Bath & Body Works, Inc.

Good morning. My name is Madison, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bath and Body Works second quarter 2022 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. Thank you. Wendy, you may begin.

Good morning. Welcome to the Bath and Body Works second quarter earnings conference call for the period ended July 30th, 2022. As a matter of formality, any forward-looking statements we may make today are subject to our Faith Harbor statement found in our SEC filings and in our press releases. Joining me on the call today are Executive Chair of the Board and Interim CEO, Sarah Nash, and Brand President, Julie Rosen. All results we discussed today represent the continuing operations of the Bath and Body Works business. The results of the Victoria's Secret business have been classified as discontinued operations. I will now turn the call over to Sarah.

Thanks, Wendy, and thank you, everyone, for joining the call today. I am delighted to be here speaking with you in my role as the company's interim CEO. The more time I spend in the day-to-day operations of the business, the more I appreciate the talented and experienced management team who lead this business. I also have been so impressed by the associates in our business and our customer-first focus. The time spent with our team has only reinforced for me how the company's innovation capabilities and predominantly North American supply chain provide us speed and agility that set us apart. And I would also like to appreciate all our vendor partners who support us in bringing our products to our customers. First, let's start with our second quarter results. We are very pleased to share with you that the results for the second quarter exceeded our most recent expectations. This was driven by improvements in both sales and expenses in the second half of July as we closed out the quarter, which enabled us to report earnings of 52 cents per share. During the month of June and during our semiannual sale, we saw deceleration in traffic trends as compared to our first quarter. Although our customers love our sale, they love our newness more. So as we entered July, we listened to our customers and took action to deliver the newness that they were looking for. Fans were thrilled when we launched our coveted Halloween collection early. Accessories are a large part of this collection, and customers are loving how they pair with our spooky scents for ghoulish fun. Our nimble... Vertical supply chain enabled us to quickly react to customer wants. We also launched our new poppy floor set in July, which included our notable fall scents. Poppy was the most successful ever July single launch fragrance across 22 forms. Now for an update on loyalty. We are truly excited that loyalty has finally arrived for Bath and Body Works. This week, we successfully launched the program to our associates with significant enthusiasm. And we can't wait to launch across the country next week on August 22nd and to invite our base of approximately 60 million customers to participate. Our store associates are excited and ready to go. We have numerous incentives and fund programs in place to encourage the buzz and enrollment, and they are dressing up for the occasion. In our test market, we saw that our loyalty customers have higher spend and retention rates than our average customer. We look forward to enrolling a significant number of our customers in the first year, as well as attracting new customers. capitalizing on enthusiasm for the brand and helping drive the growth of our customer base. Now, a little bit about our positioning of Bath and Body Works for the future and some changes in our organizational structure. As we look to the back half of the year, we are investing in our customer experience, looking to chase winners and taking action to better position the business to drive future growth and improve profitability. We are proactively working to combat the inflationary pressures by challenging ourselves on expense management and working within our supply chain to decrease costs where possible, all without compromising quality and our focus on the customer. something we will never do. As part of our effort to more strongly position the business, we reviewed our operating structure and saw areas where we could streamline and simplify, along with enhancing our omnichannel approach. Julie Rosen now has responsibility for the entire customer experience, including design, merchandising, marketing, planning, and the channels. We are committed to becoming a truly omni and customer-focused company. As part of these efforts, we are eliminating 130 roles from the organization. Some of those are open headcount, which we will not fill, and some will be a reduction in force, primarily of leadership positions. Chris Kramer has decided to step down from his role as Chief Operating Officer to pursue other opportunities. We wish him all the best in his next chapter. We do not plan to fill the Chief Operating Officer role, and Chris's responsibilities have been absorbed by Julie Rosen, Wendy Arlen, and Tom Mazurek. With these changes, we are confident that the organization will be more effective and efficient going forward in addition to delivering a true Omni experience for our customers. By shifting areas of responsibility and changing how our teams work together across the company, we will be operating like the truly global Omni brand that we are. Taken together, we expect these organizational changes and additional cost control and margin improvement actions will generate savings of approximately $30 million in the second half of 2022. We will be taking meaningful actions to address the merchandise margin, and we are focused on pricing, promotions, and assortment. We are also focused on strong expense disciplines as well as providing customers the best possible Omni experience. Everyone, including those departing the business, has worked so very hard to position Bath & Body Works for great things in the future. I am incredibly grateful to everyone. Over time, I see exceptional opportunities to capitalize on Bath & Body Works' existing strengths including our agility, our speed, our innovation, and our customers' love of our brand. We are excited to continue to extend the brand's global potential as we make the world a brighter and happier place through the power of fragrance. With that, I turn it back to Wendy.