Earnings call transcript Q4 2022

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Operator

Good morning. My name is Amanda, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Victoria's Secret & Co. Fourth Quarter 2022 Earnings Conference Call. Please be advised that today's conference is being recorded. in call. mode remain session the will today's of parties a until listen-only question-and-answer All

now to Financial would Kevin, Wynk, Relations I like Victoria's you Vice Mr. over at President Kevin may to begin. of & External Secret Reporting Investor turn and Co. the call

Kevin Wynk

Thank Good XX, January XXXX. welcome morning, to Co.'s Secret & ending you, quarter the earnings period Amanda. fourth conference and Victoria's call for

like are to we As to remind that releases. a I matter statements statements today of any SEC in Harbor may Safe would make our filings subject formality, our forward-looking in our you found and press

me Johnson. is today CEO, the TJ CFO, and Joining on Martin call Waters;

available certain our SEC questions. results our are are to adjusted and for we items minutes press exclude release call XX answer Certain impact the described today We and any in of up discuss today filings. to results on the

filings included posted our measures Reconciliations press release, of comparable most website. these GAAP SEC the and the other in section of our to the Investors measures and investor are non-GAAP our on presentation

Thanks. the to call turn And Martin. over now I'll

Martin Waters

morning, and everyone. good Kevin, Thanks,

growth Before appreciation we around work especially the doing the revolution for into and all dive we dedication brand want partners for plans. and strategic for and our the they're of as associates hard continued the share my forward world. quarter, commitment to to all I first right I'm team's deepest thankful the our of our push

the I'm welcome. this the welcome time to Welcome, and everyone Me by respective delighted connections and feels with aspire where course, family quarter. to become And our Adore delighted I'm Secret we making to of for associates valued. customers Victoria first deepening our we're a as seen

Cloud, first innovation with marketing our our this of positioning a minutes our brands. on on point ever. long independent a the that actions and we XXXX, year our in the name term. as and a few wanted over I inclusive key filled support past To bras for our full as strategy an customers And Love we've reflecting for and in to many It's spend most campaign year a been of both back debuted proof firsts and year we story look company, best taken public few, our

first and for first Secret celebrates brand our Cabello. inaugural a global that personal our campaign shared five Victoria's campaign, our diversity. Undefinable, in featuring We individual. We years to that Camilla center We fragrance -- bilingual Beauty one-of-a-kind pear, pillar fine each launched is and brand individuality introduced

now extension to Secret's and edited Amazon digital and to and and a Victoria's new our make to to technology the business. experience grow digital meaningful customer on improvements We distribution journey. channel improve an offer our deployed assortment bra-fit extended begun PINK natural We to have continue our

and future of publishing released our materiality ever XX store the our fleet to expanded the first report forward We next month. stores the spring, summary ESG first ESG our we fall, ESG worldwide, report we full to look and report our in in

growth. future we our and ourselves acquisitions year, partnerships past developed to made also and organized This fuel

leadership we we everything digitally forefront and the our inquired enhance further our do. strengthen brand to intimate to the of technology market in Importantly, native at put Me Adore ability intimates

swim invested India Miracle and a businesses, in accelerated entered Regina and the as run China and including position women we in markets the inclusive in brand with with our stake to Bikini us Frankie's reclaim agreement we new in our joint Internationally, growth Elomi. enhance like partnership minority We and our lingerie venture leadership owned Israel help completed business.

And Officer, PINK our on as to collaborative into to stronger brands Customer us the leadership a yield organization capitalize Victoria's of of We efficiencies named that Chief uniting announced a the around single centered leadership transformational to new built customer to Chief Chain our focused new Officer, next Chief the welcomed corporate Officer on us expertise growth. and and a structure focus journey. steer and part giving also a Supply structure, stage Growth we a Secret

we our pay A partners associates, past our we and XXXX, sizes, continued intersections more our include: identities. identities. races, to for commitment and women, brought those and examples certification all achieved in ambassadors few ethnicities of models Additionally, abilities our communities. ages of we diverse on genders, year, and third-party This equity

especially to leader our in work We're of of maintaining with status they our satisfaction Co. feel reporting VS & committed to proud at We're associate our proud pay a XX% as equity. associates metrics that

seven young members than customer XXXX. with our more X we and We welcomed undergarments and Director part and Independent for Secret new young eight partnership Board mirroring And VS first researchers adults with maintained Global women administered We and the grants Essentials launched by & of cancers. supply Victoria's Fund million Pelotonia we'll our as the base. of our women's to a are women, Co.

Collective there. the not in our certainly fiscal new that Already in with The we're collaboration Secret first a we Victoria's Collection, stopping system. Osaka. Naomi with first-ever bra pad features 'XX, loop collection Osaka recycled bra Naomi partner, forever x Victoria's Secret launched design And closed can a be the

is founder, Secret. Collection, Our of shopping by first-ever Victoria and beloved Frankie's available Bikini memories Secret Francesca's Secret exclusively now inspired Victoria's early Victoria's at Swim at

of program Victoria's of were regardless we which rollout by America's for program, PINK method. payment Greatest and customers of one Places the Newsweek earn Secret allow loyalty announced to our points recently named customer first And We Workplaces our to as is new Diversity. rewards

our October, number become our world's intimate apparel, to retailer fashion key of Investor busy. intent strengthening leading been the growth; three guided So, transforming the by our pillars: core; company. number we one, you of as we've Day in the at two, igniting foundation see, our announced number And three,

of leading We apparel. two five-year of we the the intimate retailer road believe we be a business, into fashion and clear are have in to turnaround our journey years a map world's

minutes. a And -- a into now I'll results few the for dive for few moments

environment we despite our navigating For remains macroeconomic customers, while the that a what for promotional fourth controlled could we challenging retail control highly a quarter, landscape.

quarter per guidance. consecutive or per earnings This operating delivered since income share results share we've above adjusted earnings operating our within guidance. adjusted income quarter sixth the recent that for diluted results adjusted adjusted and the the represents above separation most delivered and our We

of demonstrate we've of to continues created. environment market And year. financial importantly, we new platform exited and double Secret our domestic PINK year challenging believe the basis, highlights on leadership down with begin stability this as adjusted levels we a positioning inventory market share position strength an Victoria us the digits performance and the dominant our We position the that and lead in prudently

times. We we've to our are significant steadfast that and in belief more business our positioned in for remain model normal times economic stabilized weather leverage operating difficult

our stores X% our compared in guidance. and and In most year, the online was our in by periods $XXX in million diluted encouraged stores during the and in were our quarter positively Sales income peak adjusted and which were customers earnings fourth of the line activity. the per recent adjusted performance up to share we declined and quarter expectations. targeted marketing promotional of responded messages of both quarter, to sales online quarter during operating above was as time our both in $X.XX last Traffic our with

quarter pre-pandemic levels. rates conversion fourth in above compared last the remained down to the were but Our quarter year

highlighting this periods, position categories, the and near result average our cautious was aggressive year, as strength highs to selling in and a quarter unit of who is promotional the fourth down current record positive or the a most in our again, remained peak compared quarter As cost-conscious of healthy response to very last retail in but at environment. and customer

From growth year. domestic for and by starting a we Beauty compared our a to best-performing we last sleepwear perspective, market From business a category remain category. leader perspective, slight the on merchandising Victoria's followed in And the experienced basis, XX-month with bras. rolling Secret, share was intimate’s

quarter. sleepwear outperformed and a which had intimates PINK, apparel, difficult Within

While a PINK last the challenge PINK urgently the see a with and positioning holiday already and company. points the consistent begun apparel the widened will drag for and apparel underperformance couple late gap strategy, quarter four fourth PINK more was customer, alone to apparel we've of reimagine the impact been on of season, QX. we that quarters, than during in The impact our assortment during has the

So, forward. priority high very going a for me it's

sales in numbers experience plans footprint and each profitable continues very Business world. business about momentum well, Total perform international we digit and been around our well. both quarters. with stores the countries continues X numbers international to of very double continue most up in has of optimistic performing in system-wide last were to international Our of be the business And to the to XXXX. expand growth countries

challenging be As the environment to new put pressure we're economic to begin our domestic mindful on customers. we of and continues year, continues

key Victoria's three and our on focused the for experiences strategies organic XXXX, business our innovating and and identified a launches. evolving bra Secret new customer are and have and we launch customer recent However, we of pipeline program the of loyalty well pillars, including PINK growth

and you scale acquired in our recently platform, technology second Me, starting of to We technology-led the a know, through Adore We season. their on growth vehicle. fall continuing as leverage some the plan quarter

the with now most the momentum has positioned two business And new leader our future the the family. and importantly, for category years. for stores we Adore a and international both countries planned new growth, market and are Our company partner broad in in next throughout core with Me and expansion intimates plans

trends sales anniversary comparisons And the year. rolled the So, improve quarter and benefit we out as XXXX. sales of through environment we and strategies we're experiences growth second will which assuming our begin to softer from uncertain, through being macroeconomic new the XXXX customer new trends began in while remains as

With we the XXXX. range to to mid-single-digit expect increase XXXX this sales in in compared mind, for

weeks Secret due to year flat. one and fiscal the of over growth Our XXrd to week PINK for XX forecast relatively our assumes in Victoria's the approximately businesses XXXX. two points and

results Our completed Me, mid-teens to forecasted in year. our and forecast their recently in most the now in compared also XXXX which includes fiscal Adore up is

adjusted level be this expect At income similar our to sales, rate for to XXXX. of operating we XXXX

operating represents trends we our leverage single return when challenging demonstrates stabilization will income digits in believe North America. a base, and solid of the normal adjusted today's environment, Given we in high macro rate more an business

forecasted quarter, the to last year range $XX the the to in in to mid-single-digit income For we million sales decrease compared operating million. of expect adjusted first the $XX first and range quarter

optimizing two customer within fashion world's to retailer position a we our and business our of our forward global and goal clear: leadership increase cost year, by move transformation on defining bras, relentless position merchandise enhancing a by control, to Led and be the brands, market beauty management. As new to committed leading apparel. is what's inventory and we a category our focus the in performance at being remain our on best our focusing intimate experience brand into share, the intimates

a company more shifting are a and as and becomes committed culturally confident in that leaders relevant business is on more our as value and delivering remain opportunities committed We're ensuring in focus our Our to for long-term we sustainable future-facing this remain to shareholders. environment.

you, we'd to questions Thank prepared remarks. this be At that time, and concludes you take more any happy have. than might our

Operator

of Hutchinson from comes Lorraine question with first Our Bank America.

Your line is open.

Lorraine Hutchinson

you or where opportunity you see as morning. you. It technology Good sales through businesses? Adore you Thanks. then try the you much just you year of And use grow Can talk to Me like the do Victoria's the will PINK platform most recovery grow? expect business Thank the progresses. to or areas also some to how think sounds the the

Martin Waters

at one. Yes, a take crack I'll that

thing on area important the So, past, in most business we the put core That's of as growth, most And in it health to for our is focus while we're energy. us we a the the of other bra relates important active are we categories, company. do. to most where obviously,

say me launches, at least having heard that would bra major the bra per of we year. you So, two be launches time spend at

And -- this will year no so, it exception. has be been

bra probably core want have we'll I have more big of for don't very fact, two in business. plans the excited about say yet to In about launches. the the But more that we're competitive reasons. we than that

one. that's So

towards it's And last the that would about a the some of and reinvention. use PINK I've It's where, as raw out months. more legacy Customers had I design And for mentioned, new an start to seen call It's end have and it some the more of of it. will materials urgent time I'm difficult The less starts, time our second I XX reinvention, rebuild fresh in super see is It's and more excited minimal, more graphics. overt logo, outfit direction. much QX. from better fabrications. exit logo, our modern a a approach, we of

the back business the in think part well bodes of So, the of a that half lot very going that important on for I year.

And asked about also Adore you Me.

a and we're previously, said vehicle company, I've leverage three Adore their we itself growth As ways about can there us. just think for a are It's I which great excited of forward. going But is super, that in fantastic Me. super technology

One incremental to of excited Adore to the selling going be an edited that's QX. on test That that. towards is our Me that, end we're will of We're going about up site. test our assortment merchandise We're to system.

the year. to of home technology we're PINK back apply that will subscription towards Victoria's Adore and applied our that with on the customer Me scale larger be perfected, has to going in leverage we're at Secondly, services going that same half and try to much base and the and the

time helps. be there'll as that Me by. in So, but ways there initially are goes many, leverage I we're out Adore many the technology, on which three years those then we focusing hope and more can in

Lorraine Hutchinson

Thank you.

Operator

question next Fargo. Ike comes Boruchow from with Wells Our

Your line is open.

Unidentified Analyst

Ike. -- my in us And just follow-up first at think brand? XXXX? guardrails terms having Could was guess the you a maybe PINK. how might be between help PINK you the organization the Martin, think I and historically, much Kate question, help the about you structure how on Lingerie Can we thought in This VS new for is the in helpful explain or PINK. benefit maybe noted on structure around you structure I'm revenue think that will I new curious, remind separate two. of the just

here? view have follow-up on be structure And I'd a curious So, just SG&A. I on then your this

Martin Waters

the for you Yes. question. Thank

is important very So, it us, category chunks. for think and about in we two a sleep

is call sleep during second period is merchandise leverages sexy the which well we very very COVID casual gifting quarter. sleep fourth The of up did Dream part the of the part Angels more part, which obviously, major first taxi And is provocative, particularly the sleep, and and then of during a collections.

our changes participation Victoria's for would about enough XX% the to So, and close across sleep of of But this year stage. think That depending at on PINK. XX% directionally the throughout the season. system total you be

we're in putting the the large crossover What's a of significant to extent, brands. franchises, PINK customer benefit a between is business the intimates. XX% extent, a in together? To bras PINK of large the of there the two business Well, both is and and Victoria's bra

to panty and how entire customer I assortment with think single it the build to traverses a makes through our sense the bra eye experience.

time, that I of is in And leadership we the customer so, the how merchant our for the history, first our considering sees think, have entirety intimates category.

I think that's very important.

sense the benefits and but the also in of of that different it sort the should and In There we're are we in design makes the efficiency. a two. buying back teams same to with across cases, greater that some source house that the have merchandise factories. lead way we those way to single And eye merchandise different

the the efficiency end are main on those back organizational facing, us. So reasons. secondly, for customer One,

Unidentified Analyst

Sorry, follow-up SG&A. I on just one quick had

the curious flex it guess secure single-digit some I the guess given those little year. the have just SG&A supporting to priorities year like variable, earnings the seems I'm margin you. Me. less in line seems front, expense extent comp, flexibility. to top with maybe there on noted that the release, investment, that high to About Thank extent it spend like Adore flex this the between this tech remains for [indiscernible] just Certainly, incentive that a investments especially on I the guys You the commentary are

Timothy Johnson

Thanks Kate. Yes. the question, for

has the million been I a a the quarters excess quarter. dollars when evidenced each the North total capable has model, down of last America very in three several in by have challenging. quarters, Expense think $XX over think business business been flex I as of demonstrated

standpoint, well So, store feel from the if that flex and payroll volatile. business and somewhat sales a logistics distribution as particularly been I quite as have

foundation supplementing business savings that is that for XXXX. has next of just years, from think I underline continuation really three the the transform the the activity goals set a

years, three will less a the X/X in goal over that million So here that of XXXX. actually happen think $XXX we said next than I little

only levers So, little to here we bottom remain volatile but expense both cost us trends have feel also insulate goods America. line bit lines not like we of in multiple if and drive sold a the North on performance,

very teams expense job initiatives. are good against flexing a and the the doing of So, executing

where the some North in first America. in here volatility sales quarter, Even highlighting in we're continuing

take XX% in if that dollars. guidance, SG&A terms $XXX Our roughly you SG&A you the million range and XX%, to to estimates, put Kate, the million volume of get on an of $XXX

for in business business, quarter, America marketing bonus-related even and also technology, in the the $XXX year with or VS last that, primarily North first and to costs. million those is flat the Within PINK investments about

understand So control, merchandising -- volume performance hopefully, the of and I'll planning a inventory number say, under better the a to model keep we're executed teams and you ways and to mention that here. helps flexing allocation costs initiatives wonderful the little levels to bit of not have different kind the that the merchandising, of on that

So helps. that hopefully,

Operator

with comes Stanley. question from next Alex Straton Our Morgan

open. Your line is

AlexStraton

TJ. and question for Thanks Martin my having Great. today.

Just for two me.

it XQ from underlying accelerates revenue the a quarter. the fourth guide, CAGR assumes it XXXX on to First the bit looks like

So, mean there? how I'm wondering, acceleration Or does what's think that embedded we quarter-to-date? about should seeing you're

trying And you. that category that be maybe share. the grow? the Thank you there, what like then include your on also, in would do share did share if changed there's on the you can And And market I'm just to comment growth slight year-over-year. what understand market? secondly, wondering I'm anything how great. just in bras

Martin Waters

a fine essentially meaning essentially. -- as TJ, panties sleep. I and is market share, It we one you sexy most of of combined lingerie, is excludes category, The that lots one question? have we Why first market can different second traditionally bras So, might share. measures question, take use intimates call don't which the the address

market that And we definition, XX% share. that the and is bra the mix we in have see what XX% So, that panty is is mix within less. stronger

more Bra to sew It low Why fewer to business, most is would business. at business, important we're accessible economic entry. higher harder cut better every a barriers entry, engine. frankly, more barriers has be? It's And and that is of Panties it. to It's player. competitive a competitors. our easily

and And market. so, led competitive more it's price a

distinction of that's the flat point X.X we And as there. the earlier, I key across So essentially at XX maybe months, said increased. look

TJ, do second about want to question you take the acceleration?

Timothy Johnson

sales, looking than QX to to so More candidly, a those different move it we're understanding in is business more and Yes. our was that or liquidation in of times. kind inventory relates trends back much to Alex, mode to all more performance. the relative that suggest current it during much as XXXX, place. back at And liquidation business aggressive

accretive So, the down I the and single North report international which trends season our in think was in third the digits, about high and predominantly strong business, total business, America or season. if with numbers we that in the quarter to most fall being fall sales recent fourth performance very

trends In large part, we quarter. first expect continue to into those

quickly we So, retail system-wide would nice seeing business North kind response begun to low have in be digits. high as would and the to particular, of growth stores expect reopen. We down international America in sales now, terms that from in We're double the perspective, seeing we're first digits. expect a China, to be and single happen quarter in of up still

And business. first of in a X.X-point then quarter results the feel in the And alone, to terms four first will in the of of international about part about benefit get the that the increase add growth. we point our So, obviously, reporting good time. very for

to Me. of negative negative that's So Adore high mid-singles singles get we from addition the with how

expecting comments, first one this something reading some maybe than to the challenging. perspective different last drag was Just because and a underline from you I then of prepared PINK that of from mentioned the in the sell-side the Martin apparel that little quarter for night sales was were even guide the note being know some impact quarter his item of morning, a in and think the of I notes

until mentioned points. expecting four early starts into of into on the about quarter potentially We're drag to second first new that merchandise to some quarter Martin and of arrive. that the That continue

think, for visibility our fairness Clearly, there's and in if slight in So, to a of PINK you sales Alex, you, around terms didn't Street I the to was have disconnect apparel. first expecting. and our quarter -- maybe thoughts PINK expectations what

helps. that hopefully, So

Operator

you. Thank

Our with next from question comes Matthew Boss JPMorgan.

open. Your line is

Amanda Douglas

Amanda Douglas for It's on Thanks. Matt. Great.

this expectations for or opportunity the the activity then year So, in higher with in manage on see AUR you And whether release. business new growth healthier Could maybe inventories? mindset your you maybe you not you cited for first your start, promotional for Martin, launches? to expand throughout promotional with the an bra as quarter activity

Martin Waters

Thanks Yes. for question, the Amanda.

under what share it and with promotional on activity I've in being calls. inventoried getting And to previous more competitive consistent is mindset more said inventoried with do a fair my or -- less in So, with in highly has over to do or environment.

we trying are get wallet. We're with competitors that -- competing We're all We're after affluent, to consumer vacation the food on discretionary money aggressive is spend. she can feeling has of when our competing to when kinds as when So, we're to put as have we be competing vacations. that has table, with beauty. less she the all who to items, with of competing discretionary spend less less with money share on in

the to And of that's a But fresh the while also, talk market. and about sense us needs shop nudge promotional emotional in the and having with to go merchandise, to is way to come that on reason content, in promotional compete to she us. the way for best best with definitely and newness a

drives what stance. the that's So

available what's I terms to the time sharpen sure -- time good discretionary our been in get or make a we during spend. to quarter amount its fourth sharpen that think elbows and of has our of

have inventory. with do doesn't to much It

very We're down digit well are on positioned. basis. adjusted inventories double We're healthy. Our an

dry close to where open be be the us XX% the XX% or chase to returned our powder we at season agility like to have to enable winners. entering used We so keeping that to we're

position from as the of And QX can see we of balance how of let's year, the consumer relates our see how into health to to I and expect that it into consumer than a continuation newness fresh up. let's something fashion be the more see but would promotion, stands responds. So, the the optimistic QX. of lean

yes, extracting from about when The about designing consumer was just the money thinking thinking And AUR. board. end We're not are competitive more mean, of across second about I the range. the build architecture bras, question our at the for top we what's most the we're price

we've a And opening And so, a it having what competitive is that's actually better price had historically, point stronger we'll than activity environment. in this do.

So, driven pretty we're most all spectrum are the what more of it they pre-pandemic not consumer, be about good emotion -- has we But by just AUR. of to broad occasion range healthy, AURs about sense higher and feel driven year. than products needs the us throughout makes the across were yes, by what and the We're best for coming. gives what's

Operator

that your Does conclude question?

Amanda Douglas

Yes. Thank you.

Operator

Our question Simeon Markets. comes with Siegel from Capital BMO next

is line open. Your

Simeon Siegel

where similar should the lift of Me PINK I clarifying then maybe your last now one. versus buyback, vein contextualizing a just in XQ incremental you have you view on not remaining minority Adore And interest guidance. the it size then And expenses is weighing believe. any and I'm historically JV, Does on growing. ASR? for the And it then account Would it maybe including the called margin? just on quick higher just out also gross if Martin, the be apparel a help any SG&A, future?

how general you. just Thank on So versus buybacks? you're debt thoughts approaching any

Martin Waters

PINK? the question take just question. again. me Simeon, specifically financial give asking T.J. PINK let the What about I'll

Simeon Siegel

How want how apparel? large that in be? to how the is Maybe are is PINK somebody context

Martin Waters

So, it intimate. numbers, in is $X business of Half is round PINK the billion. approaching

sleep. you half split won't and other I the apparel apparel sleep. and the So, give is between

yourself. can of it tell was Simeon. you You that fourth in I significant that quarter, T.J.? company underweight it's that impact hope the framing from helps, points. that's maybe part such on have a And at that a it four when total why guess business. an the had But at the

Timothy Johnson

they want model. about I & about would is it's From mode piece, to digital-only think part. just think Adore in six than of anything VS business, more only but test on a Yes. or perspective else, the business it I Simeon, I five way. most for the the different in have digitally large this digital clarify, than their Me it's -- Co. a the part, would stores model

margins are a mid-XXs. gross from Their perspective the in

be their operating means levels be would in slightly to to company, that are given margins their similar ours, the the to expense going XXs. rate accretive are So which to high mid-

I'm successful more them. year forecasting grown their here business comfortable They've consistently XX-plus mid-teens That's in again with we're the that. and been year XXXX. in for range, percent after

it time in with in financial in it comfortable model. our we're for expenses point the up So, P&L obviously, The first it mentioning first shows here as to relates is quarter. the here

tend also So, little levels be loaded expense perspective their to front a two steps. marketing more from a in to

in customer been when year obviously, after quarter. the holiday the appropriately aggressive the the first a intent high biggest to to as there's They've of Day, it First off, relates Valentine's buy. going

their about subscription for model interest the model the feed kind when pipeline year high intent marketing high really the to the opportunity Additionally, level balance customer an in from with you a their think first high and of perspective, a of to a a basis. of buy them gives being quarter

So funnel can earlier they from customers a better, get try the in home perspective. similar a on

profile we're helping new the a is model different little bit the comfortable that ours. we acquired. So, It's very expense with understand industry just than

it's managing & are balance VS how that the company, happy the with the very I'm and the performing. expense how The Co. portion teams of base, of

out assuming debt spring. buyback ASR million just share yes, question, the full are I'll of count. for the is in that we repurchase predominantly our $XXX terms In the and the share point weighted activity average

agreement the runs in release, our mentioned we As the quarter. through second

in to peak -- kind out borrowing coming quarter. season, piece is, we'll of of the head we debt predominantly time cash second for holiday know, or the trough of into spring third terms that season, inventory peak in as purchasing The our you

for our So, question, the not have the will way of therefore, carrying 'XX point last balance ABL the significant fiscal on the later activity out a part share part in we'll of mentioning the the amount happen assumes the likely $XXX of year. throughout we The repurchase weighting that the ABL for in with and perspective, from most is of the million year be your the year, balance came into of debt balance. a model that the

the We'll cash for the the quarter year, into in the holiday cash three for the season. first of respects. with. a Simeon, came is year importance majority is We or to really And that until outflow that largely get carry we of quarter understanding two the this actually business year in

XXX the bonus off, payouts first (k) out quarter. in first matching think withholdings paid I get

Additionally, the And that component in first property I'll quarter legal settlement third estate I we the we've call or in it it, in filings a, New our then execution early real paying that to the as relates is anticipate York out described happened ASR mentioned that really first the in our City. a quarter.

we'll the until coming suggest those Hope So, we cash is the year And items of all cash a holiday that quarter first in. for carrying of again, helps. the the be get outflow therefore, after that quarter. ABL majority

Operator

Our from with next Omar comes question Saad Partners. Evercore

open. Your line is

Omar Saad

something don't on channels you off-mall and formats the the I strategy. Investor performance guys of at an Thank Thanks. maybe your quick store Day, you a I couple of mall future. of also my you taking marketplace across follow-ups. bit maybe question. update talk Then the for versus but just a little hope I store more mentioned about hear morning. Good was hoping some

Martin Waters

that. for you Thank questions. good Yes,

So, about real estate. let's talk

opened control first of high for have open So, single that time, pilots, group. period are reasonable up Store a we the performing to been their digit relative that of the Future pilots

their control So up group. digits high single to relative

So that's good.

good. opened we the The And new have that off-mall in been first those format were locations. stores in

to projecting in of stores are strength news, is be profitable, with particular All are outlets. good in that which the them

outlets. locations mean a opportunity. have So, I discount we of Those mean States across I full-price are where of number we particularly those the there don't put United outlet America, a and off-mall store. see where good been

higher it off-mall, estate about as the relates to participation having good we where strategy So, we of real really a are. feel

about It's vulnerable, situation to where new As are it hasn't any news. we gotten be. it that deterioration the no better. The fleet malls of gotten the The hasn't expect in to worse. any situation relates

ahead, of of So, new new will we're will and bigger future renovations move XX format current XX our about projecting be store higher-performing the to stores that better which format. for XX in some from stores, the of all old of Future we'll that the the have and to Store year

Incidentally, being terms not that we stand-alone all in of those way higher of PINK efficiency the and we box, more sales many many bring them, into take from run but of occasions, opportunity to those leads operation. sometimes the in of to downsize which densities occasions, the the

about capital than more there's So, we about our stores our into this million $XXX store’s year had And late going that. prior feel we organization, pretty good year. in

I So, format. terms hope helps of that in

The second question was...

Omar Saad

Marketplace.

Martin Waters

Curated Thank marketplace. Yes. you.

us halo category get basis the curated of to of number bring a bit it on get us a I'm parties, lots and board, should So, to we be team merchandise frankly. currently with brands, we this One, little determined curated three this be Victoria. many to couple it over, should the where and the the working third-party across a started say underway; does relationship this customer of of brand new different does marketplace relationship things. access management a going when of house number access too brands, was a underweight; we're base ago, where to years took we're When two, third-party that currently particularly the overall of does three,

much. And in lot we very good we what are just helping feel now a and said about really the curation. I've where like Looks is

into our at buy the Victoria customers time, into same valuable and see also customer. most that the or with third our they customers We those PINK highest per spend they're also where buy parties,

go So, very, is. it's of is all we think where and We tool on the her very Yes, area strategy needing Victoria it it's an it lifting can franchise a part our without within do good appeal of the forward? important to the an own. broaden of

that hope I helps. So,

Operator

with Our comes next Barclays. from Adrienne question Yih

Your line is open.

Adrienne Yih

to apparel the much. was back business. the PINK piece to of Thank Great. very you can kind I the Martin, remedy go if wondering of we

you of exactly the You the the you first talked that into the what about six months, takes first identified the started kind the end What exactly But of core actions. of that of imagine us as merchandise that would quarter. takes quarter, -- second and sort think issue? I have corrective immediately changing that is? some about you the issue

I what or on seasonality be cost, would Me. back significantly it so than the to we should Adore half? ask is assume And And the matches advertising the two in right? imagine Me that be And Should bit being was in seasonality Adore things little the DTC you of year? higher. and TJ, sales that the also first of then then for then the maybe for kind more expense, VS a for could follows So, last quarter

So for expense about how ad much. you consolidated Thank should we so think XXXX?

Martin Waters

Yes, go. frankly period time. assortment and us time. there. I in questions have of asked. a PINK on the been successful Well, with there's you to been over apparel? for over lot PINK remarkably a -- We're apparel a go challenge It's a relatively no the on We'll edited tight graphics renewed what's making long all to of has unpack frames

a been very a business and business high-margin us. very That's predictable for

So, boy, the we we really, on them product we of top than part life cycle. good should. renew healthy. when longer to And XX probably years. little the are to and and businesses business forget We them we've Maybe focus lose enjoyed the hang this over on a really very

a quite and a We're business years. of on marketplace we we're look not PINK that we've had at number we yes, we logo stuff. should trend as as right So, relative in be, what's to happening for assortment, overly we're frames some overly missing now our the at reliant apparel large, on and say, reliant as

a for refresh. time So,

about better thinking thinking over new raw fresher differently approach. minimal, and about new materials, And logo, about thinking being about so, starters just outfit thinking fabrications, less a more

and season, completely So, for fall particularly be think QX. quickly accelerated we've the the vendor and the of will fit. aspects our box forward strong, in to with of of the scrubbed fashion early that business, we'll things signs we've we all ready think trend that out and help base, come be don't of on recovery really we we have edited but we late see things should And out

questions? like T.J., do take the a you want to

Timothy Johnson

and -- Yes. as by more mentioned. QX alluded historically, a is Adore or they're to, quarter first seasonality you lower, QX the the And of business, better quarter to Me little fourth. as the similar a very of are little Adrienne, a followed then kind you obviously, business, VS

the as low going about to on Me. that's as So details Adore go on we're

the don't VS question of target as the Martin changing. handful I Day, at business, around I part XXXX a most your for times in has Investor typically for X% of articulated recently and that sales see for our advertising to VS of think about second Co marketing. of we terms X.X%

little that In terms goes, the rate of I'm level sales is going a up perspective. but dollars, volume a on where P&L. with we're not of comfortable Me bit that something on go dollar might tick deep absolute Adore to the depending expense from

on on with business say, historically, just you helps, that their what environment to a but focused us. business, with basis that growth partners operating that. knew really We're higher at Adrienne. be Hopefully the driving we're meaningfully as operating and rate a that growing DTC comfortable more driving profit more mentioned, that's Co in line I'll not of a go-forward than the going top focused is experiences on Adore in a to advertising sales VS on Me line. leverage our and surprise We

Adrienne Yih

Yes, it does.

Martin Waters

of here take the a fact year. the across in season season. XX% to more the fall full substantially It's on we did next business. Just we participation our I check said question, more XX% before in the sleep

to I think XX% a XX% is answer to better than closer XX%.

participation. XX% So, about plus for sleep think

question, Next please.

Operator

with Our next question Jefferies. from Tarlowe comes Corey

Your open. is line

Corey Tarlowe

question. thanks, for my and morning Good taking

a So, I phrase to pink on the this double-click you apparel number again just Martin, used dynamic, think of years.

undergoing to one. transformation confidence how could what gives saw a you talk we about just And you're work, think intimate in so business for two, you can is you So, side it's PINK going sense overall? about what that maybe number number the that apparel, then the get the on within as this you at performing

on freight And So to a the of the the seemingly with guide we freight coming margin T.J., I context better? flat how lot about within this the saw EBIT then, year of coming down do benefit year, think getting supply all Thanks. for you inventory and think of shouldn't flat issues be margins guide year? a down, that now that issues chain EBIT that the and last

Martin Waters

the question. PINK Yes, I'll take

pretty to Well, are of change process testing. the question, things or not rigorous how work So, do fundamental when we going we a if know have merchandise? we

managers through country on up. community rely that panels the from I town customer that feedback. they the inside with The We to have customer They know they went gave had our regional most personally assortment use up, our strong them, community. is I across And stores our and We we in excited. week. a thumbs last and us extremely very PINK were get

in back it's that Where's you good So is -- the PINK that confidence it is been our of year. focus. for news intimates several where international is for the we've over hit to as my to good been proportion continues I The a business increasing good. level it It be got. of confidence change high. certain, years never pretty know we've last what feel half has about our right got has strong business my extremely is with but time Well, the what level will the and steadily,

the lingerie a and at being do. are our thing of company in best bras We big to important most is both brands

So intimates that healthy business in growing. is PINK and

Timothy Johnson

flat last year. Yes, the would part margin can in slightly guide year I Corey, be expect higher year. the expect the the gross rate to your second on question, rate your fairness to for We than the of would question, for appreciate EBIT we

mentioned, the supply certainly abated. you have chain As pressures

are a and build year basis from the pre-pandemic typical to or see fall levels. we'll lower the last clearly, seasonal here close than rates perspective, As on in we go. into there's where rates But spring if both kind move getting air rates in and container season, or not season, an of back the

for So happy that. good We're about us.

flip invest earlier, side SG&A all the want kind of known we of that think we've mentioned were business this and XXXX. in certain is, here an we going parts to perspective, in to along, I the there were from

Me Adore that's profile SG&A side as is different on for deleverage a the slightly the than just expense mentioned, some I note, ours As line.

we're I'll three key seeing call However, investment really is in, it, areas.

First off, technology.

amount integrations make, to year. that's we'll team, her see the increase We're Christophe we on we're customer to confident that start we happy throughout and experience as move of As customer the and the from focus with investment. benefits an and

Bath second the people of in limited into company & Body middle remind the Victoria's separating former different our is, I brands, think separating I'll piece business, or parent Works are and that two Secret. we just from

business of brands incremental there two roughly technology each spend standpoint, million From have separation, a that be to the indicated would that. terms in million half technology in of $XXX that we will $XXX a a and

So, the spend from a VS separation. towards as trending that I'm that lower end to of it happy technology we're perspective, to report relates

in have of that, many the the the bulk said front right and large separated, separated in right a activity the Having February, bulk labor the to is couple more the month now. Having spring with of us to in of season. of come systems associated systems we here already that of successfully be

make. Corey, during that's again, mentioning happy we're investment, the XXXX, So, cost or an in the in that point is with the that, will peak season spring associated to

fashion building to show, the of second business, we're to Adrienne's marketing spend our to this question, funnel piece, of which later going the continue both invest to come the and in top new year. think is into the at on to lean also I support version

invest to store our So, going the to in future. invest of in We're marketing going we're expense.

capital As with of XX% X% at of being upwards XXXX. roughly we Future in the million our year-end X% or of $XXX store-related Martin fleet exit mentioned, increase or associated to taking as more store from

and fourth incentive was level XXXX the Clearly, for payout reflected that. year-over-year. to year the business mention relates of increase the as then And SG&A difficult I'd it a item

incentive refilled and XXXX, into the would profitability year-over-year come we or established for targeted an better. levels we increase we targets. that Obviously, bucket these achieving be As new of

three even for Corey understand helps are bit that the making four where remains areas or where of challenging. business, there hopefully, So environment we're the a though the future investments current

Corey Tarlowe

it. helpful. Got That's

more are the this about on plans? make to just any that you making. savings And year? cost you're Could then $XXX in investments also, talked us you acquisitions update million You planning

Timothy Johnson

or transform But we're I our in Last Day X/X indicated Investor to towards that question is than the not at surprising I that here October little XXXX. you. prepared million. less of at that I question, here remarks, want expense little our Corey, fairly of probably think I to maybe to less more split a in part the tilted we set answer a foundation margin little in less think happens referring bit X/X that XXXX. would And In a evenly or than that's and first towards of we suggest the the goal which $XXX

the get So cost to with slight and the of quarter the Foundation expense some see their we and a perspective notably grow that's from savings fund to line from the Dean move on and we're growth benefit it margin to as that working -- the through mentioned more around initiatives XXXX, Chris grow start where benefit I margin you'll Collier and leadership initiatives goods really XXXX, a goal of most team. on and fourth amount will that of Transforming the into

Martin Waters

Okay.

time got we've think question. one I for more

Operator

comes next Cowen. Our Jonna Kim with TD question from

Jonna Kim

you, Thank taking for question. my

the what customer from trends the seeing you to And early further learnings rate? Thank Any leverage one. the program retention you to plan are terms you of quick loyalty increase in a program? much. Just retention how and so

Martin Waters

it, But out all are team, card who were the the is energized again, for been we in to customers the super our free. good. victory I with time referencing by system only Too A program. our the has on declare We've credit onto currently take-up stores convert been early of loyalty. a spent reminder, they And this week.

be should the at about people of we month. the So, end by X this system in million

sizable a there's So, sizable community benefit going to this program. from -- that body are

consumers us. to before We as new got as about a $XXX. talk features had enable to it's we $XXX -- we've benefits well VIP to got got Access that got each And good we've where at an really million feel other at. We've we've for talk never tier will that tier all customers at

come half So, in long time of I back been through we the think think will year. benefits it's going to be a and a the coming, great the program. It's in

at time probably committed got It's Kevin. to That's right, X:XX. finishing we've all for, We X:XX.

for Wish thank interest business. you you So well. your in all our

Jonna Kim

you. Thank

Operator

That concludes today's conference. Thank you for participating.

at may You disconnect this time.

Victoria's Secret & Co. (VSCO) 3 Mar 232022 Q4 Earnings call transcript