, we believe that the carrying values of accounts receivable, accounts payable and accrued expenses approximate fair value because of their short maturity.
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The following table provides a summary of the principal value and estimated fair value of outstanding publicly traded debt as of July 31, 2021, January 30, 2021 and August 1, 2020, February 1, 2020 and August 3, 2019:2020:
July 31,
2021		January 30,
2021		August 1,
2020
(in millions)
Principal Value$5,414 $6,449 $6,708 
Fair Value, Estimated (a)6,581 7,243 6,692 
 _______________
(a)The estimated fair value is based on reported transaction prices. The estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange.
 August 1,
2020		 February 1,
2020		 August 3,
2019
 (in millions)
Principal Value$6,708
 $5,458
 $5,458
Fair Value, Estimated (a)6,692
 5,555
 5,215
As of July 31, 2021, the fair value of the Victoria's Secret & Co. Notes approximated its principal value. The estimated fair value is based on reported transaction prices, which are considered Level 2 inputs in accordance with ASC 820. This estimate is not necessarily indicative of the amount that we could realize in a current market exchange.
 _______________
(a)The estimated fair value is based on reported transaction prices. 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, restricted cash 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. Typically, ourOur investment portfolio is primarily comprised of U.S. government obligations, U.S. 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.

Item 4.CONTROLS AND PROCEDURES
Item 4.    CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective and designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred in the second quarter of 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.LEGAL PROCEEDINGS
Item 1.    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. Although 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.
In July 2019, a plaintiff shareholder filed a putative class action complaint in the U.S. District Court for the Southern District of Ohio alleging that we made false and/or misleading statements relating to the November 2018 announcement that we were reducing our quarterly dividend. In September 2019, a different plaintiff shareholder filed a second putative class action complaint in the U.S. District Court for the Southern District of Ohio containing substantially the same allegations and seeking substantially the same relief.  In October 2019, the Court issued an order consolidating the two putative class actions, appointing a lead plaintiff, and approving that lead plaintiff’s selection of lead counsel.  The lead plaintiff filed a consolidated amended complaint on December 20, 2019 that asserted substantially the same allegations and sought substantially the same relief as the initial complaint.  We filed a motion to dismiss the consolidated amended complaint on February 18, 2020, the lead plaintiff filed an opposition to our motion to dismiss on May 4, 2020, and we filed a reply brief in further support of its motion to dismiss on June 3, 2020.  Our motion to dismiss the consolidated amended complaint is now fully briefed and pending before the court.  The court will hear oral argument on the motion to dismiss on September 23, 2020. We view this lawsuit as meritless and intend to defend against this lawsuit vigorously. 
On February 19, 2020, a plaintiff shareholder filed a complaint in the U.S. District Court for the Southern District of Ohio alleging derivative claims on our behalf against certain of our current and former directors and officers.  We were named as nominal defendant.  The lawsuit asserts claims for breach of fiduciary duty, corporate waste and unjust enrichment in connection with alleged misstatements about our quarterly dividend prior to the announced reduction of the dividend in November 2018. On July 21, 2020, the court so-ordered a stipulation staying all proceedings in this lawsuit, pending resolution of the motion to dismiss that we filed on February 18, 2020 in the putative class action lawsuit described above.  We intend to seek dismissal of the lawsuit at the appropriate time.
On May 19, 2020 a purported shareholderand January 12, 2021, certain shareholders of ours filed a derivative lawsuit on behalf of L Brands, Inc.lawsuits in the Court of Common Pleas for Franklin County, Ohio.  The complaint names as defendants certain current and former directors and officers of L Brands, Inc. and alleges, among other things, that these defendants breached their fiduciary duties by violating law and/or company policies relating to workplace conduct.  We were named as nominal defendant only, and there are no claims asserted against us.  On June 16, 2020, the lawsuit wasOhio (subsequently removed to the United States District Court for the Southern District of Ohio.  On July 6, 2020,Ohio) and the court so-ordered a stipulation staying the lawsuit until December 29, 2020.  We are currently evaluating potential options for respondingDelaware 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”). In addition, we also received litigation and books-and-records demands from certain other shareholders related to the lawsuit.same matters (together with the Lawsuits, the “Actions”).
In July 2021, we announced the global settlement resolving the Actions. 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. 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. Each company has committed to invest $45 million over at least five years to fund the management and governance measures.
Item 1A.RISK FACTORS
Item 1A.    RISK FACTORS

The following information supplements the risk factors described in “Item 1A: Risk Factors” in our 20192020 Annual Report on Form 10-K and should be read in conjunction with the risk factors described in the 20192020 Annual Report on Form 10-K. We wish to caution the reader that the risk factors discussed in “Item 1A: Risk Factors” in our 20192020 Annual Report on Form 10-K and those described in this report or other SEC filings could cause actual results to differ materially from those stated in any forward-looking statements.

Divestitures or other dispositions, including any divestitureOur recently completed spin-off of the Victoria’s Secret business and related operations could negatively impact our business, and contingent liabilities from businesses that we have soldthe divestiture of such business could adversely affect our financial statements.position and results of operations.

We continually assessOn August 2, 2021, we completed the shareholder value and the strategic fitspin-off of our existing businesses, and may divest or otherwise dispose of businesses that are deemed not to fit with our strategic plan, or are not achieving the desired shareholder value or return on investment. These transactions, including any divestiture of Victoria’s Secret and related operations, posebusiness. The spin-off poses risks and challenges that could negatively impact our business. For example, weThe spin-off may be unable to do so on satisfactory terms withinimpact our anticipated timeframe or at all, and even after reaching a definitive agreement to sell or dispose a business, the sale is typically subject to satisfaction of pre-closing conditions which may not become satisfied. In addition, divestitures or other dispositions maycredit rating, dilute our earnings per share, have other adverse financial and accounting impacts and distract management, and disputes may arise with buyers.management. In addition, we may be required to indemnify buyersthe new Victoria’s Secret company against known and unknown contingent liabilities related to any businessesin connection with the spin-off of the Victoria’s Secret business. Further, we have sold or disposed of.may not receive tax-free treatment for U.S. federal income tax purposes. The resolution of these contingencies may have a material effect on our financial statements.position and results of operations. Uncertainty about the effect of any potential divestiturethe spin-off of the Victoria’s Secret business on employees, commercial partners and

vendors may have an adverse effect on us. These uncertainties may impair our ability to retain and motivate key personnel and could cause commercial partners, vendors and others that deal with us to defer or decline entering into contracts with us or seek to change existing business relationships with us. In addition, if key employees depart because of uncertainty about their future roles, and the potential complexities of any potential divestiture of Victoria’s Secret, our business could be harmed. If we are unable to divest any such businesses, includingThe spin-off may cause disruption in our business and that disruption could result in a loss of revenue. We may incur significant expenses and challenges in connection with the spin-off of the Victoria’s Secret we will continue to be subjectbusiness, which may include expenses and challenges related to the risksseparation of operating suchVictoria's Secret from our current information technology environment. Further, the efforts related to the separation of the information technology environment will require significant resources that could impact our ability to keep pace with ongoing advancement of information technology needs of the business.
In addition, we may not be able to achieve the full strategic and financial benefits that are expected to result from the spin-off and the anticipated benefits of the spin-off are based on a number of assumptions, some of which may prove incorrect. For example, there is risk that as smaller, independent companies, the companies resulting from the spin-off will be less diversified with a narrower business focus and may be more vulnerable to changing market conditions as well as the risk of takeover by third parties. There may be a loss of synergies from separating the businesses that could negatively impact the balance sheet, profit margins or earnings of both businesses. Lastly, there is risk that that the combined value of the common stock of the two publicly-traded companies will not be equal to or greater than the value of the Company’s common stock had the spin-off not occurred.

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Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Item 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides our repurchases of our common stock during the second quarter of 2020:2021:
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 Number of Shares (or Approximate Dollar Value) that May Yet be Purchased Under the Programs (c)
 (in thousands)   (in thousands)
May 202074
 $10.31
 —
 $78,677
June 202023
 17.50
 —
 78,677
July 20204
 20.39
 —
 78,677
Total101
   —
  
PeriodTotal
Number of
Shares
Purchased (a)		Average Price
Paid per
Share (b)		Total Number of Shares Purchased as Part of Publicly Announced Programs (c)Maximum Number of Shares (or Approximate Dollar Value) that May Yet be Purchased Under the Programs (c)
 (in thousands) (in thousands)
May 20211,556 $67.27 1,476 $235,508 
June 20212,527 67.81 2,519 64,681 
July 202110,624 72.93 10,393 769,900 
Total14,707 14,388 
  _______________
(a)The total number of shares repurchased includes shares repurchased in connection with tax payments due upon vesting of employee restricted stock awards and the use of our stock to pay the exercise price on employee stock options.
(b)The average price paid per share includes any broker commissions.
(c)For additional share repurchase program information, see Note 5, “Earnings (Loss) Per Share and Shareholders' Equity (Deficit)” included in Item 1. Financial Statements.

(a)The total number of shares repurchased includes shares repurchased as part of publicly announced programs, with the remainder relating to shares repurchased in connection with tax payments due upon vesting of employee restricted stock awards and the use of our stock to pay the exercise price on employee stock options.
(b)The average price paid per share includes any broker commissions.
(c)For additional share repurchase program information, see Note 4, “Earnings (Loss) Per Share and Shareholders' Equity (Deficit)” included in Item 1. Financial Statements.

Item 3.DEFAULTS UPON SENIOR SECURITIES
Item 3.    DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4.MINE SAFETY DISCLOSURES
Item 4.    MINE SAFETY DISCLOSURES

Not applicable.

Item 5.OTHER INFORMATION
Item 5.    OTHER INFORMATION

None.


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Item 6. EXHIBITS

Exhibits
  
1510.1
10.2
15
22
31.1
31.2
32
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
L BRANDS, INC.
BATH & BODY WORKS, INC.
(Registrant)
By:/s/ STUART B. BURGDOERFERWENDY C. ARLIN
Stuart B. Burgdoerfer
Wendy C. Arlin
Executive Vice President and Chief Financial Officer *
Date: September 3, 2020
*Mr. Burgdoerfer is the principal financial officer and the principal accounting officer and has been duly authorized to sign on behalf of the Registrant.

2, 2021
*    Ms. Arlin is the principal financial officer and the principal accounting officer and has been duly authorized to sign on behalf of the Registrant.

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