Good morning. My name is Amanda, and I will be your conference operator today. At this time, I’d like to welcome everyone to the Victoria’s Secret & Company’s First Quarter 2025 Earnings Conference Call. Please be advised that today’s conference is being recorded.

I would now like to turn the call over to Mr. Kevin Wynk, Head of Investor Relations at Victoria’s Secret & Company. Kevin, you may begin.

Thank you, Amanda. Good morning, and welcome to Victoria’s Secret & Company’s First Quarter Earnings Conference Call for the period ended May 3, 2025. As a matter of formality, I would like to remind you that any forward-looking statements we may make today are subject to our safe harbor statements found in our SEC filings and in our press releases. Joining me on the call today is CEO, Hillary Super and CFO, Scott Sekella. We are available today for approximately 30 minutes to answer any questions. Certain results we discuss on the call today are adjusted results and exclude the impact of certain items described in our press release and our SEC filings. Reconciliations of these and other non-GAAP measures to the most comparable GAAP measures are included in our press release, our SEC filings and the investor presentation posted on the Investors section of our website. 1 Thanks. And now I’ll turn the call over to Hillary.

Good morning. I appreciate you all being here. We’re pleased to kick off the summer on a strong note with solid first quarter results that reflect continued progress against our strategic priorities. Our teams delivered a quarter marked by disciplined execution, a continued focus on innovation and a deep commitment to serving our customers across all channels, which drove top and bottom line results exceeding our guidance and broadbased strength across both our brands. We’re excited by the momentum we’re building in a challenging market environment and encouraged by what lies ahead. We have lots to share today, including Q1 performance, key strategic hires and our balance of the year expectations. But first, I want to provide an update on a recent security incident. When we identified the incident on May 24, we immediately initiated our pre-established response protocols and third-party experts were engaged alongside our own security team. As a precaution, we took some internal systems and our e-commerce site offline. Throughout, we continued to serve customers in our Victoria’s Secret and PINK stores. Our site was back online Thursday, May 29, and all of our critical systems are fully operational. We’re now well into the recovery phase, which includes finalizing our investigation. While I won’t share further details while that work is ongoing, I do want to take a moment to recognize the extraordinary efforts of our associates. Their quick, decisive action, collaboration and resilience in the face of disruption was nothing short of inspiring. I’ve told you before how proud I am to be leading this business and working with this incredible team. I also want to thank our customers and partners for their understanding 2 and support. Now let’s discuss Q1. I’m pleased to share we built momentum month over month and ended the quarter strong. While we are still in early stages of our path to potential strategy, in Q1, we made progress across the 4 initiatives I outlined on our last earnings call. As a reminder, these are: recommit to PINK, supercharge bras, fuel growth in lifestyle categories and modernize our brand projection and go-to-market strategy. This progress was reflected in both net sales and operating income exceeding guidance. Net sales for the quarter were flat and total comparable sales were down 1% compared to last year. As we shared on our Q4 call in March, the February macroeconomic environment presented headwinds as consumer sentiment softened and inflation concerns heightened. I’m pleased to share that our teams responded with agility, making impactful adjustments to assortment and marketing that, combined with softening headwinds, helped drive results that were mostly above expectations. What did we do? We increased our percentage of newness by pulling forward March and April floor sets in VS, chasing into exciting fashion apparel for PINK and accelerating our new Mist Collection launch for Beauty. We reshot portions of our creative content with an eye towards sexier and more joyful brand expression and worked across channels to highlight it. The launch of our lacy panty franchise amplified this work, and I’m happy to report that we saw outsized returns with triple-digit comps in this franchise during its launch. We also rebalanced our marketing funnel, strategically leveraging events, activations and PR to amplify brand love and began testing new paid search strategies that we continue to expand upon. 3 Our quick response delivered strong results for the balance of the quarter. This reflects our disciplined approach in a dynamic environment and our continued commitment to strengthening the brands leaning into emotional storytelling and making agile business decisions when we see an opportunity. This is the VS & Co. mindset that I’m so proud of. We have shown the team’s capabilities to approach each season with a growth mindset knowing we are never penciled down and can always learn and iterate on the business. We saw broad-based strength across both brands and made progress on our strategic priority of fueling growth in lifestyle categories led by PINK apparel, Beauty and VSX. PINK apparel delivered its third consecutive quarter of positive comps and significant margin and AUR expansion, driven by improved product high emotion storytelling and customer engagement. These efforts bought us closer to our goal of reestablishing the brand’s magic and market position. The cross-functional team has done a great job reading and reacting not only to sales and consumer insights, but also chasing into fashion ideas they are seeing out in the world. The result has been a more balanced assortment with a wider range of categories, sensibilities and end uses that is resonating with our customer and driving a higher basket size versus last year. The team has successfully continued to grow our PINK icon business and introduce new categories such as skirts, dresses and denim, which customers love it. I am pleased that some of these ideas were created on the faster time lines that we have discussed on previous calls. We continue to push ourselves to be more agile in our product creation process and it is starting to pay off. Our PINK Break event drove significant traffic and conversion across both stores and digital as well as increased penetration of Gen Z customers. We generated a fun, upbeat shopping environment with DJs and embroidery stations while leveraging daily deals and 4 limited edition drops to drive repeat visits. Similarly, our PINK Wednesday drops are driving a significant repeat visitors each week. Our Beauty business was a standout, achieving our seventh consecutive quarter of growth, driven by Bombshell’s 15th anniversary, including an engaging New York City pop-up that resonated with a loyal consumer base that has made Bombshell America’s #1 selling fragrance. Customer favorites like the Mist Collection continued to drive traffic and brand love. But we’re most excited about what’s next. We launched body care in the final week of Q1 and have seen a strong response from customers. Especially encouraging is the enthusiasm for new formats like our oils and to new scents trends showing her willingness to experiment with us, a good indicator as we have an exciting launch plan for the back half of the year. VSX has delivered its fifth consecutive quarter of double-digit growth, reflecting continued progress against our strategic priority of supercharging bras and reinforcing our lead- ership as the bra authority. A key driver of this performance has been our relentless focus on product innovation and advanced fabric technology, all while delivering style and fashion. Our fabrics are engineered for maximum performance and versatility offering breathability and anti-sheer technology to ensure comfort and coverage. Notably, with the inclusion of proprietary raw materials such as LYCRA’s ADAPTIV fibers and our [ Xreact ] technology dynamically adjusting to the wear, shape and sweat levels, providing a custom fit and cooling effect throughout wear. Our products also feature innovative technologies such as patented Turbo Wick liners for accelerated moisture wicking and injection-molded pads for added shape and comfort. Bottom line, our sports bras are amazing and our customer agrees. 5 VSX bras were up 20% in the quarter, driven by continued standout success of the Knockout Front-Close, which is now our #2 sports bra. Its proprietary bra within a bra technol- ogy with exclusive patented design gives her the confidence of a perfect fit and support, seamless comfort and the freedom to move without distraction. We are also seeing significant integration of VSX into our off-duty bra wardrobe. The Featherweight Max is a standout in everyday where with design patented laser-cut perforations for targeted airflow. This is exciting as it shows that we’ve been listening to the customer and delivering the versatility that she craves. This focus on comfort and innovation also extends to the broader intimates category, where performance of wireless outpaced total core bras, driven by both basics and fashion. Our So Obsessed wireless bra is a standout, driving 30% year-over-year growth boosted by expanded in-store visuals and deep resonance with the millennial customer. With our expert combination of comfort, performance and style, we aren’t surprised to see that So Obsessed had more customers purchasing 2 or more at one time than other bra styles. As multiuse broad increasingly gain traction, we are continuing our efforts with new comfort and movement technologies to deliver content and experiences that create emo- tional connections with our customers. This will be reflected in our new always-on bra creative approach, which will highlight the full range of offerings rather than singular campaigns. By doing so, we’ll continue to meet customer needs across core, performance and lifestyle categories, driving deeper connections and sustained growth. On to channel performance. In stores, we outpaced mall traffic in March and April, while being less promotional than last year. Our stores continued to be a strategic advantage. They are the backdrop for emotional storytelling and meaningful experiences, and we’re seeing an encouraging response to our ongoing customer engagement work. In fact, we 6 launched the pilot last year in order to further our focus on bra fitting and service. I’m happy to share that, that pilot has been successful and we are expanding that test with the goal of improving customer experience and driving higher store performance. We are also pleased with the continued outperformance of our Store of the Future concept, which we anticipate will represent 25% of our fleet by the end of this year. In digital, we are beginning to bring some of that excitement and energy of the stores to her online experience. We see opportunities to sell more full-priced products and let our flow of newness and brand relevance drive the purchase cycle. We continued to outperform digitally within PINK, indicating we are serving our digitally native customer well. Finally, we continue to be pleased with the strength of our international business, which saw growth in nearly all categories across all channels and all regions. I recently had the privilege of spending time with our partner, Next management team, and touring several of their U.K. stores. I was impressed by their execution and the outstanding job they are doing running both physical and digital spaces. We continued to partner with our regional experts to share best practices and deepen our understanding of the global customer so we can continue the impressive growth we’ve seen internationally. To close on Q1, we exceeded expectations by reading and reacting with an urgency to win. I’m pleased with our progress and proud of the way we achieved our results. We are focused on delighting her with emotional product and content she connects with and operating with excellence. What matters is that we embraced early challenges with agility, identified the opportunity 7 and beat top line and bottom line expectations. Our results for the quarter reflect the strength of our strategy and the commitment of our teams. We are excited to build on that momentum to accelerate progress against our path to potential strategy, and I remain confident in our direction. I’d like to talk for a moment about the team we are building to deliver that strategic plan. On the last earnings call, I shared our decision to move to brand president model and hire a Chief Marketing Officer. We’ve invested in world-class leaders with proven track record of results. That begins with our brand presidents. Anne Stephenson has been named President of Victoria’s Secret; Ali Dillon, President of PINK; and Amy Kocourek, President of Beauty. Anne is a seasoned leader and a true expert in the intimates category with over 25 years of experience in product strategy, brand development and merchandising. As our Chief Merchandising Officer, she has consistently demonstrated her ability to drive innovation and deliver results. With her deep understanding of Victoria’s Secret brand and an unwavering commitment to its growth, Anne has played a key role in shaping our future vision, and I’m proud to have her at the helm. Ali joins us from Alex Mill where she served as President, overseeing strategy, product, operations and growth. With over 2 decades in merchandising and brand development, including leadership roles at Gap Inc. and J.Crew, Ali’s apparel expertise and knowledge of modern product development model positions her as the right person to lead PINK’s next chapter of growth. Amy is a deeply strategic merchant leader with a proven track record in product innovation and business transformation. Previously, Chief Merchandising Officer at Kendra Scott, Amy excels in finding white space innovating business models and elevating prod8 uct and partnerships. These experiences make her well suited to think differently about Beauty’s mature and successful business and push it further. In addition, Elizabeth Preis has joined us as Chief Marketing Officer. She will lead brand marketing across the enterprise to deepen customer connections with our iconic brands. Elizabeth joins VS & Co. as a respected marketing strategist with more than 25 years of experience in fashion, beauty and lifestyle. She is celebrated for her unparalleled acumen in crafting culturally relevant customer experiences informed by data and driven by creative storytelling. Finally, Adam Selman has been appointed Senior Vice President and Executive Creative Director reporting to Elizabeth. Adam is a multi-hyphenate creative who operates at the crossroads of commerce and culture. He has built his own label and has had notable career creating custom looks for celebrities like Beyonce and Katy Perry as well as designing Rihanna’s looks for the Victoria’s Secret Fashion Show performances. Adam is the ideal expert to steward our brands into their next chapter. These brand and product leaders join our existing team of highly skilled and tenured operational leaders. With their combined expertise, I have full confidence in our ability to drive sustained growth. Looking ahead to the remainder of the year, our success will be driven by focused execution. Scott will discuss our outlook shortly, but I’m pleased to say we are maintaining our forecasted net sales range of $6.2 billion to $6.3 billion for fiscal year 2025. This reflects our belief that we’re well positioned to navigate a complex, challenging market environment. We will clarify, differentiate and elevate our brand identities and projections by redefining PINK to meet the next generation where she is and ushering in a new era of sexy for VS. 9 Deliver product newness and innovation to meet customers’ evolving preferences by delivering innovative launches, increasing our fashion relevancy and continuing to shorten product creation time lines. Evaluate our entire marketing funnel for both optimization and brand differentiation, focusing on efficient, targeted investments to drive conversion and maximize return on mar- keting spend with a sharpened focus on acquisitions. Use the power of our global footprint to create best-in-class experiences that resonate across all markets., We will meet customers where they are while ensuring physical and digital touch points that reinforce the high standard of quality, service and innovation that define our brands. Finally, we will continue to engage with cultural moments, delivering entertaining, inspiring experiences that captivate both new and existing customers, reinforcing our position as the original entertainment brand. In closing, I’m confident in what 2025 and beyond holds for VS & Co. While we anticipate some continued uncertainty in the macro environment, we remain pleased with the strong performance of our core business and our strategy to drive long-term sustainable growth. With our talented team, we are poised to execute on our strategy, delivering the high emotion fashion and brand stories that resonate with our customers. And most importantly, we are stepping into a new era of sexy. Thank you all for your continued support. I’ll now hand it over to Scott.

Thanks, Hillary. I first want to echo Hillary’s pride in our organization’s exceptional resilience during these dynamic times. Our base business has remained strong despite the environment, navigating tariffs and a recent security incident. Our teams have demon10 strated remarkable focus and have stayed disciplined on the fundamentals we can control while protecting strategic investments in our product innovation, brand strength and customer experience, investments that will drive sustainable growth and competitive advantage over the long term. Now a review of our results. We delivered first quarter net sales of $1.353 billion and adjusted operating income of $32 million, both exceeding our guidance ranges provided in early March. Our adjusted net income per diluted share came in at $0.09, $0.01 shy of the upper end of our guidance range. On the top line, February’s challenging results reversed sharply in the March, April or Marpril period as we registered positive year-over-year growth, benefiting from an increase in traffic with traffic in our stores nicely outpacing traffic for the balance of the mall. From a brand perspective for the quarter, both Victoria’s Secret and PINK registered a slight year-over-year retail sales decline while Beauty was up low single digits. From a regional perspective, we registered strong high single-digit growth in our international operations while our North American business was essentially flat for the period. For both Victoria’s Secret and PINK, digital channels slightly outpaced stores. Total first quarter comparable sales contracted 1% compared to the prior year with a comparative low single-digit decline in traffic in both our stores and digital channels largely offset by low single-digit growth in the average transaction value across channels. AURs were up 2% in the quarter, driven by PINK and Beauty increases while VS was flat. As I mentioned, we saw continued strength in our international business. Reported first quarter international sales grew 9% to nearly $200 million while system-wide retail sales 11 increased by low double digits year-over-year. The strong growth was fueled by a combination of healthy high single-digit comparable sales gains in our existing fleet as well as continued real estate expansion. We saw particular strength in our China business, primarily driven by the digital channel as we registered strong double-digit growth in the period. First quarter adjusted gross margin dollars were $476 million our adjusted gross margin rate was 35.2% or a decline of 170 basis points compared to the first quarter of 2024 and below our guidance of approximately 36.5%. More than half of the gross margin rate pressure in the quarter was due to a combination of elevated and expected air freight rates, some tariff-related order adjustments and a higher penetration of GWP activity partially offset by a reduction in traditional promotional levels. Favorable gross margin rate drivers included cost benefits from our prudent approach to noncustomer-facing expense buckets as well as buying and occupancy leverage from rent savings. Adjusted SG&A dollars were $444 million in the first quarter, and our adjusted SG&A rate was 32.8%, better than our guidance range of 34.5% to 35.5% and leveraging 120 basis points to the prior year adjusted SG&A rate of 34%. Our better-than-prior year and expected SG&A dollar and rate performance in the quarter was due in part to our accelerated efforts to pull back on nonproduct and noncustomer investment and expense areas of the business as well as a strategic shift in marketing spend from Q1 into Q2. In light of the uncertain tariff environment, we are doubling down on our disciplined expense management across all aspects of the business. Adjusted nonoperating expenses consisting principally of interest expense were $14 mil12 lion in the quarter, better than our guidance and down from last year driven by a lower level of weighted average borrowings and interest rates. Our first quarter adjusted tax rate was 34%. Turning to the balance sheet. Total inventories ended the first quarter up 6% compared to last year and in line with our guidance for mid-single-digit year-over-year growth. From a liquidity standpoint, we ended the first quarter with a cash balance of $138 million, a strong balance sheet with sufficient liquidity to continue to execute on our strategic priorities. At the end of the first quarter, our outstanding balance was $105 million under our $750 million ABL credit facility, down $40 million from the first quarter last year, with seasonal borrowings as expected. In May, we successfully renewed our asset-based lending facility with a $750 million borrowing base and secured a 5-year term extension with favorable enhancements and lower interest rates that will generate annual savings. This refinancing strengthens our liquidity position while reducing our cost of capital and providing greater financial flexibility to execute our strategic initiatives. Now moving on to our updated outlook for fiscal year 2025 and our outlook for the second quarter. As Hillary mentioned, for fiscal year 2025 we are maintaining our forecasted net sales range of $6.2 billion to $6.3 billion compared to net sales of $6.204 billion in fiscal year 2024, which excludes the gift card breakage benefit of $26 million recognized in the fourth quarter of 2024. At this forecasted level of sales, we now expect our adjusted operating income for fiscal year 2025 to be in the range of $270 million to $320 million. The revised outlook includes 13 a gross tariff impact of approximately $120 million, which assumes 30% China tariffs and 10% non-China with tariff mitigation of approximately $70 million for a net impact to fiscal year 2025 of approximately $50 million. Our mitigation levers include cost optimization with vendors, additional sourcing diversification, a more efficient air-to-ocean freight mix and a combination of select pricing adjustments through more targeted promotions and strategic price modifications where we see a value proposition gap in the marketplace. Adjusted nonoperating expenses, consisting principally of interest expense, are projected to be about $70 million for fiscal year 2025, down from the $84 million in fiscal year 2024 driven by expected lower levels of weighted average borrowings along with lower interest rates. We estimate our adjusted tax rate will be approximately 24% to 25% for fiscal year 2025. We estimate weighted average diluted shares outstanding of approximately 82 million for the second quarter and 83 million for fiscal year 2025. Given these inputs, we are forecasting fiscal year 2025 adjusted net income per diluted share to be in the range of $1.80 and to $2.20 compared to adjusted net income per diluted share of $2.69 in fiscal year 2024. In light of the uncertain macro environment, we now estimate capital expenditures of approximately $220 million in fiscal year 2025, down from our prior forecast of $240 million. Capital investments will be primarily focused on our store capital program, along with investments in technology and logistics related to our strategic initiatives to drive growth and support productivity. Depreciation expense is estimated to be approximately $220 million in fiscal year 2025. 14 We now expect adjusted free cash flow of approximately $150 million to $200 million in fiscal year 2025. In 2025, we plan to open approximately 16 new stores in North America, mostly in the Store of the Future design and off-mall locations. We estimate approximately 30 to 40 store closures in 2025, which will mostly be consolidations of co-located Victoria’s Secret and PINK stores. We also expect about 40 renovations in North America in the Store of the Future design in 2025 with the majority consisting of square footage reductions or consolidations of co-located Victoria’s Secret and PINK stores. Square footage in our North America stores in 2025 is expected to decrease approximately 2% to 3% compared to 2024. At the end of 2025 in North America, we estimate our Store of the Future presence will be approximately 190 stores or approximately 25% of the fleet. Internationally, we estimate our Store of the Future presence at the end of 2025 will be approximately 230 to 250 stores or nearly 40% of the actual fleet. Turning to our outlook for the second quarter, we are forecasting net sales in a range of $1.38 billion to $1.41 billion compared to net sales of $1.417 billion in second quarter 2020. This forecast assumes an approximate $20 million net sales impact from the security incident. The forecast also assumes down low single-digit top line performance in our North American business with the semiannual sales scheduled 1 week earlier than last year, running for the same duration and positioned with units down double digits compared to last year. Our forecast assumes continued strength in our international business. At this forecasted level of sales, including known costs related to the security incident, we 15 expect second quarter 2025 adjusted operating income to be in the range of $15 million to $35 million compared to adjusted operating income of $62 million in the second quarter of 2024. The tariff headwind built into our second quarter forecast is approximately $10 million, the bulk of which, due to timing of the rate changes, we were not able to impact through the mitigation levers I just mentioned. In addition, the strategic marketing shift benefit I called out for Q1 will unfavorably impact Q2. Offsetting to these higher year-over-year cost is our continued noncustomer-facing expense actions, lower incentive comp and a slight improvement in our selling margin due to the significantly lower level of units in our semiannual sale this year compared to last year. This forecast also assumes an approximate $10 million operating income impact from the security incident in the second quarter excluding any consideration of insurance reimbursement. We are forecasting second quarter 2025 adjusted net income per diluted share to be in the range of 0 to $0.15 compared to adjusted net income per diluted share of $0.40 in the second quarter of 2024. We expect the second quarter 2025 adjusted gross margin rate to be approximately 35% compared to second quarter 2024’s adjusted rate of 35.4%. The adjusted SG&A rate in the second quarter 2025 is expected to be approximately 33% compared to the second quarter 2024’s adjusted rate of 31%. SG&A dollars are forecasted to increase approximately 5%. 16 We anticipate net adjusted nonoperating expense, again consisting principally of interest expense, of approximately $17 million in the second quarter of 2025, down from $20 million in the second quarter of 2024 driven by expected lower levels of weighted average borrowings, along with lower interest rates. We estimate adjusted tax expense in the second quarter of 2025 will be approximately 0 to $5 million. We expect total inventories in the second quarter of 2025, up mid-single digits compared to last year. In closing, I want to reinforce what we shared throughout today’s call. While we continued to navigate an uncertain macro environment with ongoing tariff dynamics and the impacts from our recent security incidents, our base business fundamentals remained solid and resilient. We are maintaining our disciplined approach, focusing on what we can control: operational excellence, strategic capital allocation and continued investment in the capabilities that differentiate us in the marketplace. The team’s ability to execute through these challenges gives me confidence in our positioning as we move forward. We remain committed to delivering value for our shareholders while building the foundation for sustained long-term profitable growth. With that, we will open the lines for your questions. Operator?

— Operator Instructions — For our first question, we will go to the line of Brooke Roach from Goldman Sachs.

17 Hillary, I was hoping you could dive a little bit deeper into the marketing strategy that you’re planning for the rest of the year and into the future following the hiring of the new Chief Marketing Officer. What plans do you have to engage customers in a stronger way to drive better comp sales in the back half of the year? And what changes should we expect in terms of the messaging for the customer on a go-forward basis?

Thanks, Brooke. Happy to talk about that. So as you know, Elizabeth joined us, I think this is – she’s in the beginning of her third week. So definitely early days. Adam joined us probably about 4 to 6 weeks ago. So he has been involved in the fall shoots and creative content. They were already in flight when he started, but he has definitely been involved. And what you will see creatively is it’s an evolution. There’s not going to be a flip of a switch and all of a sudden you feel something very, very different. But you will start to see the brand – both brands being pushed farther apart. You will start to see a visual evolution with VS. You will start to see a younger expression in PINK. And in terms of the marketing strategies, I would just say we’re very focused on, number one, acquisitions. Targeted acquisition through a very segmented media plan, and that’s really one of the first orders of business; and always on bra campaign, primarily expressed through media. And as we have said before, we know we are up against the fashion show. We’re not ready to talk about our plans to comp that, but we will have some sort of activation in the back half of the year that is entertainment-based. And I would just say, much more optimization of the funnel. So less spend on creating the content, more spend on getting it out in the world, pullback in direct mail and an optimization of lower funnel. So those are some of the things that are in works, and we’re pushing very hard to impact as much as we can in the back half.

18 Great. And just one follow-up for Scott. What level of price increases is embedded in your guide as a result of tariffs? And how are you thinking about elasticity of demand as you take some of those strategic price increases?

Yes. I mean, from a pricing standpoint, the thing we’re doing, first and foremost, is kind of optimizing our promos. And so both in Q1 and throughout the year, you’re going to see a little bit more headwinds on GWPs, gifts with purchase, and a pullback on sort of what I would say our traditional promos percent off-type deals. So that’s the first way we’re thinking about it. We’re being very strategic across categories in middle of opening price points and sort of not to exceed price points. And so we’re going to sort of play in the middle where we see value. So – and it won’t be across all categories as we think about our business. So it’s really that strategic case-by-case, category-by-category look that we’re taking.

Our next question comes from Alex Straton with Morgan Stanley.

Great. Maybe for Hillary first. Just when you think about the evolution of the brands and sort of the goals when you started here, can you just highlight like where you made the most progress in the first quarter? And then I’ve got one follow-up for Scott.

Sure. Happy to. I continue to be really bullish on PINK. I’m sure that’s not a surprise. We’ve made incredible progress, especially as it relates to the apparel piece of that business. I would also say that Beauty continues to be an absolute standout with year-over-year growth and lots in the pipeline to further those efforts. 19 And we are really starting to dig into VS. We see that we have an opportunity to have a more energetic, more joyful expression of VS. We think we got just a little bit too serious in past seasons. And so we are seeing that the more energy we bring, the more joy we bring to our campaigns, the more color and pattern we bring to our assortments, we’re really seeing payback. So early stages in VS, but definitely lots of progress on the PINK side.

Great. And maybe just for Scott, just on the gross margin. The quality of the commentary was helpful in the quarter. But is it possible to quantitatively break down the components of that 170 basis point decline as well as how those should evolve for the remainder of the year. It looks like you’re embedding less compression in the second quarter, but I’m just curious if that can change, perhaps an expansion in the back half?

Yes. So in the quarter, the biggest headwind year-over-year was sort of inbound rates, both air and ocean. I do expect that to subside, potentially even be a slight tailwind in the back half of the year, but it will continue to be a headwind in Q2 as well. The other – the next biggest piece in Q1 was a headwind on we had some tariff-related order cancels that we had to take on raw materials. So as we resource product out of China, given the tariff changes, we did have to write off some raw materials there. The other piece in the quarter, I touched on a little bit of a pricing question, we had a headwind with as we did more GWPs. It was partially offset by a pullback in traditional promos and I do affect that construct to continue through the balance of the year. We really like what the GWPs bring even if it’s a slight headwind on gross margin because it 20 drives a higher basket size as well as a little bit of a marketing vessel for us as the consumer takes that product out into the world. We did have some favorability in the quarter from a [ B&O ] standpoint. So I think that construct will largely continue for the year. So when you balance up the full year, the big headwind we’re going to have year-overyear is tariffs and expect that to be over 100 bps headwind and then we’ll have a little bit of the residual inbound headwind that I talked about in the first half of the year, partially offset by some favorable [ B&O ].

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

Hillary, as you work through your progress, any way to help frame how you’re thinking about sizing the revenue opportunity at PINK? And then just, Scott, how are you thinking about revenue by brand and gross margin embedded within the full year guide that you gave?

Simeon, I didn’t catch what – your first question.

So you’re seeing great – you’re talking about qualitative opportunity at PINK, Hillary. I’m just curious if you thought about how you see the revenue just, how you would size the recapture opportunity?

Over the long term? 21

Exactly.

Very, very significant. We are still in the process of modeling that. But at this moment in time, PINK is – PINK’s top line volume is significantly below its high, over $1 billion below its high. So there is an incredible amount of runway there. And I think as we start to build out the full lifestyle component, there’s a beauty opportunity in PINK. There’s an accessories opportunity in PINK. There’s an enormous opportunity to regain share in apparel and to maintain our intimates business in that brand. So I see this as our #1 volume opportunity.

When you think about gross margin by brand, not much differentiation between VS and PINK, but Beauty is several points higher. And so as we continue to grow there, that will – that mix will be a positive benefit to gross margin rate through the balance of the year.

Our next question comes from Dana Telsey with the Telsey Group.

Hillary, as you think about the intimates market and how it’s performing, you had mentioned before the slow start, it got off, I think, at the end of the fourth quarter. Where is it now and how do you think of your core categories of bras and panties and what you’re seeing in terms of performance? And then, Scott, in terms of tariff mitigation measures, when do they come into play? How do you think about that opportunity going forward?

Sure, Dana. Let me start by saying in the quarter, we definitely – I’ll start non-intimates 22 and then go to intimates. So we saw share growth in sports bras, Beauty, PINK apparel. Really, really nice gains there. As you know and as we’ve talked about in previous calls, the intimates market continues to be a little bit pressured. I think some of that is about it going to value. Some of that is about a younger consumer interacting with intimates, specifically bras, in a different way. And so we have seen a little bit of a decline in our intimates share this quarter. I would say it’s a tale of 2 stories, bras versus panties. In bras, I think it’s very much isolated to that February challenging business and that miss at Valentine’s Day that I talked about on the last call. We rebounded in March and April. We had positive business in bras in April. And as we think more about how she’s wearing bras, so shifting a little bit in the sports bras, looking for comfort, looking for wireless, we are in the process. We have a very, very robust innovation pipeline. I actually just came back from a trip to Asia to really review all of that, and we have the ability to move and shake and pull things forward. And so we are in the process really thinking about comfort and what role that plays in our total ecosystem. We’re seeing lots of positive results, and we have all kinds of innovation in the pipeline there. In panties, it’s a little bit different of a story. Our business was softer throughout the quarter in panties. We were less promotional in panties than a year ago, while our competition was more promotional. So I think – as we move forward, we have to internally answer the question, do we want to continue to gain share or do we want to pull back on promos here? We know that it drives traffic and it is an entry point to our brand. So it is a more complicated topic that we’re still thinking through, but we’re watching very carefully. And the good news is in panties, we had, in some cases, down to 2-week lead times to get back into things. So we 23 can be very agile here and think through the strategy as we move forward.

And then on the tariff mitigation. I mean, simple answer is the bulk of the mitigation is in the back half. I did call out, we do have an impact in Q2. There’s a little bit of mitigation in that number. But when you think about when the rate changes took place, those first goods before we could have any mitigation impacts are starting to roll through. The actions we did take early on, though, resourcing out of China, while those actions took place in Q1 and here into Q2, it’s going to take some time for those to roll through as they’re produced in their new origins and all that. So when you think about just how it flows, but once we hit that back half, the mitigation really comes into effect.

Our next question comes from Matthew Boss with JPMorgan.

So Hillary, how do you see the product assortment position today at both VS and PINK? Or where do you see the largest low-hanging fruit with your strategic priorities across categories that you could impact either in the back half of this year versus opportunities you see slated for next year? And then, Scott, on SG&A, what’s the best way to think about permanent savings you’ve realized relative to reinvestments in the business that you see over time? Or what’s the level of revenue growth to leverage fixed costs in the business over time?

Thanks, Matt. I’ll start. Where do I see the lowest hanging fruit? First and foremost, it’s marketing optimization and it’s developing a very focused acquisition strategy. So we continue to do very, very well with our existing customer. We’re at sort of all-time level 24 AOVs, profitability, trips. So very healthy current customer file. So we’re very much focused on acquisitions as a priority in marketing. We also know that we can optimize our spend. We know we can be more targeted in our media spend and have bigger tentpole moments throughout the year. So lots to do there. That’s not even covering the creative piece of things, pushing the 2 brands apart, utilizing collaborations in a very strategic way. So tons and tons of things to do on the brand and marketing side. In terms of categories, we are bullish about PINK. We are bullish about Beauty. And we believe that we have made a number of corrections and innovations, including some innovation launches in the back half of the year in intimates that we do think will shore up the intimates business and further differentiate us in the space. So very excited about the back half of the year overall.

On the SG&A part of the question, what we’ve been driving through Q1 and the mindset we’re taking is find those efficiencies in noncustomer areas. So those, we do expect to be permanent savings, things that won’t impact the customer experience, the brand, the product. The other thing we’re doing is what I would say is sort of fewer projects or being very selective with our investments, too. We want to do fewer, but do them better and have them have better returns and improve the customer experience. So I think some of it is not necessarily a cost takeout, but some of it is just being very selective where we’re making those investments in these uncertain times. As far as our leverage point from both [ B&O ]and SG&A it’s around a 1% to 2% sort of growth rate. So if we’re growing 1% to 2%, we’re going to really start leveraging. And 25 with some of these savings, we’re realizing that leverage point is going to continue to go down.

Our next question comes from Corey Tarlowe with Jefferies.

Hillary, I was wondering if you could just talk about your team, do you feel like you have the right team in place at present because I know you mentioned that you made a couple of hires. And I would just be curious to get your perspective there. Is this the final team that you feel is best positioned to take the company into the future? And then just, Scott, on the inventory for the balance for the quarter, is there any sort of guardrails or guidance that you can give us around what we might expect for the past for inventory growth for the year going forward?

Sure, I’ll start. I don’t know if you saw the article that referred to our team as a super squad. But they truly are the super squad, the entire ELT . I think we have built a bestin-class team, who really complements each other. A good combination of tenure and new, a good combination of operational experts and brand experts. And we’re all in the process of getting to know each other and gelling as a team. It’s very early days, but I feel very, very passionately that this is the team that will drive the strategy forward.

From an inventory perspective, in the quarter, as I said, we were up mid-single digits and basically expect that trend to continue through the year, but the color is a little bit different. So in the first half, the up sort of mid-single digits will continue because we’ve been bringing our European distribution center up. 26 So you think about building that and that will start to lap in the back half of the year. And then in the back half of the year, inventory will be up basically on a rate basis because of tariffs. If you exclude tariffs, inventory by year-end would have largely been flat.

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

Hillary, you made a comment earlier that younger customers are interacting with the intimates business differently. Can you elaborate on that? And also how this plays into your AURs, margins and attachment rates for the intimates business?

Sure. Yes, we know that the younger customer is wearing traditional bras less frequently. She is wearing sports bras, in some cases she’s wearing bra tops. She’s just thinking differently about end use. I think also just in the post-COVID days, sports bras are definitely part of sort of her work-from-home wardrobe. And so we are seeing some level of shift out of traditional bras into sports bras. But we also know that wireless is a huge piece of that and a category that is growing for us and we’re continuing to invest in as well as other comfort technologies. So I think it’s just generally no longer acceptable to not be comfortable and especially with this younger generation, and we know that and have known that for some time and have a number of innovations in the pipeline to address that.

From a margin perspective, that switch, I mean, sports bras are lower margin. But when you look at the size of bras versus sports bras, the impact that it’ll have on the total business is kind of minimal. 27

Our next question comes from Mauricio Serna with UBS.

Maybe could you talk about what you’re seeing quarter-to-date? I know you included like a $20 million impact on Q2 guide based on the security incident – given the security incident. But just thinking about excluding this impact, any sense of how the quarter-todate trend is going? And also just going back to the Q1 gross margin result, I guess just relative to your expectations when you provided the guidance, is it fair to assume that the biggest – the one unexpected thing was the freight? Or was there anything in particular that drove the miss relative to your expectations?

I’ll start and then hand it over to Scott. So we saw our business trajectory turn in Marpril. It went positive in Marpril for all brands and it continued into May independent of the cyber event. So we are seeing our base business it has strengthened over the course of spring season and we see that to have been sustained through May. So feeling really good about the base business.

In terms of Q1 gross margin versus expectations, I mean, we largely expected the inbound headwind. What we didn’t expect was the raw material write-off from resourcing out of China. And we also made the call, we were expecting favorable promos, which on traditional promos, they were favorable. But we amplified our GWPs a bit in the quarter more than expected given how things started and then just reacting to what the consumer was reacting to. So those were the biggest differences versus expectation on gross margin. 28

Got it. And a quick follow-up on the tariff impact, you expect a $50 million net impact. You said Q2 will include $10 million. Is it fair to assume the rest of $40 million is, I guess, mostly skewed towards Q4 given the volumes? Or is there a way maybe like that you might have more of your mitigation strategies fully applied that would lead to like more balanced impact in the second half of – between Q3 and Q4?

Yes. So I think it’s going to be over Q3 and Q4 and fluctuate with the size of the volume in each of the quarters is how I would think about it. So there is more of an impact dollarwise just because it’s a bigger quarter in Q4. But from a sort of rate or basis point impact, it should be relatively similar across Q3 and Q4.

Our next question comes from Marni Shapiro with Retail Tracker.

Congrats, and congrats on building a really exceptional team with so many women leading a broad business and loving that. Can we talk just a little bit about PINK because I’ve been very impressed with the drops that you’ve had there. Are you getting a new shopper in? I’m assuming so because there they’re younger, but are you also getting back the lapsed shopper? And when they come in to buy those fashion drops like the spring break set, are they also buying bras along with the fashion? Could you just give us a little color as to what this is looking like?

Sure thing. I would say the strength that we’re seeing in PINK right now is coming primarily from existing/lapsed customers and less from new than we would like. So as I speak 29 to Elizabeth’s focus really being on acquisition for both brands, it is absolutely our top priority. We are seeing a shift and uptick in consideration for actually both brands. So I think that’s probably a leading indicator, but definitely a little bit of work to do on new. We are seeing this primarily being driven by apparel and swim. We had AURs up almost to the 20% range. So very, very strong AUR performance. And the intimates business is a little bit softer, but continues to be very significant. Our Wear Everywhere bra is our #1 bra and continues to be. So some real strength in that intimates business, but also, I would say, a little bit pressured by the macro things we saw going on, and we’re working to definitely defend that business.

And could we just as a follow-up in PINK about the active segment because PINK has, at times, had a very strong active business, and then it’s been pulled back. What are your thoughts on PINK active?

I think it’s a little bit less about true sport and performance and a little bit more about lifestyle and how she’s dressing. And I think in the past, we’ve done a lot of sort of headto-toe matching set looks and that seems to be losing a little bit of relevance with her, and she’s looking to mix it and create more dynamic interesting outfits. So we’re seeing that active piece of the business being mixed in to what we would call more apparel side of the business. And quite honestly, we think that looks fresher and more modern. So we’re still working on it, but seeing some success in the mix of apparel.

Our next question comes from Jonna Kim with TD Securities. 30

Just curious on the performance of swim, what you’re seeing there. And then just the second question is around Beauty. How big is the business now? And where do you think that could go? And any commentary on the second half units that you’re thinking in the Beauty would be great.

Sure. So I’ll start with swim. Swim was a growth vehicle in both brands. I would say we were super, super pleased with PINK swim, both in our iconic PINK-branded swim at PINK Break. That’s a lot to say in one mouthful. As well as the Frankies Bikinis collaboration, which I talked about on the last call being great for basket size and customer acquisition. On the VS side, it was definitely a growth story. I think we have learnings there. We definitely have some store real estate learnings. We have some assortment learnings. Really the more classic core side of that business outperformed. So lots and lots to build on there, and I’m already looking forward to swim next season. Beauty. Beauty is very significant, about 25% of our business. Even stronger on the international side of our business. And we see lots of opportunity to innovate and expand here. We have a new product category dropping in fall that we’re excited about. Amy and team really have hit the ground running. And I think that there’s still a tremendous amount of runway there, and it’s something that drives incredible loyalty in our brands. So business we’re extremely excited about.

Our last question comes from Janet Kloppenburg with JJK Research Associates.

Hillary, I wondered what you thought of the general pricing structure at VS, PINK and your 31 major competitors? I mean, is the customer looking for the same quality at lower prices? Do you have to adjust your sourcing and your vendor partnerships to achieve that? It just feels like there’s been a lot of pricing pressure in the sector for a while. And on the marketing side, with the increase in the GWPs, does that make – does that pressure your gross margin going forward, but is it a vehicle to drive traffic and something that you think is the permanent part of the marketing mix?

Sure. Happy to talk about those things. There definitely is price pricing pressure in the intimates sector. We know that a big piece of the share is in value and off-price. I do not think that our pricing strategy is inherently wrong, but I think that we need to do a better job of expressing – showing that value and creating that emotional connection and storytelling with our customer. I think that our execution has gotten – rather than thinking about how to elevate and differentiate, I think that for a long period of time, we were attempting to compete with value. And I think that, sure, there are categories that will be value-driven, panties being one, Mist Collection being another that are really traffic-driving and basket-building items. But I think it’s all about the storytelling and the brand positioning and the product and making sure that it is so clearly differentiated that we can warrant those prices, and it will be a journey. As it relates to GWPs, we definitely like them better than traditional promos. As an example, in this quarter, we actually did 6 days less of entire box promos. We were much, much less promotional in categories like PINK apparel. Like I said, we were promotional in panties. We could debate whether or not that’s the right thing going forward and we’re going to spend some time strategizing that, but it does – it is a shift. 32 So do I think that it will put pressure on promotions? It is a headwind, but it needs to and will be offset by our more traditional promos, which I like because it feels better. It does drive traffic. It drives a higher basket size. And it’s a walking billboard. I mean, in New York City alone, you see these totes everywhere and I think that’s a good thing. The team has done a really good job, I think, making them much, much better looking. And so all in all, we view that as progress in our journey to reduce promos.

Thanks, Janet. Okay. Thanks, everyone. That concludes our call this morning. We appreciate your time this morning and your interest in VS & Co. Have a great day.

Thank you for participating in the Victoria’s Secret & Co.’s First Quarter 2025 Earnings Conference Call. That concludes today’s conference. Please disconnect at this time, and enjoy the rest of your day. Copyright © 2025, S&P Global Market Intelligence. All rights reserved 33