Bath & Body Works : 2Q 2021 Earnings Commentary

BBWI SECOND QUARTER 2021 EARNINGS COMMENTARY

AUGUST 18, 2021

Introduction

• Bath & Body Works, Inc. is providing this second quarter commentary ahead of its live earnings call scheduled for August 19th at 9:00 a.m.
• We remind you that any forward-looking statements made in this commentary are subject to our safe harbor statement found in our SEC filings and in our press releases.
• Our second quarter earnings release and related financial information are available on our website,www.bbwinc.com. Also available on our website is an investor presentation.
• All of the results included in this commentary are adjusted results and exclude the 2020 significant items as described in our press release.

Spin-off

• As we announced on August 3, the spinoff of the Victoria's Secret business into an independent public company was completed subsequent to the end of the second quarter. The second quarter total company results discussed in this

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commentary include the Victoria's Secret business. Any forward-looking commentary included in these remarks relates to the Bath & Body Works standalone business.

• A presentation of supplemental financial information which includes historical unaudited financial statements presenting the previously reported Victoria's Secret segment results as a discontinued operation can be found on our website. All of the previously reported results of the "other" segment, consisting principally of corporate overhead, are included as part of the continuing operations results, in accordance with GAAP accounting.
• We believe the spin-off will enable us to maximize management focus and financial flexibility to thrive in an evolving retail environment and deliver long- term profitable growth.
• The benefits of separation include:

1. Distinct strategic and management focus on specific operational and

growth priorities,

1. Tailored capital deployment strategies based on the operating and

financial model, and

1. The ability for the investment community to value the businesses independently of one another and create significant value and certainty for our customers, associates and shareholders.

Second Quarter Results

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• We delivered record results in the second quarter, which we could not have done without the continued hard work and dedication of our associates and partners. We'd like to express our deep appreciation for their continued efforts.
• Turning to a review of our second quarter performance, we reported record second quarter earnings of $1.34 per share compared to adjusted earnings of $0.25 per share last year.
• These bottom-line results were driven by continued strong sales and better than expected margin rates at both Bath & Body Works and Victoria's Secret.
• Net sales for the quarter were $3.318 billion. Second quarter 2020 sales were negatively impacted by the COVID-19 related store closures for roughly half the quarter. Net sales for the second quarter of 2021 increased 14% compared to sales of $2.902 billion in the second quarter of 2019.
• The gross margin rate increased by 1,130 basis points compared to 2019, and by 1,110 basis points compared to 2020 to 45.2%. Compared to 2019, the gross margin rate increase was driven by a significant increase in the merchandise margin rate and significant buying and occupancy expense leverage.
• The SG&A rate leveraged by 70 basis points compared to 2019, and SG&A dollars increased by about 11%. Second quarter costs in the other segment

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include approximately $40 million related to legal and separation fees and other discrete items.

• Second quarter total company operating income was $599.1 million compared to $206 million in 2020 and $175 million in 2019. The second quarter operating income rate was 18.1% compared to 8.9% in 2020 and 6.0% in 2019.
• Turning to the balance sheet, total inventories ended the quarter flat compared to last year, in line with expectations. Inventories were up at Bath & Body Works, supporting the sales trend, and remained down compared to last year at Victoria's Secret.
• We repurchased 14.4 million shares during the second quarter for $1.03 billion. We have $770 million remaining under our $1.5 billion share repurchase program. Year-to-date, we have repurchased 17.0 million shares for $1.19 billion.

Bath & Body Works

• Turning to Bath & Body Works, we delivered record sales and profitability in the second quarter. Throughout the quarter, sales trends remained strong at continued healthy margin rates. Similar to the first quarter, we were able to be selective on promotional activity.

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• Second quarter sales for the Bath & Body Works segment were $1.704 billion, an increase of $597 million, or 54%, compared to 2019, consistent with the first quarter sales growth versus 2019 (excluding the impact of the stimulus).
• Growth in the quarter compared to 2019 was driven by both an increase in transactions and the average dollar sale for both Stores and Direct.
• Performance was strong across all months as we saw good customer response to our summer merchandise, beginning with our Mother's Day gifting assortment. Honey Wildflower, our single-fragrance launch for the summer, led the way as a cross-category fragrance and produced a strong front-of-shop presence with seasonally relevant marketing.
• We achieved robust balanced growth of at least 35% in all merchandise categories compared to 2019. Compared to last year, we experienced significant growth in fragrant body care, home fragrance and gifting. As expected, soaps and sanitizers declined versus last year's explosive growth.
• In U.S. and Canada stores, second quarter sales were $1.229 billion, an increase of $347 million or 39% compared to 2019. Dollars per footstep (the combination of conversion and average dollar sale) in stores increased approximately 65% compared to 2019.
• Second quarter direct sales increased by 128%, or $228.8 million, compared to 2019, slightly better than the first quarter growth. As we mentioned last

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