Victorias Secret Co

Previous wording

In the first quarter of 2024, our net sales decreased $48 million, or 3%, to $1.359 billion compared to $1.407 billion in the first quarter of 2023 and comparable sales decreased 5% in the first quarter of 2024. Our North American store sales decreased by 7%, or $57 million, to $729 million compared to $786 million in the first quarter of 2023, primarily driven by a decrease in average unit retail (which we define as the average price per unit purchased), traffic and conversion (which we define as the percentage of customers who visit our stores and make a purchase) in the quarter compared to the first quarter of 2023. Our direct channel sales decreased by 3%, or $15 million, to $449 million compared to $464 million in the first quarter of 2023, as an increase in conversion was more than offset by decreases in average unit retail and traffic compared to the first quarter of 2023. Our operating income was $26 million in the first quarter of 2024 compared to operating income of $28 million in the first quarter of 2023, and our operating income rate (expressed as a percentage of net sales) was 1.9% compared to 2.0% last year. The slight decrease in operating income in the first quarter of 2024 compared to the first quarter of 2023 was primarily driven by the decrease in net sales partially offset by a decrease in costs of goods sold, buying and occupancy expenses.

Current wording

In the second quarter of 2024, our operating income increased $36 million to $62 million compared to operating income of $26 million in the second quarter of 2023, and our operating income rate (expressed as a percentage of net sales) was 4.4% compared to 1.8% in the second quarter of 2023. The increase in operating income in the second quarter of 2024 compared to the second quarter of 2023 was primarily driven by a decrease in costs of goods sold and general, administrative and store operating expenses, partially offset by a decrease in net sales. Our net sales decreased $10 million, or 1%, to $1.417 billion compared to $1.427 billion in the second quarter of 2023 and comparable sales decreased 3% in the second quarter of 2024. Our North American store sales decreased by 2%, or $17 million, to $800 million compared to $817 million in the second quarter of 2023, as an increase in traffic was more than offset by decreases in conversion (which we define as the percentage of customers who visit our stores and make a purchase) and average unit retail (which we define as the average price per unit purchased) compared to the second quarter of 2023. Our direct channel sales decreased by 1%, or $4 million, to $430 million compared to $434 million in the second quarter of 2023, as increases in traffic and average unit retail were more than offset by a decrease in conversion compared to the second quarter of 2023.

Previous wording

For additional information related to our first quarter of 2024 financial performance, see “Results of Operations.”

Current wording

For additional information related to our second quarter of 2024 financial performance, see “Results of Operations.”

Previous wording

In both the first quarter of 2024 and 2023, we recognized the financial impact of purchase accounting items, including recognition of changes in the estimated fair value of contingent consideration and Contingent Compensation Payments and amortization of acquired intangible assets. In addition, in the first quarter of 2023, we recognized the financial impact of additional acquisition-related costs and recognition in gross profit of the fair value adjustment to acquired inventories that were sold in the first quarter of 2023. For additional information, see Note 2, “Acquisition.”

Current wording

In the second quarter and year-to-date 2024 and 2023, we recognized the financial impact of purchase accounting items, including recognition of changes in the estimated fair value of contingent consideration and Contingent Compensation Payments and amortization of acquired intangible assets. In addition, in both the second quarter and year-to-date 2023, we recognized the financial impact of additional acquisition-related costs and recognition in gross profit of the fair value adjustment to acquired inventories that were sold in the respective period. For additional information, see Note 2, “Acquisition.”

Previous wording

(a)In the first quarter of 2024, we recognized an $8 million pre-tax charge ($8 million after-tax) within net loss, $7 million included in general, administrative and store operating expense and $1 million included in interest expense, related to the financial impact of purchase accounting items related to the acquisition of Adore Me. In the first quarter of 2023, we recognized an $11 million pre-tax charge ($8 million after-tax) within net income, $9 million included in costs of goods sold, buying and occupancy expense, $1 million included in interest expense and $1 million included in general, administrative and store operating expense, related to the financial impact of purchase accounting items and professional service costs related to the acquisition of Adore Me. For additional information, see Note 2, “Acquisition” included in Item 1. Financial Statements.

Current wording

(a)In the second quarter of 2024 and 2023, we recognized pre-tax income of $5 million and pre-tax expense of $18 million (income of $5 million and expense of $16 million after-tax) within net income (loss) related to the financial impact of purchase accounting items related to the acquisition of Adore Me. These items include income of $6 million and expense of $10 million, respectively, included in general, administrative and store operating expense and $1 million of interest expense in both periods. Additionally, expense of $7 million is in costs of goods sold, buying and occupancy expense in the second quarter of 2023. Year-to-date 2024 and 2023, we recognized pre-tax expense of $3 million and $28 million ($3 million and $24 million after-tax) within net income (loss) related to the financial impact of purchase accounting items and professional service costs related to the acquisition of Adore Me. These items include expense of $1 million and $10 million, respectively, in general, administrative and store operating expense and $2 million of interest expense in both periods. Additionally, expense of $16 million is in costs of goods sold, buying and occupancy expense year-to-date 2023. For additional information, see Note 2, “Acquisition” included in Item 1. Financial Statements.

Previous wording

(b)In both the first quarter of 2024 and 2023, we recognized $6 million of amortization expense ($5 million after-tax) included in general, administrative and store operating expense related to the acquisition of Adore Me. For additional information, see Note 2, “Acquisition” and Note 7, “Long-Lived Assets” included in Item 1. Financial Statements.

Current wording

(b)In both the second quarter of 2024 and 2023, we recognized amortization expense of $6 million ($5 million after-tax) in general, administrative and store operating expense related to the acquisition of Adore Me. In both year-to-date 2024 and 2023, we recognized amortization expense of $13 million ($9 million after-tax) in general, administrative and store operating expense related to the acquisition of Adore Me. For additional information, see Note 2, “Acquisition” and Note 7, “Long-Lived Assets” included in Item 1. Financial Statements.

Previous wording

(c)In the first quarter of 2023, we recognized an $11 million pre-tax charge ($8 million after-tax), $8 million included in general, administrative and store operating expense and $3 million included in buying and occupancy expense, related to restructuring activities to continue to reorganize and improve our organizational structure. For additional information, see Note 4, “Restructuring Activities” included in Item 1. Financial Statements.

Current wording

(c)In the first quarter of 2023, we recognized a pre-tax charge of $11 million ($8 million after-tax), $8 million in general, administrative and store operating expense and $3 million in buying and occupancy expense, related to restructuring activities to reorganize and improve our organizational structure. For additional information, see Note 4, “Restructuring Activities” included in Item 1. Financial Statements.

Previous wording

The following table compares the first quarter of 2024 U.S. company-operated store data to the first quarter of 2023:

Current wording

The following table compares U.S. company-operated store data for the second quarter of 2024 to the second quarter of 2023 and year-to-date 2024 to year-to-date 2023:

Previous wording

The following table represents store data for the first quarter of 2024:

Current wording

The following table represents store data for year-to-date 2024:

Previous wording

The following table represents store data for the first quarter of 2023:

Current wording

The following table represents store data for year-to-date 2023:

Previous wording

(a)Includes fourteen partner-operated stores as of April 29, 2023.

Current wording

(a)Includes fifteen partner-operated stores as of July 29, 2023.

Previous wording

For the first quarter of 2024, operating income decreased slightly by $2 million, to operating income of $26 million, compared to operating income of $28 million in the first quarter of 2023, and the operating income rate (expressed as a percentage of net sales) decreased slightly to 1.9% from 2.0%. The drivers of the operating income results are discussed in the following sections.

Current wording

For the second quarter of 2024, operating income increased $36 million, to $62 million, compared to operating income of $26 million in the second quarter of 2023, and the operating income rate (expressed as a percentage of net sales) increased to 4.4% from 1.8%. The drivers of the operating income results are discussed in the following sections.

Previous wording

The following table provides net sales for the first quarter of 2024 in comparison to the first quarter of 2023:

Current wording

The following table provides net sales for the second quarter of 2024 in comparison to the second quarter of 2023:

Previous wording

The following table provides a reconciliation of net sales from the first quarter of 2023 to the first quarter of 2024:

Current wording

The following table provides a reconciliation of net sales from the second quarter of 2023 to the second quarter of 2024:

Previous wording

The following table compares the first quarter of 2024 comparable sales to the first quarter of 2023:

Current wording

The following table compares the second quarter of 2024 comparable sales to the second quarter of 2023:

Previous wording

Net sales in the first quarter of 2024 decreased $48 million, or 3%, to $1.359 billion compared to $1.407 billion in the first quarter of 2023.

Current wording

Net sales in the second quarter of 2024 decreased $10 million, or 1%, to $1.417 billion compared to $1.427 billion in the second quarter of 2023.

Previous wording

In the stores channel, our North America net sales decreased $57 million, or 7%, to $729 million compared to the first quarter of 2023 driven by a decrease in average unit retail, traffic and conversion.

Current wording

In the stores channel, our North America net sales decreased $17 million, or 2%, to $800 million compared to the second quarter of 2023, as an increase in traffic was more than offset by decreases in conversion and average unit retail.

Previous wording

In the international channel, net sales increased $24 million, or 16%, to $181 million compared to the first quarter of 2023. Increases in net sales in the first quarter of 2024 compared to the first quarter of 2023 related to increases in net sales in China and from our wholesale arrangements, as well as royalties earned associated with franchised stores and online sales in many countries outside of North America.

Current wording

In the international channel, net sales increased $11 million, or 6%, to $187 million compared to the second quarter of 2023. Increases in net sales in the second quarter of 2024 compared to the second quarter of 2023 were driven by royalties earned associated with franchise sales in many countries outside of North America and our wholesale arrangements.

Previous wording

For the first quarter of 2024, our gross profit decreased slightly by $1 million compared to the first quarter of 2023 to $501 million, and our gross profit rate (expressed as a percentage of net sales) increased to 36.9% from 35.7%.

Current wording

For the second quarter of 2024, our gross profit increased by $14 million compared to the second quarter of 2023 to $501 million, and our gross profit rate (expressed as a percentage of net sales) increased to 35.4% from 34.1%.

Previous wording

The slight decrease in gross profit dollars was primarily due to the decrease in merchandise margin dollars driven by the decrease in net sales and the increase in promotional activity, partially offset by reductions in costs of goods sold related to our supply chain initiative and a decrease in buying and occupancy expenses. Additionally, gross profit dollars were slightly lower compared to the first quarter of 2023, primarily driven by the recognition in gross profit of $9 million in the first quarter of 2023 related to the fair value step-up adjustment on the acquired inventory from Adore Me and a restructuring charge of $3 million in the first quarter of 2023.

Current wording

The increase in gross profit dollars was primarily due to the increase in merchandise margin dollars driven by reductions in costs of goods sold related to our supply chain initiative, partially offset by the decrease in net sales and the increase in promotional activity. Additionally, the increase in gross profit dollars compared to the second quarter of 2023 was driven by the recognition in gross profit of $7 million in the second quarter of 2023 related to the fair value step-up adjustment on the acquired inventory from Adore Me and $6 million in the second quarter of 2024 related to the gain on sale of certain non-store corporate-related assets.

Previous wording

The general, administrative and store operating expense rate (expressed as a percentage of net sales) increased to 34.9% from 33.7% primarily due to deleverage driven by the decrease in sales compared to the first quarter of 2023.

Current wording

The general, administrative and store operating expense rate (expressed as a percentage of net sales) decreased to 31.0% from 32.3% primarily due to the decrease in charges related to Adore Me purchase accounting items and marketing expenses.

Previous wording

For the first quarter of 2024, our interest expense remained flat at $22 million compared to the first quarter of 2023, as our lower average outstanding debt was offset by higher average borrowing rates for our ABL Facility and Term Loan Facility.

Current wording

For the second quarter of 2024, our interest expense decreased $3 million to $21 million compared to the second quarter of 2023 primarily due to our lower average outstanding debt, partially offset by higher average borrowing rates for our ABL Facility and Term Loan Facility.

Previous wording

(a)Results include consolidated joint venture sales in China, royalties associated with franchised stores and wholesale sales.

Current wording

(a)Results include consolidated joint venture direct sales in China.

Previous wording

In the direct channel, net sales decreased $15 million, or 3%, to $449 million, as an increase in conversion was more than offset by decreases in average unit retail and traffic compared to the first quarter of 2023.

Current wording

In the direct channel, net sales decreased $19 million, or 2%, to $879 million, as an increase in traffic was more than offset by decreases in conversion and average unit retail compared to year-to-date 2023.

Previous wording

The gross profit rate increase was driven by reductions in costs of goods sold related to our supply chain initiative and the expenses recorded in the first quarter of 2023 as noted above, partially offset by increased promotional activity.

Current wording

The gross profit rate increase was primarily driven by reductions in costs of goods sold related to our supply chain initiative and the expense recorded year-to-date 2023 as noted above, partially offset by increased promotional activity.

Previous wording

For the first quarter of 2024, our general, administrative and store operating expenses increased slightly by $1 million compared to the first quarter of 2023, to $475 million. The slight increase in general, administrative and store operating expenses compared to the first quarter of 2023 was due to increases in charges related to Adore Me purchase accounting items and certain other administrative expenses, partially offset by a restructuring charge of $8 million that was recognized in the first quarter of 2023.

Current wording

For year-to-date 2024, our general, administrative and store operating expenses decreased $21 million, or 2%, to $914 million. The decrease in general, administrative and store operating expenses compared to year-to-date 2023 was primarily due to the decrease in marketing expenses and charges related to Adore Me purchase accounting items, partially offset by increases in certain other administrative expenses. Additionally, the decrease in general, administrative and store operating expenses compared to year-to-date 2023 was due to a restructuring charge of $8 million in the first quarter of 2023.

Previous wording

For the first quarter of 2024, the Company’s effective tax rate was 151.1% compared to 34.0% in the first quarter of 2023. The first quarter of 2024 rate differed from the Company’s combined estimated federal and state statutory rate primarily due to additional tax expense from the vesting of share-based compensation awards. The first quarter of 2023 rate differed from the Company's combined estimated federal and state statutory rate primarily due to non-deductible liabilities related to contingent consideration and Contingent Compensation Payments under the terms of the Merger Agreement.

Current wording

For year-to-date 2024, the Company’s effective tax rate was 35.9% compared to 62.0% year-to-date 2023. The year-to-date 2024 rate differed from the Company’s combined estimated federal and state statutory rate primarily due to additional tax expense from the vesting of share-based compensation awards. The year-to-date 2023 rate differed from the Company’s combined estimated federal and state statutory rate primarily due to non-deductible liabilities related to contingent consideration and Contingent Compensation Payments under the terms of the Merger Agreement.

Previous wording

(a)The May 4, 2024 and April 29, 2023 amounts represent thirteen-week periods and the February 3, 2024 amounts represent a fifty-three-week period.

Current wording

(a)The August 3, 2024 and July 29, 2023 amounts represent twenty-six-week periods and the February 3, 2024 amounts represent a fifty-three-week period.

Previous wording

(b)For the reporting period ended May 4, 2024, the availability under the ABL Facility was limited by our borrowing base of $646 million, less outstanding borrowings of $145 million and letters of credit of $19 million. For the reporting period ended February 3, 2024, the availability was limited by our borrowing base of $587 million, less outstanding borrowings of $145 million and letters of credit of $19 million. For the reporting period ended April 29, 2023, the availability under the ABL Facility was limited by our borrowing base of $633 million, less outstanding borrowings of $295 million and letters of credit of $30 million.

Current wording

(b)For the reporting period ended August 3, 2024, the availability under the ABL Facility was limited by our borrowing base of $647 million, less outstanding borrowings of $145 million and letters of credit of $19 million. For the reporting period ended February 3, 2024, the availability was limited by our borrowing base of $587 million, less outstanding borrowings of $145 million and letters of credit of $19 million. For the reporting period ended July 29, 2023, the availability under the ABL Facility was limited by our borrowing base of $579 million, less outstanding borrowings of $295 million and letters of credit of $30 million.

Previous wording

The following table provides a summary of our cash flow activity for the first quarter of 2024 and 2023:

Current wording

The following table provides a summary of our cash flow activity for year-to-date 2024 and 2023:

Previous wording

Net cash used for operating activities reflects net income (loss) adjusted for non-cash items, including depreciation and amortization, share-based compensation expense and deferred tax expense, as well as changes in working capital. Net cash used for operating activities in the first quarter of 2024 was $116 million, an increase in net cash flows used for operating activities of $8 million compared to the first quarter of 2023. The increase in net cash flows used for operating activities in the first quarter of 2024 was primarily driven by lower net income (loss), partially offset by lower net operating cash outflows associated with working capital changes of $19 million compared to the first quarter of 2023. The most significant working capital driver resulting in the decrease in net operating cash outflows this year compared to last year is related to income taxes paid of $6 million in the first quarter of 2024 compared to $16 million paid in the first quarter of 2023.

Current wording

Net cash used for operating activities reflects net income (loss) adjusted for non-cash items, including depreciation and amortization, share-based compensation expense, gain on sale of assets and deferred tax expense, as well as changes in working capital. Net cash used for operating activities year-to-date 2024 was $1 million, a decrease in net cash flows used for operating activities of $18 million compared to year-to-date 2023. The decrease in net cash flows used for operating activities in year-to-date 2024 was primarily driven by an increase in net income of $27 million and lower net operating cash outflows associated with working capital changes of $28 million compared to year-to-date 2023, partially offset by a decrease in depreciation and amortization of long-lived assets of $16 million and the $15 million amortization of the fair value adjustment on the acquired inventory from Adore Me year-to-date 2023. The most significant working capital driver resulting in the decrease in net operating cash outflows this year compared to last year is related to income taxes paid of $37 million year-to-date 2024 compared to $59 million paid year-to-date 2023.

Previous wording

Net cash used for investing activities in the first quarter of 2023 was $55 million, consisting solely of capital expenditures. The capital expenditures were primarily related to our store capital program, along with investments in technology, distribution and logistics to support our retail capabilities.

Current wording

Net cash used for investing activities year-to-date 2024 was $83 million, consisting of $99 million of capital expenditures, partially offset by $16 million of proceeds on the sale of certain non-store corporate-related assets. The capital expenditures were primarily related to our store capital program and investments in technology related to our strategic initiatives to drive growth.

Previous wording

Net cash used for investing activities in the first quarter of 2024 was $39 million, consisting solely of capital expenditures. The capital expenditures were primarily related to our store capital program and investments in technology related to our strategic initiatives to drive growth.

Current wording

Net cash used for investing activities year-to-date 2023 was $143 million, consisting primarily of capital expenditures. The capital expenditures were primarily related to our store capital program and investments in technology related to our strategic initiatives to drive growth and technology investments relating to separation activities from Bath & Body Works, Inc.

Previous wording

We are estimating capital expenditures to be approximately $230 million for fiscal year 2024. We expect that our capital expenditures will continue to be focused on our store capital program along with investments in technology related to our strategic initiatives to drive growth.

Current wording

We are estimating capital expenditures to be approximately $200 million for fiscal year 2024. We expect that our capital expenditures will continue to be focused on our store capital program along with investments in technology related to our strategic initiatives to drive growth.

Previous wording

Net cash used for financing activities in the first quarter of 2024 was $10 million, consisting primarily of a $16 million payment for contingent consideration related to the acquisition of Adore Me and offsetting borrowings and repayments of $90 million under the ABL Facility.

Current wording

Net cash used for financing activities year-to-date 2024 was $17 million, consisting primarily of a $16 million payment for contingent consideration related to the acquisition of Adore Me and offsetting borrowings and repayments of $145 million under the ABL Facility.

Previous wording

We did not repurchase any shares of our common stock under the March 2024 Share Repurchase Program during the first quarter of 2024. As of May 4, 2024, we were authorized to repurchase up to $250 million of our common stock under the March 2024 Share Repurchase Program.

Current wording

We did not repurchase any shares of our common stock under the March 2024 Share Repurchase Program during the second quarter or year-to-date 2024. As of August 3, 2024, we were authorized to repurchase up to $250 million of our common stock under the March 2024 Share Repurchase Program.

Previous wording

As of April 29, 2023, the $125 million payment to Goldman Sachs was recognized as a reduction to shareholders’ equity, consisting of a $100 million increase in Treasury Stock, which reflected the value of the initial 2.4 million shares received upon initial settlement, and a $25 million decrease in Paid-in Capital, which reflected the value of the stock then held by Goldman Sachs pending final settlement of the ASR Agreement. The $25 million recorded in Paid-in Capital as of April 29, 2023 was reclassified to Treasury Stock in the second quarter of 2023 in connection with the final settlement of the ASR Agreement. As a result of the initial share delivery, there was an additional $1 million increase in Treasury Stock, which reflected the excise tax liability recorded related to the share repurchase in accordance with the Inflation Reduction Act of 2022.

Current wording

In February 2023, as part of the January 2023 Share Repurchase Program, we entered into the ASR Agreement with Goldman Sachs to repurchase $125 million of our common stock. In February 2023, we made an initial payment of $125 million to Goldman Sachs and received an initial delivery of 2.4 million shares of our common stock. As a result of the initial share delivery, there was an additional $1 million increase in Treasury Stock, which reflected the excise tax liability recorded related to the share repurchase in accordance with the Inflation Reduction Act of 2022.

Previous wording

In February 2023, as part of the January 2023 Share Repurchase Program, we entered into the ASR Agreement with Goldman Sachs to repurchase $125 million of our common stock. In February 2023, we made an initial payment of $125 million to Goldman Sachs and received an initial delivery of 2.4 million shares of our common stock. The final number of shares received was based on the volume-weighted average price of our common stock during the term of the ASR Agreement, less a discount and subject to adjustments pursuant to the terms of the ASR Agreement. The final settlement of the ASR Agreement occurred in May 2023 subsequent to the end of the first quarter of 2023. At final settlement, we received an additional 1.3 million shares of our common stock from Goldman Sachs.

Current wording

In May 2023, upon final settlement of the ASR Agreement, we received an additional 1.3 million shares of our common stock from Goldman Sachs. The final number of shares received was based on the volume-weighted average price of our common stock during the term of the ASR Agreement, less a discount and subject to adjustments pursuant to the terms of the ASR Agreement. In connection with the final settlement of the ASR Agreement, the $25 million previously recorded in Paid-in Capital as of April 29, 2023 was reclassified to Treasury Stock in the second quarter of 2023.

Previous wording

Shares repurchased under the January 2023 Share Repurchase Program were retired upon repurchase. As a result, we retired the 2.4 million shares repurchased in connection with the settlement of the ASR Agreement during the first quarter of 2023. The retirement resulted in a reduction of $101 million in Treasury Stock, less than $1 million in the par value of Common Stock, $6 million in Paid-in Capital and $95 million in Retained Earnings during the first quarter of 2023.

Current wording

Shares repurchased under the January 2023 Share Repurchase Program were retired upon repurchase. As a result, we retired the 3.7 million shares repurchased in connection with the settlement of the ASR Agreement year-to-date 2023. The retirement resulted in a reduction of $126 million in Treasury Stock, less than $1 million in the par value of Common Stock, $9 million in Paid-in Capital and $117 million in Retained Earnings year-to-date 2023.

Previous wording

Cash paid for interest was $12 million and $13 million for the first quarter of 2024 and 2023, respectively.

Current wording

Cash paid for interest was $38 million and $44 million for year-to-date 2024 and year-to-date 2023, respectively.

Previous wording

On August 2, 2021, we entered into a term loan B credit facility in an aggregate principal amount of $400 million, which will mature in August 2028. The discounts and issuance costs from the Term Loan Facility are being amortized through the maturity date and are included within Long-term Debt on the Consolidated Balance Sheets. Commencing in December 2021, we are required to make quarterly principal payments on the Term Loan Facility in an amount equal to 0.25% of the original principal amount of $400 million. We made principal payments for the Term Loan Facility of $1 million during both the first quarter of 2024 and 2023.

Current wording

On August 2, 2021, we entered into a term loan B credit facility in an aggregate principal amount of $400 million, which will mature in August 2028. The discounts and issuance costs from the Term Loan Facility are being amortized through the maturity date and are included within Long-term Debt on the Consolidated Balance Sheets. Commencing in December 2021, we are required to make quarterly principal payments on the Term Loan Facility in an amount equal to 0.25% of the original principal amount of $400 million. We made principal payments for the Term Loan Facility of $1 million during both the second quarter of 2024 and 2023 and $2 million during both year-to-date 2024 and 2023.