10q10k10q10k.net

What changed in Victoria's Secret & Co.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Victoria's Secret & Co.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+437 added−456 removedSource: 10-K (2023-03-17) vs 10-K (2022-03-18)

Top changes in Victoria's Secret & Co.'s 2023 10-K

437 paragraphs added · 456 removed · 308 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

77 edited+33 added−11 removed43 unchanged
Biggest changeThe following table provides the number of our company-operated retail stores in operation as of January 29, 2022 and January 30, 2021: January 29, 2022 January 30, 2021 U.S. 808 846 Canada 26 25 Greater China — Beauty and Accessories 35 36 Greater China — Full Assortment 30 26 Total 899 933 2 Table of Contents The following table provides the changes in the number of our company-operated retail stores operated for the past three fiscal years: Beginning of Year Opened Closed Transferred to Joint Venture (a) End of Year 2021 933 7 (41) — 899 2020 1,181 26 (248) (26) 933 2019 1,222 25 (66) — 1,181 _______________ (a) Relates to the U.K. joint venture with Next.
Biggest changeThe following table provides the changes in the number of our company-operated Victoria's Secret and PINK, China joint venture and Adore Me retail stores operated for the past three fiscal years: Beginning of Year Opened Closed Acquired (a) Reclassed to Joint Venture (b) End of Year 2022 (c) 899 26 (24) 6 8 915 2021 933 7 (41) — — 899 2020 1,181 26 (248) — (26) 933 _______________ (a) Relates to acquisition of Adore Me.
We have shifted the focus of our global message across platforms towards promoting brand inclusivity and highlighting our products through an empowering, relatable, fresh brand voice to align with our customers’ values. Our marketing strategies are designed to drive brand awareness and create continued loyalty between our customers and our brands.
We have shifted the focus of our global message across platforms towards promoting inclusivity and highlighting our products through an empowering, relatable, fresh brand voice to align with our customers’ values. Our marketing strategies are designed to drive brand awareness and create continued loyalty between our customers and our brands.
Our Experience work is focused on: • Increasing associate engagement on our DEI journey • Driving inclusive leadership across our organization • Fostering a happy and healthy culture Purpose We do not just sell products, we inspire and uplift.
Our DEI Experience work is focused on: • Increasing associate engagement on our DEI journey • Driving inclusive leadership across our organization • Fostering a happy and healthy culture Purpose We do not just sell products, we inspire and uplift.
In addition, we maintain an Ethics Hotline 24 hours a day, 7 days a week where associates may anonymously report potential instances of unethical conduct and potential violations of law and/or company policies.
In addition, we maintain an Ethics Hotline where associates may anonymously report potential instances of unethical conduct and potential violations of law or company policies 24 hours a day, 7 days a week.
We also recently extended a worldwide Employee Assistance Program for all associates and anyone in their household to support mental health well-being. In addition, we offer paid time off to part-time eligible associates. We are committed to equal opportunity and treatment for all associates which includes equal career advancement opportunities and equitable and competitive wages.
We also recently extended a worldwide Employee Assistance Program for all associates and anyone in their household to support mental health well-being. In addition, we offer paid time off to eligible part-time associates. We are committed to equal opportunity and treatment for all associates which includes equal career advancement opportunities and equitable and competitive wages.
We also find it important to cater messaging towards different geographic and cultural preferences and customs in order to connect with our customers. We are committed to evolving our brand projection to serve our consumer and are developing a number of initiatives to continue that evolution through traditional media, entertainment platforms, and community-driven forums.
We also find it important to cater messaging towards different geographic and cultural preferences and customs in order to better connect with our customers. We are committed to evolving our brand projection to serve our consumer and are developing a number of initiatives to continue that evolution through traditional media, entertainment platforms, and community-driven forums.
Our People work is focused on: • Retaining more diverse associates • Increasing diversity within our workforce • Enabling the growth and advancement of all our talent Experience When our people are at their best, our company is at its best. We are committed to creating a workplace where everyone can bring their whole selves to work and thrive.
Our DEI People work is focused on: • Retaining more diverse associates • Increasing diversity within our workforce • Enabling the growth and advancement of all our talent Experience When our people are at their best, our company is at its best. We are committed to creating a workplace where everyone can bring their whole selves to work and thrive.
The Exchange Act requires us to file reports, proxy statements and other information with the U.S. Securities and Exchange Commission ("SEC"). The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC's website at www.sec.gov .
The Exchange Act requires us to file reports, proxy statements and other information with the U.S. Securities and Exchange Commission (“SEC”). The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC's website at www.sec.gov .
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on the Investors section of our website, www.victoriassecretandco.com .
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on the Investors section of our website, www.victoriassecretandco.com .
While our history runs deep as a dominant player in intimates, our brands also provide compelling offerings in fragrance, beauty, apparel, loungewear, sleepwear, athletic attire and swimwear. We believe our recent and decisive actions to evolve our positioning and promote inclusivity and diversity will allow us to attract new customers while also deepening our connection with existing ones.
While our history runs deep as a dominant player in intimates, our brands also provide compelling offerings in fragrance, beauty, apparel, loungewear, sleepwear, athletic attire and swimwear. We believe our actions to evolve our positioning and promote inclusivity and diversity will allow us to attract new customers while also deepening our connection with existing ones.
Under this agreement, we own 49% of the joint venture, and Next owns 51% and is responsible for operations. We account for our investment in the joint venture under the equity method of accounting. For additional information, see Note 5 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.
Under this agreement, we own 49% of the joint venture, and Next owns 51% and is responsible for operations. We account for our investment in the joint venture under the equity method of accounting. For additional information, see Note 6 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.
We offer a range of products across intimate apparel, sleepwear, loungewear, swimwear and beauty. Victoria’s Secret Victoria’s Secret is a leading lingerie brand, with an established history of over 40 years. The Victoria’s Secret brand celebrates female confidence and inspires women with beautiful products and experiences.
We offer a range of products across intimate apparel, sleepwear, loungewear, swimwear and beauty. Victoria’s Secret Victoria’s Secret is a leading lingerie brand, with an established history of over 45 years. The Victoria’s Secret brand celebrates female confidence and inspires women with beautiful products and experiences.
On August 3, 2021, Victoria's Secret & Co. became an independent, publicly-traded company trading on the NYSE under the stock symbol "VSCO." The Separation was achieved through the Former Parent’s distribution (the “Distribution”) of 100% of the shares of our common stock to holders of the Former Parent's common stock as of the close of business on the record date of July 22, 2021.
On August 3, 2021, Victoria's Secret & Co. became an independent, publicly-traded company trading on the NYSE under the stock symbol “VSCO.” The Separation was achieved through the Former Parent’s distribution (the “Distribution”) of 100% of the shares of our common stock to holders of the Former Parent's common stock as of the close of business on the record date of July 22, 2021.
Working Capital We fund our business operations through a combination of available cash and cash equivalents and cash flows generated from operations. In addition, our credit facilities are available for additional working capital needs and investment opportunities. 6 Table of Contents Regulations We and our products are subject to regulation by various federal, state, local and foreign regulatory authorities.
Working Capital We fund our business operations through a combination of available cash and cash equivalents and cash flows generated from operations. In addition, our credit facilities are available for additional working capital needs and investment opportunities. Regulations We and our products are subject to regulation by various federal, state, local and foreign regulatory authorities.
Due to challenging business results for our business in the United Kingdom ("U.K."), we entered into administration in June 2020 to restructure store lease agreements and reduce operating losses in the U.K. business. In October 2020, we entered into a joint venture with Next PLC ("Next") for the business in the U.K. and Ireland.
Due to challenging business results for our business in the United Kingdom (“U.K.”), we entered into administration in June 2020 to restructure store lease agreements and reduce operating losses in the U.K. business. In October 2020, we entered into a joint venture with Next PLC (“Next”) for the business in the U.K. and Ireland.
For us, it is not just about selling products – it is about using our scale and platform to champion every voice and drive forward inclusion and equity for every person.
For us, it is not just about selling products it is about using our scale and platform to champion every voice and drive forward inclusion and equity for every individual.
Our retail footprint in North America spans the U.S. and Canada with 834 stores, representing a combined 5.9 million square feet of selling space as of the end of 2021. Our North American stores channel creates an immersive environment for customers to experience our brands and try new products.
Our retail footprint in North America spans the U.S. and Canada with 843 stores, representing a combined 5.9 million square feet of selling space as of the end of 2022. Our North American stores channel creates an immersive environment for customers to experience our brands and try new products.
The systems include applications related to point-of-sale, e-commerce, merchandising, planning, sourcing, logistics, inventory management, data security and support systems including human resources and finance. Seasonal Business Our operations are seasonal in nature and consist of two principal selling seasons: Spring (the first and second quarters) and Fall (the third and fourth quarters).
The systems include applications related to point-of-sale, e-commerce, merchandising, planning, sourcing, logistics, inventory management, data security and support systems including human resources and finance. 6 Table of Conten t s Seasonal Business Our operations are seasonal in nature and consist of two principal selling seasons: Spring (the first and second quarters) and Fall (the third and fourth quarters).
We have thoughtfully designed our supply chain around three key principles: speed-to-market, quality and cost efficiency. When possible we leverage the speed that we have in our supply chain, our close partnerships with suppliers and the capabilities of our sourcing, production and logistics teams to actively manage our inventory and adjust for channel shifts across our business.
We have thoughtfully designed our supply chain around three key principles: speed-to-market, quality and cost efficiency. 4 Table of Conten t s When possible we leverage the speed that we have in our supply chain, our close partnerships with suppliers and the capabilities of our sourcing, production and logistics teams to actively manage our inventory and adjust for channel shifts across our business.
By continuing to encourage a workplace environment where diversity, equity and inclusion are valued, we believe we can serve our customers better, as well as retain highly talented associates, suppliers and vendors of different backgrounds and experiences.
By encouraging a workplace environment where diversity, equity and inclusion are valued, we believe we can serve our customers better, as well as retain highly talented associates, suppliers and vendors of different backgrounds and experiences.
Johnson served as the Chief Financial Officer and Chief Administrative Officer of Big Lots, Inc. from August 2015 to August 2019 and Chief Financial Officer from August 2012 to August 2015; • Dein Boyle, 62, has been our Chief Operating Officer since 2020. Mr.
Prior to July 2021, Mr. Johnson served as the Chief Financial Officer and Chief Administrative Officer of Big Lots, Inc. from August 2015 to August 2019 and Chief Financial Officer from August 2012 to August 2015; • Dein Boyle, 63, has been our Chief Operating Officer since 2020. Mr.
Through social, cultural and business relationships, The VS Collective works to create new associate programs, revolutionary product collections, compelling and inspiring content, and rally support for causes vital to women.
Through social, cultural and business relationships, The VS Collective, a diverse group of women ambassadors, works to create new associate programs, revolutionary product collections, compelling and inspiring content, and rally support for causes vital to women.
Copies of any of the above-referenced documents will also be made available, free of charge, upon written request to: Victoria's Secret & Co. Investor Relations Department Four Limited Parkway East Reynoldsburg, Ohio 43068 10 Table of Contents
Copies of any of the above-referenced documents will also be made available, free of charge, upon written request to: Victoria's Secret & Co. Investor Relations Department Four Limited Parkway East Reynoldsburg, Ohio 43068 11 Table of Conten t s
Our digital platform is designed to further support our physical presence and contribute to the growth of omni-channel sales. North American Stores The North American stores channel represents the stores in our North American physical retail locations and accounted for $4.194 billion, or 62%, of our revenues in 2021.
Our digital platform is designed to further support our physical presence and contribute to the growth of omni-channel sales. North American Stores The North American stores channel represents the stores in our North American physical retail locations and accounted for $3.909 billion, or 62%, of our revenues in 2022.
We are investing in our physical stores by refreshing existing stores and developing a store of the future that will include smaller, more flexible space in off-mall locations with a unique dual-brand layout to meet the needs of our customer and accomodate shifting consumer preferences for omni-channel shopping.
We are investing in our physical stores by refreshing existing stores and utilizing a store of the future concept that includes smaller, more flexible space in off-mall locations with a unique dual-brand layout to meet the needs of our customer and accommodate shifting consumer preferences for omni-channel shopping.
At Victoria's Secret & Co., our DEI vision is to celebrate, honor and reflect the diversity of our customers and the communities we engage. Our mission is to inspire and empower all by reflecting experiences, expanding access, and recognizing diversity.
At Victoria's Secret & Co., our DEI vision is to celebrate, honor and reflect the diversity of our customers, our associates and the communities we engage. 7 Table of Conten t s Our mission is to inspire and empower all by reflecting experiences, expanding access, and recognizing diversity.
In connection with the Separation, we made a cash payment of approximately $976 million to the Former Parent on August 2, 2021 from the issuances of certain debt (discussed in Note 12 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data).
In connection with the Separation, we made a cash payment of approximately $976 million to the Former Parent on August 2, 2021 from the issuances of certain debt (discussed in Note 13 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data). The Former Parent retained no ownership interest in us following the Separation.
Digital The digital channel accounted for $2.114 billion, or 31%, of our revenues in 2021. The channel includes sales that are derived from our websites and mobile applications. Our digital presence, including social media, our websites and our mobile applications, allows us to get to know our customers better and communicate with them anytime and anywhere.
Digital The digital channel accounted for $1.843 billion, or 29%, of our revenues in 2022. The channel includes sales that are derived from our websites and mobile applications. Our digital presence, including social media, our websites and our mobile applications, allows us to get to know our customers better and communicate with them anytime and anywhere.
The Former Parent retained no ownership interest in us following the Separation. 1 Table of Contents We entered into several agreements with the Former Parent that, among other things, effect the Separation and govern the relationship of the parties following the Separation, including a Separation and Distribution Agreement, a Tax Matters Agreement, an L Brands to VS Transition Services Agreement, a VS to L Brands Transition Services Agreement, an Employee Matters Agreement and a Domestic Transportation Services Agreement.
We entered into several agreements with the Former Parent that, among other things, effect the Separation and govern the relationship of the parties following the Separation, including a Separation and Distribution Agreement, a Tax Matters Agreement, an L Brands to VS Transition Services Agreement, a VS to L Brands Transition Services Agreement, an Employee Matters Agreement and a Domestic Transportation Services Agreement.
International The international channel represents our company-operated stores and websites in Greater China as well as royalty and wholesale sales related to the stores and websites operated by our franchise, license, wholesale and joint venture partners. International net sales accounted for $477 million, or 7%, of our revenues in 2021.
International The international channel represents our stores and websites in China as well as royalty and wholesale sales related to the stores and websites operated by our franchise, license, wholesale and joint venture partners. International net sales accounted for $592 million, or 9%, of our revenues in 2022.
We continue to increase the number of locations under these types of arrangements as part of our international expansion. Additional Information Merchandise Vendors During 2021, we purchased merchandise from approximately 210 vendors located throughout the world, the largest of which accounted for approximately 13% of our purchases.
We continue to increase the number of locations under these types of arrangements as part of our international expansion. 5 Table of Conten t s Additional Information Merchandise Vendors During 2022, we purchased merchandise from approximately 210 vendors located throughout the world, the largest of which accounted for approximately 14% of our purchases.
We operate 834 physical locations as of the end of 2021, including a range of full assortment stores, Victoria’s Secret Lingerie stores and free-standing PINK stores.
We operate 843 physical locations as of the end of 2022, including a range of full assortment stores, Victoria’s Secret Lingerie stores, free-standing PINK stores and free-standing Adore Me stores.
Today, the Victoria’s Secret Beauty business has grown to be one of the leading fragrance brands in America. Beauty products include fine fragrance, mists, PINK Beauty products and accessories. Products are sold at Victoria’s Secret specialty retail stores and online. Victoria's Secret & Co. Spin-Off On July 9, 2021, L Brands, Inc.
Today, the Victoria’s Secret Beauty business has grown to be one of the leading fragrance brands in America. Beauty products include fine fragrance, mists, PINK Beauty products and accessories. Products are sold at Victoria’s Secret specialty retail stores and online.
ITEM 1. BUSINESS. General Victoria's Secret & Co. (together with its subsidiaries unless the context otherwise requires, "we", "us", "our" or the "Company") is a specialty retailer of women's intimate and other apparel and beauty products marketed under the Victoria's Secret and PINK brand names.
ITEM 1. BUSINESS. General Victoria's Secret & Co. (together with its subsidiaries unless the context otherwise requires, “we”, “us”, “our” or the “Company”) is a specialty retailer of women's intimate and other apparel and beauty products marketed under the Victoria's Secret, PINK and Adore Me brand names.
Our in-store sales force is also highly knowledgeable and we have regular in-store training to promote positive customer interactions through helpful and informed store associates. Information Systems Our management information systems consist of a full range of retail, financial and merchandising systems.
Each brand has a marketing team focused on ensuring the customer is appropriately reached and engaged. Our in-store sales force is also highly knowledgeable and we have regular in-store training to promote positive customer interactions through helpful and informed store associates. Information Systems Our management information systems consist of a full range of retail, financial and merchandising systems.
Mr. Waters joined L Brands, Inc. in 2008 and previously served as the Chief Executive Officer of L Brands International from 2008 to 2021; • Timothy Johnson, 54, has been our Executive Vice President and Chief Financial Officer since July 2021. Prior to joining Victoria's Secret & Co., Mr.
Waters joined L Brands in 2008 and previously served as the CEO of L Brands International from 2008 to 2021; • Timothy Johnson, 55, has been our Chief Financial and Administrative Officer since July 2022. Mr. Johnson joined Victoria's Secret & Co. in July 2021 and previously served as Chief Financial Officer from July 2021 to July 2022.
We pursue our marketing strategy across a variety of platforms to reach our omni-channel customers, both in-store and online. We use traditional media outlets such as print, as well as digital media channels including social media, paid search and influencers. We have a dedicated team focused on marketing analytics to ensure our advertising and promotional investments are providing effective returns.
We pursue our marketing strategy across a variety of platforms to reach our omni-channel customers, both in-store and online. We use traditional media outlets such as print, as well as digital media channels including social media, paid search and influencers.
As of the end of 2021, we have 65 company-operated stores in Greater China as well as 463 partner-operated stores around the world, including locations across the Americas, Europe, Asia, Africa and the Middle East.
As of the end of 2022, we have 72 joint venture-operated stores in China as well as 443 partner-operated stores around the world, including locations across the Americas, Europe, Asia, Africa and the Middle East.
The current supply chain environment remains challenging, and we are focused on maximizing our strong relationships with our supplier partners and our sourcing and logistics capabilities to mitigate the impacts of the cost pressures and supply chain issues on our business. 4 Table of Contents Highly-Talented Management Team with Deep Industry Experience Our senior management team has a wealth of retail and business experience and a deep knowledge of our business.
We remain focused on maximizing our strong relationships with our supplier partners and our sourcing and logistics capabilities to help mitigate any supply chain challenges and cost pressures on our business. Highly-Talented Management Team with Deep Industry Experience Our senior management team has a wealth of retail and business experience and a deep knowledge of our business.
We have a written Code of Conduct that is based on our values and provides a resource where associates can find information that defines behaviors that are acceptable and those that are not. We conduct an annual Code of Conduct compliance process which requires associates to complete a Code of Conduct disclosure and a separate training course.
We have a written Code of Conduct that is based on our values and provides a resource where associates can find information that defines behaviors that are acceptable and those that are not.
We operate more than 890 Victoria’s Secret and PINK stores in the United States ("U.S."), Canada and Greater China as well as online at www.VictoriasSecret.com and www.PINK.com and other online channels worldwide. Additionally, Victoria’s Secret and PINK have more than 450 stores in more than 70 countries operating under franchise, license and wholesale arrangements.
We have more than 910 stores in the United States (“U.S.”), Canada and China, as well as our own websites, www.VictoriasSecret.com, www.PINK.com and www.AdoreMe.com and other online channels worldwide. Additionally, we have approximately 450 stores in approximately 70 countries operating under franchise, license and wholesale arrangements.
For additional information, see Note 2 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data. Joint Venture Partnerships Victoria's Secret U.K.
For additional information, see Note 3 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.
Wholesale prices, which vary by product category, are generally based on a discount to the suggested retail price. Revenue is generally recognized under wholesale arrangements at the time the title passes to the partner.
Wholesale prices, which vary by product category, are generally based on a discount to the suggested retail price.
Culture We are committed to associate engagement by striving to foster a safe, welcoming and empowering work culture where everyone can bring their whole selves to work. At Victoria's Secret & Co., our purpose goes beyond selling product.
Associate Engagement and Well-Being Associate engagement and well-being are key components of our culture and fundamental in achieving our strategic priorities and goals. Culture We are committed to associate engagement by striving to foster a happy, healthy and inclusive culture where everyone can bring their whole selves to work. At Victoria's Secret & Co., our purpose goes beyond selling product.
(“L Brands” or the “Former Parent”) announced that its Board of Directors approved the previously announced separation of the Victoria's Secret business, including PINK, into an independent, publicly traded company (the "Separation"). Prior to the Separation, L Brands operated the Bath & Body Works, Victoria’s Secret and PINK retail brands.
Spin-Off On July 9, 2021, L Brands, Inc. (“L Brands” or the “Former Parent”) announced that its Board of Directors approved the previously announced separation of the Victoria's Secret business, including PINK, into an independent, publicly traded company (the “Separation”).
Additionally, we believe that our sourcing and production functions, which have a long and deep presence in key sourcing markets including those in the U.S. and Asia, allow us to partner with premier manufacturers to manufacture high-quality products quickly. 5 Table of Contents Our product development team works with four key design periods for the year: Spring, Summer, Fall and Holiday, that represent our various selling seasons.
Additionally, we believe that our sourcing and production functions, which have a long and deep presence in key sourcing markets including those in the U.S. and Asia, allow us to partner with premier manufacturers to manufacture high-quality products quickly.
Agile and Highly Responsive Supply Chain and Sourcing Capabilities Our sourcing and production function has a long and deep presence in key sourcing markets including those in the U.S. and Asia.
Our international stores span the Americas, Europe, Asia, Africa and the Middle East, in addition to the strong digital component of our international business. Agile and Highly Responsive Supply Chain and Sourcing Capabilities Our sourcing and production function has a long and deep presence in key sourcing markets including those in the U.S. and Asia.
Our global supply chain organization is responsible for the operational planning, manufacturing, sourcing, and distribution of products to our customers. We believe we have developed a high degree of expertise in managing the complexities associated with a global supply chain. Distribution and Merchandise A substantial portion of our merchandise is shipped to our distribution centers in the Columbus, Ohio area.
We believe we have developed a high degree of expertise in managing the complexities associated with a global supply chain. Distribution and Merchandise A substantial portion of our merchandise is shipped to our distribution centers in the Columbus, Ohio area. Additionally, we use third-party operated distribution centers located throughout North America to distribute our merchandise.
Boyle joined L Brands, Inc. in 2008 and previously served as Chief Operating Officer of PINK from 2016 to 2020, Chief Administrative Officer of PINK from 2015 to 2016, and Executive Vice President at PINK from 2012 to 2014; • Amy Hauk, 55, has been our Chief Executive Officer of PINK since 2018. Ms.
Boyle joined L Brands in 2008 and previously served as Chief Operating Officer of PINK from 2016 to 2020, Chief Administrative Officer of PINK from 2015 to 2016 and Executive Vice President at PINK from 2012 to 2014; 10 Table of Conten t s • Melinda McAfee, 52, has been our Chief Human Resources Officer and Chief Legal Officer since October 2022.
Our DEI Strategic Framework We believe that integrating DEI into everything we do is not just the right thing to do but is critical to driving performance and doing well for our associates, customers and communities.
Our DEI Strategic Framework We believe that integrating DEI into everything we do is not just the right thing to do but is critical to driving performance and doing well for our associates, customers and communities. We are committed to bringing this to life through strategic actions with measurable goals, focusing on three key pillars: People, Experience and Purpose.
Our sales associates and store managers are central in creating an engaging and compelling store experience by providing a high level of customer service.
Our sales associates and store managers are central in creating an engaging and compelling store experience by providing a high level of customer service. • International. We have a significant international footprint with 515 international stores and 45 international digital sites as of the end of 2022.
The following table provides the number of our international stores operated by our partners by store type as of January 29, 2022 and January 30, 2021: January 29, 2022 January 30, 2021 Beauty and Accessories 335 338 Full Assortment 128 120 Total 463 458 Our Competitive Strengths We believe the following competitive strengths contribute to our leading market position, differentiate us from our competitors and will drive future growth: 3 Table of Contents Two Category-Defining Brands with Global Brand Awareness and Resonance Both the Victoria’s Secret and PINK brands have a strong global presence and awareness among consumers, which we believe provides us with a competitive advantage.
Our Competitive Strengths We believe the following competitive strengths contribute to our leading market position, differentiate us from our competitors and will drive future growth: Two Category-Defining Brands with Global Brand Awareness and Resonance Our Victoria's Secret and PINK brands have a strong global presence and awareness among consumers, which we believe provides us with a competitive advantage.
We offer a variety of enrichment experiences for those joining us as interns, new graduates, in mid-career or as a capstone to a career.
We believe that associates can reach their career goals through multiple roles, career paths and locations around the world. We offer a variety of enrichment experiences for those joining us as interns, new graduates, in mid-career or as a capstone to a career.
Victoria's Secret China In January 2022, we announced a partnership agreement with Regina Miracle International (Holdings) Limited ("Regina Miracle") related to our existing company-owned business in China. We have formed a joint venture with Regina Miracle to operate all of our stores and the related online business in China.
Joint Venture Partnerships Victoria's Secret China In April 2022, we announced the completion of the joint venture agreement with Regina Miracle International (Holdings) Limited (“Regina Miracle”), a company listed on the Hong Kong Stock Exchange, related to our existing Company-owned business in China.
We are committed to bringing this to life through strategic actions with measurable goals, focusing on three key pillars: People, Experience and Purpose. 7 Table of Contents People More than stores, more than products, Victoria’s Secret & Co. is a community of people with different backgrounds, qualities, abilities, and talents. Embracing and fostering that diversity is what makes us strong.
People More than stores, more than products, Victoria’s Secret & Co. is a community of people with different backgrounds, qualities, abilities, and talents. Embracing and fostering that diversity is what makes us strong.
Our e-commerce channel and store locations also provide customers with an enhanced understanding of the brands through uniform messaging and brand essence across platforms. Each brand has a marketing team focused on ensuring the customer is appropriately reached and engaged.
We have a dedicated team focused on marketing analytics to help ensure our advertising and promotional investments are providing effective returns. Our e-commerce channel and store locations also provide customers with an enhanced understanding of our brands through uniform messaging and brand essence across platforms.
On August 2, 2021 (the “Distribution Date”), after the New York Stock Exchange ("NYSE") market closing, the Separation of the Victoria's Secret business was completed.
Prior to the Separation, L Brands operated the Bath & Body Works, Victoria’s Secret and PINK retail brands. 1 Table of Conten t s On August 2, 2021 (the “Distribution Date”), after the New York Stock Exchange (“NYSE”) market closing, the Separation of the Victoria's Secret business was completed.
The emphasis on Victoria's Secret & Co.'s overall performance is intended to align our associates’ financial interests with the interests of our stockholders. We encourage associate stock ownership with the ability to purchase Victoria's Secret & Co. shares at a discount through our associate stock purchase plan.
We encourage associate stock ownership with the ability to purchase Victoria's Secret & Co. shares at a discount through our associate stock purchase plan. Ensuring Equal Pay for Equal Work The heart of our business is our talented workforce.
Our policy is to maintain sufficient quantities of inventories on hand in our retail stores and distribution centers to enable us to offer customers an appropriate selection of current merchandise. We emphasize rapid turnover and take markdowns as required to keep merchandise fresh and current.
We use a variety of shipping terms that result in the transfer of title of the merchandise at either the point of origin or point of destination. Our policy is to maintain sufficient quantities of inventories on hand in our retail stores and distribution centers to enable us to offer customers an appropriate selection of current merchandise.
The Company also includes the Victoria's Secret and PINK merchandise sourcing and production function serving us and our international partners. We operate as a single segment designed to seamlessly serve customers worldwide through stores and online channels. Our Brands Our business operates two category-defining intimates and beauty brands, Victoria's Secret and PINK.
The Company also includes the merchandise sourcing and production function serving us and our international partners. We operate as a single segment designed to seamlessly serve customers worldwide through stores and online channels. On November 1, 2022, we announced that we had signed a definitive agreement (the “Merger Agreement”) to acquire 100% of AdoreMe, Inc.
We are focused on ensuring our partners have the commitment and capability to provide a quality customer experience and to grow our brands internationally.
Franchise, License and Wholesale Arrangements In addition to our Company-operated stores, our products are sold at hundreds of partner locations and on partner websites in approximately 70 countries. We are focused on ensuring our partners have the commitment and capability to provide a quality customer experience and to grow our brands internationally.
We offer competitive compensation, company-matched savings and contributions to the retirement plan, and flexible and affordable health, wellness and lifestyle benefits to eligible associates.
Our benefit programs are designed to be comprehensive, cost-effective and competitive to help our associates and their families be well and stay well. 9 Table of Conten t s We offer competitive compensation, company-matched savings and contributions to the retirement plan, and flexible and affordable health, wellness and lifestyle benefits to eligible associates.
Hauk joined L Brands, Inc. in 2008 and previously served as Chief Merchant and Executive Vice President of Merchandising for Bath & Body Works from 2008 to 2018; and • Greg Unis, 51, has been our Chief Executive Officer of Victoria's Secret Beauty since 2016. Prior to 2016, Mr.
Unis joined L Brands in 2016 and previously served as CEO of Victoria's Secret Beauty from 2016 to July 2022. Prior to 2016, Mr. Unis served as Executive Vice President and Global Head of Men's and Licensing Merchandise for Coach from 2010 to 2016; and • Amy Hauk, 56, has been our Brand CEO since July 2022. Ms.
The current supply chain environment remains challenging, and we are focused on maximizing our strong relationships with our supplier partners and our sourcing and logistics capabilities to mitigate the impacts of the cost pressures and supply chain issues on our business.
We emphasize rapid turnover and take markdowns as required to keep merchandise fresh and current. We remain focused on maximizing our strong relationships with our supplier partners and our sourcing and logistics capabilities to help mitigate any supply chain challenges and cost pressures on our business.
Our Purpose work is focused on: • Reaching and serving more diverse customers • Investing in more minority- and women-owned businesses and suppliers • Using our platform and resources to empower our communities, advance racial equity and promote social justice As of January 29, 2022, we employed approximately 34,000 associates, approximately 20,000 of whom were part-time.
Our DEI Purpose work is focused on: • Reaching and serving more diverse customers • Investing in more women-, black, indigenous, and people of color-, LGBTQIA+-, Veteran- and People With Disabilities-owned businesses and suppliers • Using our platform and resources to empower our communities, advance racial equity and promote social justice To strengthen our workforce and better reflect and serve our customers, it is critical that we have diverse voices at the table.
Certain product lines offer more frequent introductions of new merchandise, and the primary selling seasons, Fall and Holiday, often will see greater quantities of introductions for new merchandise. We strive to tailor our buying strategies to align with customer demand and trends across our core categories with agile and fast lead times.
Our product development team works with four key design periods for the year: Spring, Summer, Fall and Holiday, that represent our selling seasons. Certain product lines offer more frequent introductions of new merchandise, and the primary selling seasons, Fall and Holiday, often will see greater quantities of introductions for new merchandise.
Our beauty and accessories stores represent smaller footprint stores including stores in airports and other travel retail locations, which enable significant global exposure. Our international stores span the Americas, Europe, Asia, Africa and the Middle East, in addition to the strong digital component of our international business.
We believe we have meaningful opportunity to grow through new beauty and accessories and full assortment stores, new digital sites and new geographies. Our beauty and accessories stores represent smaller footprint stores including stores in airports and other travel retail locations, which enable significant global exposure.
Brand image, presentation, marketing, design, price, service, fulfillment, assortment, fit and quality are the principal competitive factors. Human Capital Management Diversity, Equity and Inclusion Diversity, equity and inclusion ("DEI") are key components of our culture and fundamental in achieving our strategic priorities and goals.
Diversity, Equity and Inclusion Diversity, equity and inclusion (“DEI”) are key components of our culture and fundamental in achieving our strategic priorities and goals.
As used herein, “2021,” “2020” and “2019” refer to the 52-week periods ended January 29, 2022, January 30, 2021 and February 1, 2020, respectively. Real Estate Company-operated Retail Stores Our company-operated retail stores are located in shopping malls, lifestyle centers and off-mall locations in the U.S., Canada and Greater China.
Real Estate Company-operated, China Joint Venture and Adore Me Retail Stores Our company-operated Victoria's Secret and PINK, China joint venture and Adore Me retail stores are located in shopping malls, lifestyle centers and off-mall locations in the U.S., Canada and China.
For additional information see Note 5 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data. Franchise, License and Wholesale Arrangements In addition to our company-operated stores, our products are sold at hundreds of partner locations and on partner websites in more than 70 countries.
For additional information, see Note 6 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data. (c) Includes thirteen partner-operated China joint venture stores at January 28, 2023.
Unis served as Executive Vice President and Global Head of Men's and Licensing Merchandise for Coach from 2010 to 2016. Available Information We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and its rules and regulations.
Hauk's departure, Martin Waters will continue to serve as CEO and will also assume the responsibilities of Brand CEO. Available Information We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and its rules and regulations.
Learning and Development and Inclusion Resource Groups We are committed to investing in our associates by providing diverse learning and development opportunities, challenging work experiences and offering Inclusion Resource Groups ("IRGs"). We believe that associates can reach their career goals through multiple roles, career paths and locations around the world.
Approximately 75% of our associates work in our stores, 12% in distribution centers with the remaining balance in home office and call centers. 8 Table of Conten t s Learning and Development and Inclusion Resource Groups We are committed to investing in our associates by providing diverse learning and development opportunities, challenging work experiences and offering Inclusion Resource Groups (“IRGs”).
Our investment in our workforce in 2021 included the expansion of participation in the short-term cash incentive compensation program to include all salaried associates in the home office, distribution or call centers beginning with the Fall 2020 season and going forward.
The emphasis on Victoria's Secret & Co.'s overall performance is intended to align our associates’ financial interests with the interests of our stockholders. All salaried associates in the home office, distribution and call centers participate in our short-term cash incentive program.
In addition, temporary associates are hired during peak periods, such as the holiday season. Approximately 80% of our associates work in our stores, 10% in distribution centers with the remaining balance in home office and call centers.
As of January 28, 2023, we employed approximately 31,000 associates, approximately 17,000 of whom were part-time. In addition, temporary associates are hired during peak periods, such as the holiday season.
In addition, we currently offer the following IRGs that provide professional development opportunities for associates, support the needs of the business, shape the culture of our company and volunteer in the community: • Asian Learning, Leadership & Innovation Network (All In): Asian American and/or Pacific Islander associates and allies • Conexion: Hispanic and Latinx associates and allies • Evolve: LGBTQ+ associates and allies • Mosaic: Black and African American associates and allies • Women Inclusion Network: Associates who identify as women and allies 8 Table of Contents Associate Engagement and Well-Being Associate engagement and well-being are key components of our culture and fundamental in achieving our strategic priorities and goals.
Membership is open to all eligible associates for the following six IRGs: • Asian Learning, Leadership & Innovation Network (All In): Asian American and/or Pacific Islander associates and their allies and advocates; • Conexión: Hispanic and Latinx associates and their allies and advocates; • Evolve: LGBTQIA+ associates and their allies and advocates; • Mosaic: Black and African American associates and their allies and advocates; • Women Inclusion Network (WIN): Associates who identify as women and their allies and advocates; and • ADAPT: Associates who identify as People With Disabilities (and/or their caregivers) and their allies and advocates.
Under the terms of the agreement, which remains subject to regulatory clearance, we will own 51% of the joint venture with Regina Miracle owning the remaining 49%. Upon obtaining regulatory clearance, the transaction will be completed and we will receive $45 million in cash from Regina Miracle as consideration for our investment in the joint venture.
We formed a joint venture with Regina Miracle to operate Victoria's Secret stores and the related online business in China. Under the terms of the agreement, we own 51% of the joint venture and Regina Miracle owns the remaining 49%.
Benefits We are committed to associate well-being by providing quality benefits and offering equitable and competitive wages. We support our associates to be at their best — at work and at home. Our benefit programs are designed to be comprehensive, cost-effective and competitive to help our associates and their families be well and stay well.
We support our associates to be at their best—at work and at home.
Removed
Impacts of COVID-19 The coronavirus pandemic ("COVID-19") has created significant public health concerns as well as economic disruption, uncertainty and volatility. In 2020 and 2021, our operations and financial performance have been materially impacted by the COVID-19 pandemic.
Added
(“Adore Me”), a digitally-native intimates brand. On December 30, 2022, the acquisition was completed pursuant to the terms and conditions of the Merger Agreement. For additional information, see Note 2 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.
Removed
In the first quarter of 2020, all of our stores in North America were closed on March 17, 2020, but we were able to re-open the majority of our stores as of the beginning of the third quarter of 2020. Additionally, operations for our direct channel were temporarily suspended for approximately one week in late March 2020.

… 41 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

91 edited+30 added−43 removed146 unchanged
Biggest changeRisks Relating to Our Business • Our net sales, profit results and cash flows are sensitive to, and may be affected by, general economic conditions, consumer confidence, spending patterns, significant health hazards or pandemics, weather or other market disruptions; • The COVID-19 global pandemic has had and may continue to have an adverse effect on our business and results of operations; • Our net sales, operating income, cash and inventory levels fluctuate on a seasonal basis; • Turnover in company leadership or other key positions may have an adverse impact on our performance; • We may be impacted by our ability to attract, develop and retain qualified associates and manage labor-related costs; • Our net sales depend on a volume of traffic to our stores and the availability of suitable lease space; • Our ability to grow depends in part on new store openings and existing store remodels; • Our international operations and our plans for international expansion include risks that could impact our results and reputation; • Our licensees, franchisees, wholesalers, and joint venture partners could take actions that could harm our business or the image of our brands; • Our direct channel business includes risks that could have an adverse effect on our results; • Our ability to protect our reputation could have a material effect on the image and value of our brands; • If our marketing, advertising and promotional programs are unsuccessful, or if our competitors are more effective with their programs than we are, our revenue or results of operations may be adversely affected; 11 Table of Contents • Our ability to adequately maintain, enforce and protect our trade names, trademarks and patents could have an impact on the image and value of our brands and ability to penetrate new markets; • Our ability to compete favorably in our highly competitive segment of the retail industry could impact our results; • Our ability to manage the life cycle of our brands and to remain current with fashion trends and launch new merchandise, product lines, and brands successfully could impact the image and relevance of our brands; • We may be impacted by our ability to adequately source, distribute and sell merchandise and other materials on a global basis; • We rely on a number of vendor and distribution facilities located in the same vicinity, making our business susceptible to local and regional disruptions or adverse conditions; • We may be impacted by our vendors’ ability to manufacture and deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations; • Our results may be affected by fluctuations in freight, product input and energy costs, including those caused by inflation; • Climate change, and related legislative and regulatory responses to climate change, may adversely impact our business; • Our ability to adequately protect our assets from loss and theft could have an adverse effect on our reputation, results of operations, financial condition and cash flows; • We self-insure certain risks and may be impacted by unfavorable claims experience; • We significantly rely on our and our third-party service providers’ ability to implement and sustain information technology systems and to protect associated data and system availability; • Any significant compromise or breach of our data security, including the security of customer, associate, third-party or company information, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows; • Shareholder activism could cause us to incur significant expense, hinder execution of our business strategy and impact our stock price; • Changes in laws, regulations or technology platform rules relating to data privacy and security, or any actual or perceived failure by us to comply with such laws and regulations, or contractual or other obligations relating to data privacy and security, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows; • We may be adversely impacted by our ability to comply with regulatory requirements; • We may be adversely impacted by certain compliance or legal matters; and • We may be impacted by changes in taxation, trade and other regulatory requirements.
Biggest changeRisks Relating to Our Business • Adverse economic conditions have had and may continue to have an adverse effect on our business, results of operations and financial condition; • Our net sales, profit results and cash flows are sensitive to, and may be affected by, general economic conditions, consumer confidence, spending patterns, significant health hazards or pandemics, weather or other market disruptions; • The COVID-19 global pandemic has had and may continue to have an adverse effect on our business and results of operations; • Our net sales, operating income, cash and inventory levels fluctuate on a seasonal basis; • If we fail to maintain effective internal controls, we may not be able to report our financial results accurately or timely or prevent or detect fraud, which could have a material adverse effect on our business or the market price of our securities; • Turnover in company leadership or other key positions may have an adverse impact on our performance; • We may be impacted by our ability to attract, develop and retain qualified associates and manage labor-related costs; • Our net sales depend on a volume of traffic to our stores and the availability of suitable lease space; • Our ability to grow depends in part on new store openings and existing store remodels and right-sizing; • Our international operations and our plans for international expansion include risks that could impact our results and reputation; • Our licensees, franchisees, wholesalers, and joint venture partners could take actions that could harm our business or the image of our brands; • Our direct channel business includes risks that could have an adverse effect on our results; • We may not realize the potential benefits and synergies sought with the acquisition of Adore Me; • Our ability to protect our reputation could have a material effect on the image and value of our brands; • If our marketing, advertising and promotional programs are unsuccessful, or if our competitors are more effective with their programs than we are, our revenue or results of operations may be adversely affected; • Our ability to adequately maintain, enforce and protect our trade names, trademarks and patents could have an impact on the image and value of our brands and ability to penetrate new markets; • Our ability to compete favorably in our highly competitive segment of the retail industry could impact our results; • Our ability to manage the life cycle of our brands and to remain current with fashion trends and launch new merchandise, product lines, and brands successfully could impact the image and relevance of our brands; • We may be impacted by our ability to adequately source, distribute and sell merchandise and other materials on a global basis; • We rely on a number of vendor and distribution facilities located in the same vicinity, making our business susceptible to local and regional disruptions or adverse conditions; • We may be impacted by our vendors’ ability to manufacture and deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations; • Our results may be affected by fluctuations in freight, product input and energy costs, including those caused by inflation; • Climate change and other sustainability-related matters, and related legal, regulatory and market responses to climate change, may adversely impact our business; • Our ability to adequately protect our assets from loss and theft could have an adverse effect on our reputation, results of operations, financial condition and cash flows; • We self-insure certain risks and may be impacted by unfavorable claims experience; • We significantly rely on our and our third-party service providers’ ability to implement and sustain information technology systems and to protect associated data and system availability; • Any significant compromise or breach of our data security, including the security of customer, associate, third-party or company information, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows; 12 Table of Conten t s • Changes in laws, regulations or technology platform rules relating to data privacy and security, or any actual or perceived failure by us to comply with such laws and regulations, or contractual or other obligations relating to data privacy and security, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows; • Shareholder activism could cause us to incur significant expense, hinder execution of our business strategy and impact our stock price; • We may be adversely impacted by our ability to comply with regulatory requirements; • We may be adversely impacted by certain compliance or legal matters; and • We may be impacted by changes in taxation, trade and other regulatory requirements.
ITEM 1A. RISK FACTORS. SUMMARY RISK FACTORS We are subject to a number of risks, including risks related to the Separation and related transactions, risks related to our business operations, risks related to our indebtedness and risks related to owning our common stock. The following list of risk factors is not exhaustive.
ITEM 1A. RISK FACTORS. SUMMARY RISK FACTORS We are subject to a number of risks, including, risks related to our business operations, risks related to our indebtedness, risks related to owning our common stock and risks related to the Separation and related transactions. The following list of risk factors is not exhaustive.
In addition, we may be impacted by litigation trends, including class action lawsuits involving consumers, employees, and stockholders, that could have a material adverse effect on our reputation, the market price of our common stock, results of operations, financial condition and cash flows. We may be impacted by changes in taxation, trade and other regulatory requirements.
In addition, we may be impacted by litigation trends, including class action lawsuits involving consumers, employees, and stockholders, that could have a material adverse effect on our reputation, the market price of our common stock, and our results of operations, financial condition and cash flows. We may be impacted by changes in taxation, trade and other regulatory requirements.
If we fail to comply with any covenants, the lenders may terminate their obligation to make advances to us and declare any outstanding obligations immediately due and payable. This debt obligation could restrict our future business strategies and could adversely impact our future results of operations, financial condition, and cash flows.
If we fail to comply with any covenants, the lenders may terminate their obligation to make advances to us and declare any outstanding obligations immediately due and payable. This debt obligation could restrict our future business strategies and could adversely impact our results of operations, financial condition and cash flows.
Any violations of such laws or regulations could have an adverse effect on our reputation, market price of our common stock, results of operations, financial condition and cash flows. It can be difficult to comply with sometimes conflicting regulations in local, national or foreign jurisdictions as well as new or changing regulations.
Any violations of such laws or regulations could have an adverse effect on our reputation, the market price of our common stock, and our results of operations, financial condition and cash flows. It can be difficult to comply with sometimes conflicting regulations in local, national or foreign jurisdictions as well as new or changing regulations.
If any third party copies our products or our stores in a manner that projects lesser quality or carries a negative connotation, it could have a material adverse effect on the image of our brands and our reputation as well as our results of operations, financial condition and cash flows.
If any third party copies our products, our stores, or our websites in a manner that projects lesser quality or carries a negative connotation, it could have a material adverse effect on the image of our brands and our reputation as well as our results of operations, financial condition and cash flows.
We source merchandise and other materials directly in international markets and in our domestic market. We distribute merchandise and other materials globally to our partners in international locations and to our stores. Many of our imports and exports are subject to a variety of customs regulations and international trade arrangements, including existing or potential duties, tariffs or safeguard quotas.
We source merchandise and other materials directly in international markets and in our domestic market. We distribute merchandise and other materials globally to our partners, stores and customers in international locations. Many of our imports and exports are subject to a variety of customs regulations and international trade arrangements, including existing or potential duties, tariffs or safeguard quotas.
The Tax Matters Agreement generally prohibits us from taking certain actions that could cause the Separation and certain related transactions to fail to qualify as tax-free transactions, including: • During the two-year period following the date of the Separation (or otherwise pursuant to a “plan” within the meaning of Section 355(e) of the Code), we may not cause or permit certain business combinations or transactions to occur; • During the two-year period following the date of the Separation, we may not discontinue the active conduct of our business (within the meaning of Section 355(b)(2) of the Code); • During the two-year period following the date of the Separation, we may not sell or otherwise issue our common stock, other than pursuant to issuances that satisfy certain regulatory safe harbors set forth in Treasury regulations related to stock issued to employees and retirement plans; • During the two-year period following the date of the Separation, we may not redeem or otherwise acquire any of our common stock, other than pursuant to open-market repurchases of less than 20% of our outstanding common stock (in the aggregate); • During the two-year period following the date of the Separation, we may not amend our certificate of incorporation (or other organizational documents) or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of our common stock; and 16 Table of Contents • More generally, we may not take any action that could reasonably be expected to cause the Separation and certain related transactions to fail to qualify as tax-free transactions for U.S. federal income tax purposes or for non-U.S. tax purposes.
The Tax Matters Agreement generally prohibits us from taking certain actions that could cause the Separation and certain related transactions to fail to qualify as tax-free transactions, including: • During the two-year period following the date of the Separation (or otherwise pursuant to a “plan” within the meaning of Section 355(e) of the Code), we may not cause or permit certain business combinations or transactions to occur; • During the two-year period following the date of the Separation, we may not discontinue the active conduct of our business (within the meaning of Section 355(b)(2) of the Code); • During the two-year period following the date of the Separation, we may not sell or otherwise issue our common stock, other than pursuant to issuances that satisfy certain regulatory safe harbors set forth in Treasury regulations related to stock issued to employees and retirement plans; • During the two-year period following the date of the Separation, we may not redeem or otherwise acquire any of our common stock, other than pursuant to open-market repurchases of less than 20% of our outstanding common stock (in the aggregate); • During the two-year period following the date of the Separation, we may not amend our certificate of incorporation (or other organizational documents) or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of our common stock; and • More generally, we may not take any action that could reasonably be expected to cause the Separation and certain related transactions to fail to qualify as tax-free transactions for U.S. federal income tax purposes or for non-U.S. tax purposes.
In connection with the Separation, we entered into certain arrangements with our Former Parent pursuant to which we and our Former Parent will continue to provide to each other, on an ongoing basis, certain functions and services that the companies have historically shared.
In connection with the Separation, we entered into certain arrangements with our Former Parent pursuant to which we and our Former Parent continue to provide to each other, on an ongoing basis, certain functions and services that the companies have historically shared.
For example: • political instability, environmental hazards or natural disasters which could negatively affect international economies, financial markets and business activity; • significant health hazards or pandemics, which could result in closed factories, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in infected areas; • imposition of new or retaliatory trade duties, sanctions or taxes and other charges on imports or exports; • evolving, new or complex legal and regulatory matters; • volatility in currency exchange rates; • local business practice and political issues (including issues relating to compliance with domestic or international labor standards) which may result in adverse publicity or threatened or actual adverse consumer actions, including boycotts; • delays or disruptions in shipping and transportation and related pricing impacts; • disruption due to labor disputes; and • changing expectations regarding product safety due to new legislation or other factors.
For example: • political instability, wars, environmental hazards or natural disasters which could negatively affect international economies, financial markets and business activity; • significant health hazards or pandemics, which could result in closed factories, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in infected areas; • imposition of new or retaliatory trade duties, sanctions or taxes and other charges on imports or exports; • evolving, new or complex legal and regulatory matters; • volatility in currency exchange rates and rising interest rates; • local business practice and political issues (including issues relating to compliance with domestic or international labor standards) which may result in adverse publicity or threatened or actual adverse consumer actions, including boycotts; • delays or disruptions in shipping and transportation and related pricing impacts; • disruption due to labor disputes; and • changing expectations regarding product safety due to new legislation or other factors.
Some of these risks relate principally to the Separation, while others relate principally to our business and the industry in which we operate, to our outstanding indebtedness, or to the securities markets generally and ownership of our common stock.
Some of these risks relate principally to our business and the industry in which we operate, to our outstanding indebtedness, or to the securities markets generally and ownership of our common stock, while others related principally to the Separation.
In addition, the efforts related to the separation of the information technology environment will require significant resources that could impact our ability to keep pace with ongoing advancement of the information technology needs of the business.
In addition, the efforts related to the separation of the information technology environment require significant resources that could impact our ability to keep pace with ongoing advancement of the information technology needs of the business.
If we or our suppliers are required to comply with these laws and regulations, or if we choose to take voluntary steps to reduce or mitigate our impact on climate change, we may experience increases in energy, production, transportation and raw materials costs, capital expenditures or insurance premiums and deductibles, which could adversely impact our results of operation.
If we or our suppliers are required to comply with these laws and regulations, or if we choose to take voluntary steps to reduce or mitigate our impact on climate change, we may experience increases in energy, production, transportation and raw materials costs, capital expenditures, insurance premiums and deductibles, and compliance-related costs, which could adversely impact our results of operation.
For example, our partners may not have the business acumen or financial resources necessary to successfully operate stores in a manner consistent with our standards and may not hire and train qualified store managers and other personnel. Further, we have no control as to whether our partners comply with federal and local law.
For example, our partners may not have the business acumen or financial resources necessary to successfully operate stores in a manner consistent with our standards and may not hire and train qualified store managers and other personnel. Further, we have limited control as to whether our partners comply with federal and local law.
Our historical combined and unaudited pro forma financial information for periods prior to the Separation included in this Annual Report on Form 10-K was derived from our Former Parent’s consolidated financial statements and accounting records and are not necessarily indicative of our future results of operations, financial condition or cash flows, nor do they reflect what our results of operations, financial condition or cash flows would have been as an independent public company during the periods presented.
Our historical combined financial information for periods prior to the Separation included in this Annual Report on Form 10-K was derived from our Former Parent’s consolidated financial statements and accounting records and are not necessarily indicative of our future results of operations, financial condition or cash flows, nor do they reflect what our results of operations, financial condition or cash flows would have been as an independent public company during the periods presented.
These exclusive forum provisions, however, will not apply to actions asserting only federal law claims under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, regardless of whether the state courts in the State of Delaware have jurisdiction over those claims.
These exclusive forum provisions, however, will not apply to actions asserting only federal law claims under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, regardless of whether the state courts in the State of Delaware have jurisdiction over those claims.
These include provisions: • Providing the right to our Board of Directors to issue one or more classes or series of preferred stock without stockholder approval; • Authorizing a large number of shares of common stock that are not yet issued, which would allow our Board of Directors to issue shares to persons friendly to current management, thereby protecting the continuity of our management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us; • Prohibiting stockholders from taking action by written consent; and • Establishing advance notice and other requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted on by stockholders at our annual stockholder meetings.
These include provisions: • Providing the right to our Board of Directors to issue one or more classes or series of preferred stock without stockholder approval; • Authorizing a large number of shares of common stock that are not yet issued, which would allow our Board of Directors to issue shares to persons friendly to current management, thereby protecting the continuity of our management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us; • Prohibiting stockholders from taking action by written consent; and 25 Table of Conten t s • Establishing advance notice and other requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted on by stockholders at our annual stockholder meetings.
Major developments in tax policy or trade relations, such as the imposition of unilateral tariffs on imported products, could have a material adverse effect on our results of operations, financial condition and cash flows. 26 Table of Contents Risks Relating to Our Indebtedness We have debt obligations that could restrict our business and adversely impact our results of operations, financial condition or cash flows.
Major developments in tax policy or trade relations, such as the imposition of unilateral tariffs on imported products, could have a material adverse effect on our results of operations, financial condition and cash flows. Risks Relating to Our Indebtedness We have debt obligations that could restrict our business and adversely impact our results of operations, financial condition or cash flows.
If we are unable to successfully anticipate, identify or react to changing styles or trends or we misjudge the market for our products or any new product lines, our sales will be lower, potentially resulting in significant amounts of unsold inventory. In response, we may be forced to increase our marketing promotions or price markdowns.
If we are unable to successfully anticipate, identify or react to changing styles or trends or we misjudge the market for our products or any new product lines, our sales may decrease, potentially resulting in significant amounts of unsold inventory. In response, we may be forced to increase our marketing promotions or price markdowns.
Moreover, there could be public announcements regarding any cybersecurity incidents and any steps we take to respond to or remediate such incidents, and if securities analysts or investors perceive these announcements to be negative, it could, among other things, have a substantial adverse effect on the price of our common stock.
Moreover, there could be public announcements regarding any cybersecurity incidents and any steps we take to respond to or remediate such incidents, and if securities analysts or investors perceive these announcements to be negative, it could, among other things, have an adverse effect on the price of our common stock.
Our continued growth and success will depend in part on our ability to open and operate new stores and remodel existing stores on a timely and profitable basis.
Our continued growth and success will depend in part on our ability to open and operate new stores and right-size and remodel existing stores on a timely and profitable basis.
There can be no assurance we will be able to achieve our new store opening and existing store remodeling goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and existing stores profitably.
There can be no assurance we will be able to achieve our new store opening and existing store rightsizing and remodeling goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, right-sized, remodeled and existing stores profitably.
Risks Relating to Our Business Our net sales, profit results and cash flows are sensitive to, and may be affected by, general economic conditions, consumer confidence, spending patterns, significant health hazards or pandemics, weather or other market disruptions.
Our net sales, profit results and cash flows are sensitive to, and may be affected by, general economic conditions, consumer confidence, spending patterns, significant health hazards or pandemics, weather or other market disruptions.
Accomplishing our new store opening goals will depend upon a number of factors, including the ability to partner with developers and landlords to obtain suitable sites for new stores at acceptable costs, the hiring and training of qualified personnel and the integration of new stores into existing operations.
Accomplishing our new store opening goals will depend upon a number of factors, including the ability to partner with developers and landlords to obtain suitable sites for new stores at acceptable costs, the availability and cost of materials and contractors, the hiring and training of qualified personnel and the integration of new stores into existing operations.
We have limited history of operating as an independent company, and our historical combined and unaudited pro forma financial information for periods prior to the Separation is not necessarily representative of the results that we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.
Our historical combined pro forma financial information for periods prior to the Separation is not necessarily representative of the results that we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.
Any of the above-listed factors could have a material adverse effect on our business, financial condition and results of operations. In addition, if our cash flow from operations declines, we may be unable to service or refinance our debt. We may also incur substantial additional indebtedness in the future.
Any of the above-listed factors could have a material adverse effect on our business, financial condition and results of operations. In addition, if our cash flow from operations declines, we may be unable to service or refinance our debt. 24 Table of Conten t s We may also incur substantial additional indebtedness in the future.
We may be impacted by our ability to attract, develop and retain qualified associates and manage labor-related costs. We believe our competitive advantage is providing a positive, engaging and satisfying experience for each customer, which requires us to have highly trained and engaged associates.
We may be impacted by our ability to attract, develop and retain qualified associates and manage labor-related costs. We believe one of our key competitive advantages is providing a positive, engaging and satisfying experience for each customer, which requires us to have highly trained and engaged associates.
We expect to incur costs to establish the necessary infrastructure and create the systems and services to replace many of the systems and services that our Former Parent historically provided to us.
We expect to continue to incur costs to establish the necessary infrastructure and create the systems and services to replace certain of the systems and services that our Former Parent historically provided to us.
The market price of our common stock could fluctuate significantly due to a number of factors, many of which are beyond our control, including: • Fluctuations in our quarterly or annual earnings results or those of other companies in our industry; 27 Table of Contents • Failures of our operating results to meet the estimates of securities analysts or the expectations of our stockholders, or changes by securities analysts in their estimates of our future earnings; • Announcements by us or our customers, suppliers or competitors; • Changes in market valuations or earnings of other companies in our industry; • Changes in laws or regulations which adversely affect our industry or us; • General economic, industry and stock market conditions; • Future significant sales of our common stock by our stockholders or the perception in the market of such sales; • Future issuances of our common stock by us; and • The other factors described in these “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
The market price of our common stock has fluctuated significantly since the Separation, and may continue to fluctuate significantly due to a number of factors, many of which are beyond our control, including: • Fluctuations in our quarterly or annual earnings results or those of other companies in our industry; • Failures of our operating results to meet the estimates of securities analysts or the expectations of our stockholders, or changes by securities analysts in their estimates of our future earnings; • Announcements by us or our customers, suppliers or competitors; • Changes in market valuations or earnings of other companies in our industry; • Changes in laws or regulations which adversely affect our industry or us; • General economic, industry and stock market conditions; • Future significant sales of our common stock by our stockholders or the perception in the market of such sales; • Future issuances of our common stock by us; and • The other factors described in these “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Our Former Parent may not successfully execute its obligations to us under these arrangements, and any interruption in the functions or services that will be provided to us by our Former Parent following the Separation could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Our Former Parent may not successfully execute its obligations to us under these arrangements, and any interruption in the functions or services that are provided to us by our Former Parent pursuant to these arrangements could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Our business operations and financial performance for 2020 and 2021 were materially impacted by the COVID-19 pandemic, including closure of our stores, limited store operating hours, reduced customer traffic and consumer spending, supply chain disruption and delays, increased cost of transportation, raw materials, and labor, and other challenges.
Our business operations and financial performance have been materially impacted by the COVID-19 pandemic, including closure of our stores, limited store operating hours, reduced customer traffic and consumer spending, supply chain disruption and delays, increased cost of transportation, raw materials, and labor, and other challenges.
In accordance with Section 404 of the Sarbanes-Oxley Act, beginning with our second Annual Report on Form 10-K required to be filed with the SEC, our management will be required to conduct an annual assessment of the effectiveness of our internal control over financial reporting and include a report on these internal controls in our Annual Reports on Form 10-K, and our independent registered public accounting firm will be required to formally attest to the effectiveness of our internal controls.
In accordance with Section 404 of the Sarbanes-Oxley Act, our management is required to conduct an annual assessment of the effectiveness of our internal control over financial reporting and include a report on these internal controls in our Annual Reports on Form 10-K, and our independent registered public accounting firm is required to formally attest to the effectiveness of our internal controls.
The forum selection clause in our amended and restated bylaws may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us and affect the market price of our common stock. Your percentage ownership in the Company may be diluted in the future.
The forum selection clause in our amended and restated bylaws may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us, result in increased costs for investors to bring a claim and affect the market price of our common stock. Your percentage ownership in the Company may be diluted in the future.
These risks could have a material adverse effect on our ability to grow and our results of operations, financial condition and cash flows. 18 Table of Contents Our ability to grow depends in part on new store openings and existing store remodels.
These risks could have a material adverse effect on our ability to grow and our results of operations, financial condition and cash flows. Our ability to grow depends in part on new store openings and existing store remodels and right-sizing.
Risks include, but are not limited to, the difficulty in recreating the in-store experience through our direct channels; domestic or international resellers purchasing merchandise and reselling it outside our control; our ability to anticipate and implement innovations in technology and logistics in order to appeal to existing and potential customers who increasingly rely on multiple channels to meet their shopping needs; our ability to keep up with drastic shifts in customer demand, such as we saw with the COVID-19 pandemic; the failure of and risks related to the systems that operate our web infrastructure, websites and the related support systems, including computer viruses, theft of customer information, privacy concerns, telecommunication failures and electronic break-ins and similar disruptions. 19 Table of Contents Our failure to maintain efficient and uninterrupted order-taking and fulfillment operations could also have a material adverse effect on our results.
Risks include, but are not limited to, the difficulty in recreating the in-store experience through our direct channels; domestic or international resellers purchasing merchandise and reselling it outside our control; our ability to anticipate and implement innovations in technology and logistics in order to appeal to existing and potential customers who increasingly rely on multiple channels to meet their shopping needs; our ability to keep up with drastic shifts in customer demand, such as we saw with the COVID-19 pandemic; and the failure of and risks related to the systems that operate our web infrastructure, websites and the related support systems, including computer viruses, theft of customer information, privacy concerns, telecommunication failures and electronic break-ins and similar disruptions.
Bribery Act, the SEC and the NYSE, among others. Although we have put in place policies and procedures aimed at ensuring legal and regulatory compliance, our associates, subcontractors, vendors, licensees, franchisees, joint venture partners, and other third parties could take actions that violate these laws and regulations.
Although we have put in place policies and procedures aimed at ensuring legal and regulatory compliance, our associates, subcontractors, vendors, licensees, franchisees, joint venture partners, and other third parties could take actions that violate these laws and regulations.
The Russian invasion of Ukraine in February 2022 and the financial and economic sanctions and other measures imposed by the European Union, the U.S., and other countries and organizations in response thereto is creating, and may continue to create, market disruption and volatility and instability in the geopolitical environment.
The ongoing Russian invasion of Ukraine and the financial and economic sanctions and other measures imposed by the European Union, the U.S., and other countries and organizations in response thereto has created, and may continue to create, market disruption and volatility and instability in the geopolitical environment.
In addition, quality problems could result in a product liability judgment or a widespread product recall that may negatively impact our sales and profitability for a period of time depending on product availability, competitor reaction and consumer attitudes.
In addition, quality problems could result in product liability litigation or a widespread product recall that may negatively impact our sales and profitability depending on product availability, competitor reaction and consumer attitudes.
The satisfaction of our online customers depends on their timely receipt of merchandise. If we encounter difficulties with the distribution facilities, or if the facilities were to shut down for any reason, including as a result of fire, natural disaster or work stoppage, we could face shortages of inventory.
If we encounter difficulties with our distribution facilities, or if the facilities were to shut down for any reason, including as a result of fire, natural disaster or work stoppage, we could face shortages of inventory.
Risks Relating to Our Indebtedness • We have debt obligations that could restrict our business and adversely impact our results of operations, financial condition or cash flows; • The phase-out of LIBOR, or the replacement of LIBOR with a different reference rate, may adversely affect interest rates on our indebtedness; and • Our ability to maintain our credit rating could affect our ability to access capital and could increase our interest expense.
Risks Relating to Our Indebtedness • We have debt obligations that could restrict our business and adversely impact our results of operations, financial condition or cash flows; and • Our ability to maintain our credit rating could affect our ability to access capital and could increase our interest expense.
The COVID-19 pandemic has resulted in supply chain and product transportation challenges, which could cause us to incur significantly higher costs and longer lead times associated with distributing our products to our customers. Any of these issues could cause customer dissatisfaction and have a material adverse effect on our operations, financial condition and cash flows.
Supply chain, including inflationary pressures, or product transportation challenges have caused and could continue to cause us to incur higher costs and longer lead times associated with distributing our products to our customers. Any of these issues could cause customer dissatisfaction and have a material adverse effect on our operations, financial condition and cash flows.
The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our results of operations, financial condition and cash flows. 24 Table of Contents Shareholder activism could cause us to incur significant expense, hinder execution of our business strategy and impact our stock price.
The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our results of operations, financial condition and cash flows.
A continual rise in energy costs could adversely affect consumer spending and demand for our products and increase our operating costs, both of which could have a material adverse effect on our results of operations, financial condition and cash flows. 22 Table of Contents Climate change, and related legislative and regulatory responses to climate change, may adversely impact our business.
A continual rise in energy costs could adversely affect consumer spending and demand for our products and increase our operating costs, both of which could have a material adverse effect on our results of operations, financial condition and cash flows.
Our ability to maintain our credit rating could affect our ability to access capital and could increase our interest expense. Any downgrades in our credit ratings by the major independent rating agencies could increase the cost of borrowing under any indebtedness we may incur.
Any downgrades in our credit ratings by the major independent rating agencies could increase the cost of borrowing under any indebtedness we may incur.
Shareholder activism, which can take many forms and arise in a variety of situations, could result in substantial costs and divert management’s and our Board of Directors’ attention and resources away from our business.
Shareholder activism could cause us to incur significant expense, hinder execution of our business strategy and impact our stock price. Shareholder activism, which can take many forms and arise in a variety of situations, could result in substantial costs and divert management’s and our Board of Directors’ attention and resources away from our business.
Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any shareholder activism.
Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any shareholder activism. We may be adversely impacted by our ability to comply with regulatory requirements. We are subject to numerous regulatory requirements.
Risks Relating to the Separation • We may not realize the anticipated benefits from the Separation, and the Separation could harm our business; • We have limited history of operating as an independent company, and our historical combined and unaudited pro forma financial information for periods prior to the Separation is not necessarily representative of the results that we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results; • We historically operated within our Former Parent, and there are risks associated with the Separation; • Our Former Parent continues to perform functions for us, and we continue to perform functions for our Former Parent, on a transitional basis, and as a result we may experience operational disruptions and incur significant costs to perform these functions ourselves following the transition period or be subject to claims and liability; • The obligations associated with operating as an independent public company require significant resources and management attention; • If we fail to maintain effective internal controls, we may not be able to report our financial results accurately or timely or prevent or detect fraud, which could have a material adverse effect on our business or the market price of our securities; • In connection with the Separation, our Former Parent has agreed to indemnify us for certain liabilities and we agreed to indemnify our Former Parent for certain liabilities.
Risks Relating to the Separation • We may not realize the anticipated benefits from the Separation, and the Separation could harm our business; • Our historical combined pro forma financial information for periods prior to the Separation is not necessarily representative of the results that we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results; • Our Former Parent continues to perform functions for us, and we continue to perform functions for our Former Parent, on a transitional basis, and as a result we may experience operational disruptions and incur significant costs to perform these functions ourselves following the transition period or be subject to claims and liability; • In connection with the Separation, our Former Parent has agreed to indemnify us for certain liabilities and we agreed to indemnify our Former Parent for certain liabilities.
Sales volume and retail traffic may be adversely affected by factors that we cannot control, such as economic downturns or changes in consumer demographics in a particular area, consumer trends away from brick-and-mortar retail toward online shopping, competition from internet and other retailers and other retail areas where we do not have stores, significant health hazards or pandemics, the closing of other stores or the decline in popularity or safety in the shopping areas where our stores are located, and the deterioration in the financial condition of the operators or developers of the shopping areas in which our stores are located.
Sales volume and retail traffic may be adversely affected by factors that we cannot control, such as economic downturns or changes in consumer demographics in a particular area, consumer trends away from brick-and-mortar retail toward online shopping, competition from digital and other retailers and other retail areas where we do not have stores, significant health hazards or pandemics, the closing of other stores or the decline in popularity or safety in the shopping areas where our stores are located, and the deterioration in the financial condition of the operators or developers of the shopping areas in which our stores are located. 15 Table of Conten t s Part of our future growth is significantly dependent on our ability to operate stores in desirable locations with capital investment and lease costs providing the opportunity to earn a reasonable return.
Our ability to effectively manage and operate our business depends significantly on information technology systems, and any failure, disruption, interruption, malfunction or other issue with respect to such systems could have a material adverse effect on our business and results of operations. 14 Table of Contents The obligations associated with operating as an independent public company require significant resources and management attention.
Our ability to effectively manage and operate our business depends significantly on information technology systems, and any failure, disruption, interruption, malfunction or other issue with respect to such systems could have a material adverse effect on our business and results of operations.
Also, our potential indemnity obligation to our Former Parent might discourage, delay or prevent a change of control that our stockholders may consider favorable.
Also, our potential indemnity obligation to our Former Parent might discourage, delay or prevent a change of control that our stockholders may consider favorable. 29 Table of Conten t s ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
We may be adversely impacted by our ability to comply with regulatory requirements. We are subject to numerous regulatory requirements. Our policies, procedures and internal controls are designed to comply with all applicable foreign and domestic laws and regulations, including those required by the Sarbanes-Oxley Act of 2002, the U.S. Foreign Corrupt Practices Act, the U.K.
Our policies, procedures and internal controls are designed to comply with all applicable foreign and domestic laws and regulations, including those required by the Sarbanes-Oxley Act of 2002, the U.S. Foreign Corrupt Practices Act (the “FCPA”), the U.K. Bribery Act, the SEC and the NYSE, among others.
These risks could have a material adverse effect on our ability to grow and results of operations, financial condition and cash flows. Our international operations and our plans for international expansion include risks that could impact our results and reputation.
These risks could have a material adverse effect on our ability to grow and results of operations, financial condition and cash flows. Our international operations and our plans for international expansion include risks that could impact our results and reputation. We intend to continue to operate internationally and further expand into international markets through partner and/or joint venture arrangements.
Recent legal developments in Europe have created further complexity and uncertainty regarding transfers of personal data from the European Economic Area and the United Kingdom to the United States. These recent developments may require us to review and amend the legal mechanisms by which we make and/or receive personal data transfers.
Recent legal developments in Europe have created further complexity and uncertainty regarding transfers of personal data from the European Economic Area and the United Kingdom to the United States.
In addition to the traditional store-based retailers, we also compete with direct marketers or retailers that sell similar lines of merchandise and who target customers through online channels.
In addition to the traditional store-based retailers, we also compete with direct marketers or retailers that sell similar lines of merchandise and who target customers through online channels. Brand image, marketing, design, price, service, assortment, quality, image presentation and fulfillment are all competitive factors in both the store-based and online channels.
If the Separation, together with certain related transactions, do not qualify as transactions that are tax-free for U.S. federal income tax purposes or non-U.S. tax purposes as a result of a breach by us of any covenant or representation made by us in the Tax Matters Agreement (as defined below), we could be subject to significant liability.
For example, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between our Former Parent and us regarding the terms of the agreements governing the Separation and the relationship thereafter between the companies. 28 Table of Conten t s If the Separation, together with certain related transactions, do not qualify as transactions that are tax-free for U.S. federal income tax purposes or non-U.S. tax purposes as a result of a breach by us of any covenant or representation made by us in the Tax Matters Agreement (as defined below), we could be subject to significant liability.
Furthermore, we may experience certain operational disruptions in connection with the Separation as we transition to operating as an independent public company, including information technology disruptions as certain data, software, information technology hardware and other information technology assets and systems are transitioned or re-allocated between us and our Former Parent, or as we implement new systems or upgrades in connection with such transition.
A significant increase in the costs of performing or outsourcing these functions could materially and adversely affect our business, results of operations, financial condition and cash flows. 27 Table of Conten t s Furthermore, we may experience certain operational disruptions in connection with the Separation as we transition to operating as an independent public company, including information technology disruptions as certain data, software, information technology hardware and other information technology assets and systems are transitioned or re-allocated between us and our Former Parent, or as we implement new systems or upgrades in connection with such transition.
Risks Relating to Our Common Stock • As a new public company, the market price and trading volume of our common stock may be volatile and stockholders may not be able to resell their shares at or above the initial market price of our common stock following the Separation; • Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and certain provisions of Delaware law could delay or prevent a change in control of the Company; • Our amended and restated bylaws designate Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us and affect the market price of our common stock; • Your percentage ownership in the Company may be diluted in the future; and • Our common stock is and will be subordinate to all of our current and future indebtedness and any preferred stock, and effectively subordinate to all indebtedness and preferred equity claims against our subsidiaries. 12 Table of Contents RISK FACTORS You should carefully consider each of the following risks and all of the other information contained in this Annual Report on Form 10-K.
Risks Relating to Our Common Stock • The price of our common stock has fluctuated significantly and may continue to fluctuate significantly; • Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and certain provisions of Delaware law could delay or prevent a change in control of the Company; • Our amended and restated bylaws designate Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us and affect the market price of our common stock; • Your percentage ownership in the Company may be diluted in the future; and • Our common stock is and will be subordinate to all of our current and future indebtedness and any preferred stock, and effectively subordinate to all indebtedness and preferred equity claims against our subsidiaries.
Information technology system disruptions or data corruption, if not anticipated and appropriately mitigated, could have a material adverse effect on our operations, financial condition and cash flows.
We are aware of inherent risks associated with replacing and modifying our information technology systems, including risks relative to data integrity and system disruptions. Information technology system disruptions or data corruption, if not anticipated and appropriately mitigated, could have a material adverse effect on our operations, financial condition and cash flows.
Our business, prospects, results of operations, financial condition or cash flows could be materially and adversely affected by any of these risks, as well as additional risks not presently known to us or that we currently deem immaterial. Risks Relating to the Separation We may not realize the anticipated benefits from the Separation, and the Separation could harm our business.
Our business, prospects, results of operations, financial condition or cash flows could be materially and adversely affected by any of these risks, as well as additional risks not presently known to us or that we currently deem immaterial. 13 Table of Conten t s Risks Relating to Our Business Adverse economic conditions have had and may continue to have an adverse effect on our business, results of operations and financial condition.
Moreover, even if we ultimately succeed in recovering from our Former Parent any amounts for which we are indemnified, we may be temporarily required to bear these losses ourselves.
Moreover, even if we ultimately succeed in recovering from our Former Parent any amounts for which we are indemnified, we may be temporarily required to bear these losses ourselves. Each of these risks could have a material adverse effect on our business, results of operations and financial condition.
We may be impacted by our vendors’ ability to manufacture and deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations. We purchase products from third-party vendors. Factors outside our control, such as production or shipping delays or quality problems, could disrupt merchandise deliveries and result in lost sales, cancellation charges or excessive markdowns.
We purchase products from third-party vendors. Factors outside our control, such as production or shipping delays or quality problems, could disrupt merchandise deliveries and result in lost sales, cancellation charges or excessive markdowns.
Increased competition, combined with declines in mall and/or online website traffic, could result in price reductions, increased marketing expenditures and loss of pricing power and market share, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.
Increased competition, combined with declines in mall and/or online website traffic, could result in price reductions, increased marketing expenditures and loss of pricing power and market share, any of which could have a material adverse effect on our results of operations, financial condition and cash flows. 18 Table of Conten t s Our ability to manage the life cycle of our brands and to remain current with fashion trends and launch new merchandise, product lines, and brands successfully could impact the image and relevance of our brands.
Furthermore, our right to participate in a distribution of assets upon any of our subsidiaries’ liquidation or reorganization is subject to the prior claims of that subsidiary’s creditors and preferred stockholders.
Furthermore, our right to participate in a distribution of assets upon any of our subsidiaries’ liquidation or reorganization is subject to the prior claims of that subsidiary’s creditors and preferred stockholders. 26 Table of Conten t s Risks Relating to the Separation We may not realize the anticipated benefits from the Separation, and the Separation could harm our business.
Sustained or repeated system disruptions that interrupt our ability to process orders and deliver products to the stores, impact our customers’ ability to access our websites in a timely manner, or expose confidential customer information, merchandise, financial or other important information (including personal information) could have a material adverse effect on our results of operations, financial condition and cash flows. 23 Table of Contents In addition, from time to time, we make hardware, software and code modifications and upgrades to our information technology systems for point-of-sale, e-commerce, mobile apps, merchandising, planning, sourcing, logistics, inventory management and support systems including human resources and finance.
Sustained or repeated system disruptions that interrupt our ability to process orders and deliver products to the stores, impact our customers’ ability to access our websites in a timely manner, or expose confidential customer information, merchandise, financial or other important information (including personal information) could have a material adverse effect on our results of operations, financial condition and cash flows.
Our ability to adequately protect our assets from loss and theft could have an adverse effect on our reputation, results of operations, financial condition and cash flows. Our assets are subject to loss, including those caused by illegal or unethical conduct by associates, customers, vendors or unaffiliated third parties, natural disasters and organized retail theft.
Our assets are subject to loss, including those caused by illegal or unethical conduct by associates, customers, vendors or unaffiliated third parties, natural disasters and organized retail theft.
However, these provisions apply even if a takeover offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board of Directors determines is not in our and our stockholders’ best interests. 28 Table of Contents Our amended and restated bylaws designate Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us and affect the market price of our common stock.
Our amended and restated bylaws designate Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us and affect the market price of our common stock.
We rely to a greater degree than some of our competitors on physical locations in shopping malls and retail centers and so declines in traffic to such locations may affect us more significantly than our competitors. Some of our competitors sell their products in stores that are located in the same shopping malls and retail centers as our stores.
Some of our competitors may have greater financial, marketing and other resources available and trends across our product categories may favor our competitors. We rely to a greater degree than some of our competitors on physical locations in shopping malls and retail centers and so declines in traffic to such locations may affect us more significantly than our competitors.
In addition to competing for sales, we compete for favorable site locations and lease terms in shopping malls and retail centers.
Some of our competitors sell their products in stores that are located in the same shopping malls and retail centers as our stores. In addition to competing for sales, we compete for favorable site locations and lease terms in shopping malls and retail centers.
We rely on a number of vendor and distribution facilities located in the same vicinity, making our business susceptible to local and regional disruptions or adverse conditions. To achieve the necessary speed and agility in producing our beauty and personal care products, we rely heavily on vendor and distribution facilities in close proximity to our headquarters in Central Ohio.
To achieve the necessary speed and agility in producing our beauty and personal care products, we rely heavily on vendor and distribution facilities in close proximity to our headquarters in Central Ohio. In addition, a significant portion of our intimates and apparel products are produced in Southeast Asia.
Any significant interruption in the operations of these facilities could lead to inventory issues or increased costs, which could have a material adverse effect on our results of operations, financial condition and cash flows.
Any significant interruption in the operations of these facilities could lead to inventory issues or increased costs, which could have a material adverse effect on our results of operations, financial condition and cash flows. 19 Table of Conten t s We may be impacted by our vendors’ ability to manufacture and deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations.
These covenants and restrictions could affect our ability to operate our business and may limit our ability to react to market conditions or take advantage of potential business opportunities as they arise. The phase-out of LIBOR, or the replacement of LIBOR with a different reference rate, may adversely affect interest rates on our indebtedness.
These covenants and restrictions could affect our ability to operate our business and may limit our ability to react to market conditions or take advantage of potential business opportunities as they arise. Our ability to maintain our credit rating could affect our ability to access capital and could increase our interest expense.
Over the past two years, the COVID-19 pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions.
The COVID-19 global pandemic has had and may continue to have an adverse effect on our business and results of operations. The outbreak and spread of the COVID-19 pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, and led to significant travel and transportation restrictions.
It may be difficult for us to oversee regulatory changes impacting our business, and our responses to changes in the law could be costly and may negatively impact our operations. We may be adversely impacted by certain compliance or legal matters. We, along with third parties we do business with, are subject to complex compliance and litigation risks.
It may be difficult for us to oversee regulatory changes impacting our business, and our responses to changes in the law could be costly and may negatively impact our operations.
Each of these risks could have a material adverse effect on our business, results of operations and financial condition. 15 Table of Contents Some of our directors and officers may have actual or potential conflicts of interest because of their equity ownership in our Former Parent.
Some of our directors and officers may have actual or potential conflicts of interest because of their equity ownership in our Former Parent.
In such circumstances, we may increase the number of promotional sales, which could have a material adverse effect on our results of operations, financial condition and cash flows. The COVID-19 global pandemic has had and may continue to have an adverse effect on our business and results of operations.
Purchases of our products may decline during periods when economic or market conditions are unsettled or weak. In such circumstances, we may increase the number of promotional sales, which could have a material adverse effect on our results of operations, financial condition and cash flows.
In the U.S., various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning personal information and data security and have prioritized privacy and information security violations for enforcement actions.
These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material adverse effect on our results of operations, financial condition and cash flows. 22 Table of Conten t s In the U.S., various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning personal information and data security and have prioritized privacy and information security violations for enforcement actions.
Although we contractually require these service providers to implement and maintain a standard of security (such as implementing reasonable measures), we cannot control third parties and cannot guarantee that a security breach will not occur in their systems.
Although we contractually require these service providers to implement and maintain a standard of security (such as implementing reasonable measures), we cannot control third parties and cannot guarantee that a security breach will not occur in their systems. 21 Table of Conten t s Any significant compromise or breach of our data security, including the security of customer, associate, third-party or company information, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.
Any of these difficulties may lead to disruption in the overall timing of our international expansion efforts or increased costs. Further, entry into other markets may bring us into competition with new competitors or with existing competitors with an established market presence.
Further, entry into other markets may bring us into competition with new competitors or with existing competitors with an established market presence.
The image of our brands and our reputation may suffer materially, and our sales could decline if our partners do not operate successfully. These risks could have an adverse effect on our results of operations, financial condition and cash flows. Our direct channel business includes risks that could have an adverse effect on our results.
The image of our brands and our reputation may suffer materially, and our sales could decline if our partners do not operate successfully.
Further, potential claimants may be encouraged to bring suits based on a settlement from us or adverse court decisions against us. We cannot currently assess the likely outcome of such suits, but if the outcome were negative, it could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.
We cannot assess the likelihood that we will receive such claims or the outcome of any such claims, but if outcomes are negative, it could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.

… 84 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

8 edited+2 added−1 removed1 unchanged
Biggest changeA substantial portion of these lease commitments consists of store leases generally with an initial term of 10 years. The store leases expire at various dates between 2022 and 2034. Typically, when space is leased for a retail store in a mall or shopping center, we supply all improvements, including interior walls, floors, ceilings, fixtures and decorations.
Biggest changeTypically, when space is leased for a retail store in a mall or shopping center, we supply all improvements, including interior walls, floors, ceilings, fixtures and decorations. The cost of improvements varies widely, depending on the design, size and location of the store.
International Canada We lease an office in the Toronto, Ontario, area. As of January 29, 2022, we operate 26 retail stores located in leased facilities, primarily in malls and shopping centers, throughout the Canadian provinces. These lease commitments consist of store leases with initial terms of 5 to 10 years expiring on various dates between 2022 and 2031.
Canada As of January 28, 2023, we operated 25 retail stores located in leased facilities, primarily in malls and shopping centers, throughout the Canadian provinces. These lease commitments consist of store leases with initial terms of 5 to 10 years expiring on various dates between 2023 and 2030.
The following table provides the location, use and size of our distribution, corporate and product development facilities as of January 29, 2022: Location Use Approximate Square Footage Columbus, Ohio area Distribution, shipping and corporate offices 2,945,000 New York Office, sourcing and product development/design 220,000 Kettering, Ohio Call center 94,000 Hong Kong Office and sourcing 55,000 Mainland China Office 26,000 Canada Office 6,000 Various international locations Office and sourcing 140,000 United States Our business is principally conducted from office, distribution and shipping facilities located in the Columbus, Ohio, area.
The following table provides the location, use and size of our distribution, corporate and product development facilities as of January 28, 2023: Location Use Approximate Square Footage Columbus, Ohio area Distribution, shipping and corporate offices 2,945,000 New York Office, sourcing and product development/design 235,000 Mexico Distribution and shipping 185,000 New Jersey Distribution and shipping 126,000 Kettering, Ohio Call center 94,000 Hong Kong Office and sourcing 55,000 Various other locations Office and sourcing 211,000 United States Within the U.S., our business is principally conducted from office, distribution and shipping facilities located in the Columbus, Ohio, area.
As of January 29, 2022, we operate 65 retail stores in leased facilities in Greater China. These lease commitments consist of store leases with initial terms ranging from 3 to 15 years expiring on various dates between 2022 and 2032.
The lease for this facility expires in 2026. China We lease offices in Shanghai, Shenzhen and Hong Kong within China. As of January 28, 2023, we operated 59 retail stores in leased facilities in China. These lease commitments consist of store leases with initial terms ranging from 3 to 15 years expiring on various dates between 2023 and 2032.
Additional facilities are located in New York and Kettering, Ohio. Our distribution and shipping facilities consist of three buildings located in the Columbus, Ohio, area. These buildings, including attached office space, comprise approximately 2.9 million square feet. As of January 29, 2022, we operate 808 retail stores located in leased facilities, primarily in malls and shopping centers, throughout the U.S.
Additional facilities are located in New York, New Jersey and Kettering, Ohio. Our distribution and shipping facilities in the U.S. consist of three buildings located in the Columbus, Ohio, area and one leased building located in New Jersey. These buildings, including attached office space, comprise approximately 3.1 million square feet. The lease on the New Jersey facility expires in 2023.
Rental terms for new locations usually include a fixed minimum rent plus a percentage of sales in excess of a specified amount. We usually pay certain operating costs such as common area maintenance, utilities, insurance and taxes. For additional information, see Note 8 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.
We usually pay certain operating costs such as common area maintenance, utilities, insurance and taxes. For additional information, see Note 9 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data. International Mexico We lease an international distribution and shipping facility located in Mexico. This facility comprises approximately 0.2 million square feet.
The cost of improvements varies widely, depending on the design, size and location of the store. In certain cases, the landlord of the property may provide an allowance to fund all or a portion of the cost of improvements, serving as a lease incentive.
In certain cases, the landlord of the property may provide an allowance to fund all or a portion of the cost of improvements, serving as a lease incentive. Rental terms for new locations usually include a fixed minimum rent plus a percentage of sales in excess of a specified amount.
However, as of January 29, 2022, we continue to lease a store in the U.K., with a lease expiration in 2025, and a store in Ireland, with a lease expiration in 2037, which are sublet to and operated by the joint venture. Greater China We lease offices in Shanghai, Shenzhen and Hong Kong within Greater China.
However, as of January 28, 2023, we continue to lease a store in the U.K., with a lease expiration in 2025, and a store in Ireland, with a lease expiration in 2037, which are sublet to and operated by the joint venture. 30 Table of Conten t s Other International As of January 28, 2023, we also have global representation through stores operated by our partners: • 321 beauty and accessories stores in 64 countries; and • 135 full assortment stores in 35 countries.
Removed
Other International As of January 29, 2022, we also have global representation through stores operated by our partners: • 335 beauty and accessories stores in 69 countries; and • 128 full assortment stores in 33 countries. We also operate technology and sourcing-related office facilities in various international locations. 30 Table of Contents
Added
As of January 28, 2023, we operated 818 retail stores located in leased facilities, primarily in malls and shopping centers, throughout the U.S. A substantial portion of these lease commitments consists of store leases generally with an initial term of 10 years. The store leases expire at various dates between 2023 and 2036.
Added
We also operate technology and sourcing-related office facilities in various international locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

0 edited+0 added−5 removed2 unchanged
Removed
As previously disclosed by the Former Parent, on May 19, 2020 and January 12, 2021, the Former Parent's shareholders filed derivative lawsuits in the Court of Common Pleas for Franklin County, Ohio (subsequently removed to the United States District Court for the Southern District of Ohio) and the Delaware Court of Chancery, respectively, naming as defendants certain current and former directors and officers of the Former Parent and alleging, among other things, breaches of fiduciary duty through asserted violations of law and failures to monitor workplace conduct (the “Lawsuits”).
Removed
In addition, the Former Parent also received litigation and books-and-records demands from other shareholders related to the same matters (together with the Lawsuits, the “Actions”). In July 2021, the Former Parent announced the global settlement resolving the Actions.
Removed
The settlement resolves all derivative claims that have been or could have been asserted in the Actions or that involve in any way the allegations referred to in the Actions and releases all such claims against the Former Parent (and its subsidiaries, including us) and past and present employees, officers and directors, among others.
Removed
As part of the settlement, the Former Parent (and its subsidiaries, including us) has agreed to implement certain management and governance measures, including the maintenance of a Diversity, Equity, and Inclusion Council. Following the Separation, the settlement terms apply to both the Former Parent and us.
Removed
Each company has committed to invest $45 million over at least five years to fund the management and governance measures. The settlement was preliminarily approved on August 25, 2021, and a fairness hearing occurred on January 18, 2022. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 31 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+3 added−2 removed3 unchanged
Biggest changeThe following table provides our quarterly market prices since we began trading on August 3, 2021: Market Price High Low 2021 Fourth quarter $ 60.38 $ 45.65 Third quarter 76.00 47.97 The following graph shows the changes, for the period from August 3, 2021 (the first day we began trading on the NYSE) to January 29, 2022, in the value of $100 invested in our common stock, the Standard & Poor’s (“S&P”) 500 Composite Stock Price Index and the S&P 500 Retail Composite Index.
Biggest changeThe following graph shows the changes, for the period from August 3, 2021 (the first day we began trading on the NYSE) to January 28, 2023, in the value of $100 invested in our common stock, the Standard & Poor’s (“S&P”) 500 Composite Stock Price Index and the S&P 500 Retail Composite Index.
As of January 29, 2022, there were approximately 25,000 stockholders of record of our common stock. However, including active associates who participate in our stock purchase plan, associates who own shares through our sponsored retirement plans and others holding shares in broker accounts under street names, we estimate our stockholder base to be approximately 146,000.
As of January 28, 2023, there were approximately 25,000 stockholders of record of our common stock. However, including active associates who participate in our stock purchase plan, associates who own shares through our sponsored retirement plans and others holding shares in broker accounts under street names, we estimate our stockholder base to be approximately 141,000.
COMPARISON OF SIX-MONTH CUMULATIVE TOTAL RETURN (a) AMONG VICTORIA'S SECRET & CO., THE S&P 500 INDEX AND THE S&P 500 RETAIL COMPOSITE INDEX _______________ (a) This table represents $100 invested in stock or in index at the closing price on August 3, 2021, including reinvestment of dividends. 32 Table of Contents The following table provides our repurchases of our common stock during the fourth quarter of 2021: Period Total Number of Shares Purchased (a) Average Price Paid per Share (b) Total Number of Shares Purchased as Part of Publicly Announced Programs (c) Maximum Dollar Value of Shares that May Yet be Purchased Under the Programs (c) (in thousands) (in thousands) November 2021 4 $ 51.38 — $ — December 2021 4,122 (b) 4,117 50,000 January 2022 1 56.81 — 50,000 Total 4,127 4,117 ________________ (a) The total number of shares repurchased includes shares repurchased as part of publicly announced programs, with the remainder relating to shares repurchased in connection with tax payments due upon vesting of employee restricted stock awards and the use of our stock to pay the exercise price on employee stock options.
COMPARISON OF 18-MONTH CUMULATIVE TOTAL RETURN (a) AMONG VICTORIA'S SECRET & CO., THE S&P 500 INDEX AND THE S&P 500 RETAIL COMPOSITE INDEX _______________ (a) This table represents $100 invested in stock or in index at the closing price on August 3, 2021, including reinvestment of dividends. 32 Table of Conten t s The following table provides our repurchases of our common stock during the fourth quarter of 2022: Period Total Number of Shares Purchased (a) Average Price Paid per Share (b) Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Dollar Value of Shares that May Yet be Purchased Under the Programs (c) (in thousands) (in thousands) November 2022 15 $ 38.96 — $ 36,106 December 2022 476 43.80 469 15,526 January 2023 431 37.91 412 250,000 Total 922 881 ________________ (a) The total number of shares repurchased includes shares repurchased as part of publicly announced programs, with the remainder relating to shares repurchased in connection with tax payments due upon vesting of employee restricted stock awards and the use of our stock to pay the exercise price on employee stock options.
Removed
(b) The amount purchased in December 2021 includes the initial delivery of 4.117 million shares pursuant to the accelerated share repurchase agreement discussed in Note 17 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.
Added
(b) The average price paid per share includes any broker commissions. (c) The share repurchase program announced in March 2022 (the “March 2022 Share Repurchase Program”) authorized the purchase of up to $250 million of our common stock in open market transactions, subject to market conditions and other factors.
Removed
The average price paid per share, including any broker commissions, in December 2021 for shares not purchased pursuant to the accelerated share repurchase agreement was $53.05. (c) For additional share repurchase program information, see Note 17 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data. ITEM 6. RESERVED.
Added
The March 2022 Share Repurchase Program was completed in fiscal year 2022. The share repurchase program announced in January 2023 (the “January 2023 Share Repurchase Program”) authorizes the purchase of up to $250 million of our common stock in open market transactions, subject to market conditions and other factors.
Added
The January 2023 Share Repurchase Program will continue until exhausted, but no later than the end of fiscal year 2023. No purchases were made under the January 2023 Share Repurchase Program in fiscal year 2022. For additional share repurchase program information, see Note 18 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

119 edited+58 added−84 removed49 unchanged
Biggest changeThe table below reconciles the GAAP financial measures to the non-GAAP financial measures. 37 Table of Contents (in millions, except per share amounts) 2021 2020 2019 Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income Reported Operating Income (Loss) — GAAP $ 870 $ (101) $ (892) Asset Impairments (a) — 214 253 Restructuring Charges (b) — 51 — Hong Kong Store Closure and Lease Termination (c) — (36) — Establishment of U.K. and Ireland Joint Venture (d) — (30) — Impairment of Goodwill (e) — — 720 Adjusted Operating Income $ 870 $ 98 $ 81 Reconciliation of Reported Net Income (Loss) to Adjusted Net Income Reported Net Income (Loss) — GAAP $ 646 $ (72) $ (897) Asset Impairments (a) — 214 253 Restructuring Charges (b) — 51 — Hong Kong Store Closure and Lease Termination (c) — (36) — Establishment of U.K. and Ireland Joint Venture (d) — (30) — Impairment of Goodwill (e) — — 720 Tax Effect of Adjusted Items — (40) (26) Tax Benefit related to a Tax Matter Associated with Foreign Investments (f) — (44) — Adjusted Net Income $ 646 $ 43 $ 50 Reconciliation of Reported Net Income (Loss) Per Diluted Share to Adjusted Net Income Per Diluted Share Reported Net Income (Loss) Per Diluted Share — GAAP $ 7.18 $ (0.82) $ (10.16) Asset Impairments (a) — 1.93 2.60 Restructuring Charges (b) — 0.46 — Hong Kong Store Closure and Lease Termination (c) — (0.28) — Establishment of U.K. and Ireland Joint Venture (d) — (0.31) — Impairment of Goodwill (e) — — 8.12 Tax Benefit related to a Tax Matter Associated with Foreign Investments (f) — (0.49) — Adjusted Net Income Per Diluted Share $ 7.18 $ 0.49 $ 0.56 ________________ (a) We recognized pre-tax impairment charges of $97 million ($72 million after-tax) and $117 million ($99 million after-tax) related to certain store and lease assets in the first and second quarter of 2020, respectively.
Biggest changeReported Net Income (Loss) Per Diluted Share Attributable to Victoria's Secret & Co. — GAAP $ 4.14 $ 7.18 $ (0.82) Occupancy-related Legal Matter (a) 0.19 — — Restructuring Charges (b) 0.31 — 0.46 Happy Nation Restructuring Charge (c) 0.14 — — Adore Me Acquisition Transaction Costs (d) 0.16 — — Asset Impairments (e) — — 1.93 Hong Kong Store Closure and Lease Termination (f) — — (0.28) Establishment of U.K. and Ireland Joint Venture (g) — — (0.31) Tax Benefit related to a Tax Matter Associated with Foreign Investments (h) — — (0.49) Adjusted Net Income Per Diluted Share Attributable to Victoria's Secret & Co. $ 4.95 $ 7.18 $ 0.49 ________________ 38 Table of Conten t s (a) In the first quarter of 2022, we recognized a pre-tax charge of $22 million ($16 million after-tax), included in buying and occupancy expense, related to a legal matter with a landlord regarding a high-profile store that we surrendered to the landlord prior to the Separation.
Revenue recognized under franchise and license arrangements generally consists of royalties earned and recognized upon sale of merchandise by franchise and license partners to retail customers. Revenue is generally recognized under wholesale and sourcing arrangements at the time the title passes to the partner.
Revenue recognized under franchise and license arrangements generally consists of royalties earned and recognized upon sale of merchandise by franchise and license partners to retail customers. Revenue is generally recognized under wholesale and sourcing arrangements at the time the title of merchandise passes to the partner.
Except as may be required by law, we assume no obligation and do not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this Annual Report on Form 10-K to reflect circumstances existing after the date of this report, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.
Except as may be required by law, we assume no obligation and do not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this Annual Report on Form 10-K to reflect circumstances existing after the date of this report or to reflect the occurrence of future events, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.
As a result of our fleet rationalization executed during 2020 and the negative operating results of certain stores in 2020 and 2019, we determined that the estimated undiscounted future cash flows were less than the carrying values for certain asset groups and, as a result, determined the estimated fair values of the store asset groups using estimated discounted future cash flows and estimated market rental rates.
As a result of our store fleet rationalization executed during 2020 and the negative operating results of certain stores in 2020, we determined that the estimated undiscounted future cash flows were less than the carrying values for certain asset groups and, as a result, determined the estimated fair values of the store asset groups using estimated discounted future cash flows and estimated market rental rates.
Words such as “estimate,” “commit,” “target,” “goal,” “project,” “plan,” “believe,” “seek,” “strive,” “expect,” “anticipate,” “intend,” “planned,” “potential” and any similar expressions may identify forward-looking statements.
Words such as “estimate,” “commit,” “target,” “goal,” “project,” “plan,” “believe,” “seek,” “strive,” “expect,” “anticipate,” “intend,” “potential” and any similar expressions may identify forward-looking statements.
The cash and cash equivalents held by the Former Parent at the corporate level prior to the Separation were not specifically identifiable to us and, therefore, were not reflected in the Consolidated and Combined Balance Sheets.
The cash and cash equivalents held by the Former Parent at the corporate level prior to the Separation were not specifically identifiable to us and, therefore, were not reflected in the Consolidated Balance Sheets.
The initial delivery of shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted net income per share.
The delivery of shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted net income per share.
Our shipping and handling revenues are included in Net Sales with the related costs included in Costs of Goods Sold, Buying and Occupancy in our Consolidated and Combined Statements of Income (Loss). We also provide a reserve for projected merchandise returns based on historical experience. Net Sales exclude sales and other similar taxes collected from customers.
Our shipping and handling revenues are included in Net Sales with the related costs included in Costs of Goods Sold, Buying and Occupancy in our Consolidated and Combined Statements of Income (Loss). We also provide a reserve for projected merchandise returns based on historical experience and recent information. Net Sales exclude sales and other similar taxes collected from customers.
Further, with our customer at the core of our strategy, we are also increasing the personalization of our digital platforms through site experience and marketing designed for our customer. Our ongoing digital investments are designed to create a seamless shopping experience between online and offline and bolster our leadership in the digital channel.
Further, with our customer at the core of our strategy, we are also increasing the personalization of our digital platforms through site experience and marketing designed for our customer. Our ongoing digital investments are designed to create a seamless shopping experience between online and offline and bolster our performance in the digital channel.
The LIBOR rate applicable to the Term Loan Facility will be subject to a floor of 0.50%. 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 LIBOR rate applicable to the Term Loan Facility is subject to a floor of 0.50%. 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 following is a discussion regarding certain of our key business priorities: Invest in our Brands, Business and New Opportunities to Drive Growth. We continue to make significant investments in our iconic brands, our physical and digital business channels and our organizational capabilities in order to support the continued growth of our business.
The following is a discussion regarding certain of our key business priorities. Invest in our Brands, Business and New Opportunities to Drive Growth We continue to make significant investments in our iconic brands, our physical and digital business channels, our customer experience and our organizational capabilities in order to support the continued growth of our business.
The final number of shares received under the ASR Agreement was based on the daily average of the volume-weighted average share price of our common stock over the term of the ASR Agreement, less a discount and subject to other adjustments pursuant to the terms of the ASR Agreement.
The final number of shares received under the December 2021 ASR Agreement was based on the daily average of the volume-weighted average share price of our common stock over the term of the December 2021 ASR Agreement, less a discount and subject to other adjustments pursuant to the terms of the December 2021 ASR Agreement.
Interest on the loans under the ABL Facility will be 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%.
Interest on the loans under the ABL Facility is 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%.
The 2029 Notes and the Term Loan Facility include the maintenance of a consolidated coverage ratio and a consolidated total leverage ratio, and the ABL Facility includes the maintenance of a fixed charge coverage ratio and a debt to earnings before interest, income taxes, depreciation, amortization and rent ("EBITDAR") ratio.
The 2029 Notes and the Term Loan Facility include the maintenance of a consolidated coverage ratio and a consolidated total leverage ratio, and the ABL Facility includes the maintenance of a fixed charge coverage ratio and a debt to earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”) ratio.
Private Securities Litigation Reform Act of 1995) contained in this Annual Report on Form 10-K or made by the Company, our management, or our spokespeople involve risks and uncertainties and are subject to change based on various factors, many of which are beyond our control.
Private Securities Litigation Reform Act of 1995) contained in this Annual Report on Form 10-K or made by us, our management, or our spokespeople involve risks and uncertainties and are subject to change based on various factors, many of which are beyond our control.
We have a presence in over 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.
We have a presence in approximately 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.
In addition, we are scaling the distribution capacity of our digital business in order to support our growth and our omni-channel offerings. These strategies are aimed at increasing our digital channel mix and driving margin accretion. 36 Table of Contents Expand our International Business. Growing our international business is a key strategy.
In addition, we are scaling the distribution capacity of our digital business in order to support our growth and our omni-channel offerings. These strategies are aimed at increasing our digital channel mix and driving margin accretion. Expand our International Business Growing our international business is a key strategy.
Management believes that our cash balances and funds provided by operating activities, along with borrowing capacity and access to capital markets, taken as a whole, provide (i) adequate liquidity to meet all of our current and long-term obligations when due, including third-party debt that we incurred in connection with the Separation, (ii) adequate liquidity to fund capital expenditures, and (iii) flexibility to meet investment opportunities that may arise.
Management believes that our cash balances and funds provided by operating activities, along with the borrowing capacity under our ABL Facility, taken as a whole, provide (i) adequate liquidity to meet all of our current and long-term obligations when due, including third-party debt that we incurred in connection with the Separation, (ii) adequate liquidity to fund capital expenditures, and (iii) flexibility to meet investment opportunities that may arise.
We are investing in our stores through refreshing existing stores and working towards a store of the future that will include smaller, more flexible space in off-mall locations with a unique dual-brand layout to meet the needs of our customer and accommodate shifting consumer preferences for omni-channel shopping.
We are investing in our stores through refreshing existing stores and expanding our store of the future concept that will include smaller, more flexible space in off-mall locations with a unique dual-brand layout to meet the needs of our customer and accommodate shifting consumer preferences for omni-channel shopping.
The availability under the ABL Facility will be 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.
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.
(b) In the second quarter of 2020, we recognized pre-tax severance charges of $51 million ($40 million after-tax) related to headcount reductions as a result of restructuring activities. For additional information, see Note 5, “Restructuring Activities" included in Item 8. Financial Statements and Supplementary Data.
In the second quarter of 2020, we recognized pre-tax severance charges of $51 million ($40 million after-tax) related to headcount reductions as a result of restructuring activities. For additional information, see Note 6, “Restructuring Activities” included in Item 8. Financial Statements and Supplementary Data.
Omni-channel initiatives, including buy online pick-up in store, and an increased focus on mobile and application interactions will continue to provide flexibility and convenience to our customers. Our shopping and services initiatives will continue to modernize the customer’s digital shopping experience through features like digital selling guides, virtual try-on, digital appointments, improved checkout performance and alternative payment options.
Omni-channel initiatives, including buy online pick-up in store, and an increased focus on mobile and application interactions will continue to provide flexibility and convenience to our customers. Our shopping and services initiatives are aimed at modernizing the customer’s digital shopping experience through features like digital selling guides, virtual try-on, digital appointments, improved checkout performance and alternative payment options.
Common Stock Share Repurchases Our Board of Directors will determine share repurchase authorizations, giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements and the Tax Matters Agreement with the Former Parent, as well as financial and other conditions existing at the time.
Common Stock Share Repurchases & Treasury Stock Retirements Our Board of Directors determines share repurchase authorizations, giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements and the Tax Matters Agreement with the Former Parent, as well as financial and other conditions existing at the time.
As of January 29, 2022, the $250 million payment to Goldman Sachs was recognized as a reduction to shareholders’ equity, consisting of a $200 million increase in Treasury Stock, which reflects the value of the initial 4.1 million shares received upon initial settlement, and a $50 million decrease in Paid-in Capital, which reflects the value of the stock held back by Goldman Sachs pending final settlement of the ASR Agreement.
The $250 million payment to Goldman Sachs was recognized as a reduction to shareholders’ equity, consisting of a $200 million increase in Treasury Stock, which reflects the value of the initial 4.1 million shares received upon initial settlement, and a $50 million decrease in Paid-in Capital, which reflects the value of the stock held back by Goldman Sachs pending final settlement of the December 2021 ASR Agreement.
(c) In the second quarter of 2020, we recognized a net pre-tax gain of $36 million ($25 million after-tax) related to the closure and termination of our lease for the Hong Kong flagship store. For additional information, see Note 8, "Leases" included in Item 8. Financial Statements and Supplementary Data.
(f) In the second quarter of 2020, we recognized a net pre-tax gain of $36 million ($25 million after-tax) related to the closure and termination of our lease for the Hong Kong flagship store. For additional information, see Note 9, “Leases” included in Item 8. Financial Statements and Supplementary Data.
Additionally, we evaluate a number of key performance indicators including comparable sales, gross profit, operating income and other performance metrics such as sales per average selling square foot and inventory per selling square foot in assessing our performance. Executive Overview Victoria’s Secret is an iconic global brand of women’s intimate and other apparel, personal care and beauty products.
Additionally, we evaluate a number of key performance indicators including comparable sales, gross profit, operating income and other performance metrics such as sales per average selling square foot and inventory per selling square foot in assessing our performance. 34 Table of Conten t s Executive Overview Victoria’s Secret & Co. is an iconic global brand of women’s intimate and other apparel, personal care and beauty products.
Our management team is committed to a diverse and inclusive corporate culture and we are building a world class team to support the execution of our growth strategies.
Our management team is committed to a diverse and inclusive corporate culture and we have a world class team to support the execution of our growth strategies.
Revenue earned in connection with our U.S. private label credit card arrangement is primarily recognized based on credit card sales and usage and is included in Net Sales in the Consolidated and Combined Statements of Income (Loss). We also recognize revenues associated with franchise, license, wholesale and sourcing arrangements.
Revenue earned in connection with our credit card arrangements is primarily recognized based on credit card sales and usage and is included in Net Sales in the Consolidated and Combined Statements of Income (Loss). We also recognize revenues associated with franchise, license, wholesale and sourcing arrangements.
(d) In the third quarter of 2020, we recognized a pre-tax gain of $30 million ($27 million after-tax) related to the establishment of a joint venture for the U.K. and Ireland business with Next. For additional information, see Note 5, “Restructuring Activities" included in Item 8. Financial Statements and Supplementary Data.
(g) In the third quarter of 2020, we recognized a pre-tax gain of $30 million ($27 million after-tax) related to the establishment of a joint venture for the U.K. and Ireland business with Next. For additional information, see Note 6, “Restructuring Activities” included in Item 8. Financial Statements and Supplementary Data.
We sell our products through two brands, Victoria’s Secret and PINK. Victoria’s Secret is a category-defining global lingerie brand with a leading market position and a rich, 40-year history of serving women across the globe. PINK is a lifestyle brand for the collegiate-oriented customer, built around a strong intimates core.
We sell our products through three brands, Victoria’s Secret, PINK and Adore Me. Victoria’s Secret is a category-defining global lingerie brand with a leading market position and a rich, over 45-year history of serving women across the globe. PINK is a lifestyle brand for the collegiate-oriented customer, built around a strong intimates core.
Our financial statements for the period from August 3, 2021 through January 29, 2022 are consolidated financial statements based on our reported results as a standalone company.
Our financial statements for the period from August 3, 2021 through January 28, 2023 are consolidated financial statements based on our reported results as a standalone company.
The retirement will result in a reduction of $50 million in Treasury Stock, less than $1 million in the par value of Common Stock, less than $1 million in Paid-in Capital and nearly $50 million in Retained Earnings in the first quarter of 2022. Dividend Policy and Procedures We have not paid any cash dividends since the Separation.
The retirement resulted in a reduction of $50 million in Treasury Stock, less than $1 million in the par value of Common Stock, less than $1 million in Paid-in Capital and nearly $50 million in Retained Earnings. Dividend Policy and Procedures We have not paid any cash dividends since the Separation.
A 10% increase or decrease in the estimated physical inventory loss adjustment would have impacted net income by approximately $2 million for 2021.
A 10% increase or decrease in the inventory valuation adjustment would have impacted net income by approximately $3 million for 2022. A 10% increase or decrease in the estimated physical inventory loss adjustment would have impacted net income by approximately $2 million for 2022.
The following table provides pre-tax long-lived store asset impairment charges included in the Consolidated and Combined Statement of Income (Loss) for 2021, 2020 and 2019: 2021 2020 2019 (in millions) Store Asset Impairment $ — $ 136 $ 198 Operating Lease Asset Impairment — 118 65 Total Impairment $ — $ 254 $ 263 Our fair value estimates incorporated significant assumptions and judgments including, but not limited to, estimated future cash flows, discount rates and market rental rates.
The following table provides pre-tax long-lived store asset impairment charges included in the 2020 Consolidated and Combined Statement of Loss: 2020 (in millions) Store Asset Impairment $ 136 Operating Lease Asset Impairment 118 Total Impairment $ 254 Our fair value estimates incorporate significant assumptions and judgments including, but not limited to, estimated future cash flows, discount rates and market rental rates.
We plan to drive strong comparable sales growth in franchise stores through continued improved product offerings and adjusting assortments to better reflect local preferences. We plan to increase our international store count, enabled by a new store design, lower costs and flexible store formats, which provide a pathway to profitable growth.
We plan to drive strong sales growth in franchise, travel retail and joint venture-operated stores through continued improved product offerings and adjusting assortments to better reflect local preferences. We plan to increase our international store count, enabled by a new store design, lower costs and flexible store formats, which are designed to provide a pathway to profitable growth.
Company-Operated Store Data The following table compares 2021 U.S. company-operated store data to the comparable periods for 2020 and 2019: % Change 2021 2020 2019 2021 2020 Sales per Average Selling Square Foot (a) $ 697 $ 415 $ 684 68 % (39 %) Sales per Average Store (in thousands) (a) $ 4,835 $ 2,789 $ 4,455 73 % (37 %) Average Store Size (selling square feet) 6,942 6,928 6,551 — % 6 % Total Selling Square Feet (in thousands) 5,609 5,861 6,898 (4 %) (15 %) ________________ (a) Sales per average selling square foot and sales per average store, which are indicators of store productivity, are calculated based on store sales for the period divided by the average, including the beginning and end of period, of total square footage and store count, respectively.
Company-Operated Store Data The following table compares 2022 U.S. company-operated store data to the comparable periods for 2021 and 2020: % Change 2022 2021 2020 2022 2021 Sales per Average Selling Square Foot (a) $ 658 $ 697 $ 415 (6 %) 68 % Sales per Average Store (in thousands) (a) $ 4,558 $ 4,835 $ 2,789 (6 %) 73 % Average Store Size (selling square feet) 6,918 6,942 6,928 — % — % Total Selling Square Feet (in thousands) 5,617 5,609 5,861 — % (4 %) ________________ (a) Sales per average selling square foot and sales per average store, which are indicators of store productivity, are calculated based on store sales for the period divided by the average, including the beginning and end of period, of total square footage and store count, respectively.
Victoria’s Secret and PINK merchandise is sold online through our e-commerce platform, through company-operated retail stores located in the U.S., Canada and Greater China, and through international stores and websites operated by partners under franchise, license, wholesale and joint venture arrangements.
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.
Interest under the Term Loan Facility will be 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%.
Interest under the Term Loan Facility is calculated by reference to the London Interbank Offered Rate (“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%.
Shares acquired through the March 2022 Share Repurchase Program will be available to meet obligations under equity compensation plans and for general corporate purposes. The March 2022 Share Repurchase Program will continue until exhausted, but no later than January 28, 2023.
Shares acquired through the January 2023 Share Repurchase Program will be available to meet obligations under equity compensation plans and for general corporate purposes. The January 2023 Share Repurchase Program began upon completion of the March 2022 Share Repurchase Program and will continue until exhausted, but no later than the end of fiscal year 2023.
The capital expenditures were primarily related to spending on technology and logistics to support our digital business and other retail capabilities. We are estimating 2022 capital expenditures to be approximately $225 million.
The capital expenditures were primarily related to our store refresh program and spending on technology and logistics to support our digital business and other retail capabilities. We are estimating 2023 capital expenditures to be approximately $275 million.
Investing in our digital channel continues to be a key priority and we believe that our global brands and our scaled retail footprint in North America is a unique platform to grow our digital business.
Drive Penetration and Growth in our Digital Channel and Provide an Enhanced Omni-Channel Experience Investing in our digital channel continues to be a key priority and we believe that our global brands and our scaled retail footprint in North America is a unique platform to grow our digital business.
Risks associated with the following factors, among others, could affect our financial performance and cause actual results to differ materially from those expressed or implied in any forward-looking statements: • the spin-off from our Former Parent may not be tax-free for U.S. federal income tax purposes; • a loss of synergies from separating the businesses that could negatively impact our balance sheet, profit margins or earnings; • we may not realize all of the expected benefits of the spin-off; • general economic conditions, inflation, consumer confidence, consumer spending patterns and market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises or other major events, or the prospect of these events; • the novel coronavirus (COVID-19) global pandemic has had and may continue to have an adverse effect on our business and results of operations; • the seasonality of our business; • difficulties arising from turnover in company leadership or other key positions; • our ability to attract, develop and retain qualified associates and manage labor-related costs; • our dependence on mall traffic and the availability of suitable store locations on appropriate terms; • our ability to grow through new store openings and existing store remodels; 33 Table of Contents • our ability to successfully operate and expand internationally and related risks; • our independent franchise, license, wholesale, and joint venture partners; • our direct channel business; • our ability to protect our reputation and the image of our brands; • our ability to attract customers with marketing, advertising and promotional programs; • our ability to maintain, enforce and protect our trade names, trademarks and patents; • the highly competitive nature of the retail industry and the segments in which we operate; • consumer acceptance of our products and our ability to manage the life cycle of our brands, keep up with fashion trends, develop new merchandise and launch new product lines successfully; • our ability to source, distribute and sell goods and materials on a global basis, including risks related to: • political instability, environmental hazards or natural disasters; • significant health hazards or pandemics, which could result in closed factories, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in impacted areas; • duties, taxes and other charges; • legal and regulatory matters; • volatility in currency exchange rates; • local business practices and political issues; • delays or disruptions in shipping and transportation and related pricing impacts; • disruption due to labor disputes; and • changing expectations regarding product safety due to new legislation; • our geographic concentration of vendor and distribution facilities in central Ohio and Southeast Asia; • the ability of our vendors to deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations; • fluctuations in freight, product input and energy costs, including those caused by inflation; • our ability to adequately protect our assets from loss and theft; • claims arising from our self-insurance; • our and our third-party service providers' ability to implement and maintain information technology systems and to protect associated data and system availability; • our ability to maintain the security of customer, associate, third-party and company information; • stock price volatility; • shareholder activism matters; • our ability to maintain our credit rating; • our ability to service or refinance our debt and maintain compliance with our restrictive covenants; • our ability to comply with laws, regulations and technology platform rules or other obligations related to data privacy and security; • our ability to comply with regulatory requirements; • legal and compliance matters; and • tax, trade and other regulatory matters.
Risks associated with the following factors, among others, could affect our financial performance and cause actual results to differ materially from those expressed or implied in any forward-looking statements: • the spin-off from our Former Parent may not be tax-free for U.S. federal income tax purposes; • we may not realize all of the expected benefits of the spin-off; • general economic conditions, inflation, consumer confidence, consumer spending patterns and market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises or other major events, or the prospect of these events; • the novel coronavirus (COVID-19) global pandemic has had and may continue to have an adverse effect on our business and results of operations; • difficulties arising from turnover in company leadership or other key positions; • our ability to attract, develop and retain qualified associates and manage labor-related costs; • our dependence on mall traffic and the availability of suitable store locations on appropriate terms; • our ability to successfully operate and expand internationally and related risks; 33 Table of Conten t s • our independent franchise, license, wholesale, and joint venture partners; • our direct channel business; • our ability to protect our reputation and the image of our brands; • our ability to attract customers with marketing, advertising and promotional programs; • the highly competitive nature of the retail industry and the segments in which we operate; • consumer acceptance of our products and our ability to manage the life cycle of our brands, keep up with fashion trends, develop new merchandise and launch new product lines successfully; • our ability to realize the potential benefits and synergies sought with the acquisition of Adore Me; • our ability to source, distribute and sell goods and materials on a global basis, including risks related to: • political instability, environmental hazards or natural disasters; • significant health hazards or pandemics; • legal and regulatory matters; • delays or disruptions in shipping and transportation and related pricing impacts; and • disruption due to labor disputes; • our geographic concentration of vendor and distribution facilities in central Ohio and Southeast Asia; • the ability of our vendors to deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations; • fluctuations in freight, product input and energy costs, including those caused by inflation; • our and our third-party service providers’ ability to implement and maintain information technology systems and to protect associated data and system availability; • our ability to maintain the security of customer, associate, third-party and company information; • stock price volatility; • shareholder activism matters; • our ability to maintain our credit rating; • our ability to comply with regulatory requirements; and • legal, tax, trade and other regulatory matters.
We will focus on assortment newness and product innovation, and will also continue to search for new growth opportunities, including new brands we develop as well as partnerships with existing brands that help us attract new customers and better meet the needs of existing ones.
Additionally, we will continue to search for new growth opportunities, including new brands we may develop as well as partnerships with existing brands that help us attract new customers and better meet the needs of existing ones.
This arrangement was not reflective of the manner in which we would have financed our operations had we been an independent, publicly traded company during the periods presented prior to the Separation.
As a result, a substantial portion of our cash was transferred to the Former Parent. This arrangement was not reflective of the manner in which we would have financed our operations had we been an independent, publicly traded company during the periods presented prior to the Separation.
Commencing in December 2021, we will make quarterly principal payments on the Term Loan Facility in an amount equal to 0.25% of the original principal amount of $400 million. During 2021, we made a principal payment of $1 million for the Term Loan Facility.
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 of $4 million and $1 million for the Term Loan Facility during 2022 and 2021, respectively.
In March 2022, our Board of Directors approved a new share repurchase program ("March 2022 Share Repurchase Program"), providing for the repurchase of up to $250 million of our common stock. The $250 million authorization is expected to be utilized to repurchase shares in the open market, subject to market conditions and other factors.
January 2023 Share Repurchase Program 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 $250 million authorization is expected to be utilized to repurchase shares in the open market, subject to market conditions and other factors.
We include our tax contingencies accrual, including accrued penalties and interest, in Other Long-term Liabilities on the Consolidated and Combined Balance Sheets unless the liability is expected to be paid within one year.
We include our tax contingencies accrual, including accrued penalties and interest, in Other Long-term Liabilities on the Consolidated Balance Sheets unless the liability is expected to be paid within one year. Changes to the tax contingencies accrual, including accrued penalties and interest, are included in Provision (Benefit) for Income Taxes on the Consolidated and Combined Statements of Income (Loss).
We borrowed $13 million and $50 million under the unsecured Foreign Facilities during 2020 and 2019, respectively. Additionally, we made payments of $63 million and $59 million under these unsecured Foreign Facilities during 2020 and 2019, respectively. During the second quarter of 2020, with no borrowings outstanding, we terminated the unsecured Foreign Facilities.
During the second quarter of 2021, with no borrowings outstanding, we terminated the Secured Foreign Facilities. We borrowed $13 million and made payments of $63 million under the unsecured Foreign Facilities during 2020. During the second quarter of 2020, with no borrowings outstanding, we terminated the unsecured Foreign Facilities.
In addition, there are no new accounting standards not yet adopted that are expected to have a material impact on our results of operations, financial position or cash flows.
Recently Issued Accounting Pronouncements We did not adopt any new accounting standards during 2022 that had a material impact on our results of operations, financial position or cash flows. In addition, there are no new accounting standards not yet adopted that are expected to have a material impact on our results of operations, financial position or cash flows.
We believe we can further optimize our existing base of stores within North America to continue to deliver an elevated retail experience and to meet our customer’s evolving channel preferences.
Continue Optimizing the Customer Experience through Elevated and Profitable Company-Operated Stores We believe we can further optimize our existing base of stores within North America to continue to deliver an elevated retail experience and to meet our customers’ evolving channel preferences.
We use cash flow generated from operating activities to fund our share repurchase programs. The timing and amount of any repurchases will be made at our discretion, taking into account a number of factors, including market conditions. In December 2021, we entered into an accelerated share repurchase agreement (“ASR Agreement”) with Goldman Sachs & Co.
We use cash flow generated from operating activities to fund our share repurchase programs. The timing and amount of any repurchases will be made at our discretion, taking into account a number of factors, including market conditions.
Instead, we believe that the presentation of adjusted financial information provides additional information to investors to facilitate the comparison of past and present operations. Further, our definition of adjusted financial information may differ from similarly titled measures used by other companies.
These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Instead, we believe that the presentation of non-GAAP financial information provides additional information to investors to facilitate the comparison of past and present operations. Further, our definition of non-GAAP financial measures may differ from similarly titled measures used by other companies.
LLC (“Goldman Sachs”) to repurchase $250 million of our common stock. In accordance with the ASR Agreement, in December 2021 we made an initial payment of $250 million to Goldman Sachs, and received an initial delivery of 4.1 million shares of our common stock.
December 2021 ASR Agreement In December 2021, we entered into an accelerated share repurchase agreement (“December 2021 ASR Agreement”) with Goldman Sachs to repurchase $250 million of our common stock. In December 2021, we made an initial payment of $250 million to Goldman Sachs and received an initial delivery of 4.1 million shares of our common stock.
(c) Purchase obligations primarily include purchase orders for merchandise inventory and other agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transactions.
(c) Purchase obligations primarily include purchase orders for merchandise inventory and other agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transactions. 48 Table of Conten t s (d) Other liabilities also include future estimated payments associated with unrecognized tax benefits.
The final settlement under the ASR Agreement occurred in February 2022 subsequent to the end of fiscal year 2021. At final settlement, we received an additional 0.3 million shares of our common stock from Goldman Sachs.
In February 2022, upon final settlement of the December 2021 ASR Agreement, we received an additional 0.3 million shares of our common stock from Goldman Sachs.
We believe that these special items are not indicative of our ongoing operations due to their size and nature. We use adjusted financial information as key performance measures of results of operations for the purpose of evaluating performance internally. These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP.
We believe the presentation of these non-GAAP financial measures is useful for an assessment of our ongoing operations, and that the adjustments are not indicative of our ongoing operations due to their size and nature. We use non-GAAP financial information as key performance measures of results of operations for the purpose of evaluating performance internally.
We recognize sales upon customer receipt of merchandise, which for direct channel revenues reflect an estimate of shipments that have not yet been received by our customer based on shipping terms and historical delivery times.
Revenue Recognition We recognize revenue based on the amount we expect to receive when control of the goods or services is transferred to our customer. We recognize sales upon customer receipt of merchandise, which for direct channel revenues reflect an estimate of shipments that have not yet been received by our customer based on shipping terms and historical delivery times.
For additional information on the “carve-out” basis of accounting, see Note 1, "Description of Business, Basis of Presentation and Summary of Significant Accounting Policies." Growth Strategies We have a multi-year goal to increase sales and operating income by focusing on these key business priorities: • Invest in our brands, business and new opportunities to drive growth; • Continue optimizing the customer experience through elevated and profitable company-operated stores; • Drive penetration and growth in our digital channel and provide an enhanced omni-channel experience; and • Expand our international business.
We have a multi-year goal to increase sales and operating income by focusing on these key business priorities: • Invest in our brands, business and new opportunities to drive growth; • Continue optimizing the customer experience through elevated and profitable company-operated stores; • Drive penetration and growth in our digital channel and provide an enhanced omni-channel experience; and 35 Table of Conten t s • Expand our international business.
Risk Factors" in this Annual Report on Form 10-K. 34 Table of Contents 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 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”).
These initiatives are designed to increase productivity in our stores measured through improved sales per selling square foot, as well as overall store profitability. Drive Penetration and Growth in our Digital Channel and Provide an Enhanced Omni-Channel Experience.
These initiatives are designed to increase productivity in our stores measured through improved sales per selling square foot, as well as overall store profitability.
Long-lived store asset impairment charges are included within Costs of Goods Sold, Buying and Occupancy in the Consolidated and Combined Statements of Income (Loss).
Long-lived store asset impairment charges are included within Costs of Goods Sold, Buying and Occupancy in the Consolidated and Combined Statements of Income (Loss). 49 Table of Conten t s There were no long-lived store asset impairment charges in 2022 or 2021.
Operating Income (Loss) For 2021, operating income increased $971 million, to $870 million, compared to an operating loss of $101 million in 2020, and the operating income (loss) rate (expressed as a percentage of net sales) increased to 12.8% from (1.9%). The drivers of the operating income results are discussed in the following sections.
Operating Income For 2022, operating income decreased $392 million, to $478 million, compared to operating income of $870 million in 2021, and the operating income rate (expressed as a percentage of net sales) decreased to 7.5% from 12.8%. The drivers of the operating income results are discussed in the following sections.
Financial Statements and Supplementary Data. (b) Future lease obligations primarily represent minimum payments due under store lease agreements. For additional information, see Note 8 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.
For variable interest rate obligations under the ABL Facility, the interest payments have been estimated based on an interest rate of 5.90%. For additional information, see Note 13 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data. (b) Future lease obligations primarily represent minimum payments due under store lease agreements.
The following table represents company-operated store data for 2021: Stores at Stores at January 30, 2021 Opened Closed January 29, 2022 U.S. 846 — (38) 808 Canada 25 1 — 26 Greater China — Beauty & Accessories 36 2 (3) 35 Greater China — Full Assortment 26 4 — 30 Total 933 7 (41) 899 39 Table of Contents The following table represents company-operated store data for 2020: Stores at Transferred to Stores at February 1, 2020 Opened Closed Joint Venture (a) January 30, 2021 U.S. 1,053 21 (228) — 846 Canada 38 — (13) — 25 U.K. / Ireland 26 — — (26) — Greater China — Beauty & Accessories 41 1 (6) — 36 Greater China — Full Assortment 23 4 (1) — 26 Total 1,181 26 (248) (26) 933 _______________ (a) For additional information see Note 5, "Restructuring Activities" included in Item 8.
The following table represents store data for 2021: Stores at Stores at January 30, 2021 Opened Closed January 29, 2022 Company-Operated: U.S. 846 — (38) 808 Canada 25 1 — 26 China — Beauty & Accessories 36 2 (3) 35 China — Full Assortment 26 4 — 30 Subtotal Company-Operated 933 7 (41) 899 Partner-Operated: Beauty & Accessories 338 16 (19) 335 Full Assortment 120 8 — 128 Subtotal Partner-Operated 458 24 (19) 463 Total 1,391 31 (60) 1,362 40 Table of Conten t s The following table represents store data for 2020: Stores at Transferred to Stores at February 1, 2020 Opened Closed Joint Venture (a) January 30, 2021 Company-Operated: U.S. 1,053 21 (228) — 846 Canada 38 — (13) — 25 U.K. / Ireland 26 — — (26) — China — Beauty & Accessories 41 1 (6) — 36 China — Full Assortment 23 4 (1) — 26 Subtotal Company-Operated 1,181 26 (248) (26) 933 Partner-Operated: Beauty & Accessories 360 8 (30) — 338 Full Assortment 84 12 (2) 26 120 Subtotal Partner-Operated 444 20 (32) 26 458 Total 1,625 46 (280) — 1,391 _______________ (a) For additional information, see Note 6, “Restructuring Activities” included in Item 8.
Generally, our need for working capital peaks during the summer and fall months as inventory builds in anticipation of the holiday period. 44 Table of Contents Prior to the Separation, we generated annual cash flow from operating activities.
Generally, our need for working capital peaks during the summer and fall months as inventory builds in anticipation of the holiday period. Prior to the Separation, we generated annual cash flow from operating activities. However, we were operating within the Former Parent's cash management structure, which used a centralized approach to cash management and financing of our operations.
On August 2, 2021, we also entered into a senior secured asset-based revolving credit facility (the “ABL 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 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.
As a result of the COVID-19 pandemic, all our stores in the U.S. were closed on March 17, 2020 with the majority having re-opened as of the beginning of the third quarter of 2020. As a result, comparisons of year-over-year trends are not a meaningful way to discuss our operating results for the periods impacted by the COVID-19 pandemic.
As a result of the COVID-19 pandemic, all our stores in the U.S. were closed on March 17, 2020 with the majority having re-opened as of the beginning of the third quarter of 2020.
We recognized pre-tax impairment charges of $218 million ($200 million after-tax) and $35 million ($30 million after-tax) related to certain store and lease assets in the third and fourth quarter of 2019, respectively. For additional information see Note 7, "Long-Lived Assets" included in Item 8. Financial Statements and Supplementary Data.
(e) We recognized pre-tax impairment charges of $97 million ($72 million after-tax) and $117 million ($99 million after-tax) related to certain store and lease assets in the first and second quarter of 2020, respectively. For additional information, see Note 8, “Long-Lived Assets” included in Item 8. Financial Statements and Supplementary Data.
Credit Facilities On August 2, 2021, we entered into a term loan B credit facility in an aggregate principal amount of $400 million (the "Term Loan Facility"), which will mature in August 2028.
The issuance costs are being amortized through the maturity date and are included within Long-term Debt on the Consolidated Balance Sheets. Credit Facilities 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.
We used the net cash proceeds from the credit facilities of $384 million, which were net of issuance and financing costs of $10 million for the Term Loan Facility and $6 million for the ABL Facility, to partially fund the approximately $976 million cash payment to the Former Parent in connection with the Separation. 48 Table of Contents Our long-term debt and borrowing facilities contain certain financial and other covenants, including, but not limited to, the maintenance of financial ratios.
On August 2, 2021, we used the net cash proceeds from the credit facilities of $384 million, which were net of issuance and financing costs of $10 million for the Term Loan Facility and $6 million for the ABL Facility, to partially fund the approximately $976 million cash payment to the Former Parent in connection with the Separation.
The increase in comparable store sales was driven by an increase in store traffic and average unit retail (which we define as the average price per unit purchased), partially offset by a decrease in conversion (which we define as the percentage of customers who visit our stores and make a purchase).
Our North American store sales decreased 7%, or $285 million, to $3.909 billion compared to $4.194 billion in 2021, as an increase in traffic was more than offset by a decrease 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).
Our policy is to include interest and penalties related to uncertain tax positions in income tax expense. 52 Table of Contents Our income tax returns, like those of most companies, are periodically audited by domestic and foreign tax authorities.
Our policy is to include interest and penalties related to uncertain tax positions in income tax expense. Our income tax returns, like those of most companies, are periodically audited by domestic and foreign tax authorities. These audits include questions regarding our tax filing positions, including the timing and amount of deductions and the allocation of income among various tax jurisdictions.
A number of years may elapse before a particular matter for which we have established an accrual is audited and fully resolved or clarified.
At any one time, multiple tax years are subject to audit by the various tax authorities. A number of years may elapse before a particular matter for which we have established an accrual is audited and fully resolved or clarified.
The $50 million recorded in Paid-in Capital as of January 29, 2022 will be reclassified to Treasury Stock in the first quarter of 2022 in connection with the settlement of the ASR Agreement.
In connection with the settlement of the December 2021 ASR Agreement, $50 million previously recorded in Paid-in Capital as of January 29, 2022, was reclassified to Treasury Stock in the first quarter of 2022. In February 2022, we immediately retired the additional 0.3 million shares repurchased in connection with the settlement of the December 2021 ASR Agreement.
Credit Ratings The following table provides our credit ratings as of January 29, 2022: Moody’s S&P Corporate Ba3 BB- Senior Secured Debt with Subsidiary Guarantee Ba2 BB+ Senior Unsecured Debt with Subsidiary Guarantee B1 BB- Outlook Stable Stable 49 Table of Contents Contingent Liabilities and Contractual Obligations The following table provides our contractual obligations, aggregated by type, including the maturity profile as of January 29, 2022: Payments Due by Period Total Less Than 1 Year 1-3 Years 4-5 Years More than 5 Years Other (in millions) Long-term Debt (a) $ 1,305 $ 47 $ 93 $ 92 $ 1,073 $ — Future Lease Obligations (b) 2,049 397 671 442 539 — Purchase Obligations (c) 956 897 52 7 — — Other Liabilities (d) 10 — — — — 10 Total $ 4,320 $ 1,341 $ 816 $ 541 $ 1,612 $ 10 ________________ (a) Long-term debt obligations relate to our principal and interest payments for our outstanding debt.
Credit Ratings The following table provides our credit ratings as of January 28, 2023: Moody’s S&P Corporate Ba3 BB- Senior Secured Debt with Subsidiary Guarantee Ba2 BB+ Senior Unsecured Debt with Subsidiary Guarantee B1 BB- Outlook Stable Stable Contingent Liabilities and Contractual Obligations The following table provides our contractual obligations, aggregated by type, including the maturity profile as of January 28, 2023: Payments Due by Period Total Less Than 1 Year 1-3 Years 4-5 Years More than 5 Years Other (in millions) Long-term Debt (a) $ 1,710 $ 81 $ 161 $ 429 $ 1,039 $ — Future Lease Obligations (b) 1,949 391 616 390 552 — Purchase Obligations (c) 800 757 37 6 — — Other Liabilities (d) 29 6 — — — 23 Total $ 4,488 $ 1,235 $ 814 $ 825 $ 1,591 $ 23 ________________ (a) Long-term debt obligations relate to our principal and interest payments for our outstanding debt.
We are investing in a store capital and refresh program, and we also plan to invest in technology, distribution and logistics capabilities and general infrastructure needs as we separate into a standalone company. 46 Table of Contents Financing Activities Net cash used for financing activities in 2021 was $527 million consisting primarily of net transfers to the Former Parent of $1.253 billion and $250 million for the accelerated share repurchase program, partially offset by $982 million of net proceeds from the issuance of long-term debt.
Net cash used for financing activities in 2021 was $527 million consisting primarily of net transfers to the Former Parent of $1.253 billion and $250 million for the accelerated share repurchase program, partially offset by $982 million of net proceeds from the issuance of long-term debt.
The retirement resulted in a reduction of $200 million in Treasury Stock, less than $1 million in the par value of Common Stock, $8 million in Paid-in Capital and $192 million in Retained Earnings.
In accordance with the Board of Directors' resolution, we immediately retired the 4.1 million shares repurchased under the December 2021 ASR Agreement. The retirement resulted in a reduction of $200 million in Treasury Stock, less than $1 million in the par value of Common Stock, $8 million in Paid-in Capital and $192 million in Retained Earnings.
We also sell beauty products under both the Victoria’s Secret and PINK brands. Together, Victoria’s Secret, PINK and Victoria’s Secret Beauty support, inspire and celebrate women through every phase of their life.
We also sell beauty products under both the Victoria’s Secret and PINK brands. Adore Me is a technology-led, digital first innovative intimates brand serving women of all sizes and budgets at all phases of life. Together, Victoria’s Secret, PINK, Victoria’s Secret Beauty and Adore Me support, inspire and celebrate women through every phase of their life.
(d) Other liabilities also include future estimated payments associated with unrecognized tax benefits. The “Other” category includes $10 million of these tax items because it is not reasonably possible that the amounts could change in the next 12 months due to audit settlements or resolution of uncertainties.
The “Less Than 1 Year” category includes $6 million of these tax items because it is reasonably possible that the payments could change in the next 12 months due to audit settlements or resolution of uncertainties.
Operating income for the full year increased to $870 million as compared to an operating loss of $101 million in 2020, and our operating income (loss) rate increased to 12.8% as compared to (1.9%) last year.
Operating income for the full year decreased to $478 million compared to operating income of $870 million in 2021, and our operating income rate decreased to 7.5% compared to 12.8% last year.

… 181 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+3 added−2 removed3 unchanged
Biggest changeOur investment portfolio is maintained in accordance with our investment policy, which specifies permitted types of investments, specifies credit quality standards and maturity profiles and limits credit exposure to any single issuer. The primary objective of our investment activities is the preservation of principal, the maintenance of liquidity and the maximization of interest income while minimizing risk.
Biggest changeInterest Rate Risk Our investment portfolio primarily consists of interest-bearing instruments that are classified as cash and cash equivalents based on their original maturities. Our investment portfolio is maintained in accordance with our investment policy, which specifies permitted types of investments, specifies credit quality standards and maturity profiles and limits credit exposure to any single issuer.
Our exposure to interest rate changes is limited to the fair value of the debt issued as well as the interest we pay on the Term Loan Facility, which would not have a material impact on our earnings or cash flows.
Our exposure to interest rate changes is limited to the fair value of the debt issued as well as the interest we pay on the Term Loan Facility and ABL Facility, which we believe would not have a material impact on our earnings or cash flows.
The estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange. As of January 29, 2022, we believe that the carrying values of accounts receivable, accounts payable and accrued expenses approximate fair value because of their short maturity.
The estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange. As of January 28, 2023, we believe that the carrying values of accounts receivable, accounts payable and accrued expenses approximate fair value because of their short maturity.
Fair Value of Financial Instruments The following table provides a summary of the principal value and estimated fair value of our outstanding debt as of January 29, 2022 and January 30, 2021: January 29, 2022 January 30, 2021 (in millions) Principal Value $ 999 $ — Fair Value, Estimated (a) 975 — ________________ (a) The estimated fair value of our publicly traded debt is based on reported transaction prices which are considered Level 2 inputs in accordance with ASC 820, Fair Value Measurement .
Fair Value of Financial Instruments The following table provides a summary of the principal value and estimated fair value of our outstanding debt as of January 28, 2023 and January 29, 2022: January 28, 2023 January 29, 2022 (in millions) Principal Value $ 995 $ 999 Fair Value, Estimated (a) 894 975 ________________ (a) The estimated fair value of our publicly traded debt is based on reported transaction prices which are considered Level 2 inputs in accordance with ASC 820, Fair Value Measurement .
We may use derivative financial instruments like foreign currency forward contracts, cross-currency swaps and interest rate swap arrangements to manage exposure to market risks. We do not use derivative financial instruments for trading purposes.
We may use derivative financial instruments like foreign currency forward contracts, cross-currency swaps and interest rate swap arrangements to manage exposure to market risks.
Concentration of Credit Risk We maintain cash and cash equivalents with various major financial institutions. We monitor the relative credit standing of financial institutions with whom we transact and limit the amount of credit exposure with any one entity. Our investment portfolio is primarily comprised of bank deposits.
We monitor the relative credit standing of financial institutions with whom we transact and limit the amount of credit exposure with any one entity. As of January 28, 2023, our investment portfolio is primarily comprised of bank deposits.
Further, although our royalty arrangements with our international partners are denominated in U.S. dollars, the royalties we receive in U.S. dollars are calculated based on sales in the local currency.
Further, although our royalty arrangements with our international partners are denominated in U.S. dollars, the royalties we receive in U.S. dollars are calculated based on sales in the local currency. As a result, our royalties in these arrangements are exposed to foreign currency exchange rate fluctuations.
Our outstanding long-term debt as of January 29, 2022 consists of the 2029 Notes, which have a fixed interest rate, and the $400 million Term Loan Facility, which has a variable interest rate based on either the LIBOR or an alternate base rate.
Our outstanding long-term debt as of January 28, 2023 consists of the 2029 Notes, which have a fixed interest rate, the $395 million in outstanding borrowing under the Term Loan Facility, which has a variable interest rate based on LIBOR, and the $295 million in outstanding borrowing under the ABL Facility, which has a variable interest rate based on LIBOR.
Foreign Exchange Rate Risk We have operations and investments in unconsolidated entities in foreign countries which expose us to market risk associated with foreign currency exchange rate fluctuations. Our Canadian dollar and Chinese Yuan denominated earnings are subject to exchange rate risk as substantially all our merchandise sold in Canada and Greater China is sourced through U.S. dollar transactions.
Our Canadian dollar and Chinese Yuan denominated earnings are subject to exchange rate risk as substantially all our merchandise sold in Canada and China is sourced through U.S. dollar transactions.
Prior to the Separation, cash generated by us was invested by the Former Parent in U.S. government obligations and U.S. Treasury and AAA-rated money market funds. We also periodically review the relative credit standing of franchise, license and wholesale partners and other entities to which we grant credit terms in the normal course of business. 54 Table of Contents
We also periodically review the relative credit standing of franchise, license and wholesale partners and other entities to which we grant credit terms in the normal course of business. 52 Table of Conten t s
Removed
As a result, our royalties in these arrangements are exposed to foreign currency exchange rate fluctuations. 53 Table of Contents Interest Rate Risk Our investment portfolio primarily consists of interest-bearing instruments that are classified as cash and cash equivalents based on their original maturities.
Added
We do not use derivative financial instruments for trading purposes. 51 Table of Conten t s Foreign Exchange Rate Risk We have operations and investments in unconsolidated entities in foreign countries which expose us to market risk associated with foreign currency exchange rate fluctuations.
Removed
Our investment portfolio is primarily comprised of bank deposits. Historically cash generated by us was invested by the Former Parent in U.S. government obligations and U.S. Treasury and AAA-rated money market funds.
Added
The primary objective of our investment activities is the preservation of principal, the maintenance of liquidity and the maximization of interest income while minimizing risk. As of January 28, 2023, our investment portfolio is primarily comprised of bank deposits.
Added
We further believe the principal value of the outstanding debt under the ABL Facility approximates its fair value as of January 28, 2023 based on the terms of the borrowings under the ABL Facility. Concentration of Credit Risk We maintain cash and cash equivalents with various major financial institutions.

Other VSCO 10-K year-over-year comparisons