Group 1 - Victoria's Secret & Co. (NYSE:VSCO) is considered one of the most undervalued retail stocks, with a price target raised from $24 to $29 by Telsey Advisory while maintaining a Market Perform rating [1] - The company showed strong momentum in H1 2025, highlighted by a solid Q2 earnings beat, indicating early signs of progress under new leadership and stabilization under the Path to Potential strategy [2] - Victoria's Secret & Co. operates under multiple brands including Victoria's Secret, Victoria's Secret PINK, and Adore Me, offering a range of products such as sleepwear, loungewear, swimwear, athleisure, lingerie, prestige fragrances, and body care [3]

Core Insights - Agentic AI could represent an estimated $6 billion total cost savings opportunity for major U.S. retailers, potentially boosting profit estimates by up to 20% by 2026 [1][3] - Gap, Macy's, and Victoria's Secret are identified as the top three retailers best positioned to benefit from AI advancements [1] - Wall Street maintains a strong interest in AI-driven margin improvements in the retail sector, which has historically faced challenges with low profits and high inventory levels [2] Cost Savings and Margin Impact - The analysis estimates approximately $6 billion in annual cost savings from agentic AI tools, which include inventory planning, supply chain automation, and automated customer service [3] - If these savings are realized, it could add about 200 basis points to sector margins [3] Skepticism and Practical Applications - There is skepticism regarding the actual implementation and quantification of AI benefits in retail, as noted by Morningstar's senior equity analyst [3][4] - Practical applications of AI in retail include marketing, product recommendations, and inventory management, which could enhance customer targeting and promotion testing [5][6] - Improved demand prediction through AI could reduce markdowns and waste, significantly impacting margins if executed effectively [6] Adoption and Long-term Outlook - While AI adoption is expected to provide some benefits, it is unlikely to transform the retail industry overnight [7]

Core Insights - Victoria's Secret is expanding into the home fragrance market, which is valued at over $2 billion in North America and projected to grow at a 5.5% compound annual growth rate until 2032 [3] - The beauty segment has been a significant growth driver for Victoria's Secret, contributing approximately $1 billion in domestic sales and nearly $2 billion globally [4] - The company plans to accelerate its beauty category, which is four times larger than the intimates market in the U.S., indicating a strong growth opportunity [5] Product Launch - Victoria's Secret launched a Home Fragrance collection with prices ranging from $19.95 for a room spray to $185 for a nine-piece candle set, featuring new fragrances like Whipped Dream and Midnight Vanilla [6][8] - The collection includes nine fragrances available in various formats such as candles, room sprays, and hand soaps, aimed at enhancing the brand's emotional connection with consumers [8] Financial Performance - In Q2, Victoria's Secret reported a nearly 3% increase in net sales to $1.5 billion, with comparable sales rising 4% at stores after a decline of 5% in the previous year [7]

Core Insights - The market sentiment towards women's apparel company Victoria's Secret (NYSE: VSCO) is notably negative [1] Company Summary - Victoria's Secret is currently facing challenges in market perception, indicating a lack of confidence from investors [1]

Core Perspective - The new CEO, Hillary Super, aims to revive the brand's previously embraced sexy image after her predecessor had toned it down [1] Company Strategy - Hillary Super intends to reintroduce the brand's bold and provocative marketing approach, which had been dialed back in recent years [1] Industry Trends - The lingerie industry is witnessing a shift back towards more daring and sensual branding, reflecting changing consumer preferences [1]

Group 1 - Victoria's Secret & Co. is recognized as a strong candidate for day trading, with a Hold rating and a price target of $20 set by Morgan Stanley's analyst Alexandra Straton [1] - The company has shown progress in its turnaround efforts, with Q2 results exceeding expectations in terms of EPS, sales, and gross margin, indicating that strategic initiatives are starting to take effect [2] - Despite positive signs, EBIT margins remain below historical averages, and Q3 guidance was softer than anticipated due to challenges such as tariff pressures, increased marketing expenses, and rising labor costs [3] Group 2 - Victoria's Secret operates as a specialty retailer of women's intimate apparel and beauty products under the Victoria's Secret, PINK, and Adore Me brand names [4]

Core Viewpoint - Victoria's Secret & Co. is experiencing a positive turnaround, with analysts raising price targets following strong Q2 FY2025 earnings that exceeded expectations [2][3]. Financial Performance - Victoria's Secret reported Q2 revenue of $1.46 billion, surpassing analyst consensus by $52.92 million [2]. - Net sales increased by 3% year-over-year, with comparable sales growing by 4% [2]. - The company raised its FY2025 net sales outlook to between $6.33 billion and $6.41 billion, up from previous guidance of $6.20 billion to $6.30 billion [3]. International Sales and Brand Performance - International sales grew by 22% year-over-year, highlighting the strength of global partnerships and brand relevance [3]. - The launch of the Body by Victoria Collection resulted in double-digit new customer growth and increased engagement [3]. Analyst Ratings and Price Targets - UBS raised the price target on Victoria's Secret from $21 to $25 while maintaining a Neutral rating [1][3]. - Barclays also increased its price target from $23 to $27, keeping a Buy rating due to strong growth in Q2 [3]. - The average price target among analysts is $23, indicating a potential downside of approximately 12.38% from current levels [4].

Part I [Item 1. Financial Statements](index=3&type=section&id=Item%201%2E%20Financial%20Statements) Presents unaudited consolidated financial statements for Q2 and YTD 2025/2024, covering income, balance sheets, cash flows, and related notes [Consolidated Statements of Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income) Details the company's net sales, gross profit, operating income, and net income for Q2 and YTD 2025/2024 Consolidated Statements of Income (in millions) | Metric (in millions) | Second Quarter 2025 | Second Quarter 2024 | Year-to-Date 2025 | Year-to-Date 2024 | | :--------------------------------- | :------------------ | :------------------ | :---------------- | :---------------- | | Net Sales | $1,459 | $1,417 | $2,812 | $2,777 | | Gross Profit | $519 | $501 | $993 | $1,003 | | Operating Income | $41 | $62 | $61 | $89 | | Net Income Attributable to VSCO | $16 | $32 | $14 | $28 | | Net Income Per Diluted Share | $0.20 | $0.40 | $0.18 | $0.35 | - Net Sales increased by **3%** in Q2 2025 YoY and **1%** YTD 2025 YoY. Operating Income decreased by **$21 million** (**33.9%**) in Q2 2025 YoY and **$28 million** (**31.5%**) YTD 2025 YoY. Net Income Attributable to Victoria's Secret & Co. decreased by **50%** in Q2 2025 YoY and **50%** YTD 2025 YoY[13](index=13&type=chunk) [Consolidated Statements of Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Presents the company's net income, foreign currency translation, and total comprehensive income for Q2 and YTD 2025/2024 Consolidated Statements of Comprehensive Income (in millions) | Metric (in millions) | Second Quarter 2025 | Second Quarter 2024 | Year-to-Date 2025 | Year-to-Date 2024 | | :--------------------------------- | :------------------ | :------------------ | :---------------- | :---------------- | | Net Income | $18 | $32 | $21 | $30 | | Foreign Currency Translation | $1 | — | $2 | ($1) | | Total Comprehensive Income | $19 | $32 | $23 | $29 | | Comprehensive Income Attributable to VSCO | $17 | $32 | $17 | $28 | - Comprehensive Income Attributable to Victoria's Secret & Co. decreased by **$15 million** (**46.9%**) in Q2 2025 YoY and **$11 million** (**39.3%**) YTD 2025 YoY[15](index=15&type=chunk) [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Outlines the company's assets, liabilities, and equity as of August 2, 2025, February 1, 2025, and August 3, 2024 Consolidated Balance Sheets (in millions) | Metric (in millions) | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :--------------------------------- | :------------- | :--------------- | :------------- | | Total Current Assets | $1,539 | $1,441 | $1,488 | | Total Assets | $4,755 | $4,532 | $4,635 | | Total Current Liabilities | $1,345 | $1,375 | $1,494 | | Total Liabilities | $4,045 | $3,868 | $4,141 | | Total Equity | $710 | $664 | $494 | - Total Assets increased by **$120 million** (**2.6%**) from August 3, 2024, to August 2, 2025. Total Equity increased by **$216 million** (**43.7%**) over the same period[17](index=17&type=chunk) [Consolidated Statements of Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Equity) Shows changes in total equity, Victoria's Secret & Co. equity, and noncontrolling interest over specified periods Consolidated Statements of Equity (in millions) | Metric (in millions) | Balance, May 3, 2025 | Balance, August 2, 2025 | Balance, May 4, 2024 | Balance, August 3, 2024 | | :--------------------------------- | :------------------- | :---------------------- | :------------------- | :---------------------- | | Total Victoria's Secret & Co. Equity | $645 | $680 | $423 | $472 | | Noncontrolling Interest | $28 | $30 | $22 | $22 | | Total Equity | $673 | $710 | $445 | $494 | - Total Equity increased by **$37 million** (**5.5%**) from May 3, 2025, to August 2, 2025, and by **$216 million** (**43.7%**) from August 3, 2024, to August 2, 2025[19](index=19&type=chunk)[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash flows from operating, investing, and financing activities for YTD 2025 and YTD 2024 Consolidated Statements of Cash Flows (in millions) | Metric (in millions) | Year-to-Date 2025 | Year-to-Date 2024 | | :--------------------------------- | :---------------- | :---------------- | | Net Cash Provided by (Used for) Operating Activities | $6 | ($1) | | Net Cash Used for Investing Activities | ($111) | ($83) | | Net Cash Provided by (Used for) Financing Activities | $67 | ($17) | | Net Decrease in Cash and Cash Equivalents | ($39) | ($101) | | Cash and Cash Equivalents, End of Period | $188 | $169 | - Net cash provided by operating activities improved significantly, moving from a **$1 million** use in YTD 2024 to a **$6 million** provision in YTD 2025. Net cash used for investing activities increased by **$28 million** (**33.7%**) YTD 2025 YoY, primarily due to higher capital expenditures. Net cash provided by financing activities saw a substantial positive shift, from a **$17 million** use in YTD 2024 to a **$67 million** provision in YTD 2025, driven by ABL Facility borrowings[26](index=26&type=chunk) [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations of the company's accounting policies, acquisitions, revenue recognition, and financial instruments [1. Description of Business, Basis of Presentation and Summary of Significant Accounting Policies](index=8&type=section&id=1%2E%20Description%20of%20Business%2C%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Describes the company's business, basis of financial presentation, and key accounting policies - Victoria's Secret & Co. is a specialty retailer of women's intimate and other apparel and beauty products under the Victoria's Secret, PINK, and Adore Me brands. It operates approximately **860** stores in the U.S., Canada, and China, along with digital channels, and has about **520** stores in nearly **70** countries through franchise, license, and wholesale arrangements. The company operates as a single segment[29](index=29&type=chunk) - The company made executive leadership changes in Q1 and Q2 2025 and Q3 2024 as part of restructuring activities[30](index=30&type=chunk) - The company consolidates a **51%** owned joint venture in China and uses the equity method for other unconsolidated entities where it has significant influence[31](index=31&type=chunk)[37](index=37&type=chunk) Equity Method Investments Carrying Values (in millions) | Date | Carrying Value (in millions) | | :--------------- | :--------------------------- | | August 2, 2025 | $46 | | February 1, 2025 | $47 | | August 3, 2024 | $62 | Supplier Finance Program Obligations (in millions) | Date | Accounts Payable (in millions) | | :--------------- | :----------------------------- | | August 2, 2025 | $204 | | February 1, 2025 | $181 | | August 3, 2024 | $213 | [2. Acquisition](index=10&type=section&id=2%2E%20Acquisition) Details the acquisition of AdoreMe, Inc., including purchase price, contingent consideration, and financial impact - The company acquired **100%** of AdoreMe, Inc. on December 30, 2022, for an upfront cash payment of **$391 million**, with potential additional cash consideration of **$80 million** to **$300 million** based on strategic objectives and financial goals over two years[45](index=45&type=chunk) - During fiscal year 2024, the company made **$200 million** in payments, including a **$100 million** fixed payment and **$100 million** for strategic objectives. **$16 million** was classified as financing cash outflow and **$4 million** as operating cash outflow (Contingent Compensation Payments) in Q1 2024[46](index=46&type=chunk) - As of August 2, 2025, management believes no further contingent payment is required, though former Adore Me shareholders submitted a claim for **$11 million**, which will be presented to a neutral accountant[47](index=47&type=chunk) Financial Impact of Purchase Accounting Items (in millions) | Income Statement Line Item | Second Quarter 2025 | Second Quarter 2024 | Year-to-Date 2025 | Year-to-Date 2024 | | :------------------------------------- | :------------------ | :------------------ | :---------------- | :---------------- | | General, Administrative and Store Operating Expenses | $6 | — | $13 | $14 | | Interest Expense | — | $1 | — | $2 | [3. Revenue Recognition](index=10&type=section&id=3%2E%20Revenue%20Recognition) Explains the company's revenue recognition policies and disaggregates net sales by channel Accounts Receivable, Net from Revenue-Generating Activities (in millions) | Date | Amount | | :--------------- | :----- | | August 2, 2025 | $134 | | February 1, 2025 | $112 | | August 3, 2024 | $122 | Deferred Revenue (in millions) | Date | Amount | | :--------------- | :----- | | August 2, 2025 | $240 | | February 1, 2025 | $269 | | August 3, 2024 | $284 | - The company recognized **$91 million** as revenue year-to-date 2025 from amounts recorded as deferred revenue at the beginning of the year[51](index=51&type=chunk) Disaggregation of Net Sales (in millions) | Channel | Second Quarter 2025 | Second Quarter 2024 | Year-to-Date 2025 | Year-to-Date 2024 | | :------------------------- | :------------------ | :------------------ | :---------------- | :---------------- | | Stores – North America | $825 | $800 | $1,546 | $1,529 | | Direct | $406 | $430 | $840 | $879 | | International | $228 | $187 | $426 | $369 | | **Total Net Sales** | **$1,459** | **$1,417** | **$2,812** | **$2,777** | - Net Sales from credit card arrangements were **$18 million** in Q2 2025 (up from **$17 million** in Q2 2024) and **$34 million** in YTD 2025 (flat compared to YTD 2024)[54](index=54&type=chunk) [4. Restructuring Activities](index=11&type=section&id=4%2E%20Restructuring%20Activities) Outlines strategic leadership appointments and restructuring actions, including related expenses - In Q1 and Q2 2025, the company implemented strategic leadership appointments and restructuring actions, incurring severance, relocation, and other expenses[55](index=55&type=chunk) - In Q3 2024, the company made executive leadership changes, including appointing a new CEO and eliminating two executive officer roles, incurring related expenses[56](index=56&type=chunk) [5. Net Income Per Share and Shareholders' Equity](index=11&type=section&id=5%2E%20Net%20Income%20Per%20Share%20and%20Shareholders%27%20Equity) Presents net income per share calculations and details changes in shareholders' equity Weighted-Average Shares for EPS Calculation (in millions) | Metric | Second Quarter 2025 | Second Quarter 2024 | Year-to-Date 2025 | Year-to-Date 2024 | | :----------------- | :------------------ | :------------------ | :---------------- | :---------------- | | Basic Shares | 80 | 78 | 80 | 78 | | Effect of Dilutive Awards | 2 | 2 | 2 | 1 | | Diluted Shares | 82 | 80 | 82 | 79 | - In May 2025, the Board approved a limited-duration shareholder rights plan (Rights Plan) to protect shareholder interests, expiring May 18, 2026[60](index=60&type=chunk) - In March 2024, the Board authorized a share repurchase program of up to **$250 million**, which remains open-ended. No shares have been repurchased under this program as of August 2, 2025[61](index=61&type=chunk)[62](index=62&type=chunk) [6. Inventories](index=12&type=section&id=6%2E%20Inventories) Provides a breakdown of inventory categories and their values over different periods Inventories (in millions) | Category | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :----------------------------- | :------------- | :--------------- | :------------- | | Finished Goods Merchandise | $981 | $901 | $954 | | Raw Materials and Merchandise Components | $77 | $54 | $65 | | **Total Inventories** | **$1,058** | **$955** | **$1,019** | - Total Inventories increased by **$39 million** (**3.8%**) from August 3, 2024, to August 2, 2025[63](index=63&type=chunk) [7. Long-Lived Assets](index=12&type=section&id=7%2E%20Long-Lived%20Assets) Details property and equipment, net, including depreciation and amortization expenses Property and Equipment, Net (in millions) | Category | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :----------------------------- | :------------- | :--------------- | :------------- | | Property and Equipment, at Cost | $3,482 | $3,503 | $3,576 | | Accumulated Depreciation and Amortization | ($2,705) | ($2,729) | ($2,766) | | **Property and Equipment, Net** | **$777** | **$774** | **$810** | - Depreciation expense was **$55 million** in Q2 2025 (up from **$53 million** in Q2 2024) and **$110 million** YTD 2025 (down from **$112 million** YTD 2024). Amortization expense for intangible assets was **$6 million** in Q2 2025 and Q2 2024, and **$13 million** YTD 2025 and YTD 2024[64](index=64&type=chunk) - In Q2 2024, the company sold non-store corporate assets for **$16 million**, resulting in a **$6 million** gain[65](index=65&type=chunk) [8. Accrued Expenses and Other](index=13&type=section&id=8%2E%20Accrued%20Expenses%20and%20Other) Lists the composition of accrued expenses and other liabilities over different periods Composition of Accrued Expenses and Other (in millions) | Category | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :--------------------------------------- | :------------- | :--------------- | :------------- | | Deferred Revenue on Gift Cards and Merchandise Credits | $185 | $209 | $218 | | Compensation, Payroll Taxes and Benefits | $106 | $150 | $117 | | Accrued Freight and Other Logistics | $35 | $36 | $24 | | Accrued Duty | $35 | $14 | $19 | | Taxes, Other than Income | $31 | $30 | $35 | | Deferred Revenue on Loyalty and Credit Card Programs | $28 | $33 | $38 | | Accrued Marketing | $25 | $25 | $23 | | Returns Reserve | $16 | $17 | $13 | | Deferred Revenue on Direct Shipments not yet Delivered | $16 | $14 | $15 | | Accrued Claims on Self-insured Activities | $15 | $14 | $14 | | Accrued Interest | $7 | $7 | $9 | | Rent | $2 | $4 | $3 | | Fixed Payment Related to Adore Me Acquisition | — | — | $78 | | Contingent Consideration Related to Adore Me Acquisition | — | — | $68 | | Other | $99 | $80 | $78 | | **Total Accrued Expenses and Other** | **$600** | **$633** | **$752** | - Total Accrued Expenses and Other decreased by **$152 million** (**20.2%**) from August 3, 2024, to August 2, 2025, primarily due to the absence of fixed and contingent payments related to the Adore Me acquisition[66](index=66&type=chunk) [9. Income Taxes](index=13&type=section&id=9%2E%20Income%20Taxes) Presents effective tax rates and income taxes paid, along with impacts of new tax legislation Effective Tax Rates | Period | Effective Tax Rate | | :----------------- | :----------------- | | Second Quarter 2025 | 25.7% | | Second Quarter 2024 | 22.4% | | Year-to-Date 2025 | 30.5% | | Year-to-Date 2024 | 35.9% | - The Q2 2025 effective tax rate was consistent with the combined estimated federal and state statutory rate, while the Q2 2024 rate was lower due to foreign earnings. The YTD 2025 rate decreased from YTD 2024 primarily due to additional tax expense from share-based compensation awards[68](index=68&type=chunk)[69](index=69&type=chunk) Income Taxes Paid (in millions) | Period | Amount | | :----------------- | :----- | | Second Quarter 2025 | $42 | | Second Quarter 2024 | $31 | | Year-to-Date 2025 | $46 | | Year-to-Date 2024 | $37 | - The company does not expect the One Big Beautiful Bill Act (OBBBA) enacted in July 2025 to have a material impact on its fiscal year 2025 income tax provision[70](index=70&type=chunk) [10. Long-term Debt and Borrowing Facilities](index=14&type=section&id=10%2E%20Long-term%20Debt%20and%20Borrowing%20Facilities) Details outstanding long-term debt, borrowing facilities, and compliance with covenants Outstanding Long-term Debt (in millions) | Debt Type | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :--------------------------------------- | :------------- | :--------------- | :------------- | | Term Loan Facility ($385M due Aug 2028) | $381 | $382 | $383 | | ABL Facility (due May 2030) | $75 | — | $145 | | 2029 Notes ($600M, 4.625% due Jul 2029) | $596 | $595 | $595 | | **Total Long-term Debt, Net of Current Portion** | **$1,048** | **$973** | **$1,119** | - Cash paid for interest was **$31 million** YTD 2025, down from **$38 million** YTD 2024[71](index=71&type=chunk) - The ABL Facility was amended in May 2025, extending its maturity to May 2030, increasing the seasonal advance rate for eligible inventory, reducing availability thresholds, and lowering applicable interest rates[76](index=76&type=chunk) - As of August 2, 2025, there were **$75 million** outstanding borrowings under the ABL Facility with an interest rate of **5.81%**, and **$524 million** remaining availability[79](index=79&type=chunk) - The company was in compliance with all covenants under its long-term debt and borrowing facilities as of August 2, 2025[80](index=80&type=chunk) [11. Fair Value of Financial Instruments](index=15&type=section&id=11%2E%20Fair%20Value%20of%20Financial%20Instruments) Discusses the fair value measurements of financial instruments, including debt and contingent consideration - Cash and Cash Equivalents are considered Level 1 fair value measurements[81](index=81&type=chunk) Principal and Estimated Fair Value of Outstanding Debt (in millions) | Metric | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :----------------------- | :------------- | :--------------- | :------------- | | Principal Value | $985 | $987 | $989 | | Fair Value, Estimated (a) | $942 | $940 | $877 | - The estimated fair value of publicly traded debt uses Level 2 inputs. Carrying values of accounts receivable, accounts payable, and accrued expenses approximate fair value due to short maturity. The principal value of outstanding ABL Facility debt approximates its fair value[82](index=82&type=chunk)[83](index=83&type=chunk)[192](index=192&type=chunk) Contingent Consideration Related to Adore Me Acquisition (in millions) | Balance Sheet Location | August 2, 2025 | February 1, 2025 | August 3, 2024 | February 3, 2024 | | :--------------------- | :------------- | :--------------- | :------------- | :--------------- | | Accrued Expenses and Other | $— | $— | $68 | $74 | | Other Long-term Liabilities | $— | $— | $— | $18 | - Contingent consideration for the Adore Me acquisition is valued using Level 3 inputs (Scenario-Based method and Monte Carlo simulation). Changes in fair value are recorded in General, Administrative and Store Operating Expenses[85](index=85&type=chunk) [12. Comprehensive Income (Loss)](index=16&type=section&id=12%2E%20Comprehensive%20Income%20%28Loss%29) Explains the rollforward of accumulated other comprehensive income attributable to Victoria's Secret & Co Rollforward of Accumulated Other Comprehensive Income (Loss) Attributable to VSCO (in millions) | Metric | Year-to-Date 2025 | Year-to-Date 2024 | | :-------------------------------------- | :---------------- | :---------------- | | Balance as of February 1/3 | ($1) | $— | | Other Comprehensive Income Before Reclassifications | $3 | $— | | Current-period Other Comprehensive Income | $3 | $— | | Balance as of August 2/3 | $2 | $— | - Accumulated other comprehensive income attributable to Victoria's Secret & Co. increased from (**$1**) million at February 1, 2025, to **$2 million** at August 2, 2025, primarily due to foreign currency translation[86](index=86&type=chunk) [13. Commitments and Contingencies](index=16&type=section&id=13%2E%20Commitments%20and%20Contingencies) Outlines the company's legal claims, contingencies, and settlement accruals - The company is subject to various claims and contingencies, including lawsuits, taxes, and insurance matters, but management believes the ultimate liability will not materially adversely affect financial results[87](index=87&type=chunk) - A putative class action lawsuit filed in April 2023 regarding wage payment practices for manual workers in New York has been settled, subject to final court approval, and the company has accrued for the settlement[88](index=88&type=chunk) [14. Segment Information](index=17&type=section&id=14%2E%20Segment%20Information) Provides financial data by segment and geographic location, confirming single reportable segment operation - The company operates as a single reportable segment, with the CEO as the Chief Operating Decision Maker, assessing performance and allocating resources based on Net Income Attributable to Victoria's Secret & Co[89](index=89&type=chunk) Segment Information (in millions) | Metric | Second Quarter 2025 | Second Quarter 2024 | Year-to-Date 2025 | Year-to-Date 2024 | | :------------------------------------- | :------------------ | :------------------ | :---------------- | :---------------- | | Net Sales | $1,459 | $1,417 | $2,812 | $2,777 | | Costs of Goods Sold | ($610) | ($588) | ($1,168) | ($1,123) | | Buying and Occupancy Expenses | ($330) | ($328) | ($651) | ($651) | | General, Administrative and Store Operating Expenses (a) | ($394) | ($364) | ($751) | ($726) | | Advertising and Marketing Expenses | ($84) | ($75) | ($181) | ($188) | | Operating Income | $41 | $62 | $61 | $89 | | Net Income Attributable to Victoria's Secret & Co. | $16 | $32 | $14 | $28 | Net Sales by Geographic Location (in millions) | Geographic Location | Second Quarter 2025 | Second Quarter 2024 | Year-to-Date 2025 | Year-to-Date 2024 | | :------------------ | :------------------ | :------------------ | :---------------- | :---------------- | | U.S. | $1,179 | $1,182 | $2,292 | $2,322 | | Outside of the U.S. | $280 | $235 | $520 | $455 | | **Total Net Sales** | **$1,459** | **$1,417** | **$2,812** | **$2,777** | Long-Lived Assets by Geographic Location (in millions) | Geographic Location | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :------------------ | :------------- | :--------------- | :------------- | | U.S. | $2,258 | $2,136 | $2,159 | | Outside of the U.S. | $160 | $143 | $152 | | **Total Long-lived Assets** | **$2,418** | **$2,279** | **$2,311** | [Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995](index=18&type=section&id=Safe%20Harbor%20Statement%20Under%20the%20Private%20Securities%20Litigation%20Reform%20Act%20of%201995) Provides a cautionary statement regarding forward-looking statements, highlighting that future performance and financial results may differ materially from expectations due to various risks and uncertainties - Forward-looking statements involve risks and uncertainties, and actual results may differ materially from those expressed or implied[96](index=96&type=chunk) - Key risks include general economic conditions, inflation, and consumer spending patterns - Market disruptions such as pandemics, severe weather, natural disasters, and financial/political crises - Uncertainty in the global trade environment, including tariffs and retaliatory measures - Ability to successfully implement strategic plans, manage leadership changes, and attract/retain qualified associates - Dependence on store traffic, ability to operate and expand internationally, and performance of partners (franchisees, licensees, wholesalers, joint ventures) - Ability to grow direct channel business, protect brand reputation, and attract customers with marketing - Highly competitive retail industry, consumer acceptance of products, and ability to manage brand lifecycle and launch new merchandise - Ability to integrate acquired businesses and realize synergies, and incorporate AI successfully and ethically - Risks related to global sourcing, production, and distribution, including political instability, environmental hazards, shipping disruptions, foreign currency fluctuations, and labor disputes - Geographic concentration of facilities in central Ohio and Southeast Asia - Vendor ability to manufacture and deliver products, meet quality standards, and comply with regulations - Fluctuations in freight, product input, and energy costs - Ability to maintain IT systems and protect data against cybersecurity incidents - Stock price volatility and shareholder activism matters[96](index=96&type=chunk)[103](index=103&type=chunk) - The company assumes no obligation to publicly update or revise any forward-looking statements[97](index=97&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on the company's financial condition and results of operations, analyzing performance indicators, strategic priorities, and the impact of macro-environmental factors and a recent security incident [Executive Overview](index=19&type=section&id=Executive%20Overview) Summarizes Victoria's Secret & Co.'s Q2 2025 performance, strategic priorities, and security incident impact - Victoria's Secret & Co. operates globally recognized brands (Victoria's Secret, PINK, Adore Me) specializing in women's intimate, apparel, personal care, and beauty products, united by a commitment to supporting women[100](index=100&type=chunk) - Net sales in Q2 2025 increased **3%** to **$1.459 billion**, despite a **$20 million** negative impact from a four-day U.S. e-commerce website closure due to a security incident[102](index=102&type=chunk)[109](index=109&type=chunk) - North America store net sales increased **3%**, driven by higher average transaction value and conversion, with flat traffic (comparable traffic increased) - North America direct channel net sales decreased **5%**, with an estimated **$20 million** negative impact from the security incident. Excluding this, direct channel sales were approximately flat - International net sales increased **22%**[102](index=102&type=chunk) - Operating income in Q2 2025 decreased **$21 million** to **$41 million** (**2.8%** operating income rate), down from **$62 million** (**4.4%**) in Q2 2024. This was primarily due to increased tariff and transportation costs, higher incentive compensation, increased store selling expenses, and a strategic shift in marketing spend, partially offset by increased merchandise margin dollars[105](index=105&type=chunk) - Strategic priorities include Supercharge Bras, Recommit to PINK, Fuel Growth in Lifestyle Categories, and Evolve Brand Projection & Go-To-Market Strategy[106](index=106&type=chunk) - The security incident in May 2025 did not cause a material disruption or adverse financial impact, with all systems restored. The estimated negative impact on net sales was **$20 million** and operating income was **$14 million**, excluding potential insurance recoveries[108](index=108&type=chunk)[109](index=109&type=chunk) [Non-GAAP Financial Information](index=21&type=section&id=Non-GAAP%20Financial%20Information) Reconciles GAAP to non-GAAP financial measures for adjusted operating income, net income, and diluted EPS - The company provides non-GAAP financial measures (adjusted operating income, net income, and diluted EPS) to exclude certain non-recurring, infrequent, or unusual items, such as intangible asset amortization, restructuring charges, and Adore Me acquisition-related items, to facilitate comparison of ongoing operations[111](index=111&type=chunk) Reconciliation of Reported to Adjusted Operating Income (in millions) | Metric | Second Quarter 2025 | Second Quarter 2024 | Year-to-Date 2025 | Year-to-Date 2024 | | :------------------------------------- | :------------------ | :------------------ | :---------------- | :---------------- | | Reported Operating Income - GAAP | $41 | $62 | $61 | $89 | | Amortization of Intangible Assets | $6 | $6 | $13 | $13 | | Restructuring and Other One-time Charges | $8 | — | $13 | — | | Adore Me Acquisition-related Items | — | ($6) | — | $1 | | **Adjusted Operating Income** | **$55** | **$62** | **$87** | **$102** | Reconciliation of Reported to Adjusted Net Income Attributable to Victoria's Secret & Co. (in millions) | Metric | Second Quarter 2025 | Second Quarter 2024 | Year-to-Date 2025 | Year-to-Date 2024 | | :------------------------------------- | :------------------ | :------------------ | :---------------- | :---------------- | | Reported Net Income Attributable to VSCO - GAAP | $16 | $32 | $14 | $28 | | Amortization of Intangible Assets | $6 | $6 | $13 | $13 | | Restructuring and Other One-time Charges | $8 | — | $13 | — | | Adore Me Acquisition-related Items | — | ($5) | — | $3 | | Tax Effect of Adjusted Items | ($3) | ($1) | ($7) | ($3) | | **Adjusted Net Income Attributable to VSCO** | **$27** | **$31** | **$34** | **$41** | Reconciliation of Reported to Adjusted Net Income Per Diluted Share Attributable to Victoria's Secret & Co. | Metric | Second Quarter 2025 | Second Quarter 2024 | Year-to-Date 2025 | Year-to-Date 2024 | | :------------------------------------- | :------------------ | :------------------ | :---------------- | :---------------- | | Reported Net Income Per Diluted Share - GAAP | $0.20 | $0.40 | $0.18 | $0.35 | | Amortization of Intangible Assets | $0.06 | $0.06 | $0.11 | $0.12 | | Restructuring and Other One-time Charges | $0.07 | — | $0.12 | — | | Adore Me Acquisition-related Items | — | ($0.06) | — | $0.04 | | **Adjusted Net Income Per Diluted Share** | **$0.33** | **$0.40** | **$0.42** | **$0.51** | [Store Data](index=22&type=section&id=Store%20Data) Presents U.S. company-operated store data and changes in total store count year-to-date 2025 U.S. Company-Operated Store Data | Metric | Second Quarter 2025 | Second Quarter 2024 | % Change | Year-to-Date 2025 | Year-to-Date 2024 | % Change | | :----------------------------------- | :------------------ | :------------------ | :------- | :---------------- | :---------------- | :------- | | Sales per Average Selling Square Foot | $145 | $137 | 6% | $273 | $263 | 4% | | Sales per Average Store (in thousands) | $1,004 | $944 | 6% | $1,883 | $1,804 | 4% | | Average Store Size (selling square feet) | 6,907 | 6,892 | —% | | | | | Total Selling Square Feet (in thousands) | 5,305 | 5,507 | (4%) | | | | Store Count Changes Year-to-Date 2025 | Category | Stores at Feb 1, 2025 | Opened | Closed | Stores at Aug 2, 2025 | | :------------------- | :-------------------- | :----- | :----- | :-------------------- | | Company-Operated U.S. | 782 | 5 | (24) | 763 | | Company-Operated Canada | 24 | 1 | (1) | 24 | | China Joint Venture | 70 | — | (7) | 63 | | Partner-Operated | 505 | 35 | (19) | 521 | | Adore Me | 6 | — | (1) | 5 | | **Total** | **1,387** | **41** | **(52)** | **1,376** | - Overall, the total number of stores decreased from **1,387** at February 1, 2025, to **1,376** at August 2, 2025, with **41** new openings and **52** closures[117](index=117&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, including net sales, gross profit, and operating expenses [Second Quarter of 2025 Compared to Second Quarter of 2024](index=23&type=section&id=Second%20Quarter%20of%202025%20Compared%20to%20Second%20Quarter%20of%202024) Compares the company's financial results for the second quarter of 2025 against the same period in 2024 - Operating income decreased by **$21 million** to **$41 million** in Q2 2025, with the operating income rate falling to **2.8%** from **4.4%** in Q2 2024[120](index=120&type=chunk) Net Sales by Channel (Q2 2025 vs Q2 2024) | Channel | 2025 (in millions) | 2024 (in millions) | % Change | | :------------------ | :----------------- | :----------------- | :------- | | Stores – North America | $825 | $800 | 3% | | Direct | $406 | $430 | (5%) | | International | $228 | $187 | 22% | | **Total Net Sales** | **$1,459** | **$1,417** | **3%** | Comparable Sales (Q2 2025 vs Q2 2024) | Metric | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Comparable Sales (Stores and Direct) | 4% | (3%) | | Comparable Store Sales | 4% | (5%) | - Gross profit increased by **$18 million** to **$519 million**, with the gross profit rate increasing to **35.6%** from **35.4%**. This was driven by increased merchandise margin dollars due to higher net sales and decreased promotional activity, partially offset by increased tariff and transportation costs[128](index=128&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - General, administrative, and store operating expenses increased by **$39 million** (**9%**) to **$478 million**, primarily due to higher store selling expenses, a strategic shift in marketing spend, increased incentive compensation, and charges related to Adore Me acquisition accounting items and executive leadership restructuring[132](index=132&type=chunk) - Interest expense decreased **$3 million** to **$18 million**, mainly due to lower average outstanding debt and lower average borrowing rates[134](index=134&type=chunk) - The effective tax rate was **25.7%** in Q2 2025, up from **22.4%** in Q2 2024, consistent with the combined estimated federal and state statutory rate[135](index=135&type=chunk) [Year-to-Date 2025 Compared to Year-to-Date 2024](index=25&type=section&id=Year-to-Date%202025%20Compared%20to%20Year-to-Date%202024) Compares the company's financial results for the year-to-date period of 2025 against the same period in 2024 - Operating income decreased **$28 million** to **$61 million** YTD 2025, with the operating income rate falling to **2.2%** from **3.2%** YTD 2024[136](index=136&type=chunk) Net Sales by Channel (YTD 2025 vs YTD 2024) | Channel | 2025 (in millions) | 2024 (in millions) | % Change | | :------------------ | :----------------- | :----------------- | :------- | | Stores – North America | $1,546 | $1,529 | 1% | | Direct | $840 | $879 | (4%) | | International | $426 | $369 | 16% | | **Total Net Sales** | **$2,812** | **$2,777** | **1%** | Comparable Sales (YTD 2025 vs YTD 2024) | Metric | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Comparable Sales (Stores and Direct) | 1% | (4%) | | Comparable Store Sales | 2% | (6%) | - Gross profit decreased **$10 million** to **$993 million**, with the gross profit rate decreasing to **35.3%** from **36.1%**. This was primarily due to decreased merchandise margin dollars driven by increased transportation and tariff costs, partially offset by increased net sales and decreased promotional activity[144](index=144&type=chunk)[145](index=145&type=chunk)[147](index=147&type=chunk) - General, administrative, and store operating expenses increased **$18 million** (**2%**) to **$932 million**, mainly due to higher store selling expenses, executive leadership restructuring expenses, and incentive compensation, partially offset by lower marketing expenses[148](index=148&type=chunk) - Interest expense decreased **$8 million** to **$35 million**, primarily due to lower average outstanding debt and lower average borrowing rates[150](index=150&type=chunk) - The effective tax rate was **30.5%** YTD 2025, down from **35.9%** YTD 2024, primarily due to additional tax expense from share-based compensation awards[151](index=151&type=chunk) [FINANCIAL CONDITION](index=27&type=section&id=FINANCIAL%20CONDITION) Assesses the company's liquidity, capital resources, working capital, and debt structure [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's sources of liquidity, capital needs, and ability to meet financial obligations - The company relies on cash generated from operating activities and borrowing capacity under its ABL Facility to support operations, growth, seasonal funding, and capital expenditures[152](index=152&type=chunk)[153](index=153&type=chunk) - Management believes current cash balances, operating cash flows, and ABL Facility capacity provide adequate liquidity for current and long-term obligations, capital expenditures, and potential investment opportunities[153](index=153&type=chunk) - The company expects to use cash flows to invest in brands, talent, capabilities, strategic initiatives, and debt repayment[154](index=154&type=chunk) [Working Capital and Capitalization](index=27&type=section&id=Working%20Capital%20and%20Capitalization) Presents key metrics related to working capital, long-term debt, and total capitalization Working Capital and Capitalization (in millions) | Metric | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :------------------------------------- | :------------- | :--------------- | :------------- | | Net Cash Provided by (Used for) Operating Activities (a) | $6 | $425 | ($1) | | Capital Expenditures (a) | $111 | $178 | $99 | | Working Capital | $194 | $66 | ($6) | | Long-term Debt | $1,048 | $973 | $1,119 | | Victoria's Secret & Co. Shareholders' Equity | $680 | $640 | $472 | | **Total Capitalization** | **$1,728** | **$1,613** | **$1,591** | | Amounts Available Under the ABL Facility | $524 | $533 | $483 | - Working Capital significantly improved from (**$6**) million at August 3, 2024, to **$194 million** at August 2, 2025[156](index=156&type=chunk) [Cash Flow](index=28&type=section&id=Cash%20Flow) Analyzes cash flows from operating, investing, and financing activities for year-to-date periods Cash Flow Activity (Year-to-Date) | Metric | 2025 (in millions) | 2024 (in millions) | | :------------------------------------- | :----------------- | :----------------- | | Cash and Cash Equivalents, Beginning of Period | $227 | $270 | | Net Cash Provided by (Used for) Operating Activities | $6 | ($1) | | Net Cash Used for Investing Activities | ($111) | ($83) | | Net Cash Provided by (Used for) Financing Activities | $67 | ($17) | | Effects of Exchange Rate Changes on Cash and Cash Equivalents | ($1) | — | | Net Decrease in Cash and Cash Equivalents | ($39) | ($101) | | Cash and Cash Equivalents, End of Period | $188 | $169 | - Net cash provided by operating activities increased by **$7 million** YTD 2025 compared to YTD 2024, driven by lower net operating cash outflows from working capital changes, partially offset by a decrease in net income. The increase in inventory levels, related to international growth, European distribution center, and increased average unit costs, was a significant working capital driver[159](index=159&type=chunk) - Net cash used for investing activities was **$111 million** YTD 2025, consisting solely of capital expenditures, primarily for store capital programs and technology/logistics investments. This is an increase from **$83 million** used YTD 2024[160](index=160&type=chunk)[161](index=161&type=chunk) - Capital expenditures are estimated to be approximately **$200 million** for fiscal year 2025[163](index=163&type=chunk) - Net cash provided by financing activities was **$67 million** YTD 2025, primarily from **$245 million** in ABL Facility borrowings, partially offset by **$170 million** in repayments. This contrasts with a **$17 million** use in YTD 2024[164](index=164&type=chunk) [Common Stock Share Repurchases](index=29&type=section&id=Common%20Stock%20Share%20Repurchases) Details the company's share repurchase program and activity during the period - The Board approved a **$250 million** share repurchase program in March 2024, which is open-ended. As of August 2, 2025, no shares have been repurchased under this program[166](index=166&type=chunk)[167](index=167&type=chunk) [Dividend Policy and Procedures](index=29&type=section&id=Dividend%20Policy%20and%20Procedures) Outlines the company's dividend policy and factors influencing future dividend declarations - The company has not paid cash dividends since becoming an independent public company. Future dividend declarations are at the Board's discretion, considering financial condition, earnings, cash flows, capital requirements, debt covenants, and legal/regulatory factors[168](index=168&type=chunk) [Long-term Debt and Borrowing Facilities](index=29&type=section&id=Long-term%20Debt%20and%20Borrowing%20Facilities) Details outstanding long-term debt, borrowing facilities, and compliance with covenants Outstanding Long-term Debt (in millions) | Debt Type | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :--------------------------------------- | :------------- | :--------------- | :------------- | | Term Loan Facility ($385M due Aug 2028) | $381 | $382 | $383 | | ABL Facility (due May 2030) | $75 | — | $145 | | 2029 Notes ($600M, 4.625% due Jul 2029) | $596 | $595 | $595 | | **Total Long-term Debt, Net of Current Portion** | **$1,048** | **$973** | **$1,119** | - Cash paid for interest was **$31 million** YTD 2025, down from **$38 million** YTD 2024[169](index=169&type=chunk) - The ABL Facility was amended in May 2025, extending its maturity to May 2030, increasing the seasonal advance rate for eligible inventory, reducing availability thresholds, and lowering applicable interest rates[174](index=174&type=chunk) - As of August 2, 2025, there were **$75 million** outstanding borrowings under the ABL Facility with an interest rate of **5.81%**, and **$524 million** remaining availability[177](index=177&type=chunk) - The company was in compliance with all covenants under its long-term debt and borrowing facilities as of August 2, 2025[178](index=178&type=chunk) [Credit Ratings](index=31&type=section&id=Credit%20Ratings) Provides the company's credit ratings from Moody's and S&P, along with their outlooks Credit Ratings as of August 2, 2025 | Category | Moody's | S&P | | :-------------------------------- | :------ | :---- | | Corporate | Ba3 | BB | | Senior Secured Debt with Subsidiary Guarantee | Ba2 | BB+ | | Senior Unsecured Debt with Subsidiary Guarantee | B1 | BB | | Outlook | Stable | Stable | [Contingent Liabilities and Contractual Obligations](index=31&type=section&id=Contingent%20Liabilities%20and%20Contractual%20Obligations) Summarizes the company's contingent liabilities and contractual obligations - Contractual obligations primarily include long-term debt, interest payments, operating leases, and merchandise inventory purchase orders. There have been no material changes since February 1, 2025, except for an additional **$75 million** in ABL Facility borrowings[180](index=180&type=chunk) [Recently Issued Accounting Pronouncements](index=31&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) Discusses the impact of recently issued accounting standards on the company's financial statements - The company did not adopt any new accounting standards in Q2 2025 that materially impacted its financial statements[181](index=181&type=chunk) - FASB ASU 2024-03 (Expense Disaggregation Disclosures) will be effective for annual periods beginning FY2027 and interim periods beginning FY2028. The company is evaluating its impact[182](index=182&type=chunk) - FASB ASU 2023-09 (Improvements to Income Tax Disclosures) will be effective for annual periods beginning FY2025. The company does not expect a material impact[183](index=183&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Highlights key accounting policies and estimates that require significant management judgment - Management evaluates accounting policies, estimates, and judgments related to inventories, long-lived assets, claims and contingencies, income taxes, and revenue recognition. Actual results may differ from these estimates[184](index=184&type=chunk) - There have been no material changes to the critical accounting policies and estimates disclosed in the 2024 Annual Report on Form 10-K[185](index=185&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discusses the company's exposure to market risks, specifically foreign currency exchange rate risk and interest rate risk, and how these are managed [Market Risk](index=32&type=section&id=Market%20Risk) Explains the company's exposure to market risks, including foreign currency and interest rate fluctuations - The company's market risk stems from potential losses in fair value, earnings, or cash flows due to adverse changes in foreign currency exchange rates or interest rates. Derivative financial instruments may be used to manage these exposures, but not for trading[186](index=186&type=chunk) [Foreign Exchange Rate Risk](index=32&type=section&id=Foreign%20Exchange%20Rate%20Risk) Details the company's exposure to foreign currency exchange rate fluctuations from international operations - Operations and investments in foreign countries (Canada, China, Europe) expose the company to foreign currency exchange rate fluctuations, particularly as merchandise is sourced through U.S. dollar transactions[187](index=187&type=chunk) - Royalty arrangements with international partners, though denominated in U.S. dollars, are calculated based on local currency sales, exposing them to exchange rate risk[188](index=188&type=chunk) [Interest Rate Risk](index=32&type=section&id=Interest%20Rate%20Risk) Describes the company's exposure to interest rate changes on its investment portfolio and long-term debt - The investment portfolio consists primarily of short-term, high-quality interest-bearing instruments (money market funds and bank deposits), minimizing principal risk from interest rate changes[189](index=189&type=chunk) - Long-term debt includes fixed-rate 2029 Notes and variable-rate Term Loan Facility and ABL Facility (based on Term SOFR). Exposure to interest rate changes is limited to the fair value of debt and interest paid on variable-rate facilities, not expected to materially impact earnings or cash flows[190](index=190&type=chunk) [Fair Value of Financial Instruments](index=32&type=section&id=Fair%20Value%20of%20Financial%20Instruments) Presents the fair value measurements of the company's financial instruments, particularly outstanding debt Principal and Estimated Fair Value of Outstanding Debt (in millions) | Metric | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :----------------------- | :------------- | :--------------- | :------------- | | Principal Value | $985 | $987 | $989 | | Fair Value, Estimated (a) | $942 | $940 | $877 | - The estimated fair value of publicly traded debt is based on Level 2 inputs (reported transaction prices). Carrying values of accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short maturity. The principal value of outstanding ABL Facility debt also approximates its fair value[191](index=191&type=chunk)[192](index=192&type=chunk) [Concentration of Credit Risk](index=33&type=section&id=Concentration%20of%20Credit%20Risk) Discusses how the company manages credit risk related to cash, cash equivalents, and partner relationships - The company manages credit risk by monitoring financial institutions for cash and cash equivalents (primarily money market funds and bank deposits) and periodically reviewing the credit standing of franchise, license, and wholesale partners[193](index=193&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the second quarter of 2025 - As of August 2, 2025, management, including the CEO and CFO, concluded that disclosure controls and procedures were effective[194](index=194&type=chunk) - There were no material changes in internal control over financial reporting during Q2 2025[195](index=195&type=chunk) Part II [Item 1. Legal Proceedings](index=34&type=section&id=Item%201%2E%20Legal%20Proceedings) States that the company is involved in various lawsuits, not expected to materially impact financial results - The company is a defendant in various lawsuits arising in the ordinary course of business, including commercial, tort, intellectual property, customer, employment, data privacy, and securities claims[198](index=198&type=chunk) - Management believes current legal proceedings are not expected to have a material adverse effect on the company's financial position or results of operations[198](index=198&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A%2E%20Risk%20Factors) Refers to risk factors from the annual report, noting no material changes and potential impact on forward-looking statements - The risk factors affecting the business are set forth in the 2024 Annual Report on Form 10-K[199](index=199&type=chunk) - There have been no material changes to the risk factors from those described in the 2024 Annual Report on Form 10-K[199](index=199&type=chunk) - These risk factors could cause actual results to differ materially from any forward-looking statements[199](index=199&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details share repurchase activity for tax withholding and stock option exercises, not under the public program Repurchases of Common Stock During Q2 2025 | Period | Total Number of Shares Purchased (in thousands) | Average Price Paid per Share | | :---------------------- | :-------------------------------------------- | :--------------------------- | | May 4, 2025 - May 31, 2025 | 4 | $19.14 | | June 1, 2025 - July 5, 2025 | 4 | $20.81 | | July 6, 2025 - August 2, 2025 | 7 | $20.39 | | **Total** | **15** | | - The repurchased shares were primarily related to tax withholding payments upon vesting of employee restricted stock awards and paying the exercise price on employee stock options[200](index=200&type=chunk) - No shares were repurchased under the March 2024 Share Repurchase Program, which authorizes up to **$250 million** in repurchases and remains open-ended[200](index=200&type=chunk)[201](index=201&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203%2E%20Defaults%20Upon%20Senior%20Securities) Indicates that this item is not applicable, with no defaults on senior securities - Not applicable[202](index=202&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204%2E%20Mine%20Safety%20Disclosures) Indicates that this item is not applicable, with no mine safety disclosures - Not applicable[203](index=203&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205%2E%20Other%20Information) States that there is no other information to report for this section - None[204](index=204&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206%2E%20Exhibits) Lists the exhibits filed with the 10-Q report, including corporate governance documents, the shareholder rights agreement, an amendment to the revolving credit agreement, and certifications - Amended and Restated Certificate of Incorporation and Bylaws - Certificate of Designations of Series A Preferred Stock - Rights Agreement, dated May 19, 2025 - Amendment No. 2 to Revolving Credit Agreement, dated May 21, 2025 - Section 302 and 906 Certifications by CEO and CFO - XBRL Instance Document and Taxonomy Extension Documents[206](index=206&type=chunk) [Signature](index=36&type=section&id=Signature) Contains the signature of the registrant's Chief Financial and Operating Officer, confirming report authorization - The report is signed by Scott Sekella, Chief Financial and Operating Officer of Victoria's Secret & Co., on September 5, 2025[208](index=208&type=chunk)

Core Insights - The CEO expresses enthusiasm about the transformative potential of the brands and their cultural significance, indicating a strong belief in the company's market position and future growth [1]. Company Changes - The company has implemented numerous changes, although specific details were not provided in the excerpt [2].

Financial Data and Key Metrics Changes - The company has updated its guidance to account for 30% tariffs in China and 20% for the rest of the world, estimating a net impact of about $100 million for fiscal year 2025, which includes $70 million from mitigation efforts this year [35][36] - The company reported a comp sales growth of about 22% last quarter, indicating strong performance in the international market [34] Business Line Data and Key Metrics Changes - The bra business is central to the company's strategy, with a reestablished innovation pipeline and dedicated teams focusing on bra expertise, leading to a significant increase in market share [11][13] - The beauty segment is described as a "secret assassin," with less than 40% of the customer file currently shopping beauty, indicating substantial growth potential [21][22] - The PINK brand is being repositioned to regain its former size, with a focus on marketing and brand differentiation [15][16] Market Data and Key Metrics Changes - The company is acquiring a younger customer demographic, particularly through collaborations like LoveShackFancy, which is expected to enhance brand equity [19][20] - The international business has seen strong growth, particularly in China, where the company was the number one brand during a recent TikTok event [33] Company Strategy and Development Direction - The company is focused on two distinct growth brands, emphasizing creativity, customer focus, and technology [6][7] - The strategy includes evolving the brand projection and go-to-market approach, with a new Chief Marketing and Customer Officer to differentiate the Victoria's Secret and PINK brands [23][25] - The company aims to convert about 50% of its global footprint to the "store of the future" concept by the end of 2027, which has shown to increase sales significantly [27][28] Management's Comments on Operating Environment and Future Outlook - Management describes the current consumer state as strong, with a focus on creating emotional connections through product execution and modern marketing strategies [30] - The company is optimistic about returning to historical margin levels by finding efficiencies in non-customer-facing areas and optimizing the supply chain [46][47] Other Important Information - The company is implementing a new 26-week production calendar to enhance agility in product development, particularly for PINK apparel [41][43] - The company is strategically evaluating pricing and promotions to mitigate tariff impacts while maintaining customer engagement [35][37] Q&A Session Summary Question: What changes should we expect in the bra business go-to-market strategy? - The company has reestablished a deeper innovation pipeline and dedicated teams focusing on bra expertise, leading to a significant increase in market share [11][12] Question: What excites you about the PINK brand? - The PINK brand has the potential to regain its former size, with a clear path to address past dilution and a focus on lifestyle branding [15][16] Question: How is the beauty business performing? - The beauty segment is a powerful growth area, with significant opportunities to increase customer engagement and market share [21][22] Question: What is the company's strategy for the store of the future? - The company plans to convert 50% of its global footprint to the store of the future concept by 2027, which has shown to increase sales [27][28] Question: How is the company addressing tariff impacts? - The company has updated its guidance to account for tariffs and is focusing on sourcing diversification and reducing promotional activities to mitigate impacts [35][36]