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10-K – 2026-03-12 – 0000701985-26-000008-xbrl.zip
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C. 20549 ______________________________________________________ FORM 10-K ______________________________________________________ (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 31 , 2026 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission file number 1-8344 ______________________________________________________ BATH & BODY WORKS, INC. (Exact name of registrant as specified in its charter) _________________________________________________ Delaware 31-1029810 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) Three Limited Parkway, Columbus, Ohio 43230 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code ( 614 ) 415-7000 ______________________________________________________ Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.50 Par Value BBWI The New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ 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 pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ☐ Non-accelerated filer ☐ 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $ 5.8 billion. Number of shares outstanding of the registrant’s Common Stock as of March 6, 2026: 201,134,265 . DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant’s Proxy Statement for the Registrant’s 2026 Annual Meeting of Stockholders are incorporated by reference into Part III. Table of Contents Table of Contents Page No. Part I Item 1. Business 1 Item 1A. Risk Factors 6 Item 1B. Unresolved Staff Comments 20 Item 1C. Cybersecurity 20 Item 2. Properties 22 Item 3. Legal Proceedings 23 Item 4. Mine Safety Disclosures 23 Part II Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 24 Item 6. [Reserved] 25 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38 Item 8. Financial Statements and Supplementary Data 40 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 66 Item 9A. Controls and Procedures 66 Item 9B. Other Information 66 Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 66 Part III Item 10. Directors, Executive Officers and Corporate Governance 67 Item 11. Executive Compensation 67 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 67 Item 13. Certain Relationships and Related Transactions, and Director Independence 67 Item 14. Principal Accountant Fees and Services 67 Part IV Item 15. Exhibits and Financial Statement Schedules 68 Item 16. Form 10-K Summary 72 Signatures 73 Table of Contents PART I ITEM 1. BUSINESS. General Bath & Body Works is a global leader in personal care and home fragrance, driven by the belief that everybody deserves to feel good. For over 35 years, the brand’s beloved and iconic scents have been expertly crafted for exceptional performance and a luxury fragrance experience. Formulated with thoughtfully chosen ingredients, Bath & Body Works’ body care products are available in multiple forms including fine fragrance mist, body cream, lotion, eau de parfum, body wash, hand soap, sanitizer and more, and home to our famous 3-wick candles. Consumers can shop Bath & Body Works anytime and anywhere they choose, from welcoming, in-store experiences at 1,927 company-operated stores in the United States of America (“U.S”) and Canada, our e-commerce sites in the U.S. and Canada, 573 international stores and 34 e-commerce sites in more than 45 other countries, as well as Amazon. Throughout this Annual Report on Form 10-K, we refer to Bath & Body Works, Inc. as “we” and the “Company.” Fiscal Year We utilize the retail calendar for reporting and our fiscal year ends on the Saturday nearest to January 31. As a result, “2025” refers to the 52-week period ended January 31, 2026, “2024” refers to the 52-week period ended February 1, 2025 and “2023” refers to the 53-week period ended February 3, 2024. Strategy Our strategy is rooted in the Consumer First Formula, launched in the third quarter of 2025, which puts the consumer at the center of everything we do. The Consumer First Formula is a multi-year, comprehensive transformation plan to revitalize Bath & Body Works across brand, product and marketplace. We are focused on our four largest revenue driving opportunities to try to attract new, younger consumers to the brand, which we expect will help us unlock our next era of sustainable growth: • Creating Disruptive and Innovative Products : We intend to reestablish best in class product leadership in our hero categories. • Reigniting the Brand : We expect to invest in marketing to build a brand with cultural currency, showing up in culture through creators, in store visuals and bigger storytelling, creating meaningful emotional connections with consumers. • Winning in the Marketplace : We plan to expand access and ease of discovery through an enhanced digital experience, third-party channels and refreshed in-store merchandising to acquire new and lapsed consumers. • Operating with Speed and Efficiency : We are working to transform Bath & Body Works to be a faster and more efficient organization by empowering teams, working with focus and agility to prioritize what customers care about most. As we move forward under the Consumer First Formula, we believe the following competitive advantages endure and will help enable our return to sustainable growth: • We are a market leader in attractive, growing categories; • We are an iconic brand with global recognition; • We have a global store footprint with 2,500 locations employing a community of exceptional store associates; • We have a customer loyalty program with 40 million active members; and • We benefit from a fast, predominantly domestic, vertically-integrated supply chain. We are investing in new capabilities and talent, focusing our teams on the highest-value work and moving at the speed of the consumer, while optimizing expenses to fuel innovation and long-term performance. Since Daniel Heaf joined as our new Chief Executive Officer, he has put leaders in roles for accountability to drive the priorities of the Consumer First Formula, with responsibilities across our marketplace channels, product merchandizing and human resources. Company-operated Stores We are a predominantly off-mall retailer with 60% of our North American store fleet located in off-mall locations as of January 31, 2026. We are continuing our off-mall expansion to limit our exposure to vulnerable mall locations, with a target mix of 75% off-mall over time given continued consumer preference. We proactively manage our stores and adjust our investment levels based on individual store and fleet performance. 1 Table of Contents The following table provides the number of our Company-operated retail stores as of January 31, 2026 and February 1, 2025: January 31, 2026 February 1, 2025 United States 1,814 1,782 Canada 113 113 Total 1,927 1,895 The following table provides the changes in the number of our Company-operated retail stores for the past three fiscal years: Beginning of Year Opened Closed End of Year 2025 1,895 94 (62) 1,927 2024 1,850 106 (61) 1,895 2023 1,802 95 (47) 1,850 During 2025, we opened 94 new North American stores, nearly all in off-mall locations, and permanently closed 62 stores, predominantly in malls, which, when combined with store remodel activity, resulted in net square footage growth of 2%. In 2026, we expect North American square footage growth of approximately 1%. Franchise, License and Wholesale Arrangements In addition to our Company-operated stores, our products are sold at partner-operated locations and e-commerce sites in more than 45 countries through franchise, license and wholesale arrangements. Our international partner-based, asset-light business model allows us to establish operating standards by owning assortment, pricing architecture, promotions, store designs and real estate approval while our partners make investments and contribute as experts in local real estate, people and practices. The following table provides the number of international stores operated by our partners as of January 31, 2026 and February 1, 2025: January 31, 2026 February 1, 2025 International 536 494 International - Travel Retail 37 35 Total (a) 573 529 ________________ (a) Includes store locations only and does not include kiosks, shop-in-shops, gondola or beauty counter locations. Additionally, our partners operated 34 international e-commerce sites as of January 31, 2026, compared to 31 as of February 1, 2025. As part of the Consumer First Formula, we launched on Amazon in the U.S. in February 2026, allowing more consumers to discover and shop the brand’s iconic fragrances and most loved products. Additional Information Merchandise Vendors During 2025, we purchased merchandise from approximately 90 vendors, primarily located in the U.S. Our largest vendor supplied approximately 12% of our total merchandise purchases (on a dollar basis) during 2025, while no other single vendor accounted for more than 10% of our merchandise purchases (on a dollar basis). Our five largest vendors supplied approximately 40% of our total merchandise purchases (on a dollar basis) on a combined basis during 2025. Information Systems We have undertaken a multi-year project to modernize and significantly upgrade our digital and information technology (“IT”) systems, capabilities and organization to, among other things, advance our data analytics capabilities, enhance our in-store and online customer experience, enable us to more effectively personalize our marketing, shopping, and promotional experiences, streamline our IT and digital operations and enable us to work more efficiently (the “IT Transformation Project”). We believe successful execution of the IT Transformation Project will enhance our omnichannel capabilities and support the growth and profitability of our business while also enhancing the security of, and otherwise reducing risks associated with, our IT systems. Our technology roadmap remains on-track, as we enhance our systems and put in place foundational tools to enable more personalization and seamless customer engagement to drive sustainable growth. 2 Table of Contents Seasonal Business Our operations are seasonal in nature and the fourth quarter, including the holiday selling season, typically accounts for approximately 40% of our Net Sales and is our most profitable quarter. Working Capital We fund our business operations through a combination of available cash and cash equivalents and cash flows generated from operations. In addition, our credit facility is available for additional working capital needs and investment opportunities. Regulation We and our products are subject to regulation by various federal, state, local and foreign regulatory authorities. We are subject to a variety of tax and customs regulations and international trade agreements. Intellectual Property Our trademarks, copyrights and patents, which constitute our primary intellectual property, have been registered or are the subject of pending applications in the U.S. Patent and Trademark Office and with the registries of many foreign countries and/or are protected by common law. We believe our products are identified by our intellectual property and our intellectual property is an integral tool in protecting innovation. Thus, we believe our intellectual property is of significant value. Accordingly, we intend to maintain our intellectual property and related registrations and vigorously protect our intellectual property assets against infringement. Competition The sale of body care, home fragrance and soap and sanitizer products is a highly competitive business with numerous competitors, including individual and chain specialty stores, department stores, online retailers and discount retailers. Brand image, presentation, marketing, design, price, service, fulfillment, assortment and quality are the principal competitive factors. Other Information For additional information about our business, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included under Item 7. of this Annual Report on Form 10-K. Human Capital Management Human Capital At Bath & Body Works, our purpose goes beyond selling product. We strive to be an employer of choice, make a difference in our communities and foster a safe and empowering environment where all associates, customers and suppliers are valued. We believe everyone belongs at Bath & Body Works. We work to create a culture where all associates can contribute their strengths, skills and abilities and where unique perspectives, and experiences, are valued, recognized and celebrated. The Human Capital & Compensation Committee of our Board oversees, among other things, the Company’s programs, policies, practices and strategies relating to culture, talent, equal employment opportunities and the Company’s executive compensation programs. In addition, our Board oversees the talent review and succession planning process for our Chief Executive Officer and other critical, senior level roles. Workforce Demographics As of January 31, 2026, we employed over 60,700 associates, none of whom were covered by a collective bargaining agreement. Approximately 94% of our associates work in our stores, with the remainder working in our home office or distribution and fulfillment centers. The following table includes the number of associates in full-time status or part-time status (which are associates who work less than 40 hours per week) as of January 31, 2026: Work Status Number of Associates Full-time 9,071 Part-time 51,664 Total 60,735 Focus on Culture We champion a supportive work environment that prioritizes attracting, engaging, developing and promoting talent. By fostering a healthy workplace culture where every individual feels valued, we believe we can better serve our customers while attracting and retaining highly talented associates. We are committed to ensuring all team members have access to opportunities, including career advancement pathways and competitive wages. 3 Table of Contents Commitment to Competitive Wages Our compensation programs are designed to link annual changes in compensation to overall Company performance, as well as each individual’s contribution to the results achieved. Our pay for performance philosophy includes participation of all salaried associates in home office and distribution and fulfillment centers in our short-term cash incentive compensation program. In addition, our store leaders are eligible to earn monthly bonuses based on performance. The emphasis on overall Company performance is intended to align the associates’ financial interests with the interests of the Company and our stockholders. Commitment to Providing Quality Benefits We offer competitive, performance-based compensation; a company-matched 401(k) retirement plan; and flexible and affordable health, wellness and lifestyle benefits. Subject to certain eligibility requirements, associates can choose benefits and resources that fit their lifestyle, including, but not limited to, 14 weeks paid maternity leave, six weeks paid parental leave, mental health benefits, family planning benefits including fertility, adoption and surrogacy, expanded bereavement leave time, military leave, tuition-free access to education, tuition assistance, no co-pays for insulin and other critical prescriptions, commuter benefits, a tobacco cessation program, an associate stock purchase plan that allows associates to purchase Company stock at a discount, an associate assistance program for all full-time and seasonal associates and a generous merchandise discount. In 2025, we continued our focus on ensuring associate well-being by rolling out medical, dental and vision offerings for our part-time associates and promoting our wellness center in our Columbus, Ohio headquarters, which provides accessible, low-cost medical care, physical therapy, mental health services and an on-site pharmacy to our associates. We continue to offer DailyPay (earned income wage access as needed) to our associates in our distribution and fulfillment centers and in stores. As part of our caring culture, our associates help fellow associates going through extreme personal hardships through the Bath & Body Works Associates for Associates Emergency Fund (“A4A”). Administered by the Columbus Foundation with funds donated by associates and matched by the Bath & Body Works Foundation, A4A provides monetary aid and/or makes community resources available to associates facing crisis, such as fire destruction, a serious medical condition or a natural disaster. During 2025, the A4A fund awarded over $527,000 in grants to approximately 300 associates. In addition, we launched a Dream Bright scholarship fund for associates and their dependents, which is also administered by the Columbus Foundation with funds from the Bath & Body Works Foundation. We distributed $185,000 for Dream Bright scholarships in 2025. Safety Is a Priority We are committed to providing all of our associates a healthy and safe working environment and for protecting the safety of our customers. Our health and safety programs (including safety training for associate onboarding, developmental e-learning and on-the-job training) are designed to meet or exceed regulatory requirements for the various industry sectors of our business and in the jurisdictions in which we operate. Code of Conduct We have a written Code of Conduct that is based on our values and is a resource which establishes standards for associate conduct that reinforce the Company’s commitment to integrity and ethical conduct. All associates are required to complete a Code of Conduct training course and certify their compliance annually. We maintain an Ethics Hotline, operated by a third-party, 24 hours a day, seven days a week, where any individual may anonymously report concerns, including potential instances of unethical conduct and potential violations of law or Company policies. Available Information We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and its rules and regulations. The Exchange Act requires us to file reports, proxy statements and other information with the U.S. Securities and Exchange Commission (“SEC”). The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at www.sec.gov . Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on our website at www.bbwinc.com . Our website and information included in or linked to our website are not part of this Annual Report on Form 10-K. Copies of any of the above-referenced documents will also be made available, free of charge, upon written request to: Bath & Body Works, Inc. 4 Table of Contents Investor Relations Department Three Limited Parkway Columbus, Ohio 43230 5 Table of Contents ITEM 1A. RISK FACTORS. 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,” “potential,” “target,” “goal” and any similar expressions may identify forward-looking statements. Risks associated with the following factors, among others, in some cases have affected and, in the future, could affect our financial performance and actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this report or otherwise made by the Company or our management: • general economic conditions, inflation, tariffs, consumer confidence, consumer spending patterns and market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises, government shutdowns or other major events, or the prospect of these events; • the seasonality of our business; • our ability to successfully execute on our Consumer First Formula strategic transformation; • our ability to attract, develop and retain qualified associates and manage labor-related costs; • difficulties arising from turnover in Company leadership or other key positions; • the dependence on store traffic and the availability of suitable store locations on appropriate terms; • our continued growth in part 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, wholesale and other distribution-related partners; • our direct channel business; • our ability to protect our reputation and our brand image; • our ability to attract customers with marketing, advertising, promotional programs and our loyalty program; • 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; • new and current consumer acceptance of our products and our ability to manage the life cycle of our brand and launch our strategic transformation successfully; • our ability to innovate and produce high quality products and attract new and retain current consumers; • our ability to source, distribute and sell goods and materials on a global basis, including risks related to: • political instability, wars and other armed conflicts, environmental hazards or natural disasters; • significant health hazards or pandemics, which could result in closed factories and/or stores, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in impacted areas; • duties, taxes, tariffs and other charges; • legal and regulatory matters; • volatility in currency exchange rates; • local business practices and political issues; • delays or disruptions in shipping and transportation and related pricing impacts; • disruption due to labor disputes; or • changing expectations regarding product safety due to new legislation; • our ability to successfully complete sustainability initiatives, and associated costs thereof; • the geographic concentration of third-party manufacturing facilities and our distribution facilities in central Ohio; • our reliance on a limited number of suppliers to support a substantial portion of our inventory purchasing needs; • the ability of our vendors to deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations; • fluctuations in foreign currency exchange rates; • fluctuations in product input costs; • fluctuations in energy costs; • our ability to adequately protect our assets from loss and theft; • claims arising from our 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 and Company information; • stock price volatility; • our ability to pay dividends and make share repurchases under share repurchase authorizations; • shareholder activism matters; • our ability to maintain our credit ratings; 6 Table of Contents • our ability to service or refinance our debt and maintain compliance with our restrictive covenants; • our ability to comply with laws, regulations, standards, technology platform rules or other requirements related to data privacy and cybersecurity; • 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. We announce material financial and operational information using our investor relations website, press releases, SEC filings and public conference calls and webcasts. Information about the Company, our business and our results of operations may also be announced by posts on our accounts on social media channels, including the following: Facebook, Instagram, X, LinkedIn, Pinterest, TikTok and YouTube. The information contained on, or that can be accessed through, our social media channels and our website is deemed not to be incorporated in this Annual Report on Form 10-K or to be a part of this Annual Report on Form 10-K. The information that we post through these social media channels and on our website may be deemed material. As a result, we encourage investors, the media and others interested in the Company to monitor these social media channels in addition to following our investor relations website, press releases, SEC filings and public conference calls and webcasts. The list of social media channels we use may be updated from time to time on our investor relations website. The following discussion of risk factors contains “forward-looking statements.” These risk factors may be important to understanding any statement in this Annual Report on Form 10-K, other filings or in any other discussions of our business. The following information should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation and Item 8. Financial Statements and Supplementary Data. In addition to the other information set forth in this report, the reader should carefully consider the following factors which could materially affect our business, results of operations, financial condition and/or cash flows. The risks described below are not our only risks. Additional risks and uncertainties not currently known or that are currently deemed to be immaterial may also adversely affect our business, results of operations, financial condition and/or cash flows in a material way. Risks related to our business: Our net sales, results of operations and cash flows are sensitive to, have been affected by and may in the future be further impacted by, general economic conditions, inflation, tariffs, consumer confidence, consumer spending patterns, significant health hazards or pandemics, severe weather or other market disruptions. Our net sales, results of operations, cash flows and future growth may be affected by local, regional, national or international political or economic trends or developments that can reduce consumers’ ability or willingness to spend or alter consumer behavior and spending patterns. These trends and developments (including tariffs and government shutdowns), which can vary substantially by country, include political, financial or social instability or conditions, geopolitical events, corruption, anti-American sentiment, social and ethnic unrest, military conflicts and terrorism, as well as changes in general economic conditions (including unemployment levels, inflation and market volatility). For example, in recent years, the global economy was negatively impacted by high inflation rates, which has resulted in higher prices that have negatively impacted and may continue to negatively impact consumer demand. In addition, market disruptions due to natural disasters, significant health hazards or pandemics or other major events or the prospect of these events could also impact or shift consumer spending and sentiment. Extreme weather conditions in the areas in which our stores are located, particularly in markets where we have multiple stores, or in the central Ohio region where most of our third-party manufacturers and our distribution centers are located, have adversely affected and could in the future adversely affect our business. During periods when economic or market conditions are unsettled or weak, or during events such as government shutdowns, which impact discretionary spending, purchases of our products have declined, and may in the future further decline. In such circumstances, we have increased, and may in the future continue to increase, the number of promotional sales which, when combined with inflationary cost pressures, have negatively affected our merchandise margin rates and, in the future, could have a material adverse effect on our results of operations, financial condition and cash flows. Our net sales, operating income, cash and inventory levels fluctuate on a seasonal basis. We experience major seasonal fluctuations in our net sales and operating income, with a significant portion of our operating income and cash flows typically realized during the fourth quarter holiday season. Any decrease in sales or margins during this critical period could have a material adverse effect on our results of operations, financial condition and cash flows. 7 Table of Contents Seasonal fluctuations also affect our cash and inventory levels since we usually order merchandise in advance of peak selling periods and sometimes before new trends are confirmed by customer purchases. We must carry a significant amount of inventory, especially before the holiday season selling period. If we are not successful in selling inventory, we may have to sell the inventory at significantly reduced prices or may not be able to sell the inventory at all, which could have a material adverse effect on our results of operations, financial condition and cash flows. We cannot guarantee the successful implementation of our strategic transformation. We launched a multi-year “Consumer First Formula” strategic transformation in the third quarter of 2025, as outlined in item I – “ Business – Strategy ”. Our ability to successfully execute this transformation is subject to various risks and uncertainties, such as our ability to successfully execute our plan, changes in consumer demands and trends, general economic conditions, and other risks. Achievement of sustainable growth may require significant investment and, therefore, may be dilutive to our earnings in the short term. In addition, at times the attention of our senior management team may be focused on the Consumer First Formula and be diverted from day-to-day business operations, which may disrupt our business. There can be no guarantee regarding the timing of or extent to which we will realize the anticipated benefits of these investments and other costs, if at all, and these factors could have a material adverse effect on our results of operations, financial condition and cash flows. We may be impacted by our ability to attract, develop and retain qualified associates and manage labor-related costs. We believe one of our competitive advantages is providing positive, engaging and satisfying experiences for our diverse customer base, which requires us to have highly trained, engaged and diverse associates. Our success depends in part upon our ability to attract, develop and retain a sufficient number of qualified associates, including, but not limited to, store personnel, associates in our home office, distribution and fulfillment centers and key product and support talent. The turnover rate in the retail industry is generally high, and qualified individuals of the requisite caliber and number needed to fill these positions have been in short supply in some areas. Competition for such qualified individuals and shifts in the labor market, including availability of skilled talent, and continued changes and complexity in labor and healthcare laws have caused us to incur higher labor costs, and such increases in labor costs could continue in the future. Our inability to recruit a sufficient number of qualified individuals in the future may, among other things, delay planned openings of new stores, affect the speed with which we expand, or negatively impact our ability to timely and efficiently fulfill orders, to develop new merchandise and to launch new product lines. Delayed store openings, significant increases in associate turnover rates or significant increases in labor-related costs could have a material adverse effect on our results of operations, financial condition and cash flows. If we are subject to a unionization campaign from our associates, we would incur significant expenses in the form of legal and consulting fees and potentially be subject to negative publicity that could significantly disrupt our operations and have an adverse effect on our results of operations, financial condition and cash flows. An increase in the costs of associate wages, benefits and insurance (including workers’ compensation, general liability, property and health) has adversely affected, and could continue to adversely affect, our operating results. In particular, labor shortages and the current competitive labor market have increased competition for qualified associates, which has compelled, and may continue to compel, us to pay higher wages to attract or retain qualified associates. Such increases in costs may result from general economic or competitive conditions or from government imposition of higher minimum wages at the federal, state or local level, including in connection with the increases in state minimum wages that have been enacted by various states. Moreover, there may be a long-term trend toward higher wages in developing markets. Any increase in such operating expenses could have a material adverse effect on our results of operations, financial condition and cash flows. Turnover in Company leadership or other key positions, and our ability to attract and retain new talent, may have an adverse impact on Company performance. We have in the past and may in future experience changes in key leadership or key positions in the future. The departure of key personnel can result in the loss of significant knowledge and experience. This loss of knowledge, expertise and experience can be mitigated through successful internal succession planning or external hiring and transition, but there can be no assurance that we will be successful in such efforts. Attracting and retaining qualified senior leadership may be more challenging during business transformations (including organizational changes or workforce reductions) or under adverse business conditions. Failure to attract and retain the right talent or to smoothly manage the transition of responsibilities resulting from such turnover could affect our ability to meet our goals and may cause us to miss performance objectives or financial targets or disrupt our relationships with our customers, vendors or other third parties. Our net sales depend on a volume of traffic to our stores and the availability of suitable lease space. More than half of our stores are located in off-mall retail shopping areas with the remainder located in malls and other types of retail centers. Sales at these stores are derived, in part, from the volume of consumer traffic in those retail areas. Our stores benefit from the ability of the retail center and other attractions in an area, including “destination” retail stores, to generate consumer traffic in the vicinity of our stores. Sales volume and retail traffic may be adversely affected by factors that we cannot control, such as economic downturns, including due to inflationary or tariff pressures, or changes in consumer 8 Table of Contents demographics in a particular area, consumer trends away from brick-and-mortar retail toward online shopping, competition from digital and other retailers and other retail areas where we do not have stores, significant health hazards or pandemics, the closing of other stores or the decline in popularity or safety in the shopping areas where our stores are located and the deterioration in the financial condition of the operators or developers of the shopping areas in which our stores are located. Part of our future growth is significantly dependent on our ability to operate stores in desirable locations with capital investment and lease costs providing the opportunity to earn a reasonable return. We cannot be sure as to when or whether such desirable locations will become available at reasonable costs. Additionally, we are dependent upon the suitability of the lease spaces that we currently use. The leases that we enter into are generally noncancelable leases with initial terms of ten years. If we determine that it is no longer economical to operate a store and decide to close it, we may remain obligated under the applicable lease for, among other things, payment of the base rent for the balance of the lease term. These risks could have a material adverse effect on our ability to grow and our results of operations, financial condition and cash flows. Our continued growth and success depend in part on new store openings and existing store remodels and expansions. Our continued growth and success depend in part on our ability to open and operate new, primarily off-mall stores and expand and remodel existing stores on a timely and profitable basis. Accomplishing our new and existing store expansion goals will depend upon a number of factors, including the ability to partner with developers and landlords to obtain suitable sites for new and expanded stores at acceptable costs and on acceptable timelines, the hiring and training of qualified personnel and the integration of new stores into existing operations. There can be no assurance we will be able to achieve our store expansion goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and expanded stores profitably. These risks could have a material adverse effect on our ability to grow and our results of operations, financial condition and cash flows. Our international operations and our plans for international expansion include risks that could impact our results and reputation. We intend to continue to operate internationally and further expand in our existing markets and into new international markets, including through franchise and other distribution-related partner arrangements. The risks associated with international markets include, among others, difficulties in attracting customers due to a lack of customer familiarity with our brand, our ability to comply with international laws and regulations, our lack of familiarity with local customer preferences, cultures or religious norms and seasonal differences in the international markets. Any of these difficulties may lead to disruption in the overall timing of our international expansion efforts, lower sales than we anticipate and increased costs. Further, entry into other markets may bring us into competition with new competitors or with existing competitors with an established presence in such markets. Such expansions will also have upfront investment costs, some of which may be significant, that may not be accompanied by sufficient revenues to achieve expected operational and financial performance. Other risks include general economic conditions in specific countries or markets, reliance on franchise partners, service providers and other distribution-related partners that we do not control, volatility in the geopolitical landscape (including social and ethnic unrest, military conflicts and terrorism), anti-American sentiment, foreign governmental regulation and enforcement (including the risks of local tariffs and operating in markets in which there are uncertainties regarding the interpretation and enforceability of legal requirements and the enforceability of contract rights and intellectual property rights), legal actions, disruptions or delays in shipments, restrictions on the repatriation of funds held internationally, occurrence of significant health hazards or pandemics, changes in diplomatic and trade relationships and political instability. For example, the conflict in the Middle East had resulted in unpredictable conditions in the region and around the world, and may continue to affect, our business and operations as a result of, among other things, the economic consequences and disruptions from such conflict, supply chain availability, consumer boycotts of Western brands, and consumer reaction to perceived acts or failures to act by us or our franchise partners including commencing and/or maintaining operations in countries or regions that are linked to such conflicts. Further, our results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates. See “Fluctuations in foreign currency exchange rates could impact our results of operations, financial condition and cash flows” below. All of the above risks could have a material adverse effect on our results of operations, financial condition and cash flows. Our results could be impacted by our relationships with our licensees, franchisees, wholesalers and other distribution-related partners, including by such partners taking actions that could harm our business or brand images. Our results are partially dependent on our franchise partners, wholesalers and other distribution-related partners. Although we believe that our business relationships with these partners are positive, we cannot guarantee that these relationships will generate sales in line with expectations. We may also face challenges in launching new third-party distribution channels and ensuring consistent execution across our franchise partners, wholesalers and other distribution-related partners, with increased organizational and operational complexity as our footprint grows. Managing a multi-market, multi-partner, multi-channel 9 Table of Contents organization could strain management systems, internal controls and decision-making speed. Failing to scale our operational infrastructure, governance or technology in line with potential growth could impact execution and financial performance. Further, we have global brand exposure through digital sites and stores independently owned and/or operated by our franchise partners, wholesalers and other distribution-related partners. Although we have criteria to evaluate and select prospective partners, the level of control we can exercise over our partners is limited, and the quality and success of their operations may be diminished by any number of factors beyond our control. For example, despite our due diligence and vetting efforts, our partners may not have the business acumen or financial resources necessary to successfully operate stores in a manner consistent with our standards and may not hire and train qualified store managers and other personnel. Further, we primarily rely on our partners to comply with applicable laws and regulations in the international markets in which they operate. Our brand image and reputation may suffer materially, and our sales could decline, if our partners do not operate successfully, including operating in compliance with applicable laws and regulations. These risks could have an adverse effect on our results of operations, financial condition and cash flows. Our direct channel business includes risks that could have a material adverse effect on our results. Our direct channel (also referred to as digital or e-commerce) is subject to numerous risks that could have a material adverse effect on our results of operations, financial condition and cash flows. Such risks include, but are not limited to, domestic or international large scale buyers and resellers purchasing merchandise and reselling it outside our control; resellers competing against us on domestic or international platforms where we legitimately sell our goods, or competition on marketplaces; our other alternative distribution channels competing with our direct channel business; our ability to address unauthorized distributions and related impact on results; our ability to anticipate and implement innovations in technology and logistics in order to appeal to existing and potential customers who increasingly rely on multiple channels to meet their shopping needs; legal and regulatory developments associated with digital, data, analytics, artificial intelligence (“AI”), communications and ad-targeting practices (including, without limitation, the use of technologies and third-party services to personalize or create concierge-like customer experiences); risks associated with increases in order fulfillment logistics costs; risks associated with the level of support provided by third party partners’ web infrastructure, websites and related support systems; and the failure of and risks related to the resources that underlay and support the operation of our and our third-party partners’ web infrastructure, websites and the related support systems, including computer viruses, malware (including, without limitation, ransomware), unauthorized access to and theft of customer information, privacy violations, fraudulent branded phishing sites impersonating our direct channel, ad scams causing customer confusion, information technology and vendor system failures, deepfakes and other malicious uses of AI, disruption of critical services caused by threat actors and similar disruptions. Our failure to maintain efficient and uninterrupted order-taking and fulfillment operations could also have a material adverse effect on our results of operations, financial condition and cash flows. We utilize third-party service providers for order management and for a majority of our fulfillment services. If these third-party service providers do not maintain efficient and uninterrupted service, we have experienced, and may in the future experience, merchandise delivery delays, loss of sales, stranded inventory, cancellation charges or excessive promotional activity to clear inventory. Further, we may have difficulty replacing these third-party service providers, or transitioning from one third-party service provider to another, and there can be no assurance we can do so in a timely manner, without logistical difficulties or on terms favorable to us. The satisfaction of our direct channel customers also depends on their timely receipt of merchandise. If we encounter difficulties with the distribution and fulfillment facilities, or if the facilities were to shut down for any reason, including as a result of a pandemic, fire, severe weather, natural disaster or work stoppage, we could face shortages of inventory; we could incur significantly higher costs and longer lead times associated with distributing our products to our customers; we could face scrutiny by regulators and litigants; and our customers may be dissatisfied. Any of these issues could have a material adverse effect on our results of operations, financial condition and cash flows. Our ability to protect our reputation could have a material adverse effect on our brand image. Our ability to maintain our reputation is critical to our brand image. Our reputation could be jeopardized if we fail to maintain high standards for merchandise quality and integrity of the consumer’s experience in stores and online. If third parties with which we have a business relationship, including our influencer network, celebrity endorsements and collaboration partners, fail to represent our brand in a manner consistent with our brand image, it could harm our reputation. In addition, ineffective marketing, product diversion and unauthorized distribution channels, product defects, counterfeit products and failure to maintain, protect and enforce the intellectual property rights in our brand may threaten the strength of our brand, and those and other factors could diminish consumer confidence in us. Any negative publicity, including information publicized through traditional or social media platforms and similar venues such as websites, blogs and other forums, may affect our reputation and brand and, consequently, reduce demand for our merchandise and negatively impact our reputation, even if such publicity is unverified or inaccurate. Failure to comply with or the perception that we have failed to comply with ethical, social, product, labor, privacy, systems and data security and environmental standards, or related political considerations, or that we have failed to ensure the safety of our 10 Table of Contents stores and products, could also jeopardize our reputation and potentially lead to various adverse consumer actions, including boycotts. Failure to comply with applicable laws and regulations, to maintain an effective system of internal controls, to maintain the security of customer, associate, third-party and company information or to provide accurate and timely financial statement information could also hurt our reputation. Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations, financial condition and cash flows, as well as require additional resources to rebuild our reputation. If our marketing, advertising, promotional programs or loyalty program are unsuccessful, or if our competitors are more effective with their programs than we are, our results of operations, financial condition and cash flows may be adversely affected. Customer traffic and demand for our merchandise are influenced by our advertising, marketing and promotional activities, the effectiveness of our loyalty program, the name recognition and reputation of our brand and the location of and service offered in our stores and through our direct business. Although we use marketing, advertising and promotional programs and our loyalty program to attract customers through various media, including social media, websites, mobile applications, email and print, and we continue to invest to improve the online and mobile user experience for our customers, some of our competitors may expend more for their programs than we do or use different or more efficient approaches than we do, which may provide them with a competitive advantage. Our financial forecasts are dependent on our marketing, advertising and promotional programs and our loyalty program enhancements driving customer acquisition and stronger customer retention. Our recent investment in a new brand strategy and programs may not be effective or could require increased expenditures, which could have a material adverse effect on our results of operations, financial condition and cash flows. Our ability to adequately maintain, enforce and protect our trade names, trademarks and patents could have an impact on our brand image and ability to penetrate new markets. We believe that our trade names, trademarks and patents are important assets and an essential element of our strategy. We have obtained or applied for federal registration of these trade names, trademarks and patents and have applied for or obtained registrations in many foreign countries. There can be no assurance that we will obtain such applied for registrations or that the registrations we obtain will prevent the imitation of our products or infringement or other violation of our intellectual property rights by others. In particular, the laws of certain foreign countries may not protect proprietary rights to the same extent as the laws of the U.S. If any third party copies our products, our or our partners’ websites or our or our partners’ stores in a manner that projects lesser quality or carries a negative connotation, it could have a material adverse effect on our brand image and reputation as well as our results of operations, financial condition and cash flows. Third parties may assert rights in or ownership of our trademarks and other intellectual property rights, or trademarks that are similar to our trademarks, or claim that we are infringing, misappropriating or otherwise violating their intellectual property rights. We may be unable to successfully resolve these types of conflicts to our satisfaction and may be required to enter into costly license agreements, be required to pay significant royalties, settlement costs or damages, be required to rebrand our products and/or be prevented from selling some of our products. Our ability to compete favorably in our highly competitive segments of the consumer goods and retail industry could impact our results of operations, financial condition and cash flows. The consumer goods and retail industry is highly competitive. We compete for sales with a broad range of other retailers, including individual and chain specialty stores, department stores and discount retailers. In addition to the traditional store-based retailers, we also compete with direct marketers or retailers that sell similar lines of merchandise and who target customers through online channels. Brand image, marketing, design, price, service, assortment, quality, innovation, image presentation and fulfillment are all competitive factors in both the store-based and online channels. Some of our competitors may have greater financial, marketing and other resources available and trends across our product categories may favor our competitors. We rely to a greater degree than some of our competitors on physical locations in retail centers. Therefore, declines in traffic to such locations may affect us more significantly than our competitors. Some of our competitors sell their products in stores that are located in the same retail centers as our stores. In addition to competing for sales, we compete for favorable site locations and lease terms in retail centers. Increased competition, combined with declines in store and/or direct channel traffic, could result in price reductions, increased marketing expenditures and loss of pricing power and market share, any of which could have a material adverse effect on our results of operations, financial condition and cash flows. Our ability to manage the life cycles of our brand and to remain current with trends and launch our strategic transformation successfully could impact the image and relevance of our brand. Our success depends in part on management’s ability to effectively manage the life cycles of our brand, to anticipate and respond to changing preferences and consumer demands and to translate market trends into appropriate, saleable product 11 Table of Contents offerings in advance of the actual time of sale to the customer. We are dependent on certain product categories and declines in customer demand in these product categories have negatively impacted, and may in the future impact, our results of operations, financial condition and cash flows. Our financial forecasts are dependent on our ability to drive growth through our Consumer First Formula by creating new and innovative products in our hero product categories, including body care, home fragrance and soaps and sanitizers, while streamlining our product assortment and attracting new consumers. Customer demands and trends change rapidly. If we are unable to successfully anticipate, identify or react to changing preferences or trends, we misjudge the market for our products or any new product lines, or our launches or expansions of new product lines are unsuccessful, we may not be able to achieve the growth in our business that we currently anticipate. In response, we may be forced to increase our marketing, promotions or price markdowns and potentially discontinue a product line. These risks are particularly acute for us as we launch our new Consumer First Formula strategic transformation to engage new and existing customers and could have a material adverse effect on our brand image and reputation as well as our results of operations, financial condition and cash flows. We rely on innovation and high-quality products to compete in the market for our products. Innovation and quality management in our design and manufacturing processes are essential to the commercial success of our products and development of new products. We must continue to invest in research and development in connection with the innovation and design of our products in order to attract new and retain current consumers. If we are unable to anticipate consumer preferences or industry changes, or if we are unable to introduce new products or modify our existing products on a timely basis, we may lose channel partners and consumers or become subject to greater pricing pressures. Our operating results would also suffer if our innovations and designs do not respond to the needs and demands of our channel partners and consumers, are not appropriately timed with market opportunities or are not effectively brought to market. Any failure on our part to innovate and design new products or modify existing products may harm our brand image and consumer demand for our products could decline and could result in a decrease in our revenue and an increase in our inventory levels. We may be impacted by the ability to adequately source, distribute and sell merchandise and other materials on a global basis. We source merchandise and other materials directly in domestic and international markets. We distribute merchandise and other materials globally to our franchise and other distribution-related partners in international locations and to our stores. Many of our imports and exports are subject to a variety of customs regulations and international trade agreements, including existing or potential duties, tariffs or safeguard quotas. We also compete with other companies for manufacturing facilities. We also face a variety of other risks generally associated with doing business on a global basis. For example: • political instability, geopolitical conflict, including the war between Russia and Ukraine and the conflict in the Middle East, environmental hazards or natural disasters, which could negatively affect international economies, financial markets and business activity; • significant health hazards or pandemics, which could result in closed factories, distribution and fulfillment centers and/or stores, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in impacted areas; • imposition of new or retaliatory trade duties, sanctions, tariffs or taxes and other charges on imports or exports; • evolving, new or complex legal and regulatory matters; • volatility in currency exchange rates; • local business practices and political issues (including issues relating to compliance with domestic or international labor standards) and anti-American sentiment, which may result in adverse publicity or threatened or actual adverse consumer actions, including boycotts; • 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 laws or regulations or other factors. On February 20, 2026, the U.S. Supreme Court invalidated tariffs imposed under the International Emergency Economic Power Act (the “IEEPA Decision”). There remains significant uncertainty regarding the implementation of the IEEPA Decision, including the process that will govern refund claims, the timing of any potential refunds, and the ultimate amounts, if any, that we recover. In addition, immediately following the IEEPA Decision, the U.S. government initiated new tariffs under alternative authorities, resulting in continued tariff exposure. Certain goods that we import are sourced from third-party suppliers in China. Our ability to successfully import such materials may be adversely affected by U.S. and Canadian laws and changes in those laws. The Uyghur Forced Labor Prevention Act (“UFLPA”) imposes a presumptive ban on the import of goods to the U.S. that are made, wholly or in part, in the Xinjiang Uyghur Autonomous Region of China (“XUAR”) or by persons that participate in certain programs in the XUAR that entail the use of forced labor. U.S. Customs and Border Protection (“CBP”) has published both a list of entities that are known to utilize forced labor, and a list of commodities that are most at risk, such as poly-vinyl chloride, cotton, tomatoes and silica-based 12 Table of Contents products. Although none of our Chinese suppliers are located in the XUAR, we do not currently have full visibility to the entirety of each supplier’s separate sub-tier supply chains to be able to ensure that the raw materials or other inputs they use to manufacture their goods are not produced in the XUAR. Materials we import into the U.S. could be held by the CBP based on a suspicion that inputs used in such materials originated from the XUAR or that they may have been produced by Chinese suppliers accused of participating in forced labor, pending our providing satisfactory evidence to the contrary. Among other consequences, such an outcome could result in negative publicity that harms our brand and reputation and could result in a delay or complete inability to import such materials, which could result in inventory shortages and an increase in supply chain compliance costs. We also rely upon third-party transportation providers for substantially all of our product shipments, including shipments to and from our distribution centers to our stores and fulfillment centers, and to our customers. Our utilization of these delivery services for shipments is subject to risks, including increases in labor costs and fuel prices, which would increase our shipping costs, and associate strikes and inclement weather, which may impact our transportation providers’ ability to provide delivery services that adequately meet our shipping needs. Our ability, or perceived inability, to complete sustainability, community impact and human capital initiatives may have a material adverse effect on our reputation. Investors, other stakeholders, the general public and U.S. and foreign governmental and nongovernmental organizations have been focused on sustainability initiatives, including with respect to climate change, greenhouse gas emissions, packaging and waste, culture and belonging, worker pay and benefits, human rights, sustainable supply chain practices, animal health and welfare, deforestation and land, energy and water use. We maintain a sustainability function to provide direction and coordinate sustainability work throughout the Company. Increased sustainability reporting requirements and scrutiny of sustainability initiatives by public, regulatory, investor and other stakeholders, including U.S. and foreign governmental agencies, may put pressure on us to adjust our disclosures in these areas, and make adjustments to our commitments, targets, or goals and take actions to meet or address such adjustments, which could expose us to market, operational, regulatory, legal and execution costs or risks. Our business may also face increased scrutiny related to sustainability activities, including from U.S. and foreign governmental agencies, and potentially lead to enforcement actions and litigation. Setting these targets and goals or expanding or adjusting our disclosure or our failure, or perceived failure, to meet or properly adjust such targets and goals could adversely affect our reputation and, as a result, our business, financial performance and growth. We rely on a number of manufacturing and distribution facilities located in the same vicinity, making our business susceptible to local and regional disruptions or adverse conditions. To achieve the necessary speed and agility in supply of our inventory, we rely heavily on third-party manufacturing facilities and our distribution facilities in close proximity to our headquarters in central Ohio. As a result of the geographic concentration of many of the manufacturing and distribution facilities that we rely upon, our operations are susceptible to local and regional factors, such as accidents, system failures, economic and weather conditions, natural disasters (including as may be exacerbated by climate change), demographic and population changes and other unforeseen events and circumstances. Any significant interruption in the operations of these facilities could lead to inventory issues, increased costs or interruptions to our operations, which could have a material adverse effect on our results of operations, financial condition and cash flows. A change in the relationship with our key vendors could have a material effect on our business. We rely on a limited number of vendors (including manufacturers) to supply our inventory. In 2025, our largest vendor supplied approximately 12% of our total merchandise purchases (on a dollar basis) and our largest five vendors in the aggregate supplied approximately 40% of our total merchandise purchases (on a dollar basis). Our business depends on developing and maintaining close relationships with our vendors and on our vendors’ ability or willingness to sell quality products to us at competitive prices and on other favorable terms. Many factors outside of our control may impact these relationships and the ability or willingness of these vendors to sell us products on favorable terms. For example, financial or operational difficulties that our vendors may face could increase the cost of the products we purchase from them or our ability to source products from them. We may be impacted by our vendors’ ability to manufacture and deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations. We purchase products from third-party vendors. Factors outside our control, such as production issues, shipping delays, quality problems, geopolitical conflicts and wars, outbreaks of disease, or natural disasters, could disrupt merchandise deliveries and result in lost sales, cancellation charges or excessive markdowns. In addition, quality problems could result in product liability judgments or widespread product recalls that may negatively impact our sales and profitability for a period of time depending on product availability, reaction of competitors and consumer attitudes. Even if product liability claims are unfounded, unsuccessful or are not fully pursued, the negative publicity surrounding any assertions could adversely impact our reputation with existing and potential customers and our brand image. 13 Table of Contents Our business could also suffer if our third-party vendors fail to comply with applicable laws and regulations. While our internal and vendor operating guidelines promote ethical business practices and our associates and third-party compliance auditors visit and monitor the operations of our third-party vendors, we do not control these vendors or their practices. Violations of labor, environmental or other laws by third-party vendors used by us or the divergence of a third-party vendor’s or partner’s labor or environmental practices from those generally accepted as ethical or appropriate could interrupt or otherwise disrupt the shipment of finished products to us or damage our reputation. These risks could have a material adverse effect on our results of operations, financial condition and cash flows. Fluctuations in foreign currency exchange rates could impact our results of operations, financial condition and cash flows. We are exposed to foreign currency exchange rate risk with respect to our sales, profits, assets and liabilities denominated in currencies other than the U.S. dollar. In addition, our royalty arrangements are calculated based on sales in local currency and, as such, we are exposed to foreign currency exchange rate fluctuations. Although we use foreign currency forward contracts to hedge certain foreign currency risks, these measures may not succeed in offsetting all of the short-term negative impacts of foreign currency rate movements on our business and results of operations, financial condition and cash flows. Hedging would generally not be effective in offsetting the long-term impact of sustained shifts in foreign exchange rates on our business results. As a result, the fluctuation in the value of the U.S. dollar against other currencies could have a material adverse effect on our results of operations, financial condition and cash flows. Our results may be affected by fluctuations in product input costs. Product input costs, including freight, labor and raw materials, fluctuate subject to price volatility caused by any fluctuation in aggregate supply and demand or other external conditions, such as inflationary conditions, weather and climate conditions, geopolitical conflicts and wars, energy costs, natural events or disasters, taxes and tariffs (including as a result of trade disputes), industry demand, labor shortages, transportation issues, fuel costs, product recalls, governmental regulation and other factors, all of which are beyond our control and in many instances are unpredictable. These factors may result in an increase in our product input costs. We may not be able to, or may elect not to, fully pass these increases on to our customers which may adversely impact our profit margins. These risks could have a material adverse effect on our results of operations, financial condition and cash flows. Our results may be affected by fluctuations in energy costs. Energy costs have fluctuated in the past and may fluctuate in the future due to changes in factors beyond our control, such as weather and climate conditions or natural events or disasters, taxes and tariffs (including as a result of trade disputes), industry demand, high demand for renewable energy, inflationary conditions, labor shortages, transportation issues, fuel costs, geopolitical conflicts and wars, governmental regulation and other factors. These fluctuations may result in an increase in our transportation costs for distribution, utility costs for our retail stores, distribution and fulfillment centers and other Company locations and costs to purchase products from third-party manufacturers. A continual rise in energy costs could adversely affect consumer spending and demand for our products and increase our operating costs, both of which could have a material adverse effect on our results of operations, financial condition and cash flows. Our results may be impacted by our ability to adequately protect our assets from loss and theft. Our assets are subject to loss, including those caused by illegal or unethical conduct by associates, customers, vendors, partners or unaffiliated third parties (including from organized retail crime). We experience events that cause inventory shrinkage. Our inventory shrinkage rates have fluctuated in recent years and may continue to fluctuate, and we cannot assure that incidences of loss and theft will decrease in the future or that the measures we are taking will effectively reduce these losses. Higher rates of loss or increased security costs to combat theft could have a material adverse effect on our results of operations, financial condition and cash flows. We self-insure certain risks and may be impacted by unfavorable claims experience. We are self-insured for various types of insurable risks including associate medical benefits, workers’ compensation, property, general liability and automobile, up to certain stop-loss limits in certain cases. Claims are difficult to predict and may be volatile, and recently we have seen an increase in healthcare and medical costs, as well as broader loss cost trends across certain property and casualty lines. Any adverse claims experience could have a material adverse effect on our results of operations, financial condition and cash flows. 14 Table of Contents We have undertaken a multi-year initiative to upgrade our digital and information technology systems and capabilities. We significantly rely on our, and our third-party service providers’, ability to successfully implement, upgrade and sustain information technology systems and to protect associated data and system availability. We have undertaken the IT Transformation Project, a multi-year project to modernize our digital and information technology systems and capabilities to, among other things, advance our data analytics capabilities, deploy AI applications, enhance our in-store and online customer experience, enable us to more effectively personalize our marketing, shopping and promotional experiences, enhance the security of and otherwise reduce risks associated with our IT systems, streamline our information technology operations and enable us to work more efficiently. We, together with our third-party service providers and vendors, maintain a complex ecosystem of information technology systems and environments that will be impacted by the IT Transformation Project. As with any information technology upgrade, the IT Transformation Project increases the risk of interruption of service, data loss and vulnerabilities, corruption of data, breach, failure and degradation of AI applications leading to unpredictability and untrustworthiness, failure of information technology systems to effectively communicate and other disruptions to our operations. Moreover, the IT Transformation Project could result in expenses and capital expenditures that substantially exceed the expenses and capital expenditures that we currently anticipate. The success of our business depends, in part, on the secure and uninterrupted performance of our, and our third-party service providers’ and vendors’, information technology systems. Our information technology systems, as well as those of our service providers and vendors, are vulnerable to damage, interruption, degradation, “data poisoning,” service availability or breach from a variety of sources, including cyberattacks, cyber extortion, ransomware attacks, deepfakes and other malicious uses of AI, telecommunication and/or technology failures, malicious human acts, human errors and natural disasters. Moreover, despite maintaining comprehensive measures, some of our systems, e-commerce environments and servers and those of our service providers and vendors are potentially vulnerable to physical or electronic break-ins, malware (including, without limitation, ransomware), computer viruses and similar disruptive problems. Such incidents have disrupted, and could in the future further disrupt, our operations (whether directly or due to disruptions of our service providers’ and vendors’ operations) including our ability to timely ship and track product orders and project inventory requirements and lead to interruptions or delays in our supply chain. Additionally, these types of problems could result in an actual or perceived breach of confidential customer, merchandise, financial, associate or other important information (including personal information), which could result in damage to our reputation, costly litigation, customer complaints, negative publicity, breach and other notification obligations, regulatory or administrative sanctions, inquiries, orders or investigations, indemnity obligations, damages for contract breach or penalties for violations of applicable laws or regulations. The proliferation of mobile devices and data applications and services may heighten these and other operational risks. Despite the precautions we have taken, unanticipated problems or events may nevertheless cause failures in, or unauthorized access to, our and our third-party service providers’ and vendors’ information technology systems. Sustained or repeated system disruptions that interrupt our ability to process orders and deliver products to the stores or directly to our customers, impact our ability to process transactions in our stores, impact our customers’ ability to access our websites and mobile applications in a timely manner or expose confidential customer, merchandise, financial, associate or other important information (including personal information), the risks of which may be heightened as we execute on the IT Transformation Project, could have a material adverse effect on our results of operations, financial condition and cash flows. We use third-party service providers and vendors to store, transmit and otherwise process certain confidential customer, merchandise, financial, associate or other important information (including personal information) on our behalf, and our third-party service providers and vendors are subject to cybersecurity and privacy risks similar to us. Due to applicable laws and regulations or contractual obligations, we may be held responsible for any cybersecurity incidents or privacy violations attributed to our service providers or vendors as they relate to the information we share with them, information to which they are granted access, or information that they process for us to deliver services to our customers. Although we strive to contractually require these service providers and vendors to implement and maintain controls and a standard of security (such as implementing reasonable safeguards) and to comply with applicable law, we cannot control third parties and cannot guarantee that a security breach or privacy violation will not occur in connection with their systems and practices. Any significant compromise or breach of our data security, including the security of customer, associate, third-party or Company information, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows. In the operation of our business, we collect, use, transmit and otherwise process a large volume of personal and other confidential, proprietary and sensitive information. Information systems are susceptible to an increasing threat of continually evolving cybersecurity risks. Breaches or failures of security involving our information systems, including those provided, managed and supported by any of our third-party service providers, have occurred, and in the future may occur. Any significant compromise or breach of our data security, media reports about such an incident, whether accurate or not, or our failure to make adequate or timely disclosures to the public, regulatory agencies or law enforcement agencies following any such event, whether due to delayed discovery or a failure to follow existing protocols or regulations, could significantly damage 15 Table of Contents our reputation with our customers, associates, investors and other third parties, cause the disclosure of personal, confidential, proprietary or sensitive customer, associate, third-party or Company information, cause interruptions to our operations and distraction to our management, cause our customers to stop shopping with us, inhibit our ability to attract new customers and result in significant legal, regulatory and financial liabilities and lost revenues. Compounding these risks is the complexity of our information systems, which are a collection of our and our third-party service providers’ systems. While we train our associates, have implemented systems, processes and security measures to protect our physical facilities and information technology systems against unauthorized access and prevent data loss, and have vetted our third-party service providers’ systems, processes and security measures, there is no guarantee that these procedures are adequate to safeguard against all data security threats to us or our third-party service providers. Despite these measures, we have been and may in the future be vulnerable to targeted or random attacks on our systems that could lead to security breaches, extortion, denial of service, vandalism, computer viruses, malware, ransomware, misplaced, corrupted or lost data, programming and/or human errors or similar events. Our systems and facilities (and the systems and facilities of our third-party service providers) are also subject to compromise from internal threats, such as theft, misuse, unauthorized access or other improper actions by associates, contractors and third-party service providers with otherwise legitimate access to our (or such third-party service providers’) systems, websites, mobile applications or facilities (which risks may be heightened as a result of our (or their) associates working from home). Furthermore, because the methods of cyberattack and deception change frequently, are increasingly complex and sophisticated (including through the use of AI and deepfakes to carry out cyber intrusions) and can originate from a wide variety of sources, including nation-state actors, despite our efforts to ensure the confidentiality, availability and integrity of our systems, websites and mobile applications, it is possible that we may not be able to anticipate, detect, appropriately react and respond to or implement effective preventative measures against all cybersecurity threats, and our third-party service providers may be subject to the same risks. We have and may in the future be required to expend significant capital and other resources to protect against, respond to and recover from any potential, attempted or existing cybersecurity incidents. As cybersecurity incidents continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. In addition, our remediation efforts may not be successful or may not be completed in a timely manner. The inability to implement, maintain and upgrade adequate safeguards could have a material adverse effect on our results of operations, financial condition and cash flows. Moreover, there could be public announcements regarding cybersecurity incidents and any steps we take to respond to or remediate such incidents, and if securities analysts or investors perceive these announcements to be negative, it could, among other things, have a substantial adverse effect on the price of our common stock. While we currently maintain cybersecurity insurance, such insurance may not be sufficient in type or amount to cover us against claims related to breaches, violations of law, failures or other data security-related incidents, and we cannot be certain that cybersecurity insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our results of operations, financial condition and cash flows. Risks related to our common stock: Our stock price may be volatile. Our stock price has fluctuated and may continue to fluctuate substantially as a result of variations in our actual or projected performance or the financial performance of other companies in the retail or consumer product industries. Any guidance that we provide is based on goals that we believe are reasonably attainable at the time guidance is given. If, or when, we announce actual results that differ from those that have been forecasted by us, outside investment analysts or others, our stock price could be adversely affected. Investors who rely on these forecasts when making investment decisions with respect to our securities do so at their own risk. The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies. In particular, our common stock currently is and may in the future be traded by short sellers which may put pressure on the supply and demand for our common stock, further influencing volatility in its market price. Public perception and other factors outside of our control may additionally impact the stock price of companies like us that garner a disproportionate degree of public attention, regardless of actual operating performance. 16 Table of Contents If we are unable to pay quarterly dividends or repurchase our shares at intended levels, our reputation and stock price may be impacted. Quarterly cash dividends and share repurchase programs have historically been part of our capital allocation strategy. We are not required to declare dividends or make any share repurchases under our share repurchase programs in the future. For example, in 2020, we did not repurchase any of our shares, and we suspended our quarterly cash dividends due to the anticipated impact of the COVID-19 pandemic. Our Board will determine our future levels of dividend payments and share repurchase authorizations, if any, giving consideration to our levels of profit and cash flow, capital requirements, capital allocation strategy, current and forecasted liquidity and the restrictions placed upon us by our borrowing arrangements, as well as financial and other conditions which may be beyond our control. Any reduction, or failure, to pay dividends or repurchase our shares after we have announced our intention to do so, or any change to our capital allocation strategy, may negatively impact our reputation, investor confidence in us and our stock price. Shareholder activism could cause us to incur significant expense, impact the execution of our business strategy and have an adverse effect on our business. Shareholder activism, which can take many forms and arise in a variety of situations, could result in substantial costs and divert our attention and resources from our business and our ability to execute our strategic plans. Additionally, such shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with our associates, customers, service providers or other vendors and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant fees and other expenses related to activist shareholder matters, including for third-party advisors. Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any shareholder activism. Risks related to our indebtedness: Our ability to maintain our credit ratings could affect our ability to access capital and could increase our interest expense. The credit rating agencies periodically review our capital structure and the quality and stability of our earnings. A deterioration in our capital structure or the quality and stability of our earnings could result in a downgrade of our credit ratings. Any negative ratings actions could constrain the capital available to us or our industry and could limit our access to funding for our operations. We are dependent upon our ability to access capital at rates and on terms we determine to be attractive. If our ability to access capital becomes constrained, our interest costs may increase, we may not be able to fund future growth or we may not be able to meet some or all of our financial obligations, which could have a material adverse effect on our results of operations, financial condition and cash flows. We may be unable to service or refinance our debt or maintain compliance with restrictive covenants in our debt instruments, including our asset-backed revolving credit facility. We currently have substantial indebtedness. Our asset-backed revolving credit facility (the “ABL Facility”) contains a covenant and negative covenants that under certain circumstances require maintenance of a certain financial ratio and also, under certain conditions, restrict our ability to pay dividends, repurchase shares of our common stock and make other restricted payments as defined in the agreement. Our cash flow from operations provides the primary source of funds for our debt service payments. If our cash flow from operations declines, we may be unable to service or refinance our current debt. If we fail to comply with any covenant, including our financial covenant, it could result in an event of default and our lenders could terminate the commitments under our ABL Facility and make the entire debt incurred thereunder immediately due and payable, or we may be forced to sell assets, restructure our indebtedness or seek additional equity capital, which would dilute our stockholders’ interests. Risks related to laws and regulations: Changes in laws, regulations, standards, technology platform rules or other requirements relating to privacy, cybersecurity and AI, or any actual or perceived failure by us to comply with such laws, regulations, rules or contractual or other obligations relating to data privacy, cybersecurity and AI, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows. We are, and may increasingly become, subject to various laws, directives, industry standards, rules and regulations, as well as contractual obligations, relating to data privacy and cybersecurity (including the use of AI) in the jurisdictions in which we operate and may in the future operate. The legal and regulatory environment related to data privacy and cybersecurity is increasingly rigorous and rapidly evolving, with new requirements, constantly changing requirements, and new or novel interpretations of existing requirements applicable to our business, and enforcement actions and litigation are likely to remain uncertain for the foreseeable future. These laws and regulations may be interpreted and applied differently over time and from 17 Table of Contents jurisdiction to jurisdiction, and it is possible that the laws and regulations will be interpreted and applied in ways that may have a material adverse effect on our results of operations, financial condition and cash flows. In the U.S., data privacy and protection are regulated at federal, state and local levels, and the use of AI is now regulated at state and local levels. Various federal and state regulators, including governmental agencies like the SEC and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning data privacy and cybersecurity and have prioritized data privacy and cybersecurity-related violations for enforcement actions. Certain state laws are, and in the future may continue to be, more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal, international or other state laws, and such laws may differ from each other, all of which complicates compliance efforts and increases risks to our business. Privacy laws and regulations range from the “sectoral” variety (i.e., laws that govern specific practices, services or technologies) to omnibus laws (i.e., laws that comprehensively seek to govern all aspects of data processing practices). As an omnichannel retailer, we are subject to both. In North America, we are subject to sectoral privacy laws that impose different enforcement regimes, whether enforced by government agencies or class action and/or mass arbitration litigants, with fines and statutory damages that can result in significant exposure when applied to large customer segments. Illustrative of the sectoral variety are laws that govern telephonic communications (e.g., the Federal Telephone Consumer Protection Act), email communications (e.g., the Federal Controlling the Assault of Non-Solicited Pornography and Marketing Act and Canada’s Anti-Spam Legislation), the use of biometric technology (e.g., the Illinois Biometric Information Privacy Act), the printing of payment card numbers on certain transaction receipts (e.g., the Federal Fair and Accurate Credit Transactions Act), the use of call recordings (e.g., federal and state laws governing unlawful surveillance and consent for recordings), the collection of consumer information at retail point of sale (e.g., the California Song-Beverly Act), and the collection of driver’s license information (e.g., state laws governing the scanning of government identification). We are further subject to omnibus data privacy and protection laws. For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, the “CCPA”), broadly governs data privacy practices, increases privacy rights for California residents and imposes obligations on companies that process their personal information, including certain sensitive personal information. Among other things, the CCPA requires covered companies to provide disclosures to California consumers and provide such consumers data protection and privacy rights, including the ability to opt out of certain disclosures of their personal information and the ability to access and delete personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of certain classifications of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. Other states and countries have passed omnibus data privacy laws that are similar to the CCPA, further complicating the legal landscape, and similar bills are making their way through several state legislatures. In addition, laws in all 50 U.S. states require businesses to provide notice to consumers (and, in some cases, to regulators) of data breaches, which are when certain types of personal information have been accessed, impacted or acquired without authorization. State laws are changing rapidly, and there have been deliberations in the U.S. Congress regarding a new comprehensive federal data privacy law to which we would become subject if one were to be enacted. Such a law could add complexity, variation in requirements, restrictions and potential legal risk. Moreover, it could require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and result in increased compliance costs or changes in business practices and policies. While most of our international operations are conducted through franchise, license, wholesale and other distribution-related arrangements, we are also subject to certain international laws, regulations, rules and standards in certain international jurisdictions and may be subject to additional international laws, regulations, rules and standards, whether existing or enacted in the future, that apply broadly to the collection, use, retention, security, disclosure, handling transfer and other processing of personal information. In Canada, we are subject to the Personal Information Protection and Electronic Documents Act (“PIPEDA”) as well as substantially similar provincial privacy laws (e.g., Quebec’s Law 25). These data privacy laws broadly govern the entire lifecycle of personal information, enumerating principles that govern accountability; purpose; consent; assessment; privacy by default; limitations on collection, use, disclosure and retention; accuracy; safeguards; transparency; data rights of access, correction and deletion; and complaint-handling. Certain of the laws also contain a mandatory breach notification regime. Canadian federal and provincial authorities and litigants enforce these laws. Privacy regulators have an express obligation to investigate complaints and have the authority to initiate investigations. Under PIPEDA, the Office of the Privacy Commissioner of Canada has the power to require an organization to enter into a compliance agreement and failure to comply may result in a court order or court proceedings. A complainant may also appeal to Federal Court, and the court has broad authority including awarding damages. Similarly, the European Union’s (“EU”) General Data Protection Regulation (“GDPR”) imposes strict data privacy and cybersecurity requirements for handling personal data. Further, the GDPR was transposed into U.K. law (“U.K. GDPR”) as supplemented by the U.K.’s Data Protection Act of 2018, which currently imposes the same obligations as the GDPR in most material respects. Additionally, under the GDPR, EU member states have enacted 18 Table of Contents certain implementing legislation that adds to and/or further interprets the GDPR requirements and, depending on the extent and degree to which we conduct business in the European Economic Area (“EEA”) and the U.K., potentially extends our obligations and potential liability for failing to meet such obligations. The GDPR, together with national legislation, regulations and guidelines of the EEA states and the U.K. GDPR governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, handle, transfer and otherwise process personal data, and other international jurisdictions are expected to pass similar laws that may include even more stringent requirements. Changes in such international laws or changes in our business strategy such as direct expansions into additional jurisdictions may cause us to incur additional compliance costs, increase our risks of being subject to lawsuits, complaints and/or regulatory investigations or fines, or restrict our ability to transfer personal data between and among countries and regions in which we operate or may in the future operate. Such international laws, and our compliance with such laws, could impact the manner in which we do business and the geographical location or segregation of our relevant operations and could adversely affect our results of operations, financial condition and cash flows. Use of emerging and new technologies, including AI, could also expose us to liability or actual or alleged violations of applicable laws, rules and regulations, including third-party claims of intellectual property infringement, misappropriations or other violations, as it is possible that our employees using such tools for development purposes may overly rely on results generated via these tools and may not conduct sufficient checks, verifications or investigations of pre-existing design or other intellectual property rights with respect to the outputs generated by these tools. Further, we may jeopardize our own intellectual property rights via over-zealous use of such new technologies by, for example, inputting our proprietary materials into a tool that collects data for further development or provision of its services to third parties. Similarly, intellectual property ownership and license rights surrounding AI has not been fully addressed by international and U.S. courts or the laws, rules or regulations of U.S. and foreign jurisdictions. Any materials created by us using AI may not be subject to intellectual property protection, which may affect our ability to commercialize such materials. While we do monitor and provide guidance to our employees on the use of AI in our business operations and development, risk to our intellectual property rights is hard to completely mitigate as employees may not follow proper internal processes or such tools' service providers may utilize data and materials included in their tools in ways contrary to what they claim. AI regulation is nascent but rapidly evolving. Several U.S. states have adopted, or are considering, AI specific or adjacent laws addressing issues such as high-risk AI uses, bias and discrimination, algorithmic decision making, pricing practices, and transparency. For example, Colorado has enacted a comprehensive, risk-based AI law that will require governance programs, risk and impact assessments, disclosures, and human-oversight mechanisms for certain uses of AI. Other states, including California, New York, Texas, and Utah, have adopted or proposed a range of targeted laws addressing aspects of AI and automated decision making, including transparency, consumer disclosures, pricing practices, and the use of AI in connection with personal information. Similar to the evolving privacy law landscape, this patchwork of existing and anticipated AI laws could increase regulatory complexity, elevate legal and compliance risk, and require additional investment of resources as our use of AI continues to grow. All of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational changes, investing in and implementing additional data protection technologies and other safeguards and training associates and engaging third-party service providers, which are likely to increase over time. In addition, such requirements may require us to modify our data processing or cybersecurity practices and policies and distract management or divert resources from other initiatives and projects, all of which could have a material adverse effect on our results of operations, financial condition and cash flows. Any failure or perceived failure by us or our partners to comply with any applicable federal, state or similar foreign laws, regulations, standards or rules relating to data privacy, cybersecurity and AI could result in damage to our reputation and our relationship with our customers, as well as proceedings or litigation by governmental agencies or customers, including class action litigation in certain jurisdictions, which could subject us to significant fines, sanctions, awards, penalties or judgments, any of which could have a material adverse effect on our results of operations, financial condition and cash flows. We may be impacted by our ability to comply with legal and regulatory requirements. We are subject to numerous legal and regulatory requirements. Our policies, procedures and internal controls are designed to comply with all applicable foreign and domestic laws and regulations, including those required by the Sarbanes-Oxley Act of 2002, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, the SEC and the New York Stock Exchange (“NYSE”), among others. Although we have put in place policies and procedures aimed at ensuring legal and regulatory compliance, our associates, subcontractors, manufacturers, other vendors, licensees, franchisees and other third parties could take actions that violate these laws and regulations. Any violations of such laws or regulations could have an adverse effect on our reputation, the market price of our common stock and our results of operations, financial condition and cash flows. It can be difficult to comply with sometimes conflicting statutes or regulations in local, national or foreign jurisdictions as well as new or changing laws and regulations. Also, changes in such laws and regulations could make operating our business more expensive or require us to change the way we do business. For example, changes in product safety or other consumer protection laws could lead to increased costs for certain merchandise, increased research and development costs associated with 19 Table of Contents product reformulations or new product lines, additional labor costs, or other costs associated with readying merchandise for sale. We operate stores in all 50 states, Canada and Puerto Rico, which requires us to comply with a myriad of provincial, state and local laws pertaining to all aspects of our business, including our associates and consumers. The trend for states and localities in the U.S. to legislate in the absence of national laws passed by the U.S. Congress has greatly increased the complexity of legal compliance for us. In addition, future domestic and international legislative and regulatory efforts to combat climate change or other environmental considerations could result in increased regulation and additional taxes and other expenses in a manner that adversely affects our business, financial performance and growth. It may be difficult for us to comply with these laws, compliance may be costly and compliance and associated costs may negatively impact our operations. We may be adversely impacted by certain compliance or legal matters. We, along with third parties we do business with, are subject to complex compliance and litigation risks. Actions filed against us from time to time include commercial, tort, intellectual property, product liability, tax, customer, employment, wage and hour, data privacy, securities, anti-corruption and other claims, including purported class action lawsuits and mass arbitration claims. The cost of defending against these types of claims against us or the ultimate resolution of such claims, whether by settlement or adverse court decision, may harm our business. Further, potential claimants may be encouraged to bring suits based on a settlement from us or adverse court decisions against us. We cannot currently assess the likely outcome of such suits, but if the outcome were negative, it could have a material adverse effect on our reputation, results of operations, financial condition and cash flows. In addition, we may be impacted by litigation trends, including class action lawsuits involving consumers and stockholders, that could have a material adverse effect on our reputation, the market price of our common stock and our results of operations, financial condition and cash flows. We may be impacted by changes in taxation, trade and other regulatory requirements. We are subject to income tax in local, national and international jurisdictions. In addition, our products are subject to import and excise duties and/or sales or value-added taxes in many jurisdictions. We are also subject to the examination of our tax returns and other tax matters by the IRS and other tax authorities and governmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes. There can be no assurance as to the outcome of these examinations. Fluctuations in tax rates and duties, changes in tax legislation or regulation or adverse outcomes of these examinations could have a material adverse effect on our results of operations, financial condition and cash flows. There is increased uncertainty with respect to international tax policy and trade relations between the U.S. and other countries. The uncertainty results from, among other things, executive actions or legislative priorities taken, set or under consideration, by the current U.S. presidential administration, major developments in tax policy or trade relations (including the imposition of unilateral tariffs on imported products), and Organization for Economic Cooperation and Development actions adopted in certain jurisdictions. These actions, legislation and developments and the response by foreign governments to these actions could have a material adverse effect on our results of operations, financial condition and cash flows. ITEM 1B. UNRESOLVED STAFF COMMENTS. None. ITEM 1C. CYBERSECURITY The Company has developed an information security program to address material risks from cybersecurity threats and incidents, which is integrated within its overall enterprise risk management (“ERM”) program. The Board oversees both programs, assisted by the Audit Committee, regularly reviewing the ERM program at the enterprise level and the information security program at the program level. Program & Risk Management The information security program includes policies and procedures that identify how security measures and controls are developed, implemented and maintained. Under the program, the Company performs one or more cyber risk assessments each year based on recognized industry best practices and standards and cyber threat intelligence. The risk assessments, together with risk-based analysis and judgment, are used to determine security measures and controls to address identified risks. The Company considers the following factors, among others, during its risk and control implementation assessments: the likelihood and severity of the risk; the impact on the Company, the Company’s customers, associates and stockholders, and others if a risk materializes; the feasibility and cost of security measures and controls; and the impact of security measures and controls on operations and others. 20 Table of Contents The Company’s information security program currently includes the following security measures and controls, which are deployed as the Company deems applicable: • endpoint threat detection and response; • identity and access management; • privileged access management; • logging and monitoring involving the use of security information and event management; • multi-factor authentication; • firewalls and intrusion detection and prevention; • security testing; • web application firewalls and bot security tools; and • vulnerability and patch management. All of the Company’s office-based associates and certain distribution and fulfillment center associates undergo mandatory security awareness training at the time of hiring and on an annual basis thereafter. The Company’s store-based associates receive ad hoc awareness communications and are provided with cybersecurity awareness materials as part of the store operating manual. The Company uses third-party security firms in different capacities to provide or operate certain security measures and controls and technology systems, including cloud-based platforms and services. For example, third parties are used to conduct assessments, such as vulnerability scans and penetration testing. The Company also uses a variety of processes designed to address cybersecurity threats and incidents related to the use of third-party technology and services, including pre-acquisition diligence, imposition of contractual obligations and performance monitoring. As part of the Company’s ERM program, the Company has developed business continuity and disaster recovery plans, which include measures designed to respond to potential disruptions to its information technology systems (or information technology systems of third parties on which it relies). The Company also maintains a written information security incident response plan and conducts tabletop exercises to enhance incident response preparedness. The Company is also a member of an industry cybersecurity intelligence and risk sharing organization. The Company (or third parties on which it relies) may not be able to fully, continuously and effectively implement security measures and controls as designed or intended. As described above, the Company utilizes a risk-based approach and judgment to determine the security measures and controls to implement, and it is possible that the Company may not implement appropriate security measures and controls if management does not recognize, or underestimates, a particular risk. In addition, security measures and controls, no matter how well designed or implemented, may only partially mitigate, but not fully eliminate, risks. Cybersecurity threats and incidents, even when detected or foreseeable, may not always be immediately understood or acted upon by the Company (or by third parties on which it relies). The Company, like many retailers, relies upon third-party service providers, such as payment processors, network providers and application providers, that have faced risks from threat actors and cybercriminal groups that seek to steal payment card data, consumer data, and other sensitive information; disrupt critical information technology systems; and/or demand ransom payments. Although the Company has implemented security measures and controls designed to address these risks, if these risks were to materialize, such as in the event of a cybersecurity incident causing the networks of a third-party payment processor to not be operational, the impact to the Company could be material. The Company has not identified risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, which have materially affected, or are reasonably likely to materially affect, the Company, including its business strategy, results of operations, or financial condition. However, the Company continues to face risks from cybersecurity threats and incidents that, if realized, may have such material effect. Despite its ongoing efforts, the Company cannot provide complete assurance that its information security program will be effective in detecting, preventing, or mitigating such cybersecurity risks. See also “We have undertaken a multi-year initiative to upgrade our digital and information technology systems and capabilities. We significantly rely on our, and our third-party service providers’, ability to successfully implement, upgrade and sustain information technology systems and to protect associated data and system availability” and “Any significant compromise or breach of our data security, including the security of customer, associate, third-party or Company information, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows” in Item 1A. Risk Factors of this Annual Report on Form 10-K for a discussion of cybersecurity risks that could have a material impact on the Company, which sections should be read in conjunction with this Item 1C. 21 Table of Contents Governance At the Board level, the Audit Committee assists the Board with overseeing the Company’s information security program. The Audit Committee, which is composed entirely of independent members of the Board, receives reports directly from the Company’s Chief Information Security Officer (“CISO”) at least three times per year. These reports address, among other things, cybersecurity policies and practices, program resources, third-party assessments, key risks, security measures and controls, and incident-response planning. The Company’s information security program is led by the CISO: a member of the management team with primary responsibility for the development, operation and maintenance of the program. The CISO holds a master of science degree in information assurance and has over 25 years of cybersecurity experience with Fortune 500 financial, defense, consulting and retail companies. The Company’s executive management team oversees enterprise risk management, including cybersecurity risk, and regularly reviews the Company’s ERM program and information security program. The ERM team oversees the identification, prioritization and mitigation of enterprise risks, including cybersecurity, privacy and AI risks. To support data stewardship and responsible technology use, the CISO, Chief Information Officer (“CIO”), and Chief Privacy Officer (“CPO”) co‑chair or participate in the Company’s Data Governance and Artificial Intelligence committees. These committees oversee and guide programs addressing data management, security, privacy and AI through unified frameworks that include monitoring, vendor management, assessment, testing, remediation and incident response. While the Data Governance and Artificial Intelligence committees address distinct subject matters, they are interrelated with the Company's information security program and inform each other on matters of shared concern. The executive management team regularly reviews matters addressed through these programs as part of the Company’s ERM oversight. Incident Response As described above, the Company maintains an information security incident response plan that includes processes and procedures for evaluating and escalating cybersecurity threats and incidents to, as determined to be appropriate, the Company’s executive management team and members of the Board. The initial impact level of each cybersecurity threat or incident is evaluated by a designated team of information security specialists using risk criteria that have been defined and approved by the Company’s executive management team and reviewed with the Audit Committee. If escalated, the threat or incident is evaluated by a cross-functional core and extended team, as applicable, of managers that includes the CISO, CIO and CPO, as well as identified associates from across the Company’s business and functions, as applicable. Cybersecurity threats and incidents are assigned incident impact levels based on the core team’s determination of potential impact to the Company. The core team employs defined risk criteria to classify incidents and escalate incidents accordingly. Based on the severity classification assigned by the core team, incidents may be escalated to, as applicable, representatives of the Company’s executive management team (which includes the Disclosure Committee), the Chairs of the Board and the Audit Committee, other members of the Audit Committee and/or the full Board. The incident response plan is tested regularly. During 2025, the core team conducted four tabletop exercises across different areas and levels of the Company to test protocols for communication, decision making, remediation, escalation and reporting. One tabletop exercise focused on the senior management team. The results of all 2025 exercises were shared with, and reviewed by, the Audit Committee. ITEM 2. PROPERTIES. Company-operated The following table provides the location, use and size of our Company-operated distribution, fulfillment, office and product development facilities as of January 31, 2026: Location Use Approximate Square Footage (in thousands) Columbus, Ohio area Office, distribution and fulfillment centers and shipping facilities 5,000 Other North America Office and product development/design 80 We own five office, distribution center and shipping facilities located in the Columbus, Ohio area comprising approximately 4 million square feet. In addition, we operate an approximately 1 million square foot leased direct channel fulfillment center located near Columbus, Ohio. We also lease various other office and product development/design locations in North America, primarily in New York. 22 Table of Contents As of January 31, 2026, we operated 1,814 and 113 retail stores located in leased facilities throughout the U.S. and Canada, respectively. A substantial portion of our U.S. store leases generally have an initial term of ten years, while our Canadian store leases generally have initial terms of five to ten years. A majority of our store leases expire at various dates between fiscal 2026 and fiscal 2036. Third-party Operated Fulfillment and Distribution Centers As of January 31, 2026, we leased and utilized four third-party operated direct channel fulfillment centers in North America, comprising approximately 2 million square feet. We also utilize six third-party operated regional distribution centers in North America, comprising approximately 1 million square feet, that enable us to position inventory geographically closer to our customers. International Partner-operated Stores As of January 31, 2026, our partners operated 573 retail stores in more than 45 international countries. ITEM 3. LEGAL PROCEEDINGS. We are a defendant in a variety of lawsuits arising in the ordinary course of business. Actions filed against the Company from time to time may include commercial, tort, intellectual property, tax, customer, employment, wage and hour, data privacy, securities, anti-corruption 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 results of operations, financial condition or cash flows. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 23 Table of Contents PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock is traded on the New York Stock Exchange under the symbol “BBWI.” As of January 31, 2026, the Company had approximately 25,000 stockholders of record. This number excludes persons whose stock is held in nominee or street name by brokers. Dividend Policy We paid a quarterly dividend of $0.20 per share during each quarter of 2025. Our Board 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, the macroeconomic environment 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. For additional discussion regarding our dividends, see “Liquidity and Capital Resources” included under Item 7. of this Annual Report on Form 10-K. Performance Graph The following graph shows the changes, over the past five-year period, in the value of $100 invested at the closing stock price on January 30, 2021, including the reinvestment of dividends, in our common stock, the Standard & Poor’s (“S&P”) 500 Composite Stock Price Index, the S&P 500 Consumer Discretionary Distribution & Retail Index, the S&P MidCap 400 Index and the S&P 400 Consumer Discretionary Sector Index. During 2025, we became a member of the S&P MidCap 400 Index. As a result, we have elected to replace the S&P 500 Index with the S&P MidCap 400 Index, and related Consumer Discretionary indices, in the graph below. In future years, we will no longer provide a comparison to the S&P 500 indices. The Company’s stock prices prior to August 3, 2021 have been adjusted to give effect to the Victoria’s Secret spin-off. 24 Table of Contents Common Stock Repurchases The following table provides our repurchases of our common stock during the fourth quarter of 2025: Fiscal 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 Dollar Value of Shares that May Yet be Purchased Under the Programs (c) (in thousands) (in thousands) November 2025 3,638 $ 15.74 3,622 $ 117,341 December 2025 — 20.24 — 117,341 January 2026 — 21.49 — 117,341 Total 3,638 3,622 ________________ (a) The total number of shares repurchased includes shares repurchased as part of publicly announced programs, with the remainder relating to shares in connection with tax payments due upon vesting of associate restricted share and performance share unit awards and the use of our stock to pay the exercise price on associate stock options. (b) The average price paid per share includes any broker commissions. (c) For additional share repurchase program information, see Note 13 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data. ITEM 6. [Reserved] ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as codified in the Accounting Standards Codification (“ASC”). The following information should be read in conjunction with our financial statements and the related notes included in Item 8. Financial Statements and Supplementary Data. Our operating results are generally impacted by economic changes and, therefore, we monitor the retail environment using, among other things, certain key industry performance indicators including competitor performance and traffic data. These indicators can provide insight into consumer spending patterns and shopping behavior in the current retail environment and assist us in assessing our performance as well as the potential impact of industry trends on our future operating results. Additionally, we evaluate a number of key performance indicators including net sales, gross profit, operating income and other performance metrics, such as sales per average selling square foot and sales per average store, in assessing our performance. A discussion regarding our financial condition and results of operations for 2025 compared to 2024 is presented below. A discussion regarding our financial condition and results of operations for 2024 compared to 2023 can be found under Item 7. of our Annual Report on Form 10-K for the year ended February 1, 2025, filed with the SEC on March 14, 2025. Executive Overview Our 2025 performance did not meet our expectations. While we believe macroeconomic pressures impacted consumer sentiment throughout the year, we also underperformed in our sector. Accordingly, we took actions to help return the Company to sustainable growth. During the second quarter, we welcomed our new Chief Executive Officer, Daniel Heaf, to the business and, in the third quarter, launched the Consumer First Formula, our multi-year, comprehensive transformation plan to revitalize Bath & Body Works across brand, product and marketplace. The Consumer First Formula invests behind our four largest revenue driving opportunities to try to attract new, younger consumers to the brand, which we expect will help us unlock our next era of sustainable growth: • Creating Disruptive and Innovative Products : We intend to reestablish best in class product leadership in our hero categories. • Reigniting the Brand : We expect to invest in marketing to build a brand with cultural currency, showing up in culture through creators, in store visuals and bigger storytelling, creating meaningful emotional connections with consumers. • Winning in the Marketplace : We plan to expand access and ease of discovery through an enhanced digital experience, third party channels and refreshed in-store merchandising to acquire new and lapsed consumers. 25 Table of Contents • Operating with Speed and Efficiency : We are working to transform Bath & Body Works to be a faster and more efficient organization by empowering teams, working with focus and agility to prioritize what customers care about most. We have plans to deliver $250 million in cost savings over the next two years, with $175 million expected in fiscal 2026. We expect that these savings will be used to invest in revenue-generating initiatives across product and brand. Fiscal 2025 Overview For 2025, total Net Sales were $7,291 million, which decreased $16 million, or 0.2%, compared to 2024. Total North American Net Sales decreased $31 million compared to 2024, due to a decline in transactions mostly offset by increased order size, and International Net Sales increased $15 million. For 2025, Operating Income was $1,126 million, which decreased $140 million, or 11%, compared to 2024, and our Operating Income rate (expressed as a percentage of Net Sales) decreased to 15.4% from 17.3%. The Operating Income results were impacted by an increase in General, Administrative and Store Operating Expenses and a decline in our Gross Profit rate. For additional information related to our 2025 financial performance, see “Results of Operations – 2025 Compared to 2024.” Fiscal 2026 Outlook We expect 2026 to be a year of disciplined investment behind the Consumer First Formula, balancing rigorous cost control with targeted reinvestment intended to position the business for sustainable long-term growth. We are confident in our strategy and our ability to reposition the Company as a premier, global brand. While we anticipate a macroeconomic environment similar to 2025, with continued value-oriented consumer behavior, we are focused on translating our strategy into action as we realign the business to evolving consumer expectations. Adjusted Financial Information In addition to our results provided in accordance with GAAP above and throughout this Annual Report on Form 10-K, provided below are non-GAAP measures that present Operating Income, Net Income and Net Income per Diluted Share in 2025 and 2024 on an adjusted basis, which removes certain items. We believe that these items are not indicative of our ongoing operations due to their size and nature. We use adjusted financial information as key performance measures for the purpose of evaluating performance internally. These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP. Instead, we believe that the presentation of adjusted financial information provides additional information to investors to facilitate the comparison of past and present operations. Further, our definitions of adjusted financial information may differ from similarly titled measures used by other companies. 26 Table of Contents The table below reconciles our GAAP financial measures to our non-GAAP financial measures: (in millions, except per share amounts) 2025 2024 Reconciliation of Reported Operating Income to Adjusted Operating Income Reported Operating Income $ 1,126 $ 1,266 Business Transformation Activities (a) 15 — Leadership Transition Costs (b) 15 — Adjusted Operating Income $ 1,156 $ 1,266 Reconciliation of Reported Net Income to Adjusted Net Income Reported Net Income $ 649 $ 798 Business Transformation Activities (a) 15 — Leadership Transition Costs (b) 15 — Gain on Sale of Non-core Asset (c) (8) — Gain on Sales of Easton Investments (d) — (39) Tax Effect of Adjustments (2) 14 Tax Benefit from Valuation Allowance Release (e) — (44) Adjusted Net Income $ 669 $ 729 Reconciliation of Reported Net Income per Diluted Share to Adjusted Net Income per Diluted Share Reported Net Income Per Diluted Share $ 3.11 $ 3.61 Business Transformation Activities (a) 0.07 — Leadership Transition Costs (b) 0.07 — Gain on Sale of Non-core Asset (c) (0.04) — Gain on Sales of Easton Investments (d) — (0.18) Tax Effect of Adjustments (0.01) 0.06 Tax Benefit from Valuation Allowance Release (e) — (0.20) Adjusted Net Income Per Diluted Share $ 3.21 $ 3.29 ________________ (a) In 2025, we recognized aggregate pre-tax costs of $15 million (after-tax costs of $12 million), primarily included in General, Administrative and Store Operating Expenses, resulting from business transformation activities in connection with the Consumer First Formula. These costs are primarily related to severance benefits. (b) In 2025, we recognized aggregate pre-tax costs of $15 million (after-tax costs of $14 million), included in General, Administrative and Store Operating Expenses, due to the transition of certain members of the leadership team, primarily related to severance benefits. (c) In 2025, we recognized a pre-tax gain of $8 million (after-tax gain of $6 million), included in Other Income, Net, related to the sale of a non-core asset. (d) In 2024, we sold our investments in Easton Town Center and Easton Gateway, resulting in an aggregate pre-tax gain of $39 million (after-tax gain of $25 million), included in Other Income, Net. For additional information, see Note 1 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data. (e) In 2024, we recognized a $44 million tax benefit related to the release of a valuation allowance on a deferred tax asset. Company-operated Store Data The following table compares Company-operated store data for 2025 and 2024: 2025 2024 % Change Sales per Average Selling Square Foot (a) $ 1,026 $ 1,042 (2 %) Sales per Average Store (in thousands) (a) $ 2,921 $ 2,955 (1 %) Average Store Size (selling square feet) 2,851 2,845 — % Total Selling Square Feet (in thousands) 5,493 5,391 2 % 27 Table of Contents ________________ (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 selling square footage and store count, respectively. The following table represents Company-operated store data for 2025: Stores Stores February 1, 2025 Opened Closed January 31, 2026 United States 1,782 94 (62) 1,814 Canada 113 — — 113 Total 1,895 94 (62) 1,927 Partner-operated Store Data The following table represents partner-operated store data for 2025: Stores Stores February 1, 2025 Opened Closed January 31, 2026 International 494 70 (28) 536 International - Travel Retail 35 4 (2) 37 Total International (a) 529 74 (30) 573 ________________ (a) Includes store locations only and does not include kiosks, shop-in-shops, gondola or beauty counter locations. Results of Operations—2025 Compared to 2024 Net Sales The following table provides Net Sales for 2025 in comparison to 2024: 2025 2024 % Change (in millions) Stores - U.S. and Canada (a) $ 5,582 $ 5,534 0.9 % Direct - U.S. and Canada 1,395 1,474 (5.4 %) International (b) 314 299 4.9 % Total Net Sales $ 7,291 $ 7,307 (0.2 %) _______________ (a) Results include fulfilled buy online, pickup in store (“BOPIS”) orders. (b) Results include royalties associated with franchised stores and wholesale sales. Total Net Sales were $7,291 million and decreased $16 million, or 0.2%, compared to 2024. Direct Net Sales decreased $79 million, or 5.4%, due to a decline in fulfilled orders, which was primarily due to our customers continuing to select our BOPIS option (which is recognized as store Net Sales), partially offset by an increased average order size. Stores Net Sales increased $48 million, or 0.9%, primarily driven by an increase in transactions due to higher BOPIS fulfilled orders and new store growth. International Net Sales increased $15 million, or 4.9%, compared to 2024. Gross Profit Our Gross Profit was $3,189 million, which decreased $45 million compared to 2024, and our Gross Profit rate (expressed as a percentage of Net Sales) was 43.7%, which decreased from 44.3% in 2024. Gross Profit dollars decreased due to the decline in the merchandise margin rate, primarily driven by tariffs, partially offset by lower Buying and Occupancy Expenses, which benefited from exiting a third-party fulfillment center in the first quarter of 2025. The Gross Profit rate decreased due to the lower merchandise margin rate, primarily driven by tariffs, partially offset by the decline in Buying and Occupancy Expenses. 28 Table of Contents General, Administrative and Store Operating Expenses The following table provides details for our General, Administrative and Store Operating Expenses for 2025 compared to 2024: 2025 2024 Change (in millions) % of Net Sales (in millions) % of Net Sales (in millions) % of Net Sales Selling Expenses $ 1,238 17.0 % $ 1,191 16.3 % $ 47 0.7 % Marketing Expenses 255 3.5 % 242 3.3 % 13 0.2 % General and Administrative Expenses 570 7.8 % 535 7.3 % 35 0.5 % Total $ 2,063 28.3 % $ 1,968 26.9 % $ 95 1.4 % Our total General, Administrative and Store Operating Expenses were $2,063 million, which increased $95 million compared to 2024, and the rate (expressed as a percentage of Net Sales) was 28.3%, which increased from 26.9% in 2024. Selling Expenses increased primarily due to higher payroll related costs, mainly driven by investments in wages and new stores, and higher healthcare costs. General and Administrative Expenses increased primarily due to $15 million of costs related to the transition of certain members of the leadership team and $14 million of business transformation activities. The General, Administrative and Store Operating Expense rate increased primarily due to higher healthcare costs, leadership transition costs, business transformation activities and the increase in payroll related costs, as well as incremental investments in marketing. Other Income and Expenses Interest Expense The following table provides the average daily borrowings and average borrowing rates for 2025 and 2024: 2025 2024 Average daily borrowings (in millions) $ 3,916 $ 4,273 Average borrowing rate 7.1 % 7.3 % Our Interest Expense was $276 million, which decreased $36 million compared to 2024. The decrease was due to lower average daily borrowings and borrowing rate, which were driven by the early extinguishment of outstanding notes in 2024. Other Income, Net Our Other Income, Net was $32 million compared to $74 million for 2024. Included in 2025 is an $8 million pre-tax gain on the sale of a non-core asset. Included in 2024 is an aggregate $39 million pre-tax gain on sales of certain Easton investments and the recognition of a $10 million pre-tax loss on extinguishment of outstanding notes. The remaining decrease is primarily due to lower interest income on invested cash in 2025. Provision for Income Taxes Our effective tax rate was 26.4% compared to 22.4% in 2024. The 2025 rate was higher than our combined estimated federal and state statutory rate primarily due to accrued interest expense related to unrecognized tax benefits. The 2024 rate was lower than our combined estimated federal and state statutory rate primarily due to the sales of Easton investments, which resulted in the release of a valuation allowance on a deferred tax asset. FINANCIAL CONDITION A discussion regarding our financial condition for 2024 compared to 2023 can be found under Item 7. of our Annual Report on Form 10-K for the year ended February 1, 2025, filed with the SEC on March 14, 2025. 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, future common stock and debt repurchases, and capital expenditures. Our cash provided from operations is impacted by our net income and working capital changes. Our net income is impacted by, among other things, sales volume, seasonal sales patterns, success of new product introductions and product and market expansions, profit margins, income taxes and inflationary pressures. Our sales are typically highest during the fourth quarter of the fiscal year due to seasonal and holiday-related sales patterns. Generally, our need for working capital peaks during the summer and fall months as inventory builds in anticipation of the holiday period. Our cash and cash equivalents held by foreign subsidiaries were $210 million as of January 31, 2026. 29 Table of Contents During 2025, we did not repurchase any of our outstanding senior notes. However, subsequent to January 31, 2026, we issued a notice of redemption for any and all outstanding of our 6.694% Senior Notes due January 2027. We expect the aggregate redemption price to be approximately $289 million, to be paid in the first quarter of fiscal 2026. We repurchased 15.1 million shares of our common stock for $400 million. We may, from time to time, repurchase, or otherwise retire, additional debt or shares of our common stock, as applicable. We believe that our current cash position, our cash flows generated from operations and our borrowing capacity under our ABL Facility will be sufficient to meet our liquidity needs, including capital expenditure requirements, for at least the next twelve months. Debt Leverage Ratio Our debt leverage ratio is defined as adjusted debt, which includes our short-term and long-term debt as well as total operating lease liabilities, divided by earnings before interest, taxes, depreciation, amortization and rent (“EBITDAR”). EBITDAR is calculated as Total Company Adjusted Operating Income, or Operating Income in periods where there are no adjustments, which excludes interest and taxes, before depreciation, amortization and lease costs. Our debt leverage ratio is a non-GAAP financial measure which we believe is useful to analyze our capital structure. Our debt leverage ratio calculation may not be comparable to similarly-titled measures reported by other companies. Our debt leverage ratio should be evaluated in addition to, and not considered a substitute for, other GAAP financial measures. The following table provides our debt leverage ratio as of, and for the years ended, January 31, 2026 and February 1, 2025: January 31, 2026 February 1, 2025 (dollars in millions) Total Debt $ 3,892 $ 3,884 Total Operating Lease Liabilities 1,062 1,075 Adjusted Debt $ 4,954 $ 4,959 Adjusted Operating Income $ 1,156 $ 1,266 Depreciation and Amortization 254 282 Total Lease Costs 437 418 EBITDAR $ 1,847 $ 1,966 Debt Leverage Ratio 2.7 2.5 Free Cash Flow Our free cash flow is defined as net cash provided by operating activities less capital expenditures. Free cash flow is a non-GAAP financial measure which we believe is useful to analyze our ability to generate cash. Our free cash flow calculation may not be comparable to similarly-titled measures reported by other companies. Our free cash flow calculation should be evaluated in addition to, and not considered a substitute for, other GAAP financial measures. The following table provides our free cash flows for 2025 and 2024: 2025 2024 (in millions) Net Cash Provided by Operating Activities (a) $ 1,102 $ 886 Capital Expenditures (237) (226) Free Cash Flow $ 865 $ 660 ________________ (a) Fiscal 2024 includes tax payments of $65 million related to the sales of our investments in Easton Town Center and Easton Gateway. 30 Table of Contents Cash Flows The following table provides a summary of our Consolidated Statements of Cash Flows for 2025 and 2024: 2025 2024 (in millions) Cash and Cash Equivalents, Beginning of Year $ 674 $ 1,084 Net Cash Flows Provided by Operating Activities 1,102 886 Net Cash Flows Used for Investing Activities (227) (162) Net Cash Flows Used for Financing Activities (599) (1,132) Effects of Exchange Rate Changes on Cash and Cash Equivalents 3 (2) Net Increase (Decrease) in Cash and Cash Equivalents 279 (410) Cash and Cash Equivalents, End of Year $ 953 $ 674 Operating Activities Net cash provided by operating activities in 2025 was $1,102 million, including net income of $649 million. Net income included depreciation of $254 million, deferred income tax expense of $63 million and share-based compensation expense of $31 million. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. The most significant items in working capital were the cash flow benefit in Accounts Payable, Accrued Expenses and Other of $111 million due to our efforts to improve working capital and the $57 million cash flow detriment associated with Income Taxes Payable. Net cash provided by operating activities in 2024 was $866 million, including net income of $798 million. Net income included depreciation of $282 million, a deferred income tax benefit of $112 million, share-based compensation expense of $40 million and an aggregate pre-tax gain on sales of certain Easton investments of $39 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 $50 million decrease associated with Accounts Payable, Accrued Expenses and Other, the $26 million decrease associated with Inventory and the $23 million decrease associated with Income Taxes Payable. Investing Activities Net cash used for investing activities in 2025 was $227 million, primarily related to capital expenditures of $237 million, partially offset by aggregate cash proceeds of $9 million related to the sale of a Non-core asset. The capital expenditures included approximately $140 million related to new off-mall stores and remodels of existing stores, approximately $45 million for various IT projects, primarily to support the growth and profitability of our business, and approximately $25 million related to distribution and logistics capabilities. Net cash used for investing activities in 2024 was $162 million, primarily related to capital expenditures of $226 million, partially offset by aggregate cash proceeds, net of fees, of $40 million related to the sales of certain Easton investments. The capital expenditures included approximately $140 million related to new off-mall stores and remodels of existing stores, approximately $45 million for various IT projects, primarily to support the growth and profitability of our business, and approximately $25 million related to distribution and logistics capabilities. In 2026, we expect to invest approximately $270 million in capital expenditures, focused on high return real estate, Consumer First Formula investments, largely related to product assortment, and logistics and fulfillment upgrades. Financing Activities Net cash used for financing activities in 2025 was $599 million, primarily consisting of $401 million for share repurchases, dividend payments of $0.80 per share, or $167 million and payments on finance leases of $14 million. Net cash used for financing activities in 2024 was $1,132 million, primarily consisting of $522 million for debt repurchases, $401 million for share repurchases, dividend payments of $0.80 per share, or $177 million, $17 million for payments on finance leases and tax payments of $16 million related to share-based awards. Common Stock and Debt Repurchases Our Board will determine share and debt 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 and debt 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. 31 Table of Contents Common Stock Repurchases Under the authority of our Board, we repurchased shares of our common stock under the following repurchase programs during 2025 and 2024: Repurchase Program Amount Authorized Shares Repurchased Amount Repurchased Average Stock Price 2025 2024 2025 2024 2025 2024 (in millions) (in thousands) (in millions) February 2022 $ 1,500 NA 842 NA $ 39 NA $ 46.08 January 2024 500 460 9,583 $ 17 361 $ 37.67 37.70 January 2025 500 14,612 NA 383 NA 26.19 NA Total 15,072 10,425 $ 400 $ 400 There were share repurchases of $1 million reflected in Accounts Payable on the Consolidated Balance Sheet as of February 1, 2025. On February 27, 2025, we cancelled the remaining $121 million authorization available under the January 2024 Program and began repurchasing shares under the January 2025 Program. The January 2025 Program had $117 million and $500 million of remaining authority as of January 31, 2026 and February 1, 2025, respectively. There were no share repurchases reflected in Accounts Payable on the Consolidated Balance Sheet as of January 31, 2026. Dividend Policy and Procedures Our Board 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. We paid the following dividends during 2025 and 2024: Ordinary Dividends Total Paid (per share) (in millions) 2025 First Quarter $ 0.20 $ 43 Second Quarter 0.20 42 Third Quarter 0.20 41 Fourth Quarter 0.20 41 2025 Total $ 0.80 $ 167 2024 First Quarter $ 0.20 $ 45 Second Quarter 0.20 45 Third Quarter 0.20 44 Fourth Quarter 0.20 43 2024 Total $ 0.80 $ 177 On March 6, 2026, we paid our first quarter 2026 ordinary dividend of $0.20 per share to stockholders of record at the close of business on February 20, 2026. 32 Table of Contents Long-term Debt and Borrowing Facility The following table provides our outstanding debt balances, net of unamortized debt issuance costs and discounts, as of January 31, 2026 and February 1, 2025: January 31, 2026 February 1, 2025 (in millions) Senior Debt with Subsidiary Guarantee $284 million, 6.694% Fixed Interest Rate Notes due January 2027 (“2027 Notes”) $ 280 $ 277 $444 million, 5.250% Fixed Interest Rate Notes due February 2028 (“2028 Notes”) 444 443 $482 million, 7.500% Fixed Interest Rate Notes due June 2029 (“2029 Notes”) 477 476 $844 million, 6.625% Fixed Interest Rate Notes due October 2030 (“2030 Notes”) 839 838 $802 million, 6.875% Fixed Interest Rate Notes due November 2035 (“2035 Notes”) 797 796 $575 million, 6.750% Fixed Interest Rate Notes due July 2036 (“2036 Notes”) 571 571 Total Senior Debt with Subsidiary Guarantee 3,408 3,401 Senior Debt $284 million, 6.950% Fixed Interest Rate Debentures due March 2033 (“2033 Notes”) 284 283 $201 million, 7.600% Fixed Interest Rate Notes due July 2037 (“2037 Notes”) 200 200 Total Senior Debt 484 483 Total Debt 3,892 3,884 Current Debt (280) — Total Long-term Debt, Net of Current Portion $ 3,612 $ 3,884 Repurchases of Notes The losses and gains on the extinguishment of debt, which include the write-offs of unamortized issuance costs and discounts, are included in Other Income, Net in the Consolidated Statements of Income. There were no repurchases of outstanding senior notes in 2025. Subsequent to January 31, 2026, we issued a notice of redemption for any and all outstanding of our 6.694% Senior Notes due January 2027. We expect the aggregate redemption price to be approximately $289 million, and to recognize a pre-tax loss of approximately $9 million in the first quarter of fiscal 2026 as a result of this redemption. 2024 Repurchases During 2024, we repurchased in the open market and extinguished $200 million principal amount of our outstanding senior notes. The aggregate repurchase price for these notes was $202 million, resulting in an aggregate pre-tax loss of $3 million, including the write-off of unamortized issuance costs and discounts. During 2024, we also completed a make-whole call to repurchase the remaining $314 million principal amount of our outstanding 2025 Notes. The repurchase price for these notes was $320 million, resulting in a pre-tax loss of $7 million, including the write-off of unamortized issuance costs and discounts. The following table provides details of the outstanding principal amounts of senior notes repurchased and extinguished during 2024: 2024 (in millions) 2025 Notes $ 314 2027 Notes 14 2028 Notes 17 2029 Notes 17 2030 Notes 94 2033 Notes 10 2035 Notes 10 2036 Notes 38 Total $ 514 33 Table of Contents Asset-backed Revolving Credit Facility We and certain of our 100% owned subsidiaries guarantee and pledge collateral to secure our ABL Facility. The ABL Facility, which allows borrowings and letters of credit in U.S. and Canadian dollars, has aggregate commitments of $750 million. In May 2025, we entered into an amendment and restatement (“Amendment”) of the ABL Facility. The Amendment removed the interest rate credit spread adjustment of 0.10%, extended the expiration date from August 2026 to May 2030 and included certain other technical amendments. Availability under the ABL Facility is 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 exceeds the lesser of (i) the borrowing base and (ii) the aggregate commitment, we are required to repay the outstanding amounts under the ABL Facility to the extent of such excess. As of January 31, 2026, our borrowing base was $482 million and we had no borrowings outstanding under the ABL Facility. The ABL Facility supports our letter of credit program. We had $9 million of outstanding letters of credit as of January 31, 2026 that reduced our availability under the ABL Facility. As of January 31, 2026, our availability under the ABL Facility was $473 million. As of January 31, 2026, 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 1.25% per annum. In addition, the interest rate on outstanding U.S. dollar borrowings was the Term Secured Overnight Financing Rate plus 1.25% per annum. The interest rate on outstanding Canadian dollar-denominated borrowings was the Canadian Overnight Repo Rate Average plus 1.25% per annum. The ABL Facility requires 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 (i) $70 million or (ii) 10% of the maximum borrowing amount. As of January 31, 2026, we were not required to maintain this ratio. Credit Ratings The following table provides our credit ratings as of January 31, 2026: Moody’s S&P Corporate Ba2 BB+ Senior Unsecured Debt with Subsidiary Guarantee Ba2 BB+ Senior Unsecured Debt B1 BB- Outlook Stable Stable Guarantor Summarized Financial Information Certain of our subsidiaries, which are listed on Exhibit 22 to this Annual Report on Form 10-K, have guaranteed our obligations under the 2027 Notes, 2028 Notes, 2029 Notes, 2030 Notes, 2035 Notes and 2036 Notes (collectively, the “Notes”). The Notes have been issued by Bath & Body Works, Inc. (the “Parent Company”). The Notes are its senior unsecured obligations and rank equally in right of payment with all of our existing and future senior unsecured obligations, are 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 Notes. The Notes are fully and unconditionally guaranteed on a joint and several basis by certain of our wholly-owned subsidiaries, including certain subsidiaries that also guarantee our obligations under our ABL Facility (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. 34 Table of Contents JANUARY 31, 2026 SUMMARIZED BALANCE SHEET (in millions) ASSETS Current Assets (a) $ 2,249 Noncurrent Assets 2,403 LIABILITIES Current Liabilities (b) $ 2,793 Noncurrent Liabilities 4,626 _______________ (a) Includes amounts due from non-Guarantor subsidiaries of $596 million as of January 31, 2026. (b) Includes amounts due to non-Guarantor subsidiaries of $1,501 million as of January 31, 2026. 2025 SUMMARIZED STATEMENT OF INCOME (in millions) Net Sales (a) $ 6,911 Gross Profit 2,969 Operating Income 1,040 Income Before Income Taxes 761 Net Income (b) 583 _______________ (a) Includes Net Sales of $181 million to non-Guarantor subsidiaries. (b) Includes a Net Loss of $23 million related to transactions with non-Guarantor subsidiaries. Contingent Liabilities and Contractual Obligations The following table provides our contractual obligations, aggregated by type, including the maturity profile as of January 31, 2026: Payments Due by Period Total Less Than 1 Year 1-3 Years 4-5 Years More Than 5 Years Other (in millions) Outstanding Debt (a) $ 5,681 $ 547 $ 921 $ 1,714 $ 2,499 $ — Future Lease Obligations (b) 1,386 278 458 305 345 — Purchase Obligations (c) 650 518 101 30 1 — Other Liabilities (d) 159 127 — — — 32 Total $ 7,876 $ 1,470 $ 1,480 $ 2,049 $ 2,845 $ 32 ________________ (a) Outstanding Debt obligations relate to our principal and interest payments for outstanding notes and debentures. Interest payments have been estimated based on the coupon rate for fixed rate obligations for the contractual term of the obligation. Interest obligations exclude amounts which have been accrued through January 31, 2026. For additional information, see Note 10 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data. (b) Future lease obligations primarily represent minimum payments due under operating lease agreements. For additional information, see Note 6 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data. (c) Purchase obligations primarily include purchase orders for merchandise inventory and other agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transactions. (d) Other liabilities include future estimated payments associated with unrecognized tax benefits. The “Less Than 1 Year” category includes $127 million of these tax items because it is reasonably possible that the amounts could change in 35 Table of Contents