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What changed in Victoria's Secret & Co.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Victoria's Secret & Co.'s 2023 and 2024 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 2024 report.

+458 added−497 removedSource: 10-K (2024-03-22) vs 10-K (2023-03-17)

Top changes in Victoria's Secret & Co.'s 2024 10-K

458 paragraphs added · 497 removed · 375 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

88 edited+6 added−21 removed44 unchanged
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.
Biggest changeThe following table provides the number of our company-operated Victoria's Secret and PINK, China joint venture and Adore Me retail stores in operation as of February 3, 2024 and January 28, 2023: February 3, 2024 January 28, 2023 Company-Operated: U.S. 808 812 Canada 23 25 831 837 China Joint Venture: Beauty & Accessories (a) 34 39 Full Assortment 36 33 70 72 Adore Me 6 6 Total 907 915 _______________ (a) Includes thirteen partner-operated stores. 2 Table of Contents The 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 2023 (c) 915 21 (29) — — 907 2022 (c) 899 26 (24) 6 8 915 2021 933 7 (41) — — 899 _______________ (a) Relates to acquisition of Adore Me.
The management team is supported by well qualified leaders and is highly collaborative across our brands and our channels. Distribution Channels Our distribution channels include digital, North American stores and international stores. We utilize these channels to reach our consumers in the physical and digital locations they frequent within their geographies.
The management team is supported by well qualified leaders and is highly collaborative across our brands and channels. Distribution Channels Our distribution channels include digital, North American stores and international stores. We utilize these channels to reach our consumers in the digital and physical locations they frequent within their geographies.
Our digital customers engage in more transactions relative to non-digital customers. Within digital, we have taken a mobile-first approach to help drive sales. We have taken steps to modernize the digital platform, including the use of artificial intelligence-driven chatbots and geo-targeted digital marketing.
Our digital customers engage in more transactions relative to non-digital customers. Within digital, we have taken a mobile-first approach to help drive sales. We have taken steps to modernize our digital platform, including the use of artificial intelligence-driven chatbots and geo-targeted digital marketing.
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 the 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.
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.
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, their caregivers, and their allies and advocates.
Ms. McAfee joined Victoria’s Secret & Co. in May 2021 and previously served as Chief Legal Officer from May 2021 to October 2022. Prior to May 2021, Ms.
McAfee joined Victoria’s Secret & Co. in May 2021 and previously served as Chief Legal Officer from May 2021 to October 2022. Prior to May 2021, Ms.
Brand image, presentation, marketing, design, price, service, fulfillment, assortment, fit and quality are the principal competitive factors. Human Capital Management We believe the way we view human capital management is a strength, and we are committed to continuing to build a responsible and inclusive business based on uncompromising transparency, fairness, diversity, and integrity, consistent with our Company values.
Brand image, presentation, marketing, design, price, service, fulfillment, assortment, fit and quality are the principal competitive factors. Human Capital Management We believe the way we view human capital management is a strength, and we are committed to continuing to build a responsible and inclusive business based on uncompromising transparency, fairness, diversity, and integrity, consistent with our values.
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.
Associate Engagement and Well-Being Associate engagement and well-being are key components of our culture and fundamental to 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.
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.
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, Victoria's Secret PINK (“PINK”) and Adore Me brand names.
McAfee served as Senior Vice President, General Counsel and Corporate Secretary of Express, Inc., from December 2018 to April 2021 and Deputy General Counsel and Chief Privacy Officer of Abercrombie & Fitch Co. from November 2016 to October 2018; • Christine Rupp, 54, has been our Chief Customer Officer since September 2022. Prior to joining Victoria's Secret & Co., Ms.
McAfee served as Senior Vice President, General Counsel and Corporate Secretary of Express, Inc., from December 2018 to April 2021 and Deputy General Counsel and Chief Privacy Officer of Abercrombie & Fitch Co. from November 2016 to October 2018; • Christine Rupp, 55, has been our Chief Customer Officer since September 2022. Prior to joining Victoria's Secret & Co., Ms.
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.
We believe we have meaningful opportunity to grow our international business 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.
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 pursue our marketing strategy across a variety of platforms to reach our omni-channel customers, both in stores and online. We use traditional media outlets such as print, as well as digital media channels including social media, paid search and influencers.
The Victoria’s Secret Global Fund for Women’s Cancers funds innovative research projects aimed at progressing treatments and cures for women’s cancers and investing in the next generation of women scientists who represent the diverse population they serve.
The Victoria’s Secret Global Fund for Women’s Cancers funds innovative research projects aimed at progressing treatments and cures for women’s cancers and investing in the next generation of women scientists who represent the diverse populations they serve.
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 provide 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 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.
We encourage associate stock ownership with the ability to purchase Victoria's Secret & Co. shares at a discount through our associate stock purchase plan. 9 Table of Contents Ensuring Equal Pay for Equal Work The heart of our business is our talented workforce.
Royalty rates, which generally range from low double digits to mid-teens, vary based on store format, local business conditions and various other factors. Our wholesale arrangements with our partners typically have an initial term of five years, with an option to renew, subject to customary conditions.
Royalty rates, which are generally low-double digits to low-teens, vary based on store format, local business conditions and various other factors. Our wholesale arrangements with our partners typically have an initial term of five years, with an option to renew, subject to customary conditions.
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).
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).
We achieve success through frequent and fashionable product launches across product categories with a focus on fit, fabric, finish, and superior quality. Our merchant, design and sourcing teams have a long history of designing innovative products to meet our customers’ needs.
We prioritize frequent and fashionable product launches across product categories with a focus on fit, fabric, finish, and superior quality. Our merchant, design and sourcing teams have a long history of designing innovative products to meet our customers’ needs.
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
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 Contents
We recognize we have opportunity to increase our diverse workforce and leadership representation, and will drive progress by: • Being intentional about promoting and advancing women and people of color; • Recommending diverse interview slates; • Tapping into diverse talent pipelines from stores and distribution centers to the home office; • Offering equitable learning and development opportunities for all, including sending women and people of color to programs dedicated to the development and advancement of diverse leaders; • Evolving our full life cycle recruiting process to address any barriers to entry; • Forming new partnerships and relationships with organizations that cultivate a diverse talent pipeline; and • Holding leaders accountable for supporting the growth of diverse talent.
We recognize we have opportunity to increase our workforce and leadership representation in certain groups, and will drive progress by: • Being intentional about ensuring opportunities for promotion and advancement for women and people of color; • Recommending diverse interview slates; • Tapping into talent pipelines from stores and distribution centers to the home office; • Offering equitable learning and development opportunities for all, including sending women and people of color to programs dedicated to the development and advancement of diverse leaders; • Evolving our full life cycle recruiting process to address any barriers to entry; • Forming new partnerships and relationships with organizations that cultivate a diverse talent pipeline, including persons from underrepresented groups; and • Holding leaders accountable for supporting the growth of all talent, including talent from underrepresented groups.
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.
We have approximately 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 digital channels worldwide. Additionally, we have more than 460 stores in nearly 70 countries operating under franchise, license and wholesale arrangements.
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.
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).
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.
Each brand has a marketing team focused on ensuring that we reach and engage with the customer. 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.
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.
We have thoughtfully designed our supply chain around three key principles: speed to market, quality and cost efficiency. 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.
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.
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 533 international stores and 50 international digital sites as of the end of 2023.
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.
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 of Big Lots from August 2012 to August 2015; • Dein Boyle, 64, has been our Chief Operating Officer since 2020. Mr.
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.
Our retail footprint in North America spans the U.S. and Canada with 837 stores, representing a combined 5.8 million square feet of selling space as of the end of 2023. Our North America stores channel creates an immersive environment for customers to experience our brands and try new products.
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.
(c) Includes thirteen partner-operated China joint venture stores. 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 nearly 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.
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.
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; • Melinda McAfee, 53, has been our Chief Human Resources Officer and Chief Legal Officer since October 2022. Ms.
Rupp served as the Chief Customer Officer of Albertsons Companies, Inc. from December 2019 to July 2022 and General Manager of Microsoft Corporation from February 2016 to November 2019; • Greg Unis, 52, has been our Chief Growth Officer since July 2022. Mr.
Rupp served as the Chief Customer Officer of Albertsons Companies, Inc. from December 2019 to July 2022 and General Manager of Microsoft Corporation from February 2016 to November 2019; and • Greg Unis, 53, has been our Brand President since June 2023. Mr.
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”).
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”). Prior to the Separation, L Brands operated the Bath & Body Works, Victoria’s Secret and PINK retail brands.
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.
As of the end of 2023, we have 70 joint venture-operated stores in China as well as 463 partner-operated stores around the world, including locations across Asia, Europe, the Americas, the Middle East and Africa.
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.
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 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 remain focused on maximizing our relationships with our supplier partners and our sourcing and logistics capabilities to help mitigate supply chain challenges, cost pressures on our business and to continuously enhance our speed to market capabilities. 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.
For additional information, see Note 2 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data. (b) In 2022, this relates to the China joint venture with Regina Miracle. In 2021, this relates to the U.K. joint venture with Next.
For additional information, see Note 2 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data. (b) Relates to the China joint venture with Regina Miracle. For additional information, see Note 6 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.
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.
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 $3.480 billion, or 56%, of our revenue in 2023.
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.
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 $687 million, or 11%, of our revenue in 2023.
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.
Waters joined L Brands in 2008 and previously served as the CEO of VS Lingerie from 2020 to 2021 and CEO of L Brands International from 2008 to 2020; • Timothy Johnson, 56, has been our Chief Financial and Administrative Officer since July 2022. Mr.
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.
We operated 837 physical locations as of the end of 2023, including a range of full assortment stores, Victoria’s Secret Lingerie stores, free-standing PINK stores and free-standing Adore Me stores.
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.
Digital The digital channel accounted for $2.015 billion, or 33%, of our revenue in 2023. This 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.
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.
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 offer competitive compensation, company-matched savings and contributions to the retirement plan, and flexible and affordable health, wellness and lifestyle benefits to eligible associates.
We focus on speed to market and believe our lead times are amongst the shortest in the industry, allowing us to read and react to customer preferences. The agility within our supply chain provides us with flexibility to quickly re-order strong sellers as we seek to maximize our sales and merchandise margin rate opportunities.
We focus on speed to market, allowing us to read and react to customer preferences. The agility within our supply chain provides us with flexibility to quickly re-order strong selling products as we seek to maximize our sales and merchandise margin rate opportunities.
Our process reviews gender, race, ethnicity and the intersection of these identities. (Many jurisdictions outside the U.S. limit our ability to collect information on race and ethnicity and also what we can do with that information.) Because workforces are dynamic and ever-changing, so is the work to ensure pay equity.
(Many jurisdictions outside the U.S. limit our ability to collect information on race and ethnicity and also what we can do with that information.) Because workforces are dynamic and ever-changing, so is the work to ensure pay equity. We believe that pay equity is a journey, not a destination.
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 intend to continue to increase the number of locations under these types of arrangements as part of our international expansion. Additional Information Merchandise Vendors During 2023, we purchased merchandise from approximately 325 vendors located throughout the world, the largest of which accounted for approximately 11% of our purchases.
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 .
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, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC, on the Investors section of our website, www.victoriassecretandco.com .
We believe our products are identified by our trademarks and, thus, our trademarks are of significant value. Accordingly, we intend to maintain our trademarks and related registrations and vigorously protect our intellectual property assets against infringement, misappropriation or other violations.
Patent and Trademark Office and with the registries of many foreign countries where our products are manufactured or sold. We believe our products are identified by our trademarks and, thus, our trademarks are of significant value. Accordingly, we intend to maintain our trademarks and related registrations and vigorously protect our intellectual property assets against infringement, misappropriation and other violations.
Our Brands Our business operates two category-defining intimates and beauty brands, Victoria's Secret and PINK, that share a common purpose of inspiring and uplifting our customers in every stage of their lives, and Adore Me, a technology-led, digital-first innovative intimates brand serving women of all sizes and budgets at all phases of life.
Our Brands Our business operates two market leading intimates and beauty brands, Victoria's Secret and PINK, that share a common purpose of supporting women in all they do, and Adore Me, a technology-led, digital first innovative intimates brand serving women of all sizes and budgets at all phases of life.
We are committed to retaining more diverse associates, attracting more diverse talent and empowering the growth and advancement of all our associates.
We are committed to retaining associates of all backgrounds, including those in underrepresented groups, attracting diverse talent and empowering the growth and advancement of all our associates.
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.
We are committed to creating a workplace where everyone can bring their whole selves to work and thrive. 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.
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.
Joint Venture Partnership Victoria's Secret China In April 2022, we entered into a joint venture agreement with Regina Miracle International (Holdings) Limited (“Regina Miracle”), a company listed on the Hong Kong Stock Exchange, to operate Victoria's Secret stores and the related online business in China.
Our compensation programs are designed to link annual changes in compensation to Victoria's Secret & Co.'s overall performance. At the individual level, we strive to assess performance on both an associate's contributions as well as behaviors displayed to achieve them.
Our compensation programs are designed to link annual changes in compensation to the Company's overall performance. At the individual level, we strive to assess performance on both an associate's contributions as well as behaviors displayed to achieve them. The emphasis on the Company's overall performance is intended to align our associates’ financial interests with the interests of our stockholders.
Examples include: • Development Days: Dedicated time to advance technical, creative or business skills. • Leadership Development: Courses for associates in management positions to build critical skills and grow as effective leaders. • Onboarding: Dedicated time to learn the business and to form important relationships for mentoring and development. • Tuition Assistance: Reimbursement of 100% of eligible tuition expenses, up to $5,250 per calendar year.
Examples include: • Development Days: Dedicated time to advance technical, creative or business skills. • Leadership Development: Courses for associates in management positions to build critical skills and grow as effective leaders. • Onboarding: Dedicated time to learn the business and to form important relationships for mentoring and development. • Tuition Assistance: Reimbursement of 100% of eligible tuition expenses, up to $5,250 per calendar year. 8 Table of Contents Our IRGs create an opportunity for associates to connect with one another around their shared passion for the important role DEI plays in our organization and for creating an inclusive and equitable workplace for all associates.
To support these values, we have established compliance processes and protocols which apply to all Victoria's Secret & Co. associates and third parties participating in photo shoots, public relations events, fit sessions and other internal meetings where models are present.
To support these values, we have established compliance processes and protocols which apply to all our associates and third parties participating in photo shoots, public relations events, fit sessions and other internal meetings where models are present. Our Global Ethics and Compliance team is responsible for the day-to-day administration and management of the model engagement and photo shoot compliance protocols.
Wholesale prices, which vary by product category, are generally based on a discount to the suggested retail price.
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.
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.
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 selling seasons.
We believe that pay equity is a journey, not a destination. Victoria's Secret & Co. engages in an ongoing analysis and is committed to continued transparency relative to our metrics on pay equity, and we plan to report to our associates and to the public on an annual basis.
We engage in an ongoing analysis and are committed to continued transparency relative to our metrics on pay equity, and we plan to report to our associates and to the public on an annual basis.
While there are no current regulatory matters that we expect to be material to our results of operations, financial position, or cash flows, there can be no assurances that existing or future laws, regulations and standards applicable to our operations or products will not lead to a material adverse impact on our results of operations, financial position or cash flows.
While there are no current regulatory matters that we expect to be material to our results of operations, financial position, or cash flows, there can be no assurance that existing or future laws, regulations and standards applicable to our operations or products will not lead to a material adverse impact on our results of operations, financial position or cash flows. 6 Table of Contents Intellectual Property Our trademarks and patents, which constitute our primary intellectual property, have been registered or are the subject of pending applications in the U.S.
Our Global Ethics and Compliance team is responsible for the day-to-day administration and management of the model engagement and photo shoot compliance protocols. Responsibilities include, but are not limited to, executing certain compliance processes related to the Photo Shoot Procedures and Fit Session Protocol, training new and existing associates, and escalating allegations of misconduct for investigation by the appropriate teams.
Responsibilities include, but are not limited to, executing certain compliance processes related to the Photo Shoot Procedures and Fit Session Protocol, training new and existing associates, and escalating allegations of misconduct for investigation by the appropriate teams. For photo shoots, all external crew is required to certify to the Victoria's Secret & Co.
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.
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.
Due to the timing and availability of financial information of Adore Me, we consolidate Adore Me's financial information on an approximate one-month reporting lag.
As a result of our acquisition of Adore Me on December 30, 2022, Adore Me's financial information is included in our consolidated financial statements. Due to the timing and availability of financial information of Adore Me, we consolidate Adore Me's financial information on an approximate one-month reporting lag.
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 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.
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.
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 December 30, 2022, we completed our acquisition of AdoreMe, Inc. (“Adore Me”), a digitally-native intimates brand.
We conduct an annual, rigorous and transparent review of 100% of our worldwide workforce that is verified by an independent third party to ensure that all salaries and incentive compensation targets are fair and unbiased. If we find any differences in pay between men and women globally or by race and ethnicity in the United States, we make upward adjustments.
We offer competitive pay and benefits to our associates around the world and pay all associates equitably regardless of gender, race, ethnicity or background. We conduct an annual, rigorous and transparent review of 100% of our worldwide workforce that is verified by an independent third party to ensure that all salaries and incentive compensation targets are fair and unbiased.
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.
Our DEI People work is focused on: • Retaining associates of all backgrounds, including those in underrepresented groups • 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.
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.
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.
Adore Me Adore Me is a direct-to-consumer lingerie and apparel brand that is focused on serving women of all sizes and budgets at all phases of life.
PINK uses its platform to create connection and community. PINK is sold across North America and internationally at Victoria’s Secret and PINK retail stores and online. Adore Me Adore Me is a direct-to-consumer lingerie and apparel brand that is focused on serving women of all sizes and budgets at all phases of life.
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.
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.
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.
As we strive to create a better future for our organization and our world, we are committed to consciously and continuously learning and growing from our past and present. 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.
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.
We are committed to bringing this to life through strategic actions with measurable goals, focused 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.
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.
For additional information, see Note 2 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.
We also have Adore Me, a technology-led, digital first innovative intimates brand which we believe is transforming the way customers shop with a pioneering home try-on commerce service and a series of innovation-driven products.
Adore Me, a technology-led, digital first innovative intimates brand is focused on transforming the way customers shop with a pioneering home try-on commerce service and a series of innovation-driven products. 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.
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.
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.
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.
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 mark down products as needed to keep merchandise fresh and current.
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.
The following table provides the number of our international stores operated by our partners by store type as of February 3, 2024 and January 28, 2023: February 3, 2024 January 28, 2023 Beauty and Accessories (a) 307 308 Full Assortment 156 135 Total 463 443 _______________ (a) Does not include the thirteen partner-operated China joint venture stores. 3 Table of Contents 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 Market Leading 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.
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. 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.
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.
As of February 3, 2024, we employed approximately 30,000 associates, approximately 17,000 of whom were part-time. In addition, temporary associates are hired during peak periods, such as the holiday season. Approximately 73% of our associates work in our stores, 12% in distribution centers, with the remaining balance working in our home office and call center.
Since we have retained control over the joint venture, the joint venture's assets, liabilities and results of operations continue to be consolidated in our consolidated financial statements. For additional information, see Note 6 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data. Victoria's Secret U.K.
Under the terms of the agreement, we own 51% of the joint venture and Regina Miracle owns the remaining 49%. Since we have retained control over the joint venture, the joint venture's assets, liabilities and results of operations continue to be consolidated in our consolidated financial statements.
As used herein, “2022,” “2021” and “2020” refer to the 52-week periods ended January 28, 2023, January 29, 2022 and January 30, 2021, respectively. Historically, Adore Me's fiscal year ended on December 31. As a result of our acquisition of Adore Me on December 30, 2022, Adore Me's financial information is included in our consolidated financial statements.
As used herein, “2023” refers to the fifty-three-week period ended February 3, 2024 and “2022” and “2021” refer to the fifty-two-week periods ended January 28, 2023 and January 29, 2022, respectively. Historically, Adore Me's fiscal year ended on December 31.
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.
All salaried associates in the home office, distribution and call center participate in our short-term cash incentive program.
Executive Officers of Registrant Our executive officers at the end of 2022 were as follows: • Martin Waters, 57, has been our Chief Executive Officer (“CEO”) since February 2021. Mr.
Anti-Harassment and Civility Policy and authorized compliance monitors are assigned to every photo shoot to provide oversight and ensure compliance with the Photo Shoot Procedures and Fit Session Protocol. Executive Officers of Registrant Our executive officers at the end of 2023 were as follows: • Martin Waters, 58, has been our Chief Executive Officer (“CEO”) since February 2021. Mr.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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.
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 revenue, results of operations and cash flows are sensitive to consumer confidence and spending patterns, and may be adversely affected by negative political or economic trends, geopolitical conflicts, significant health hazards or pandemics, severe weather or other market disruptions; • Our future success depends in part on our ability to successfully implement our strategic plan; • 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 store locations on satisfactory terms; • 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 or omissions that could harm our business or the image of our brands; • Our direct channel business is subject to 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 incorporate artificial intelligence into our business operations successfully and ethically may affect our reputation and results of operations; • 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 our ability to successfully enter 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 value of our brands; • We may be impacted by our ability to adequately source materials and produce, distribute and sell merchandise on a global basis; • We rely on a number of production 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; 12 Table of Contents • Any significant cybersecurity compromise or breach, including with respect to customer, associate, third-party or company information, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows; • 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 related contractual or other obligations, 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.
These events and similar events in the future could have a material adverse effect on our customers, our international partners and our third-party suppliers, and may negatively impact our international digital sales and international stores.
These events and similar events in the future could have a material adverse effect on our customers, our international partners and our third-party suppliers, and may negatively impact our international digital sales and stores.
Despite these measures, we may be vulnerable to targeted or random attacks on our systems that could lead to security breaches, phishing attacks, denial of service attacks, acts of vandalism, computer viruses, malware, ransomware, misplaced or lost data, programming and/or human errors or similar events.
Despite these measures, we may be vulnerable to targeted or random attacks on our systems that could lead to security breaches, phishing attacks, denial of service attacks, acts of vandalism, computer viruses, malware, ransomware, misplaced or lost data, programming and human errors or similar events.
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.
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 laws and regulations.
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.
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 and cash flows.
However, we may fail to realize these benefits and synergies for a variety of reasons, including: • failure to successfully manage relationships with customers, distributors and suppliers; • failure of Adore Me’s customers to continue as customers of the combined company; • potential incompatibility or difficulties integrating and harmonizing technologies to effectively leverage Adore Me's technology to improve the Victoria's Secret and PINK customer experience and to modernize our current digital platform; • integration may be more costly, time-consuming or less effective than anticipated; • the loss of key employees; and • failure to combine product offerings and purchase experiences efficiently and effectively.
However, we may fail to realize these benefits and synergies for a variety of reasons, including: • failure to successfully manage relationships with customers, distributors and suppliers; • failure of Adore Me’s customers to continue as customers of the combined company; • potential incompatibility or difficulties integrating and harmonizing technologies to effectively leverage Adore Me’s technology to improve the Victoria’s Secret and PINK customer experience and to modernize our digital platform; • integration may be more costly, time-consuming or less effective than anticipated; • the loss of key employees; and • failure to combine product offerings and purchase experiences efficiently and effectively.
Additionally, such shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with our associates, customers or service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant fees and other expenses related to activist shareholder matters, including for third-party advisors.
Additionally, such shareholder activism could give rise to perceived uncertainties as to our future prospects, adversely affect our relationships with our associates, customers or service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant fees and other expenses related to activist shareholder matters, including for third-party advisors.
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.
If we or our suppliers are required to comply with these laws and regulations, or if we 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.
Inflation can also have an adverse impact on us because increasing costs of materials and labor may adversely impact our profit margins, especially if we are not be able to, or elect not to, pass these increases on to our customers. These risks could have a material adverse effect on our results of operations, financial condition and cash flows.
Inflation can also have an adverse impact on us because increasing costs of materials and labor may adversely impact our profit margins, especially if we are not able to, or elect not to, pass these increases on to our customers. These risks could have a material adverse effect on our results of operations, financial condition and cash flows.
Pursuant to our amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware) shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim for or based on a breach of a fiduciary duty owed by any of our directors or officers or other employees or agents to us or to our stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty; (iii) any action asserting a claim against us or any of our directors or officers or other employees or agents arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws; (iv) any action asserting a claim related to or involving us that is governed by the internal affairs doctrine; or (v) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the Delaware General Corporation Law.
Pursuant to our Bylaws, unless we consent in writing to the selection of an alternative forum, a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware) shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim for or based on a breach of a fiduciary duty owed by any of our directors or officers or other employees or agents to us or to our stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty; (iii) any action asserting a claim against us or any of our directors or officers or other employees or agents arising pursuant to any provision of the Delaware General Corporation Law or our Certificate of Incorporation or Bylaws; (iv) any action asserting a claim related to or involving us that is governed by the internal affairs doctrine; or (v) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the Delaware General Corporation Law.
Further, our integration efforts could disrupt both companies’ existing operations and also divert management attention and resources. If we experience difficulties with the integration process, the anticipated benefits of the acquisition, including anticipated sales and growth opportunities, may not be realized fully, or at all, and may take longer to realize than expected.
Further, our integration efforts could disrupt both companies’ existing operations and divert management attention and resources. If we experience difficulties with the integration process, the anticipated benefits of the acquisition, including anticipated sales and growth opportunities, may not be realized fully, or at all, and may take longer to realize than expected.
Even if the product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertions could adversely impact our reputation with existing and potential customers and the image of our brands. Our business could also suffer if our third-party vendors fail to comply with applicable laws, regulations or ethical standards.
Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertions could adversely impact our reputation with existing and potential customers and the image of our brands. Our business could also suffer if our third-party vendors fail to comply with applicable laws, regulations or ethical standards.
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.
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 related contractual or other obligations, could have a material adverse effect on our reputation, results of 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.
We are aware of inherent risks associated with replacing and modifying our information technology systems, including risks relative to cybersecurity, 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.
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.
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 partners, 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.
We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers.
We believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers.
Also, changes in such laws could make operating our business more expensive or require us to change the way we do business. For example, changes in product safety or other consumer protection laws could lead to increased costs for certain merchandise, or additional labor costs associated with readying merchandise for sale.
Also, changes in laws could make operating our business more expensive or require us to change the way we do business. For example, changes in product safety or other consumer protection laws could lead to increased costs for certain merchandise, or additional labor costs associated with readying merchandise for sale.
In connection with the Separation, our Former Parent has agreed to indemnify us for certain liabilities and we agreed to indemnify it for certain liabilities. If we are required to act under these indemnities to our Former Parent, we may need to divert cash to meet those obligations, which could adversely affect our financial results.
In connection with the Separation, our Former Parent agreed to indemnify us for certain liabilities, and we agreed to indemnify it for certain liabilities. If we are required to act under these indemnities to our Former Parent, we may need to divert cash to meet those obligations, which could adversely affect our financial results.
We may be required to expend significant capital and other resources to protect against, respond to, and recover from any potential, attempted, or existing cybersecurity incidents. As cybersecurity incidents continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
We may be required to expend significant capital and other resources to protect against, respond to, and recover from any potential, attempted, existing or future cybersecurity incidents. As cybersecurity incidents continue to evolve, we may be required to expend significant additional resources to continue to modify and enhance our protective measures or to investigate and remediate any information security vulnerabilities.
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.
Risks Relating to Our Common Stock • The price of our common stock has fluctuated significantly and may continue to fluctuate significantly; • Provisions in our Certificate of Incorporation and Bylaws and certain provisions of Delaware law could delay or prevent a change in control of the Company; • Our 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.
We believe that there are significant benefits and synergies that may be realized, including as a result of leveraging Adore Me’s expertise and technology to improve the Victoria's Secret and PINK customer shopping experience and accelerate the modernization of our current digital platform.
We believe that there are significant benefits and synergies that may be realized, including as a result of leveraging Adore Me’s expertise and technology to improve the Victoria’s Secret and PINK customer shopping experience and accelerate the modernization of our digital platform.
While we train our associates and have implemented systems, processes and security measures to protect our physical facilities and information technology systems against unauthorized access and prevent data loss, there is no guarantee that these procedures are adequate to safeguard against all data security threats.
While we train our associates and have implemented systems, processes and security measures to protect our physical facilities and information technology systems against unauthorized access and prevent data loss, there is no guarantee that these procedures are adequate to safeguard against all cybersecurity threats.
Failure to comply with local laws and regulations, to maintain an effective system of internal controls, to maintain the security of customer, associate, third-party and Company information or to provide accurate and timely financial statement information could also hurt our reputation.
Failure to comply with local laws and regulations, to maintain an effective system of internal controls, to maintain the security of customer, associate, third-party and Company information or to provide accurate and timely financial statement disclosure could also hurt our reputation.
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.
Risks Relating to Our Indebtedness • We have debt obligations that could restrict our business and adversely impact our results of operations, financial condition and cash flows; and • Our ability to maintain our credit rating could affect our ability to access capital and could increase our interest expense.
We may choose to launch new product categories or brands, and our ability to successfully introduce new merchandise, product lines, and brands will impact our results of operations and the image of our brands. Customer demands and fashion trends change rapidly.
We may choose to launch new product categories or brands, and our ability to successfully introduce new merchandise, product lines, and brands will impact our results of operations and the image and relevance of our brands. Customer demands and fashion trends change rapidly.
We are, and may increasingly become, subject to various laws, directives, industry standards and regulations, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate.
We are, and may increasingly become, subject to various laws, regulations and industry standards, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate.
Any significant compromise or breach of our data security, media reports about such an incident, whether accurate or not, or our failure to make adequate or timely disclosures to the public or law enforcement agencies following any such event, whether due to delayed discovery or a failure to follow existing protocols, could significantly damage our reputation with our customers, associates, investors and other third parties, cause the disclosure of personal, confidential, proprietary or sensitive customer, associate, third-party or company information, cause interruptions to our operations and distraction to our management, cause our customers to stop shopping with us and result in significant legal, regulatory and financial liabilities and lost revenues.
Any significant cybersecurity compromise or breach, media reports about such an incident, whether accurate or not, or our failure to make adequate or timely disclosures to the public or law enforcement agencies following any such event, whether due to delayed discovery or a failure to follow existing protocols, could significantly damage our reputation with our customers, associates, investors and other third parties, cause the disclosure of personal, confidential, proprietary or sensitive customer, associate, third-party or company information, cause interruptions to our operations and distraction to our management, cause our customers to stop shopping with us and result in significant legal, regulatory and financial liabilities and lost revenues.
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. Modifications involve replacing existing systems with successor systems, making changes to existing systems or acquiring new systems with new functionality.
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 applications, merchandising, planning, sourcing, logistics, inventory management and support systems including human resources and finance. Modifications involve replacing existing systems with successor systems, making changes to existing systems or acquiring new systems with new functionality.
While we currently maintain cybersecurity insurance, such insurance may not be sufficient in type or amount to cover us against claims related to breaches, failures or other data security-related incidents, and we cannot be certain that cybersecurity insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
While we currently maintain cybersecurity insurance, such insurance may not be sufficient in type or amount to cover us against claims related to breaches, failures or other cybersecurity incidents, and we cannot be certain that cybersecurity insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
This level of debt could have significant consequences on our future operations, including: • Making it more difficult for us to meet our payment and other obligations under our outstanding debt; • Resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our debt agreements, which could result in all of our debt becoming immediately due and payable; • Reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; • Limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy; and • Placing us at a competitive disadvantage compared to any of our competitors that have less debt or are less leveraged.
Our debt obligations could restrict our future business strategies and have significant consequences on our future operations, including: • Making it more difficult for us to meet our payment and other obligations under our outstanding debt; • Resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our debt agreements, which could result in all of our debt becoming immediately due and payable; • Reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; • Limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy; and • Placing us at a competitive disadvantage compared to any of our competitors that have less debt or are less leveraged.
Hedging would generally not be effective in offsetting the long-term impact of sustained shifts in foreign exchange rates on our business results. As a result, the fluctuation in the value of the U.S. dollar against other currencies could have a material adverse effect on our results of operations, financial condition and cash flows.
For example, hedging would generally not be effective in offsetting the long-term impact of sustained shifts in foreign exchange rates on our business results. As a result, the fluctuation in the value of the U.S. dollar against other currencies could have a material adverse effect on our results of operations, financial condition and cash flows.
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.
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 our international operations and further expand into international markets through partner and/or joint venture arrangements.
We compete with other companies for production facilities. We also face a variety of other risks generally associated with doing business on a global basis.
We also compete with other companies for production facilities. We face a variety of risks associated with doing business on a global basis.
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.
The forum selection clause in our 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.
In addition, our amended and restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, powers, preferences and relative, participating, optional and other rights, and such qualifications, limitations or restrictions as our Board of Directors may determine.
In addition, our Certificate of Incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, powers, preferences and relative, participating, optional and other rights, and such qualifications, limitations or restrictions as our Board of Directors may determine.
Further, the rapid increase in demand for online shopping has led to increased pressure on the capacity of our fulfillment network. 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.
Further, the rapid increase in demand for online shopping has led to increased pressure on the capacity of our fulfillment network. We rely on a number of production and distribution facilities located in the same vicinity, making our business susceptible to local and regional disruptions or adverse conditions.
Furthermore, because the methods of cyber-attack and deception change frequently, are increasingly complex and sophisticated, and can originate from a wide variety of sources, including nation-state actors, despite our reasonable efforts to ensure the integrity of our systems and website, it is possible that we may not be able to anticipate, detect, appropriately react and respond to, or implement effective preventative measures against, all cybersecurity incidents.
Furthermore, because the methods of cyber-attack and deception change frequently, are increasingly complex and sophisticated, and can originate from a wide variety of sources, including nation-state actors, despite our efforts to ensure the integrity of our systems and websites, it is possible that we may not be able to anticipate, detect, appropriately react and respond to, or implement effective preventative measures against, all cybersecurity incidents.
If we announce sustainability-related goals and targets, there can be no assurance that our stakeholders will agree with our strategies, and any perception, whether or not valid, that we have failed to achieve, or to act responsibly with respect to such matters or to comply with new or additional legal or regulatory requirements regarding climate change and other sustainability-related matters could result in adverse publicity and adversely affect our business and reputation. 20 Table of Conten t s 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.
If we announce sustainability-related goals and targets, there can be no assurance that our stakeholders will agree with our strategies, and any perception, whether or not valid, that we have failed to achieve, or to act responsibly with respect to such matters or to comply with new or additional legal or regulatory requirements regarding climate change and other sustainability-related matters could result in adverse publicity and adversely affect our business and reputation. 20 Table of Contents 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 utilization of these delivery services for shipments is subject to risks, including increases in labor costs and fuel prices, which would increase our shipping costs, and associate strikes and inclement weather, which may impact our transportation providers’ ability to provide delivery services that adequately meet our shipping needs.
Our utilization of these delivery services is subject to risks, including increases in labor costs and fuel prices, which would increase our shipping costs, and associate strikes and inclement weather, which may impact our transportation providers’ ability to provide delivery services that adequately meet our shipping needs.
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 new markets may bring us into competition with new competitors or with existing competitors with an established market presence.
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.
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.
Our programs may not be effective or could require increased expenditures, which could have a material adverse effect on our revenue and results of operations. 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 programs may not be effective or could require increased expenditures, which could have a material adverse effect on our revenue and results of operations. 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 our ability to successfully enter new markets.
While our internal and vendor operating guidelines promote ethical business practices and our associates visit and monitor the operations of certain third-party vendors, we do not control these vendors or their practices.
While our internal and supplier operating guidelines promote ethical business practices and our associates visit and monitor the operations of certain third-party vendors, we do not control these vendors or their operations.
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.
We source materials and produce merchandise in international markets and in our domestic market. We distribute merchandise 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.
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.
For example: • political instability, wars and geopolitical conflicts, environmental hazards or natural disasters, which could negatively affect international economies, financial markets, supply chain operations 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 affected 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 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.
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.
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 in a timely and profitable manner.
The violation of labor, environmental or other laws by third-party vendors used by us, or the divergence of a third-party vendor’s or partner’s labor or environmental practices from those generally accepted as ethical or appropriate, could interrupt or otherwise disrupt the shipment of finished products to us or damage our reputation.
The violation of labor, environmental or other laws by our third-party vendors, or the divergence of a third-party vendor’s or partner’s labor or environmental practices from those generally accepted as ethical or appropriate, could disrupt the shipment of finished products to us or damage our reputation.
Additionally, organizations that provide information to investors on corporate governance and other matters have developed rating systems for evaluating companies on their approach to environmental, social and governance matters. Unfavorable ratings may also affect our reputation and the sentiment of our brands, which could have a negative impact on our stock price.
Additionally, organizations that provide information to investors on corporate governance and other matters have developed rating systems for evaluating companies on their approach to environmental, social and governance matters. Unfavorable ratings may also affect our reputation and the perception of our brands, which could have a negative impact on our financial performance and stock price.
Moreover, despite maintaining comprehensive measures, some of our systems, e-commerce environments, servers and those of our service providers and vendors are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems.
Moreover, despite protective measures, some of our systems, e-commerce environments, servers and those of our service providers and vendors are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems.
The increased use of smartphones, tablets and other mobile devices may also heighten these and other operational risks. Despite the precautions we have taken, unanticipated problems or events may nevertheless cause failures in, or unauthorized access to, our and our third-party services providers’ and vendors’ information technology systems.
The increased use of artificial intelligence, smartphones, tablets and other mobile devices may also heighten these and other operational risks. Despite the precautions we have taken, unanticipated problems or events may nevertheless cause failures in, or unauthorized access to, our and our third-party service providers’ and vendors’ information technology systems.
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.
In addition to the traditional store-based retailers, we also compete with direct marketers and retailers that sell similar merchandise and 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.
Our licensees, franchisees, wholesalers, and joint venture partners could take actions that could harm our business or the image of our brands. We have global representation through independently owned stores operated by our partners.
Our licensees, franchisees, wholesalers, and joint venture partners could take actions or omissions that could harm our business or the image of our brands. We have global representation through independently owned stores operated by our third-party partners.
These risks 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 may be impacted by our ability to adequately source, distribute and sell merchandise and other materials on a global basis.
These risks could have a material adverse effect on the value of our brands and our reputation as well as our results of operations, financial condition and cash flows. We may be impacted by our ability to adequately source materials and produce, distribute and sell merchandise on a global basis.
In addition, future acquisitions of foreign companies or new foreign ventures and any joint ventures with foreign companies could potentially lead to risks related to, among other things, increased exposure to foreign exchange rate changes, government price control, repatriation of profits and liabilities related to the FCPA. 23 Table of Conten t s We may be adversely impacted by certain compliance or legal matters.
In addition, future acquisitions of foreign companies or new foreign ventures and any joint ventures with foreign companies could potentially lead to risks related to, among other things, increased exposure to foreign exchange rate changes, government price control, repatriation of profits and liabilities related to the FCPA. We may be adversely impacted by certain compliance or legal matters.
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.
Sustained or repeated system disruptions that interrupt our ability to process orders and deliver products to our customers and stores, impact our customers’ ability to access our websites, or expose confidential customer, 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.
We, along with third parties we do business with, are subject to complex compliance and litigation risks. Actions filed against us from time to time may include commercial, tort, intellectual property, customer, employment, wage and hour, data privacy, securities, anti-corruption and other claims, including purported class action lawsuits.
We, along with third parties we do business with, are subject to complex compliance requirements and litigation risks. Legal actions filed against us from time to time may include commercial, breach of contract, tort, intellectual property, customer, employment, wage and hour, data privacy, securities, anti-corruption and other claims, including purported class action lawsuits.
We are subject to income tax in local, national and international jurisdictions. In addition, our products are subject to import and excise duties and/or sales or value-added taxes in many jurisdictions. We are also subject to the examination of our tax returns and other tax matters by the IRS and other tax authorities and governmental bodies.
We are subject to income tax in local, federal and foreign jurisdictions. In addition, our products are subject to import and excise duties and/or sales or value-added taxes in many jurisdictions. We are also subject to the examination of our tax returns and other tax matters by the IRS and other tax authorities and governmental bodies.
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.
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. Risks Relating to the Separation We may not realize the anticipated benefits from the Separation, and the Separation could harm our business.
We may be unable to successfully resolve these type of conflicts to our satisfaction and may be required to enter into costly license agreements, be required to pay significant royalty, settlements costs or damages, be required to rebrand our products and/or be prevented from selling some of our products.
We may be unable to successfully resolve these type of conflicts to our satisfaction and may be required to enter into costly licensing agreements, be required to pay significant royalties, settlements costs or damages, be required to rebrand our products or be prevented from selling some of our products.
As a result of geographic concentration of the vendor and distribution facilities that we rely upon, our operations are susceptible to local and regional factors, such as accidents, system failures, economic and weather conditions, natural disasters, demographic and population changes, and other unforeseen events and circumstances.
As a result of the geographic concentration of the production and distribution facilities that we rely upon, our operations are susceptible to local and regional factors, such as accidents, system failures, economic and extreme weather conditions, natural disasters, demographic and population changes, and other unforeseen or uncontrollable events and circumstances.
Inflationary pressures on the products we sell could impact our revenues and profitability, especially if we are unable to adjust our retail prices to reflect changes in our costs. During fiscal year 2022, we experienced levels of inflation that were higher than we have experienced in recent years, which impacted consumer confidence and spending patterns.
Inflationary pressures on the products we sell could impact our revenues and profitability, especially if we are unable to increase our retail prices to reflect increases in our costs. During fiscal years 2022 and 2023, we experienced levels of inflation that were higher than we have experienced in recent years, which impacted consumer confidence and spending patterns.
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.
Supply chain 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, reduced sales and profitability and have a material adverse effect on our operations, financial condition and cash flows.
Failure to attract and retain the right talent, or to smoothly manage the transition of responsibilities resulting from such turnover, could affect our ability to meet our challenges and may cause us to miss performance objectives or financial targets or disrupt our relationships with our customers.
Failure to attract and retain the right talent, or to smoothly manage the transition of responsibilities resulting from such turnover, could affect our ability to accomplish our strategic plans and may cause us to miss performance objectives or financial targets or disrupt our relationships with our customers.
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.
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 and promotional activity.
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.
Although we generally 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 Contents Any significant cybersecurity compromise or breach, including with respect to 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 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.
Any significant interruption in the operations of these facilities could lead to inventory shortages, supply chain disruption or increased costs, which could have a material adverse effect on our results of operations, financial condition and cash flows. 19 Table of Contents 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 ability to compete favorably in our highly competitive segment of the retail industry could impact our results. The retail industry is highly competitive. We compete for sales with a broad range of other retailers, including individual and chain specialty stores, department stores and discount retailers.
Our ability to compete favorably in our highly competitive segment of the retail industry could impact our results. The retail industry is highly competitive, especially with respect to the intimates, apparel and beauty markets. We compete for sales with a broad range of other retailers, including individual and chain specialty stores, department stores and discount retailers.
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.
To accelerate speed and agility in producing our beauty and personal care products, we rely heavily on production 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.
Energy costs may fluctuate as a result of inflation and other factors, including the Ukraine/Russia conflict and related economic sanctions. These fluctuations may result in an increase in our transportation costs for distribution, utility costs for our retail stores and costs to purchase products from our manufacturers.
Energy costs may fluctuate as a result of inflation and other factors, including geopolitical conflicts and related economic sanctions. These fluctuations may result in an increase in our transportation costs for distribution, utility costs for our retail stores and costs to purchase products from our manufacturers.
Any future indenture or credit agreements that we may enter into may include restrictive covenants that, subject to certain exceptions and qualifications, restrict or limit our ability and the ability of our restricted subsidiaries to, among other things, incur additional indebtedness, pay dividends, make certain investments, sell certain assets and enter into certain strategic transactions, including mergers and acquisitions.
Any future indenture or credit agreements that we may enter into may include restrictive covenants that restrict or limit our ability to, among other things, incur additional indebtedness, pay dividends, make certain investments, sell certain assets and enter into certain strategic transactions, including mergers and acquisitions.
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.
There can be no assurance we will be able to achieve our initiatives regarding opening new stores and rightsizing and remodeling existing stores, manage our growth effectively, successfully integrate new stores into our operations or operate our new, right-sized, remodeled and existing stores profitably.
We believe that our trade names, trademarks and patents are important assets and an essential element of our strategy, especially with respect to new brands and innovative new products. We have obtained or applied for federal registration of our trade names, trademarks and patents and have applied for or obtained registrations in many foreign countries.
We believe that our trade names, trademarks and patents are important assets and an essential element of our strategy, especially with respect to innovative new products and maintaining the integrity of our brands. We have applied for or obtained registration of our trade names, trademarks and patents in the U.S. and in many foreign countries.
Our systems and facilities are also subject to compromise from internal threats, such as theft, misuse, unauthorized access or other improper actions by employees, third-party service providers and other third parties with otherwise legitimate access to our systems, website or facilities (which risks may be heightened as a result of work-from-home policies and technologies implemented in the wake of the COVID-19 pandemic).
Our systems and facilities are also subject to compromise from internal threats, such as theft, misuse, unauthorized access or other improper actions by employees, third-party service providers and other third parties with otherwise legitimate access to our systems, website or facilities (which risks may be heightened as a result of remote or hybrid work policies and technologies that have continued following the COVID-19 pandemic).
Our net sales, profit, cash flows and future growth may be affected by negative local, regional, national or international political or economic trends or developments that reduce consumers’ ability or willingness to spend, including the effects of national and international security concerns such as war, terrorism or the threat thereof.
Our revenue, results of operations, cash flows and future growth may be affected by negative local, regional, national or international political or economic trends or developments, including the effects of national and international security concerns such as war, terrorism or the threat thereof, to the extent such developments reduce consumers’ ability or willingness to spend.
The existence of certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law could discourage, delay or prevent a change in control of the Company that a stockholder may consider favorable.
The existence of certain provisions of our amended and restated certificate of incorporation (“Certificate of Incorporation”) and second amended and restated bylaws (“Bylaws”) and Delaware law could discourage, delay or prevent a change in control of the Company that stockholders may consider favorable.
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.
Our ability to open new stores depends 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.
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.
ITEM 1A. RISK FACTORS. SUMMARY OF RISK FACTORS We and our stockholders 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.
We have experienced events such as inventory shrinkage in the past, and we cannot assure that incidences of loss and theft will decrease in the future or that the measures we are taking will effectively reduce these losses.
We have experienced inventory shrinkage due to theft, and we cannot assure that incidences of loss and theft will decrease in the future or that the measures we are taking will effectively reduce these losses.
In addition, if our controls are not effective, our ability to accurately and timely report our financial position could be impaired, which could result in late filings of our annual and quarterly reports under the Exchange Act, restatements of our financial statements, a decline in our stock price, or suspension or delisting of our common stock from the NYSE, and could have a material adverse effect on our business, financial condition, prospects and results of operations.
In addition, if our controls are not effective, our ability to accurately and timely report our financial position could be impaired, which could result in late filings of our annual and quarterly reports under the Exchange Act, restatements of our financial statements, a decline in our stock price, or suspension or delisting of our common stock from the NYSE.
The risks associated with international markets include difficulties in attracting customers due to a lack of customer familiarity with our brands, our lack of familiarity with local customer preferences and seasonal differences in the market. Any of these difficulties may lead to disruption in the overall timing of our international expansion efforts or increased costs.
The risks associated with international markets are numerous and include difficulties in attracting customers due to a lack of customer familiarity with our brands and our lack of familiarity with local customer preferences. Any of these difficulties may lead to disruption in the overall timing or profitability of our international expansion efforts.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeHowever, 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.
Biggest changeHowever, as of February 3, 2024, we continue to lease a store in the U.K., with a lease expiration in 2024, and a store in Ireland, with a lease expiration in 2036, which are sublet to and operated by the joint venture. 29 Table of Contents Other International As of February 3, 2024, we also have global representation through stores operated by our partners: • 320 beauty and accessories stores in 58 countries; and • 156 full assortment stores in 36 countries.
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.
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 2028.
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.
The lease for this facility expires in 2026. China We lease offices in Shanghai, Shenzhen and Hong Kong within China. As of February 3, 2024, we operated 57 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 2024 and 2032.
United Kingdom / Ireland As a result of our joint venture with Next, we no longer operate any stores in the U.K. or Ireland.
United Kingdom / Ireland As a result of our joint venture with Next PLC, we no longer operate any stores in the United Kingdom (“U.K.”) or Ireland.
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.
As of February 3, 2024, we operated 814 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 2024 and 2036.
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.
The following table provides the location, use and size of our distribution, corporate and product development facilities as of February 3, 2024: Location Use Approximate Square Footage Columbus, Ohio area Distribution, shipping and corporate offices 2,945,000 New York Office, sourcing and product development/design 234,000 Mexico Distribution and shipping 185,000 New Jersey Distribution and shipping 126,000 Kettering, Ohio Call center 94,000 Hong Kong Office and sourcing 38,000 Various other locations Office and sourcing 216,000 United States Within the U.S., our business is principally conducted from office, distribution and shipping facilities located in the Columbus, Ohio, area.
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.
Canada As of February 3, 2024, we operated 23 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 2024 and 2035.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, our current legal proceedings are not expected to have a material adverse effect on our financial position or results of operations.
Biggest changeAlthough it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, our current legal proceedings are not expected to have a material adverse effect on our financial position or results of operations. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 30 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCOMPARISON 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.
Biggest changeCOMPARISON OF YEARLY CHANGES IN CUMULATIVE TOTAL RETURN (a) AMONG VICTORIA'S SECRET & CO., THE S&P 500 INDEX AND THE S&P 500 CONSUMER DISCRETIONARY DISTRIBUTION & RETAIL INDEX _______________ (a) This table represents $100 invested in stock or in index at the closing price on August 3, 2021, including reinvestment of dividends. 31 Table of Contents The following table provides our repurchases of our common stock during the fourth quarter of 2023: Period Total Number of Shares Purchased (a) Average Price Paid per Share (b) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs (c) (in thousands) (in thousands) October 29, 2023 - November 25, 2023 (“November 2023”) 6 $ 17.77 — $ 125,000 November 26, 2023 - December 30, 2023 (“December 2023”) 25 25.67 — 125,000 December 31, 2023 - February 3, 2024 (“January 2024”) 22 24.99 — — Total 53 — ________________ (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 withholding payments due upon vesting of employee restricted stock awards and the use of our common stock to pay the exercise price on employee stock options.
We have not paid any cash dividends since the Separation. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if and when we commence paying dividends.
We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if and when we commence paying dividends.
The 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.
The following graph shows the yearly changes, for the period from August 3, 2021 (the first day our common stock began trading on the NYSE) to February 3, 2024, in the value of $100 invested in our common stock compared to the Standard & Poor’s (“S&P”) 500 Composite Stock Price Index (“S&P 500 Index”) and the S&P 500 Consumer Discretionary Distribution & Retail Index, formerly known as the S&P 500 Retail Composite Index.
(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.
(b) The average price paid per share includes any broker commissions. (c) The share repurchase program announced on January 11, 2023 (the “January 2023 Share Repurchase Program”) authorized the purchase of up to $250 million of our common stock, subject to market conditions and other factors. The January 2023 Share Repurchase Program expired at the end of fiscal year 2023.
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.
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 112,000. We have not paid any cash dividends since the Separation.
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.
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 6. RESERVED.
Removed
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
As of February 3, 2024, there were approximately 25,000 stockholders of record of our common stock. This number does not include beneficial or “street name” holders of our common stock whose shares are held by banks, brokers and other financial institutions which are aggregated into a single holder of record.

Item 7. Management's Discussion & Analysis

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

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Biggest changeRisks 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.
Biggest changeRisks associated with the following factors, among others, could affect our results of operations and financial performance and cause actual results to differ materially from those expressed or implied in any forward-looking statements: • we may not realize all of the expected benefits of the spin-off from our Former Parent; • general economic conditions, inflation and changes in consumer confidence and consumer spending patterns; • 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; • our ability to successfully implement our strategic plan; • 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 traffic to our stores and the availability of suitable store locations on satisfactory terms; • our ability to successfully operate and expand internationally and related risks; • the operations and performance of our franchisees, licensees, wholesalers, and joint venture partners; • our ability to successfully operate and grow our direct channel business; • our ability to protect our reputation and the image and value of our brands; • our ability to attract customers with marketing, advertising and promotional programs; 32 Table of Contents • 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, remain current with fashion trends, and develop and launch new merchandise, product lines and brands successfully; • our ability to realize the potential benefits and synergies sought with the acquisition of Adore Me; • our ability to incorporate artificial intelligence into our business operations successfully and ethically while managing associated risks; • our ability to source materials and produce, distribute and sell merchandise on a global basis, including risks related to: • political instability and geopolitical conflicts; • environmental hazards and natural disasters; • significant health hazards and pandemics; • delays or disruptions in shipping and transportation and related pricing impacts; and • disruption due to labor disputes; • our geographic concentration of production and distribution facilities in central Ohio and Southeast Asia; • the ability of our vendors to manufacture and deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations; • fluctuations in freight, product input and energy costs; • 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.
Financing Activities Net cash provided by financing activities in 2022 was $58 million, consisting primarily of borrowings of $295 million from the ABL Facility and $55 million of cash received from Regina Miracle in connection with the joint venture agreement completed in the first quarter of 2022.
Net cash provided by financing activities in 2022 was $58 million, consisting primarily of borrowings of $295 million from the ABL Facility and $55 million of cash received from Regina Miracle in connection with the joint venture agreement completed in the first quarter of 2022.
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.
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. 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.
The remaining portion totaling $23 million is included in the “Other” category because it is not reasonably possible that the payments could change in the next 12 months due to audit settlements or resolution of uncertainties. For additional information, see Note 12 to the Consolidated and Combined Financial Statements in Item 8. Financial Statements and Supplementary Data.
The remaining portion totaling $12 million is included in the “Other” category because it is not reasonably possible that the payments could change in the next 12 months due to audit settlements or resolution of uncertainties. For additional information, see Note 12 to the Consolidated and Combined Financial Statements in Item 8. Financial Statements and Supplementary Data.
The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in our Consolidated and Combined Statement of Income (Loss) in the period that includes the enactment date. The Company treats the global intangible low-taxed income provisions enacted as part of the U.S. Tax Cuts and Jobs Act as a current period expense.
The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in our Consolidated and Combined Statement of Income in the period that includes the enactment date. The Company treats the global intangible low-taxed income provisions enacted as part of the U.S. Tax Cuts and Jobs Act as a current period expense.
The balance sheets and cash flows for the periods prior to the Separation include only those assets and liabilities directly related to the Victoria’s Secret business, and the statements of income (loss) include the historically reported results of the Victoria’s Secret business along with allocations of a portion of the Former Parent's total corporate expenses.
The balance sheets and cash flows for the periods prior to the Separation include only those assets and liabilities directly related to the Victoria’s Secret business, and the statements of income include the historically reported results of the Victoria’s Secret business along with allocations of a portion of the Former Parent's total corporate expenses.
A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized. Significant judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and liabilities.
A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized. Judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and liabilities.
Our net income (loss) is impacted by, among other things, sales volume, seasonal sales patterns, success of new product introductions, profit margins and income taxes. Historically, sales are higher during the fourth quarter of the fiscal year due to seasonal and holiday-related sales patterns.
Our net income is impacted by, among other things, sales volume, seasonal sales patterns, success of new product introductions, profit margins and income taxes. Historically, sales are higher during the fourth quarter of the fiscal year due to seasonal and holiday-related sales patterns.
Gift card breakage revenue is recognized in proportion, and over the same period, as actual gift card redemptions. We determine the gift card breakage rate based on historical redemption patterns. Gift card breakage is included in Net Sales in our Consolidated and Combined Statements of Income (Loss).
Gift card breakage revenue is recognized in proportion, and over the same period, as actual gift card redemptions. We determine the gift card breakage rate based on historical redemption patterns. Gift card breakage is included in Net Sales in our Consolidated and Combined Statements of Income.
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.
Common Stock Share Repurchases & Treasury Stock Retirements Our Board of Directors determines share repurchase authorizations, giving consideration to our levels of profit and cash flows, capital requirements, current and forecasted liquidity, the restrictions placed upon us by our borrowing arrangements and the Tax Matters Agreement with our Former Parent, as well as financial and other conditions existing at the time.
We 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.
We plan to drive strong sales growth in franchise, travel retail and joint venture-operated stores through continued improved product offerings and assortments to 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.
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 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 for Income Taxes on the Consolidated and Combined Statements of Income.
(c) In the fourth quarter of 2022, we recognized a $16 million charge ($12 million after-tax), $15 million included in costs of goods sold, buying and occupancy expense and $1 million included in general, administrative and store operating expense, for inventory and other costs related to restructuring actions associated with Happy Nation.
(e) In the fourth quarter of 2022, we recognized a $16 million charge ($12 million after-tax), $15 million included in costs of goods sold, buying and occupancy expense and $1 million included in general, administrative and store operating expense, for inventory and other costs related to restructuring actions associated with Happy Nation.
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.
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 in stores and bolster our performance in the digital channel.
If the likelihood of an adverse outcome is only reasonably possible (as opposed to probable) or if an estimate is not reasonably determinable, disclosure of a material claim or contingency is disclosed in the Notes to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.
If the likelihood of an adverse outcome is only reasonably possible (as opposed to probable) or if an estimate is not reasonably determinable, disclosure of a material claim or contingency is disclosed in the Notes to the Consolidated and Combined Financial Statements included in Item 8.
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.
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 2022, we retired the additional 0.3 million shares repurchased in connection with the settlement of the December 2021 ASR Agreement.
We continue to take actions to transform the foundation of our company by making foundational changes to modernize and make our operating model more efficient to help us deliver long-term sustainable value for our shareholders.
We continue to take actions to transform the foundation of our company by making foundational changes to modernize and make our operating model more efficient to help us deliver long-term sustainable value for our stockholders.
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.
On August 2, 2021, we entered into a term loan B credit facility in an aggregate principal amount of $400 million, which will mature in August 2028. The discounts and issuance costs from the Term Loan Facility are being amortized through the maturity date and are included within Long-term Debt on the Consolidated Balance Sheets.
Additionally, we expect to continue investing in and growing the digital components of our international business, including through country-specific web platforms tailored to local languages and preferences and through additional regional expansion.
Additionally, we expect to continue growing the digital components of our international business, including through country-specific web platforms tailored to local languages and preferences and through additional regional expansion.
For additional information related to our 2022 financial performance, see “Results of Operations – 2022 Compared to 2021.” For a discussion of our financial condition and results of operations for 2021 compared to 2020, refer to “Part II, Item 7.
For additional information related to our 2023 financial performance, see “Results of Operations – 2023 Compared to 2022.” For a discussion of our financial condition and results of operations for 2022 compared to 2021, refer to “Part II, Item 7.
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.
We have a presence in nearly 70 countries and we believe we benefit from global brand awareness, a wide and compelling product assortment and a powerful, deep connection with our customers.
The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channel. The change in comparable sales provides an indication of period over period growth (decline).
The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. The change in comparable sales provides an indication of period over period growth (decline).
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%.
Prior to the amendment, interest on the loans under the ABL Facility was calculated by reference to (i) LIBOR or an alternative base rate and (ii) in the case of loans denominated in Canadian dollars, Canadian Dollar Offered Rate (“CDOR”) or a Canadian base rate, plus an interest rate margin based on average daily excess availability ranging from (x) in the case of LIBOR and CDOR loans, 1.50% to 2.00% and (y) in the case of alternate base rate loans and Canadian base rate loans, 0.50% to 1.00%.
We are evolving the positioning of Victoria's Secret and PINK to drive profitable growth and are focused on strengthening the core of our business by leading with a customer-first approach and rewarding customer loyalty, advancing technology to improve and expand the customer experience, delivering best-in-class products across all categories and focusing on being “best at bras”.
We are evolving the positioning of Victoria's Secret and PINK to drive profitable growth and are focused on accelerating the core of our business by leading with a customer-first approach and rewarding customer loyalty, advancing technology to improve and enhance the customer experience, delivering best-in-class products across all categories and focusing on being “best at bras”.
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.
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. 50 Table of Contents We also recognize revenues associated with franchise, license, wholesale and sourcing arrangements.
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.
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. 33 Table of Contents Executive Overview Victoria’s Secret & Co. is an iconic global brand of women’s intimate and other apparel, personal care and beauty products.
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.
Commencing in December 2021, we are required to make quarterly principal payments on the Term Loan Facility in an amount equal to 0.25% of the original principal amount of $400 million. We made principal payments for the Term Loan Facility of $4 million during both 2023 and 2022.
(d) In the fourth quarter of 2022, we recognized a $15 million charge ($14 million after-tax), included in general, administrative and store operating expense, related to professional services and other transaction-related costs associated with the acquisition of Adore Me. For additional information, see Note 2, “Acquisition” included in Item 8. Financial Statements and Supplementary Data.
In the fourth quarter of 2022, we recognized a pre-tax charge of $15 million ($14 million after-tax), included in general, administrative and store operating expense, related to professional services and other transaction-related costs associated with the acquisition of Adore Me. For additional information, see Note 2, “Acquisition” included in Item 8.
However, certain investment opportunities may require us to seek additional debt or equity financing, and there can be no assurances that we will be able to obtain additional debt or equity financing on acceptable terms, if at all, in the future.
However, certain investment opportunities or seasonal funding requirements may require us to seek additional debt or equity financing, and there can be no assurance that we will be able to obtain additional debt or equity financing on acceptable terms, if at all, in the future.
We expect to utilize our cash flows to continue to invest in our brands, talent and capabilities, and growth strategies as well as to fund our share repurchase programs and to repay our indebtedness over time. We believe that our available short-term and long-term capital resources are sufficient to fund requirements over the next 12 months.
We expect to utilize our cash flows to continue to invest in our brands, talent and capabilities, and growth strategies as well as to repay our indebtedness over time. We believe that our available short-term and long-term capital resources are sufficient to fund our working capital and other cash flow requirements over the next 12 months.
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.
Omni-channel initiatives 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.
In February 2023, we made an initial payment of $125 million to Goldman Sachs and received an initial delivery of 2.4 million shares of our common stock.
LLC (“Goldman Sachs”) to repurchase $125 million of our common stock. In February 2023, we made an initial payment of $125 million to Goldman Sachs and received an initial delivery of 2.4 million shares of our common stock.
Our ability to fund our operating needs is primarily dependent upon our ability to continue to generate positive cash flow from operations, as well as borrowing capacity under our senior secured asset-based revolving credit facility (the “ABL Facility”), which we rely on to supplement cash generated by our operating activities, particularly when our need for working capital peaks in the summer and fall months as discussed above.
Our ability to fund our operating needs is primarily dependent upon our ability to continue to generate positive cash flow from operations, as well as borrowing capacity under our ABL Facility, which we rely on to supplement cash generated by our operating activities, particularly when our need for working capital peaks in the summer and fall months as discussed above.
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.
During 2021, we 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.
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.
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, (ii) adequate liquidity to fund capital expenditures, and (iii) flexibility to consider investment opportunities that may arise.
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.
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 becoming an independent, publicly traded company.
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.
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. 34 Table of Contents The following is a discussion regarding certain of our key business priorities.
We are committed to maintaining adequate liquidity. Cash generated from our operating activities provides the primary resources to support current operations, growth initiatives, seasonal funding requirements and capital expenditures. Our cash provided from operations is impacted by our net income (loss) and working capital changes.
Cash generated from our operating activities provides the primary resources to support current operations, growth initiatives, seasonal funding requirements and capital expenditures. Net cash provided by our operating activities is impacted by our net income and working capital changes.
Additionally, stores are excluded if total selling square footage in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.
Upon re-opening, the stores are included in the calculation. Additionally, stores are excluded if total selling square footage in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis.
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.
Our financial statements for the period from August 3, 2021 through February 3, 2024 are consolidated financial statements based on our reported results as a standalone company.
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 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.
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%.
Prior to the amendment, interest under the Term Loan Facility was calculated by reference to LIBOR or an alternative base rate, plus an interest rate margin equal to (i) in the case of LIBOR loans, 3.25% and (ii) in the case of alternate base rate loans, 2.25%.
Deferred tax assets are also recognized for realizable operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted income tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
Deferred tax assets and liabilities are measured using enacted income tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
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.
A 10% increase or decrease in the inventory valuation adjustment would have impacted net income by approximately $2 million for 2023.
Those proceeds were partially offset by $250 million of share repurchases and $42 million of payments for taxes on share-based compensation awards.
Those proceeds were partially offset by $250 million of share repurchases and $42 million of payments for payroll taxes relating to the vesting of share-based compensation awards.
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.
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 growth of our business.
Income Taxes We account for income taxes under the asset and liability method. Under this method, taxes currently payable or refundable are accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Under this method, taxes currently payable or refundable are accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for realizable operating loss and tax credit carryforwards.
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.
Operating Income For 2023, operating income decreased $232 million, to $246 million, compared to operating income of $478 million in 2022, and the operating income rate (expressed as a percentage of net sales) decreased to 4.0% from 7.5%. The drivers of the operating income results are discussed in the following sections.
The obligation to pay principal and interest on the 2029 Notes is jointly and severally guaranteed on a full and unconditional basis by certain of our wholly-owned subsidiaries.
The obligation to pay principal and interest on the loans under the ABL Facility is jointly and severally guaranteed on a full and unconditional basis by certain of our wholly-owned domestic and Canadian subsidiaries.
In the fourth quarter of 2022, we recognized a pre-tax charge of $6 million ($4 million after-tax), $5 million included in general, administrative and store operating expense and $1 million included in buying and occupancy expense, related to restructuring activities to continue to reorganize and improve our organizational structure.
(c) In the first quarter of 2023, we recognized a pre-tax charge of $11 million ($8 million after-tax), $8 million included in general, administrative and store operating expense and $3 million included in buying and occupancy expense, related to restructuring activities to continue to reorganize and improve our organizational structure.
Our strategic growth plan is guided by our three key pillars: 1) strengthening our core; 2) igniting growth; and 3) transforming the foundation of our company.
Our strategic direction is guided by three priorities: 1) accelerating our core; 2) igniting growth; and 3) transforming the foundation of our company.
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.
Company-Operated Store Data The following table compares 2023 U.S. company-operated store data to the comparable period for 2022: 2023 2022 % Change Sales per Average Selling Square Foot (a) $ 588 $ 658 (11 %) Sales per Average Store (in thousands) (a) $ 4,038 $ 4,558 (11 %) Average Store Size (selling square feet) 6,837 6,918 (1 %) Total Selling Square Feet (in thousands) 5,565 5,617 (1 %) ________________ (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.
Cash Flow The following table provides a summary of our cash flow activity for the fiscal years ended January 28, 2023, January 29, 2022 and January 30, 2021: 2022 2021 2020 (in millions) Cash and Cash Equivalents, Beginning of Year $ 490 $ 335 $ 245 Net Cash Flows Provided by Operating Activities 437 851 674 Net Cash Flows Used for Investing Activities (555) (169) (123) Net Cash Flows Provided by (Used for) Financing Activities 58 (527) (465) Effects of Exchange Rate Changes on Cash and Cash Equivalents (3) — 4 Net Increase (Decrease) in Cash and Cash Equivalents (63) 155 90 Cash and Cash Equivalents, End of Year $ 427 $ 490 $ 335 Operating Activities Net cash provided by operating activities reflects net income adjusted for non-cash items, including depreciation, share-based compensation expense and deferred tax expense, as well as changes in working capital.
Cash Flow The following table provides a summary of our cash flow activity for the fiscal years ended February 3, 2024 and January 28, 2023: 2023 2022 (in millions) Cash and Cash Equivalents, Beginning of Year $ 427 $ 490 Net Cash Provided by Operating Activities 389 437 Net Cash Used for Investing Activities (254) (555) Net Cash Provided by (Used for) Financing Activities (291) 58 Effects of Exchange Rate Changes on Cash and Cash Equivalents (1) (3) Net Decrease in Cash and Cash Equivalents (157) (63) Cash and Cash Equivalents, End of Year $ 270 $ 427 Operating Activities Net cash provided by operating activities reflects net income adjusted for non-cash items, including depreciation and amortization, share-based compensation expense and deferred tax expense, as well as changes in working capital.
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.
(e) Other liabilities also include future estimated payments associated with unrecognized tax benefits. The “Less Than 1 Year” category includes $20 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.
(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.
(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.
Such estimates are subject to change as our work continues. Basis of Presentation Our financial statements for periods through the Separation date of August 2, 2021 are combined financial statements prepared on a “carve-out” basis, which reflects the business as historically managed within the Former Parent.
For additional information, see Note 2, “Acquisition.” Basis of Presentation Our financial statements for periods through the Separation date of August 2, 2021 are combined financial statements prepared on a “carve-out” basis, which reflects the business as historically managed within the Former Parent.
Based upon our cash balances and funds provided by operating activities, along with the borrowing capacity under our ABL Facility, we believe we will be able to continue to meet our working capital needs. 43 Table of Conten t s The following table provides a summary of our working capital position and capitalization for the periods post-Separation as of January 28, 2023 and January 29, 2022: January 28, 2023 January 29, 2022 (in millions) Net Cash Provided by Operating Activities $ 437 $ 851 Capital Expenditures 164 169 Working Capital 158 (7) Capitalization: Long-term Debt 1,271 978 Victoria's Secret & Co.
Working Capital and Capitalization Based upon our cash balances and net cash provided by our operating activities, along with the borrowing capacity under our ABL Facility, we believe we will be able to continue to meet our working capital needs. 41 Table of Contents The following table provides a summary of our working capital position and capitalization as of February 3, 2024 and January 28, 2023: February 3, 2024 January 28, 2023 (in millions) Net Cash Provided by Operating Activities (a) $ 389 $ 437 Capital Expenditures (a) 256 164 Working Capital (81) 158 Capitalization: Long-term Debt 1,120 1,271 Victoria's Secret & Co.
The effective tax rate for both years was lower than the Company's combined estimated federal and state statutory rate primarily due to the recognition of excess tax benefits related to share-based compensation awards that vested in the respective periods. 42 Table of Conten t s FINANCIAL CONDITION Liquidity and Capital Resources Liquidity, or access to cash, is an important factor in determining our financial stability.
The 2022 rate was lower than the Company's combined estimated federal and state statutory rate primarily due to the recognition of excess tax benefits related to shared-based compensation awards that vested in 2022. FINANCIAL CONDITION Liquidity and Capital Resources Liquidity, or access to cash, is an important factor in determining our financial stability. We are committed to maintaining adequate liquidity.
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.
We sell our products through three brands, Victoria’s Secret, PINK and Adore Me. Victoria’s Secret is a market leading global lingerie brand with a history of serving women across the globe. PINK is a fashion and lifestyle brand for young women built around a strong intimates core. We also sell beauty products under both the Victoria’s Secret and PINK brands.
Net cash provided by operating activities in 2022 was $437 million, a decrease of $414 million compared to 2021. The decrease in net cash from operating activities in 2022 was primarily driven by lower net income and higher cash outflows associated with working capital changes.
The decrease in net cash flows provided by operating activities in 2023 was primarily driven by a decrease in net income of $222 million, partially offset by lower operating cash outflows associated with working capital changes of $115 million compared to 2022.
The final number of shares to be repurchased will be based on the volume-weighted average price of our common stock during the term of the ASR Agreement, less a discount and subject to adjustments pursuant to the terms of the ASR Agreement. The final settlement of the ASR Agreement is expected to be completed in the second quarter of 2023.
The final number of shares received was based on the volume-weighted average price of our common stock during the term of the ASR Agreement, less a discount and subject to adjustments pursuant to the terms of the ASR Agreement.
The capital expenditures were primarily related to our store capital program, along with investments in technology, distribution and logistics to support our retail capabilities. Net cash used for investing activities in 2021 was $169 million for capital expenditures.
Net cash used for investing activities in 2022 was $555 million, consisting primarily of our $369 million cash payment, net of cash acquired, in connection with the Adore Me acquisition and capital expenditures of $164 million. The capital expenditures were primarily related to our store capital program, along with investments in technology, distribution and logistics to support our retail capabilities.
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 North America store sales decreased 11%, or $429 million, to $3.480 billion compared to $3.909 billion in 2022, primarily driven by a decrease in traffic, average unit retail (which we define as the average price per unit purchased) and conversion (which we define as the percentage of customers who visit our stores and make a purchase).
As of January 28, 2023, the interest rate on loans under the Term Loan Facility was 7.98%. On August 2, 2021, we also entered into a senior secured asset-based revolving credit facility.
As of February 3, 2024, the interest rate on loans under the Term Loan Facility was 8.89%. 45 Table of Contents On August 2, 2021, we also entered into a senior secured asset-based revolving credit facility.
The ASR Agreement is a component of the January 2023 Share Repurchase Program. March 2022 Share Repurchase Program In March 2022, our Board of Directors approved a share repurchase program (“March 2022 Share Repurchase Program”), providing for the repurchase of up to $250 million of our common stock.
March 2022 Share Repurchase Program In March 2022, our Board of Directors approved a 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 was utilized in 2022 to repurchase shares in the open market.
Gross Profit For 2022, our gross profit decreased $502 million to $2.258 billion, and our gross profit rate (expressed as a percentage of net sales) decreased to 35.6% from 40.7%.
Gross Profit For 2023, our gross profit decreased $16 million to $2.242 billion, and our gross profit rate (expressed as a percentage of net sales) increased to 36.3% from 35.6%.
Long-term Debt and Borrowing Facilities The following table provides our outstanding debt balance, net of unamortized debt issuance costs and discounts, as of January 28, 2023 and January 29, 2022: January 28, 2023 January 29, 2022 (in millions) Senior Secured Debt with Subsidiary Guarantee $395 million Term Loan due August 2028 (“Term Loan Facility”) $ 387 $ 390 Asset-based Revolving Credit Facility due August 2026 (“ABL Facility”) 295 — Total Senior Secured Debt with Subsidiary Guarantee 682 390 Senior Debt with Subsidiary Guarantee $600 million, 4.625% Fixed Interest Rate Notes due July 2029 (“2029 Notes”) 593 592 Total Senior Debt with Subsidiary Guarantee 593 592 Total 1,275 982 Current Debt (4) (4) Total Long-term Debt, Net of Current Portion $ 1,271 $ 978 46 Table of Conten t s Cash paid for interest was $52 million and $18 million in 2022 and 2021, respectively.
We would use net cash flow provided by operating and financing activities to fund our dividends. 44 Table of Contents Long-term Debt and Borrowing Facilities The following table provides our outstanding Long-term Debt balance, net of unamortized debt issuance costs and discounts and any current portion, as of February 3, 2024 and January 28, 2023: February 3, 2024 January 28, 2023 (in millions) Senior Secured Debt with Subsidiary Guarantee $391 million Term Loan due August 2028 (“Term Loan Facility”) $ 385 $ 387 Asset-based Revolving Credit Facility due August 2026 (“ABL Facility”) 145 295 Total Senior Secured Debt with Subsidiary Guarantee 530 682 Senior Debt with Subsidiary Guarantee $600 million, 4.625% Fixed Interest Rate Notes due July 2029 (“2029 Notes”) 594 593 Total Senior Debt with Subsidiary Guarantee 594 593 Total 1,124 1,275 Current Debt (4) (4) Total Long-term Debt, Net of Current Portion $ 1,120 $ 1,271 Cash paid for interest was $87 million and $52 million in 2023 and 2022, respectively.
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.
(b) Future lease obligations primarily represent minimum payments due under store lease agreements. For additional information, see Note 9 to the Consolidated and Combined Financial Statements included in Item 8. Financial Statements and Supplementary Data.
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.
We use cash flows provided by our operating activities to fund our share repurchases. Once authorized by our Board of Directors, the timing and amount of any share repurchases are made at our discretion, taking into account a number of factors, including market conditions.
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. 39 Table of Conten t s The following table represents store data for 2022: Stores at Reclassed to Stores at January 29, 2022 Opened Closed Acquired (b) Joint Venture January 28, 2023 Company-Operated: U.S. 808 16 (12) — — 812 Canada 26 — (1) — — 25 Subtotal Company-Operated 834 16 (13) — — 837 China Joint Venture: Beauty & Accessories (a) 35 6 (10) — 8 39 Full Assortment 30 4 (1) — — 33 Subtotal China Joint Venture 65 10 (11) — 8 72 Partner-Operated: Beauty & Accessories 335 20 (39) — (8) 308 Full Assortment 128 21 (14) — — 135 Subtotal Partner-Operated 463 41 (53) — (8) 443 Adore Me — — — 6 — 6 Total 1,362 67 (77) 6 — 1,358 _______________ (a) Includes thirteen partner-operated stores at January 28, 2023.
The following table represents store data for 2023: Stores at Stores at January 28, 2023 Opened Closed February 3, 2024 Company-Operated: U.S. 812 15 (19) 808 Canada 25 — (2) 23 Subtotal Company-Operated 837 15 (21) 831 China Joint Venture: Beauty & Accessories (a) 39 2 (7) 34 Full Assortment 33 4 (1) 36 Subtotal China Joint Venture 72 6 (8) 70 Partner-Operated: Beauty & Accessories 308 31 (32) 307 Full Assortment 135 33 (12) 156 Subtotal Partner-Operated 443 64 (44) 463 Adore Me 6 — — 6 Total 1,358 85 (73) 1,370 _______________ (a) Includes thirteen partner-operated stores at February 3, 2024. 38 Table of Contents The following table represents store data for 2022: Stores at Reclassed to Stores at January 29, 2022 Opened Closed Acquired (b) Joint Venture January 28, 2023 Company-Operated: U.S. 808 16 (12) — — 812 Canada 26 — (1) — — 25 Subtotal Company-Operated 834 16 (13) — — 837 China Joint Venture: Beauty & Accessories (a) 35 6 (10) — 8 39 Full Assortment 30 4 (1) — — 33 Subtotal China Joint Venture 65 10 (11) — 8 72 Partner-Operated: Beauty & Accessories 335 20 (39) — (8) 308 Full Assortment 128 21 (14) — 135 Subtotal Partner-Operated 463 41 (53) — (8) 443 Adore Me — — — 6 — 6 Total 1,362 67 (77) 6 — 1,358 _______________ (a) Includes thirteen partner-operated stores at January 28, 2023.
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.
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 non-GAAP financial measures may differ from similarly titled measures used by other companies. The table below reconciles the most directly comparable GAAP financial measure to each non-GAAP financial measure.
The following table provides certain measures of liquidity and capital resources for the periods post-Separation as of January 28, 2023 and January 29, 2022: January 28, 2023 January 29, 2022 Debt-to-capitalization Ratio (a) 77 % 79 % Operating Cash Flow to Capital Expenditures 266 % 504 % ________________ (a) Long-term debt divided by total capitalization.
The following table provides certain measures of liquidity and capital resources as of February 3, 2024 and January 28, 2023: February 3, 2024 January 28, 2023 Debt-to-capitalization Ratio (a) 73 % 77 % Net Cash Provided By Operating Activities to Capital Expenditures 152 % 266 % ________________ (a) Long-term debt divided by total capitalization.
Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended January 29, 2022, filed with the SEC on March 18, 2022. 37 Table of Conten t s Non-GAAP Financial Information In addition to our results provided in accordance with GAAP above and throughout this Annual Report on Form 10-K, provided below are non-GAAP financial measures which present adjusted operating income, adjusted net income attributable to Victoria's Secret & Co. and adjusted net income per diluted share attributable to Victoria's Secret & Co. in 2022, 2021 and 2020, which exclude the impact of certain items.
Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended January 28, 2023, filed with the SEC on March 17, 2023. 36 Table of Contents Non-GAAP Financial Information In addition to our results provided in accordance with GAAP above and throughout this Annual Report on Form 10-K, provided below are non-GAAP financial measures that present operating income, net income attributable to Victoria's Secret & Co. and net income per diluted share attributable to Victoria's Secret & Co. in 2023 and 2022 on an adjusted basis, which remove certain non-recurring, infrequent or unusual items that we believe are not indicative of the results of our ongoing operations due to their size and nature.
We are investing in our store capital program along with investments in technology related to our strategic initiatives to drive growth and technology investments relating to the Separation activities.
The capital expenditures were primarily related to our store capital program and investments in technology related to our strategic initiatives to drive growth and technology investments relating to separation activities from our Former Parent.
(b) For additional information, see Note 2, “Acquisition” included in Item 8. Financial Statements and Supplementary Data.
(b) For additional information, see Note 2, “Acquisition” included in Item 8. Financial Statements and Supplementary Data. Results of Operations — 2023 Compared to 2022 The following information summarizes our results of operations for 2023 compared to 2022.
Interest payments have been estimated based on the coupon rate for fixed rate obligations. For variable interest rate obligations under the Term Loan Facility, the interest payments have been estimated based on a LIBOR rate of 4.73% plus an interest rate margin of 3.25%.
Interest payments have been estimated based on the coupon rate for fixed rate obligations. For variable interest rate obligations under the Term Loan Facility, the interest payments have been estimated based on an interest rate of 8.89%, which was the interest rate as of February 3, 2024.
Valuation of Long-lived Assets Long-lived Store Assets Long-lived store assets, which include leasehold improvements, store related assets and operating lease assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
A 10% increase or decrease in the estimated physical inventory loss adjustment would have impacted net income by approximately $3 million for 2023. 48 Table of Contents Valuation of Long-lived Assets Long-lived Store Assets Long-lived store assets, which include leasehold improvements, store related assets and operating lease assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
We repurchased the following shares of our common stock under the March 2022 Share Repurchase Program during 2022: Amount Authorized Shares Repurchased Amount Repurchased Average Stock Price (in millions) (in thousands) (in millions) March 2022 Share Repurchase Program $ 250 5,985 $ 250 $ 41.77 45 Table of Conten t s In accordance with the Board of Directors' resolution, shares of our common stock repurchased under the March 2022 Share Repurchase Program were retired upon repurchase and were available to meet obligations under equity compensation plans and for general corporate purposes.
We repurchased the following shares of our common stock under the March 2022 Share Repurchase Program during 2022: Amount Authorized Shares Repurchased Amount Repurchased Average Stock Price (in millions) (in thousands) (in millions) March 2022 Share Repurchase Program $ 250 5,985 $ 250 $ 41.77 Shares of our common stock repurchased under the March 2022 Share Repurchase Program were retired upon repurchase.
We are committed to optimizing our performance by focusing on what is within our control, and we are confident in our strategic growth plan and remain committed to delivering long-term sustainable value for our stockholders.
We are committed to optimizing our performance by focusing on what is within our control, and we are confident in our strategic direction and remain committed to delivering long-term sustainable value for our stockholders. Financial Impacts of the Adore Me Acquisition We consolidate Adore Me's financial information on an approximate one-month reporting lag.
The financial covenants could, within specific predefined circumstances, limit our ability to incur additional indebtedness, make certain investments, pay dividends or repurchase shares.
The financial covenants could, within specific predefined circumstances, limit our ability to incur additional indebtedness, make certain investments, pay dividends or repurchase shares. As of February 3, 2024, we were in compliance with all covenants under our long-term debt and borrowing facilities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur 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.
Biggest changeForeign 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 China is sourced through U.S. dollar transactions.
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.
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 the ABL Facility, which we believe would not have a material impact on our earnings or cash flows.
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
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 Contents
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.
The estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange. As of February 3, 2024, 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 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 .
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 February 3, 2024 and January 28, 2023: February 3, 2024 January 28, 2023 (in millions) Principal Value $ 991 $ 995 Fair Value, Estimated (a) 897 894 ________________ (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 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.
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 February 3, 2024, our investment portfolio is primarily comprised of bank deposits.
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 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.
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.
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 February 3, 2024, our investment portfolio is primarily comprised of bank deposits.
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.
We further believe the principal value of the outstanding debt under the ABL Facility approximates its fair value as of February 3, 2024 based on the terms of the borrowings under the ABL Facility. 51 Table of Contents Concentration of Credit Risk We maintain cash and cash equivalents with various major financial institutions.
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.
Our outstanding long-term debt as of February 3, 2024 consists of the 2029 Notes, which have a fixed interest rate, the $391 million in outstanding borrowing under the Term Loan Facility, which has a variable interest rate based on Term SOFR, and the $145 million in outstanding borrowing under the ABL Facility, which has a variable interest rate based on Term SOFR.
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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.

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