Victoria's Secret & Co.

Previous wording

•difficulties arising from turnover in company leadership or other key positions;

Current wording

•difficulties arising from changes and turnover in company leadership or other key positions;

Previous wording

•our ability to realize the potential benefits and synergies sought with the acquisition of Adore Me;

Current wording

•our ability to integrate acquired businesses and realize the benefits and synergies sought with such acquisitions;

Previous wording

•our ability to incorporate artificial intelligence into our business operations successfully and ethically while managing associated risks;

Current wording

•our ability to incorporate artificial intelligence into our business operations successfully and ethically while effectively managing the associated risks;

Previous wording

•delays or disruptions in shipping and transportation and related pricing impacts; and

Current wording

•delays or disruptions in shipping and transportation and related pricing impacts;

Previous wording

The following discussion and analysis of financial condition and results of operations are based upon our Consolidated and Combined Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as codified in the Accounting Standards Codification (“ASC”). The following information should be read in conjunction with our financial statements and the related notes included in Item 8. Financial Statements and Supplementary Data.

Current wording

The following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as codified in the Accounting Standards Codification (“ASC”). The following information should be read in conjunction with our financial statements and the related notes included in Item 8. Financial Statements and Supplementary Data.

Previous wording

Victoria’s Secret, PINK and Adore Me merchandise is sold online through e-commerce platforms, through retail stores located in the U.S., Canada and China, and through international stores and websites operated by partners under franchise, license, wholesale and joint venture arrangements. We have a presence in nearly 70 countries and we believe we benefit from global brand awareness, a wide and compelling product assortment and a powerful, deep connection with our customers.

Current wording

Our merchandise is available through our digital channels, in retail stores across the U.S., Canada and China, and through international stores and websites and mobile applications operated by partners under franchise, license, wholesale and joint venture arrangements. With a presence in nearly 70 countries, we benefit from strong global brand recognition, a compelling product assortment and a deep, lasting connection with our customers.

Previous wording

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

Current wording

In December 2022, we acquired Adore Me. In both 2024 and 2023, we recognized the financial impact of purchase accounting items related to the acquisition, 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 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 2023. For additional information, see Note 2, “Acquisition” to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Previous wording

(a)In 2023, we recognized pre-tax charges of $50 million ($42 million after-tax) within net income, $29 million included in costs of goods sold, buying and occupancy expense, $16 million included in general, administrative and store operating expense and $5 million included in interest expense, related to the financial impact of purchase accounting items and professional service costs related to the acquisition of Adore Me. In the fourth quarter of 2022, we recognized a pre-tax charge of $15 million ($14 million after-tax), included in general, administrative and store operating expense, related to professional services and other transaction-related costs associated with the acquisition of Adore Me. For additional information, see Note 2, “Acquisition” included in Item 8. Financial Statements and Supplementary Data.

Current wording

(a)In 2024 and 2023, we recognized pre-tax expense of $9 million and $50 million ($6 million and $42 million after-tax, respectively) within net income 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 $4 million and $16 million, respectively, included in general, administrative and store operating expense and interest expense of $5 million and $5 million, respectively. Additionally, expense of $29 million is in costs of goods sold, buying and occupancy expense in 2023. For additional information, see Note 2, “Acquisition” to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Previous wording

(b)In 2023, we recognized $25 million ($19 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 10, “Intangible Assets” included in Item 8. Financial Statements and Supplementary Data.

Current wording

(b)In both 2024 and 2023, we recognized amortization expense of $25 million ($19 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 9, “Intangible Assets” to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Previous wording

(c)In the first quarter of 2023, we recognized a pre-tax charge of $11 million ($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. In 2022, we recognized pre-tax charges of $35 million ($26 million after-tax), $21 million included in general, administrative and store operating expense and $14 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 6, “Restructuring Activities” included in Item 8. Financial Statements and Supplementary Data.

Current wording

(d)In the third quarter of 2024, we recognized a pre-tax charge of $13 million ($11 million after-tax) in general, administrative and store operating expense related to the appointment of a new CEO and the elimination of two executive officer roles to restructure our executive leadership team. In the first quarter of 2023, we recognized a pre-tax charge of $11 million ($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 reorganize and improve our organizational structure. For additional information, see Note 5, “Restructuring Activities” to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Previous wording

The following table compares 2023 U.S. company-operated store data to the comparable period for 2022:

Current wording

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

Previous wording

We utilize the retail calendar for financial reporting. As such, our results for 2023 represent the 53-week period ended February 3, 2024, and the results for 2022 represent the 52-week period ended January 28, 2023. We estimate the extra week in 2023 represented approximately $80 million in incremental net sales and approximately $20 million in incremental operating income.

Current wording

The following information summarizes our results of operations for 2024 compared to 2023. As a result of the retail calendar, our results for 2024 represent the 52-week period ended February 1, 2025, and our results for 2023 represent the 53-week period ended February 3, 2024. We estimate the extra week in 2023 represented approximately $80 million in incremental net sales and approximately $20 million in incremental operating income.

Previous wording

For 2023, operating income decreased $232 million, to $246 million, compared to operating income of $478 million in 2022, and the operating income rate (expressed as a percentage of net sales) decreased to 4.0% from 7.5%. The drivers of the operating income results are discussed in the following sections.

Current wording

For 2024, operating income increased $64 million, to $310 million, compared to operating income of $246 million in 2023, and the operating income rate (expressed as a percentage of net sales) increased to 5.0% from 4.0%. The drivers of the operating income results are discussed in the following sections.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(a)The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. The change in comparable sales provides an indication of period over period growth (decline). A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Closed stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more. Upon re-opening, the stores are included in the calculation. Additionally, stores are excluded if total selling square footage in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Therefore, the percentage change in comparable sales for 2023 was calculated on a 53-to-53-week basis and the percentage change in comparable sales for 2022 was calculated on a 52-to-52-week basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.

Current wording

(a)The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. The change in comparable sales provides an indication of period over period growth (decline). A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Closed stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more. Upon re-opening, the stores are included in the calculation. Additionally, stores are excluded if total selling square footage in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Therefore, the percentage change in comparable sales for 2024 was calculated on a 52-to-52-week basis and the percentage change in comparable sales for 2023 was calculated on a 53-to-53-week basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.

Previous wording

Net sales in 2023 decreased $162 million, or 3%, to $6.182 billion compared to $6.344 billion in 2022. We estimate the extra week in 2023 represented approximately $80 million in incremental net sales.

Current wording

Net sales in 2024 increased $48 million, or 1%, to $6.230 billion compared to $6.182 billion in 2023. In the fourth quarter of 2024, we recorded a change in our accounting estimate relating to the expected redemption of our outstanding gift cards. As a result of this change in accounting estimate, we recognized a cumulative adjustment which increased net sales by approximately $26 million in the fourth quarter of 2024. Additionally, we estimate the extra week in 2023 represented approximately $80 million in incremental net sales. Excluding the impact from the change in accounting estimate relating to outstanding gift cards in 2024 and the incremental net sales related to the extra week in 2023, net sales in 2024 increased approximately 2% compared to 2023.

Previous wording

In the direct channel, net sales increased $172 million, or 9%, to $2.015 billion driven by the inclusion of Adore Me sales in our results beginning in 2023 and the incremental net sales from the extra week in 2023. On a comparable basis, our direct channel sales decrease was driven by a decrease in average unit retail, conversion and traffic.

Current wording

In the direct channel, net sales increased $27 million, or 1%, to $2.042 billion compared to 2023 as increases in traffic and average unit retail were partially offset by the incremental net sales from the extra week in 2023 and a decrease in conversion.

Previous wording

For 2023, our gross profit decreased $16 million to $2.242 billion, and our gross profit rate (expressed as a percentage of net sales) increased to 36.3% from 35.6%.

Current wording

For 2024, our gross profit increased $42 million to $2.284 billion, and our gross profit rate (expressed as a percentage of net sales) increased to 36.7% from 36.3%.

Previous wording

For 2023, the decrease in gross profit dollars was primarily due to the decrease in merchandise margin dollars driven by the decrease in net sales and an increase in promotional activity, partially offset by a decrease in supply chain costs, reductions in costs of goods sold related to our supply chain initiative and incremental profit related to the extra week in 2023. Buying and occupancy expenses were down compared to 2022, primarily driven by a legal reserve of $22 million related to a landlord matter in the first quarter of 2022 and restructuring charges of $14 million in 2022, partially offset by the inclusion of Adore Me buying and occupancy expenses beginning in 2023. Additionally, the decrease in gross profit dollars was driven by the recognition in gross profit of the $29 million inventory fair value step-up adjustment related to acquired inventory from Adore Me.

Current wording

For 2024, the increase in gross profit dollars was primarily due to the increase in net sales, reductions in costs of goods sold related to our supply chain initiative and a decrease in buying and occupancy expenses, partially offset by an increase in promotional activity and incremental gross profit recognized in 2023 as a result of the extra week last year. Additionally, the increase in gross profit dollars compared to 2023 was driven by the recognition in gross profit of $29 million in 2023 related to the fair value step-up adjustment on the acquired inventory from Adore Me, partially offset by $22 million of impairment and other charges for certain of our equity method investments in 2024.

Previous wording

For 2023, our general, administrative and store operating expenses increased $216 million, or 12%, to $1.996 billion. The increase in general, administrative and store operating expenses compared to 2022 was primarily due to the inclusion of Adore Me general, administrative and store operating expenses beginning in 2023 and strategic marketing investments including the Victoria’s Secret World Tour in 2023. The increase in general, administrative and store operating expenses in 2023 was also due to the amortization of intangible assets acquired from Adore Me of $25 million, incremental expenses in the extra week in 2023, recognition of $8 million of restructuring charges to continue to reorganize and improve our organizational structure in the first quarter of 2023, partially offset by restructuring charges of $21 million in 2022.

Current wording

For 2024, our general, administrative and store operating expenses decreased $22 million, or 1%, to $1.974 billion. The decrease in general, administrative and store operating expenses compared to 2023 was primarily due to a decrease in marketing expenses and charges related to Adore Me purchase accounting items, partially offset by an increase in certain other administrative expenses. The decrease in general, administrative and store operating expenses in 2024 was also due to incremental expenses recognized in 2023 as a result of the extra week last year.

Previous wording

The general, administrative and store operating expense rate (expressed as a percentage of net sales) increased to 32.3% from 28.1% due to the inclusion of Adore Me general, administrative and store operating expenses beginning in 2023, strategic marketing investments including the Victoria’s Secret World Tour and deleverage driven by the decrease in sales compared to 2022.

Current wording

The general, administrative and store operating expense rate (expressed as a percentage of net sales) decreased to 31.7% from 32.3% due to leverage driven by the increase in net sales compared to 2023 and the decrease in marketing expenses.

Previous wording

For 2023, our interest expense increased $39 million to $99 million compared to 2022, primarily driven by the increase in our outstanding debt due to the borrowings from the ABL Facility during 2023 and a higher average borrowing rate for our Term Loan Facility and ABL Facility.

Current wording

For 2024, our interest expense decreased $13 million to $86 million compared to 2023, primarily due to our lower average outstanding debt and lower average borrowing rate for our ABL Facility, partially offset by our higher average borrowing rate for our Term Loan Facility.

Previous wording

For 2023, the Company's effective tax rate was 21.4% compared to 19.0% in 2022. The 2023 rate differed from the Company's combined estimated federal and state statutory rate primarily due to foreign earnings taxed at a rate lower than our combined estimated federal and state statutory rate and due to the resolution of certain tax matters. The 2022 rate was lower than the Company's combined estimated federal and state statutory rate primarily due to the recognition of excess tax benefits related to shared-based compensation awards that vested in 2022.

Current wording

For 2024, the Company's effective tax rate was 23.6% compared to 21.4% in 2023. The difference between the Company's effective tax rate in 2024 and the combined estimated federal and state statutory rate was primarily due to foreign earnings taxed at a rate lower than our combined estimated federal and state statutory rate, partially offset by additional tax expense related to share-based compensation awards that vested in 2024. The difference between the Company's effective tax rate in 2023 and the combined estimated federal and state statutory rate was primarily due to foreign earnings taxed at a rate lower than our combined estimated federal and state statutory rate and the resolution of certain tax matters.

Previous wording

(a)Amounts shown represent the fifty-three-week period ended February 3, 2024 and the fifty-two-week period ended January 28, 2023.

Current wording

(a)Amounts shown represent the fifty-two-week period ended February 1, 2025 and the fifty-three-week period ended February 3, 2024.

Previous wording

(b)For the period ended February 3, 2024, the availability under the ABL Facility was limited by our borrowing base of $587 million, less outstanding borrowings of $145 million and letters of credit of $19 million. For the period ended January 28, 2023, the availability was limited by our borrowing base of $596 million, less outstanding borrowings of $295 million and letters of credit of $42 million.

Current wording

(b)For the period ended February 1, 2025, the availability under the ABL Facility was limited by our borrowing base of $550 million, less letters of credit of $17 million. For the 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.

Previous wording

Net cash provided by operating activities reflects net income 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 provided by operating activities in 2023 was $389 million, a decrease in net cash flows provided by operating activities of $48 million compared to 2022. The decrease in net cash flows provided by operating activities in 2023 was primarily driven by a decrease in net income of $222 million, partially offset by lower operating cash outflows associated with working capital changes of $115 million compared to 2022. The most significant working capital driver resulting in lower net operating cash outflows this year compared to last year was the timing of payments related to the increased inventory levels throughout last year, which were primarily driven by modal mix changes and longer in-transit shipment times. The other significant working capital driver resulting in lower net operating cash outflows this year is related to income taxes paid of $74 million in 2023 compared to $161 million paid in 2022.

Current wording

Net cash provided by operating activities reflects net income adjusted for non-cash items, including depreciation and amortization, share-based compensation expense, equity method investment impairment charges, deferred tax expense and gain on sale of assets, as well as changes in working capital. Net cash provided by operating activities in 2024 was $425 million, an increase in net cash provided by operating activities of $36 million compared to 2023. The increase in net cash provided by operating activities in 2024 was primarily driven by lower net operating cash outflows associated with working capital changes of $74 million, an increase in net income of $53 million and equity method impairment charges of $19 million in 2024, partially offset by $39 million of payments for contingent compensation related to the acquisition of Adore Me in 2024, the $29 million amortization of the fair value adjustment on the acquired inventory from Adore Me in 2023 and a decrease in depreciation and amortization of long-lived assets of $26 million. The most significant working capital drivers resulting in the increase in net operating cash flows in 2024 compared to 2023 were the payment of the occupancy-related legal matter in 2023 and income taxes paid of $54 million in 2024 compared to $74 million paid in 2023. The increase in net operating cash flows in 2024 compared to 2023 was partially offset by the decrease in Accounts Payable in 2024.

Previous wording

Net cash used for investing activities in 2022 was $555 million, consisting primarily of our $369 million cash payment, net of cash acquired, in connection with the Adore Me acquisition and capital expenditures of $164 million. 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 in 2024 was $153 million, consisting primarily of capital expenditures of $178 million, partially offset by $25 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 2023 was $254 million, consisting of capital expenditures of $256 million. 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 our Former Parent.

Current wording

Net cash used for investing activities in 2023 was $254 million, consisting of capital expenditures of $256 million. 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.

Previous wording

We are estimating 2024 capital expenditures to be approximately $230 million. 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 2025 capital expenditures to be approximately $240 million. We expect that our capital expenditures will be focused on our store capital program along with investments in technology and logistics related to our strategic initiatives to drive growth and support productivity.

Previous wording

Our Board of Directors determines share repurchase authorizations, giving consideration to our levels of profit and cash flows, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements and the Tax Matters Agreement with our Former Parent, as well as financial and other conditions existing at the time. We use cash flows provided by our operating activities to fund our share repurchases. Once authorized by our Board of Directors, the timing and amount of any share repurchases are made at our discretion, taking into account a number of factors, including market conditions.

Current wording

Our Board determines share repurchase authorizations, giving consideration to our levels of profit and cash flows, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements, as well as financial and other conditions existing at the time. We use cash flows provided by our operating activities to fund any share repurchases. Once authorized by our Board of Directors, the timing and amount of any share repurchases are made at our discretion, taking into account a number of factors, including market conditions.

Previous wording

In March 2024, subsequent to the end of fiscal year 2023, our Board of Directors approved a share repurchase program (“March 2024 Share Repurchase Program”), authorizing the repurchase of up to $250 million of our common stock, subject to market conditions and other factors, through open market, accelerated share repurchase or privately negotiated transactions, including pursuant to one or more Rule 10b5-1 trading plans. The March 2024 Share Repurchase Program is open-ended in term, eligible to begin immediately and will continue until exhausted.

Current wording

In March 2024, our Board approved a share repurchase program (“March 2024 Share Repurchase Program”), authorizing the repurchase of up to $250 million of our common stock, subject to market conditions and other factors, through open market, accelerated share repurchase or privately negotiated transactions, including pursuant to one or more Rule 10b5-1 trading plans. The March 2024 Share Repurchase Program is open-ended in term and will continue until exhausted.

Previous wording

In January 2023, our Board of Directors approved a share repurchase program (“January 2023 Share Repurchase Program”), authorizing the repurchase of up to $250 million of our common stock. The authorization, which expired at the end of 2023, was utilized in 2023 to repurchase shares in the open market and under the accelerated share repurchase agreement described below.

Current wording

In January 2023, our Board approved a share repurchase program (“January 2023 Share Repurchase Program”), authorizing the repurchase of up to $250 million of our common stock. The authorization, which expired at the end of 2023, was utilized in 2023 to repurchase shares in the open market and under the accelerated share repurchase agreement described below.

Previous wording

We have not paid any cash dividends since becoming an independent, publicly traded company. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if and when we commence paying dividends. The declaration and amount of any dividends to holders of our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including our financial condition, earnings, cash flows, capital requirements of our business, covenants associated with our debt obligations, legal requirements, regulatory constraints, industry practice and any other factors the Board of Directors deems relevant. We would use net cash flow provided by operating and financing activities to fund our dividends.

Current wording

We have not paid any cash dividends since becoming an independent, publicly traded company. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if and when we commence paying dividends. The declaration and amount of any dividends to holders of our common stock will be at the discretion of our Board and will depend upon many factors, including our financial condition, earnings, cash flows, capital requirements of our business, covenants associated with our debt obligations, legal requirements, regulatory constraints, industry practice and any other factors the Board deems relevant. We would use net cash flow provided by operating and financing activities to fund our dividends.

Previous wording

Cash paid for interest was $87 million and $52 million in 2023 and 2022, respectively.

Current wording

Cash paid for interest was $77 million and $87 million in 2024 and 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 $4 million during both 2023 and 2022.

Current wording

We have a senior secured term loan B credit facility with an original 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. 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 $4 million during both 2024 and 2023.

Previous wording

In May 2023, we amended our Term Loan Facility to allow for an early transition to using the Term Secured Overnight Financing Rate (“Term SOFR”) as the applicable reference rate to calculate interest instead of the London Interbank Offered Rate (“LIBOR”). Prior to the amendment, interest under the Term Loan Facility was calculated by reference to LIBOR or an alternative base rate, plus an interest rate margin equal to (i) in the case of LIBOR loans, 3.25% and (ii) in the case of alternate base rate loans, 2.25%. The LIBOR rate applicable to the Term Loan Facility was subject to a floor of 0.50%. In accordance with the amendment, interest on Term SOFR loans under the Term Loan Facility is now calculated by reference to Term SOFR, plus an interest rate margin ranging from 3.36% to 3.68%. The obligation to pay principal and interest on the loans under the Term Loan Facility is jointly and severally guaranteed on a full and unconditional basis by certain of our wholly-owned domestic subsidiaries. The loans under the Term Loan Facility are secured on a first-priority lien basis by certain assets of ours and guarantors that do not constitute priority collateral of the ABL Facility and on a second-priority lien basis by priority collateral of the ABL Facility, subject to customary exceptions. As of February 3, 2024, the interest rate on loans under the Term Loan Facility was 8.89%.

Current wording

Interest on the loans under the Term Loan Facility is calculated by reference to the Term Secured Overnight Financing Rate (“Term SOFR”) or an alternative base rate, plus an interest rate margin (i) in the case of Term SOFR loans, ranging from 3.36% to 3.68% and (ii) in the case of alternate base rate loans, equal to 2.25%. The obligation to pay principal and interest on the loans under the Term Loan Facility is jointly and severally guaranteed on a full and unconditional basis by certain of our wholly-owned domestic subsidiaries. The loans under the Term Loan Facility are secured on a first-priority lien basis by certain assets of ours and our subsidiary guarantors that do not constitute priority collateral under the ABL Facility and on a second-priority lien basis by priority collateral of the ABL Facility, subject to customary exceptions. As of February 1, 2025, the interest rate on loans under the Term Loan Facility was 7.94%.

Previous wording

On August 2, 2021, we also entered into a senior secured asset-based revolving credit facility. The ABL Facility allows for borrowings and letters of credit in U.S. dollars or Canadian dollars, and has aggregate commitments of $750 million and an expiration date of August 2026. The availability under the ABL Facility is the lesser of (i) the borrowing base, determined primarily based on our eligible U.S. and Canadian credit card receivables, eligible accounts receivable, eligible inventory and eligible real property, and (ii) the aggregate commitment. In May 2023, we amended our ABL Facility to allow for an early transition to using Term SOFR as the applicable reference rate to calculate interest instead of LIBOR. Prior to the amendment, interest on the loans under the ABL Facility was calculated by reference to (i) LIBOR or an alternative base rate and (ii) in the case of loans denominated in Canadian dollars, Canadian Dollar Offered Rate (“CDOR”) or a Canadian base rate, plus an interest rate margin based on average daily excess availability ranging from (x) in the case of LIBOR and CDOR loans, 1.50% to 2.00% and (y) in the case of alternate base rate loans and Canadian base rate loans, 0.50% to 1.00%. In accordance with the amendment, interest on Term SOFR loans under the ABL Facility is now calculated by reference to Term SOFR, plus an interest rate margin based on average daily excess availability ranging from 1.60% to 2.10%. Unused commitments under the ABL Facility accrue an unused commitment fee ranging from 0.25% to 0.30%. The obligation to pay principal and interest on the loans under the ABL Facility is jointly and severally guaranteed on a full and unconditional basis by certain of our wholly-owned domestic and Canadian subsidiaries. The loans under the ABL Facility are secured on a first-priority lien basis by our eligible U.S. and Canadian credit card receivables, eligible accounts receivable, eligible inventory and eligible real property and on a second-priority lien basis on substantially all other assets of ours, subject to customary exceptions.

Current wording

We also have a senior secured asset-based revolving credit facility. The ABL Facility allows for borrowings and letters of credit in U.S. dollars or Canadian dollars and has aggregate commitments of $750 million and an expiration date of August 2026. The availability under the ABL Facility is equal to the lesser of (i) the borrowing base, determined primarily based on our eligible U.S. and Canadian credit card receivables, eligible accounts receivable, eligible inventory and eligible real property, and (ii) the maximum aggregate commitment amount of $750 million. Interest on the loans under the ABL Facility is calculated by reference to (i) Term SOFR or an alternative base rate and (ii) in the case of loans denominated in Canadian dollars, Canadian Dollar Offered Rate (“CDOR”) or a Canadian base rate, plus an interest rate margin based on average daily excess availability ranging from (x) in the case of CDOR loans, 1.50% to 2.00%, (y) in the case of alternate base rate loans and Canadian base rate loans, 0.50% to 1.00%, and (z) in the case of Term SOFR loans, 1.60% to 2.10%. Unused commitments under the ABL Facility accrue an unused commitment fee ranging from 0.25% to 0.30%. The obligation to pay principal and interest on the loans under the ABL Facility is jointly and severally guaranteed on a full and unconditional basis by certain of our wholly-owned domestic and Canadian subsidiaries. The loans under the ABL Facility are secured on a first-priority lien basis by our eligible U.S. and Canadian credit card receivables, eligible accounts receivable, eligible inventory and eligible real property and on a second-priority lien basis on substantially all other assets of ours, subject to customary exceptions.

Previous wording

We borrowed $465 million and $295 million from the ABL Facility during 2023 and 2022, respectively, and made payments of $615 million under the ABL Facility during 2023. As of February 3, 2024, there were borrowings of $145 million outstanding under the ABL Facility and the interest rate on the borrowings was 7.46%. We had $19 million of outstanding letters of credit as of February 3, 2024 that further reduced our availability under the ABL Facility. As of February 3, 2024, our remaining availability under the ABL Facility was $423 million.

Current wording

We borrowed $460 million and $465 million from the ABL Facility during 2024 and 2023, respectively, and made repayments of $605 million and $615 million under the ABL Facility during 2024 and 2023, respectively. As of February 1, 2025, there were no borrowings outstanding under the ABL Facility and we had $17 million of outstanding letters of credit that reduced our availability under the ABL Facility. As of February 1, 2025, our remaining availability under the ABL Facility was $533 million.

Previous wording

(a)Long-term debt obligations relate to our principal and interest payments for our outstanding debt. Interest payments have been estimated based on the coupon rate for fixed rate obligations. For variable interest rate obligations under the Term Loan Facility, the interest payments have been estimated based on an interest rate of 8.89%, which was the interest rate as of February 3, 2024. For variable interest rate obligations under the ABL Facility, the interest payments have been estimated based on an interest rate of 7.46%, which was the interest rate as of February 3, 2024. For additional information, see Note 13 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Current wording

(a)Long-term debt obligations relate to our principal and interest payments for our outstanding debt. Interest payments have been estimated based on the coupon rate for fixed rate obligations. For variable interest rate obligations under the Term Loan Facility, the interest payments have been estimated based on an interest rate of 7.94%, which was the interest rate as of February 1, 2025. For additional information, see Note 12 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.