Bath & Body Works, Inc.

Good morning. My name is Julie and I will be your conference operator today. At this time, I would like to welcome everyone to the Bath and Body Works third quarter 2021 earnings conference call. Please be advised that today's conference is being recorded. During the question and answer portion, you may ask a question from the phone by pressing star 1. I will now turn the call over to Ms. Wendy Arlen, Chief Financial Officer at Bath and Body Works. Wendy, you may begin.

Good morning. Welcome to the Bath and Body Works third quarter earnings conference call for the period ending October 31st, 2021. As a matter of formality, I need to remind you that any forward-looking statements we may make today are subject to our safe harbor statement found in our SEC filings and in our press releases. Joining me on the call today are CEO Andrew Meslow and Senior Vice President of Investor Relations, Amy Preston. All results we discuss on the call today are adjusted results and exclude the third quarter loss on extinguishment of debt in both years as described in our press release. All results we discuss today represent the continuing operations of the Bath and Body Works business as the Victoria's Secret business has been classified as discontinued operations due to its spinoff on August 2, 2021. Thanks, and now I'll turn the call over to Andrew.

Thanks, Wendy, and good morning, everyone. Turning to our third quarter performance, we delivered strong results, and we could not have done so without the continued hard work and commitment of our associates and partners in stores, distribution and fulfillment centers, call centers, at our vendors, and our offices. We'd like to express our deep appreciation for their ongoing dedication and efforts. We reported adjusted third quarter earnings from continuing operations of $0.92 per share compared to $0.83 per share last year. This result significantly exceeded our third quarter guidance for earnings per share between $0.55 and $0.60. The upside versus our guidance was driven by better than forecasted sales and a higher merchandise margin rate. We continued our strong momentum in the third quarter. Net sales were 1.681 billion, a decline of just 1% versus last year's exceptionally strong results, and a 53% increase compared to 2019, which was consistent with the two-year growth we delivered in the first half of the year. Performance was strong across all months of the quarter, as we saw a good customer response to our fall seasonal and Halloween merchandise. We also launched two new fragrances in the third quarter, Fairytale and Open Sky, both of which exceeded our expectations. We are satisfied with our inventory position as we head into holiday. While we are better positioned than most retailers due to our primarily domestic supply chain, we are not immune to challenges. We have proactively managed production and promotions throughout the third quarter and did not experience significant out-of-stocks, and we do expect our assortments to be full and abundant for holiday. We are partnering closely with our vendors to support production needs in order to continue to meet customer demand. In terms of our product offering and marketing stories, we invite you to watch a video showcasing our holiday assortment, which we posted to our website this morning. Inflationary pressures in raw materials, wages, supply chain, and transportation costs negatively impacted our third quarter results and will put even more pressure on our fourth quarter as we described in the commentary which we released yesterday evening. We will continue to proactively manage pricing and promotion with the goal of offsetting as much of this cost pressure as possible. We are forecasting fourth quarter sales and earnings per share growth over last year and significant growth versus 2019. Specifically, we expect fourth quarter earnings per share between $2.10 and $2.25 compared to earnings per share from continuing operations of $1.96 in 2020 and $1.41 in 2019. And we expect sales growth in the mid to high single digit percent range compared to last year. We are well positioned as we go into the important holiday season and fourth quarter. We have confidence in our merchandise assortments And although it is very early, customers are responding positively, and quarter-to-date sales are in line with our expectations. Risks related to COVID persist, and we will continue to operate both of our channels in a safe manner for our customers and our associates. With continued smart and disciplined management of the business, I believe we can deliver a strong holiday and fourth quarter. Thanks, and now I'll turn it over to Amy Preston.