Good morning. My name is Melissa, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Bath & Body Works third quarter 2025 earnings conference call. Please be advised that today's conference is being recorded. During the question-and-answer portion, you may ask a question from the phone by pressing star one. I'll now turn the call over to Luke Long, Vice President of Investor Relations. Luke, you may begin. Good morning and welcome to Bath & Body Works third quarter 2025 earnings conference call. Joining me on the call today are Daniel Heaf, Chief Executive Officer, and Eva Boratto, Chief Financial Officer. In addition to this call and this morning's press release, we have posted a slide presentation on our website that summarizes the information in these prepared remarks and provides some related facts and figures regarding our operating performance and guidance. As a reminder, some of the comments today may include forward-looking statements related to future events and expectations. For factors that could cause the actual results to differ materially from these forward-looking statements, please refer to the risk factors in Bath & Body Works 2024 Form 10-K. Today's call also contains certain non-GAAP financial measures. Please refer to this morning's press release and supplemental materials for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measure. With that, I'll turn the call over to Daniel. Thank you, Luke, and good morning. Let me begin by acknowledging that our third quarter results and our lower expectations for the fourth quarter do not live up to the expectations we all have for this brand. I joined Bath & Body Works to accelerate growth, and I remain confident in our ability to do so. Today, I will set out a clear diagnosis for what has been challenging our performance and the actions we are already taking to address it. While the consumer environment is tougher, this is no excuse as we continue to underperform the sector. We are focused on addressing the issues within our control to return to growth. Our transformation started the week I joined with our no-regret moves, and the whole company is working with the utmost urgency. This will take time. 2026 will be a year of investing behind our brand to strengthen our fundamentals and position our business for sustainable long-term growth. Before I outline what must change, let me ground you in what endures: the competitive advantages that give us the right to win. We are a market leader in attractive, growing consumer categories. We are an iconic American brand recognized worldwide. We have a vault of beloved fragrance franchises, with each of our top five franchises generating over $100 million in annual revenue and our largest fragrance generating over $250 million yearly. We operate more than 2,400 stores around the world, employ a community of exceptional associates, have 40 million active loyalty members, and benefit from a fast, largely domestic supply chain. Our business model generates strong margins and high free cash flow conversions. Despite these strengths and the revenue growth in recent quarters, I've concluded that swift and decisive action is needed to build the engine to drive sustainable long-term growth. From my first day, we have refocused on putting the consumer at the center of everything we do and listening closely to their feedback and insights. This has guided a disciplined end-to-end review of every aspect of our business: product, brand, digital, stores, operations, and talent. The plan we are announcing today, and the actions we are taking, and the strategic investments that we are making are the result of that comprehensive review, not a reaction to a single quarter. Let me first give you the diagnosis in four clear points. Firstly, we pursued adjacency to attract new consumers, but that strategy has not delivered the growth we expected, and it reduced focus in investing in our core categories. Secondly, collaborations that should have been used to drive excitement, energy, and equity into our brand have been used to carry quarters. Thirdly, as these strategies and other tactics have not delivered growth, we have relied on deeper and more frequent promotions. Great value and exciting deals have been part of our brand, and that will not change. However, over-reliance on promotion delivers diminishing returns and erodes brand equity, and that is what has happened here. While all these efforts appealed to our existing consumers, they did not grow our customer base, and we have not attracted a younger consumer. Finally, our organization has become slow and inefficient. Unnecessary complexity has reduced our speed, dampened our innovation, and we prioritized efforts that were not targeted to acquiring a new and younger consumer. Unlocking the next phase of growth requires decisive action. We are investing in new talent, focusing our teams on the highest value work and moving at the speed of the consumer, while optimizing expenses to fuel innovation and long-term performance. Our strategy is guided by what we have seen working in the marketplace. Over the years, consumers have evolved. They seek greater efficacy, ingredient-led products, modern packaging, emotive storytelling, and elevated multi-channel experiences. Our competitors have risen to meet those needs. We have not. In some cases, as with our formulations, we have invested in these attributes, but we have not communicated them consistently and effectively. Today, we are announcing a holistic growth plan to revitalize Bath & Body Works across the brand, product, and the marketplace, designed to drive value for our stakeholders. We are reclaiming our legacy as an innovative brand rooted in nature and benefits and leading the world in scent and self-care. This plan, the consumer-first formula, focuses our investment behind our four largest revenue-driving opportunities. These strategic priorities have already been communicated across the organization, and work is well underway. The first pillar of our plan is to create disruptive and innovative products that serve the needs of today's consumer. Desire will be designed. We will develop products in our core categories to deliver luxury scents with benefits created to be accessible to everybody. Thoughtfully sourced and ingredient-led, refocusing on what made Bath & Body Works distinct. In 2026, we will reinvest in our core categories. We are returning to best-in-class product leadership in body care, home fragrance, and soaps and sanitizers. Two consumer muses designed with deep consumer insights guide our every decision: Jen, who demands bold fragrance, fun, seasonality, and value; and Zoe, who craves clean products with elevated scent and design at an accessible price point. These two muses keep us true to today's consumer while providing opportunities to engage new and younger consumers. We are making changes to better serve these muses, embedding consumer insights at the start of product development, accelerating new franchise development, and leveraging rapid testing to inform our innovation. Consumers will start to see these new products in the second half of 2026. From body care to home fragrance, we are introducing new forms, vessels, and formulas in our core categories that will drive growth and elevate the overall experience. To sharpen our focus and make our in-store experience less overwhelming, we will cut our assortment and reduce complexity, concentrating on fewer, more on-trend product priorities. Starting in the first half of next year, you will see thoughtful edits to our assortment and selective category exits such as hair and men's grooming as we refocus on the core. The second pillar of our strategy is to reignite our brand and reclaim cultural relevance. In 2026, we will market fewer, bolder, more targeted product moments with stronger creator advocacy and a more aspirational positioning. You can already see early proof points of this strategy in our Touch of Gold collection. We are recruiting a network of influencers to ignite social buzz while communicating credible, science-based claims that differentiate our products from our competitors. We will make Big Bigger by elevating and amplifying two iconic Bath & Body Works scents. New consumers will discover and love these fragrances when we treat them with the reverence they deserve, elevate, and market them properly. We will deliver more impactful visual experiences in all our channels and across social platforms. The third pillar of our strategy is winning in the marketplace. Discovery should feel effortless. We will make it simpler for a new and young consumer to find us, love us, and buy us wherever they shop. We will elevate our owned retail channels and thoughtfully expand our distribution to new channels, positioning ourselves directly in the path of our consumer. As part of this, we will continue to enhance our app and website to increase engagement, to make product discovery easier, to deliver richer brand and product stories, and to reduce purchase friction. This work is already well underway. For example, our mobile homepage has undergone a refresh, and in early 2026, we will invest in a permanently lower and more competitive free shipping threshold. We will also expand thoughtfully into marketplaces and select wholesale channels, with Amazon expected to go live in the first half of 2026. In anticipation of an Amazon launch, we are curbing brand-dilutive gray market selling by restricting bulk purchases from resellers online and in-store. Amazon will enable us to reach new consumers and re-engage loved ones, and we will launch with a curated assortment of evergreen, hero products and over time introduce products designed to acquire a new consumer. Our brand-operated channels will always carry the widest assortment and offer the most immersive brand storytelling. To encourage new consumers to enter our operated stores, we will pilot updated merchandising, improved navigation, and refreshed retail marketing in 2026. Our final pillar is operating with speed and efficiency. We expect to fund investments through better execution, tightening inventory, shortening cycle times, and implementing a multi-year cost-savings program. Consistent with the focus of the consumer-first formula, this initiative prioritizes high-value, consumer-focused activities funded through value engineering and sourcing optimization. We have planned to deliver $250 million in cost savings over the next two years, with over half identified for 2026. These savings will be reinvested into revenue-generating activities in product and brand. A transformational plan requires transformational leadership, and we are putting the right leaders in the right roles with clear accountability. Earlier this month, we welcomed Maly Bernstein as our Chief Commercial Officer, overseeing the full marketplace across stores, digital, and wholesale channels. She brings extensive multi-channel retail experience within our sector, backed by a proven track record of impressive results. We're equally thrilled to welcome Véronique Gabai as our product and merchandising advisor. Her creative vision, strategic insight, and global experience in beauty will add invaluable perspective to our transformation. In addition, we also now have in place new leaders across digital, wholesale, and human resources, and we will continue to invest in talent to support the execution of our plan. As a result of our no-regret moves that I outlined six months ago, some of our strategic actions are already visible to the consumer, but it will take time before we see the benefits in our financial performance. I believe that we have the foundation, the plan, and the focus to deliver sustainable growth and shareholder value. We are acting with urgency and clarity, putting the consumer at the center of every decision. I am confident in Bath & Body Works' future and the immense opportunity we have in front of us. Now, I'll hand over to Eva. Thank you, and good morning, everyone. As Daniel emphasized, our path forward is anchored to the four pillars of our consumer-first formula: creating disruptive and innovative product, reigniting our brand, winning in the marketplace, and operating with speed and efficiency to attract a new and younger consumer to the brand and unlock our next era of growth. We will invest behind our strategy as we also drive diligent cost discipline to fund the actions we're taking. Our team is already hard at work unlocking the targeted $250 million of additional cost savings over the next two years. While we are moving with pace, this strategy will take time to impact our financial performance. Now, turning to the financials, I'll begin with a summary of the third quarter. I'll then provide an update on our Q4 guidance. As Daniel noted, the Q3 results didn't live up to the expectations we have for this brand. In Q3, we delivered net sales of $1.6 billion, down 1% to the prior year, and adjusted earnings per diluted share of 35 cents, both below our expectations. Relative to our expectations, the Villains collection did not generate the consumer excitement, traffic, or sales that we expected. Our start to holiday in late October has been very challenging. I'll provide more color on that shortly. Versus prior year, all of our core categories declined low single digits. This underscores the need to focus investment in our core categories. In U.S. and Canadian stores, net sales totaled $1.2 billion, flat versus the prior year. Direct net sales were $299 million, a decrease of 7% compared to last year. When adjusted for buy-online pickup in store, which is reported as store sales, digital net sales were down 1%, a sequential improvement from Q2 performance. While we continue to make progress on our app and mobile web enhancements, there is substantial work ahead to develop a best-in-class experience. International net sales were $73 million in the third quarter, an increase of 6% and in line with our expectations. International system-wide retail sales grew 16% in the quarter, a continued acceleration as the business has stabilized since the effects of the war in the Middle East. Our third quarter gross profit rate of 41.3% was below our expectations and decreased 220 basis points compared to the prior year, driven by a 260 basis point decrease in merch margin. Our merch margin was negatively impacted by approximately $35 million, or roughly 200 basis points, from tariffs. We increased our promotional activity to clear seasonal product as we ended the quarter with clean inventory. The merch margin decline was partially offset by D&O driving 40 basis points of leverage, which benefited from the exit of a third-party fulfillment center in Q1. SG&A as a percentage of net sales was 31.2%, representing 120 basis points deleveraged compared to the prior year. The deleverage was driven by soft sales performance, investments in new stores, and higher healthcare costs. In response to weaker sales, we acted quickly to flex costs down, such as store payroll and incentive compensation, which partially offset the deleverage. Bringing it all together, third quarter operating income was $161 million, down 26% to last year. Turning to real estate, our portfolio remains healthy, with 59% of our fleet in off-mall locations. In the third quarter, we opened 40 new North American stores, primarily in off-mall locations, and permanently closed 10 stores, primarily in malls. Internationally, our partners opened 10 new stores and closed three stores during the quarter, and we ended the quarter with 544 stores. Our international store expansion plans for 2025 remain on track, with at least 30 planned net new store openings. Moving to our Q4 guidance, the trends we experienced at the end of the third quarter have continued into the first few weeks of Q4, with sales to date down high single digits. Macro consumer sentiment is weighing heavily on our consumer's purchase intent. Recent data shows consumer confidence continued to decline due to a number of factors, including concerns about job loss and affordability. This dynamic negatively affected our start to the holiday season and our largest quarter. This impact is compounded by a highly competitive retail marketplace. Our research indicates that our customers are waiting for deeper discounts before making purchases. In this volatile environment, we are providing cautious guidance that assumes these early Q4 trends persist through the season, while we are taking action to strengthen our performance. With that as context, we expect Q4 sales to be down high single digits versus last year and gross profit rate to be approximately 44.5%, which includes the impacts of tariffs and higher promotional levels, which we believe are required to compete effectively. We expect our SG&A rate to be approximately 24%, reflecting top-line declines partially offset by disciplined cost management. We are aggressively managing cost while working closely with our teams to ensure that any reductions do not compromise the consumer experience. Moving down the P&L, we expect interest expense and other of approximately $60 million and a tax rate of approximately 25%, and weighted average diluted shares outstanding of approximately $204 million. Considering these inputs, we are forecasting fourth quarter earnings per diluted share of at least $1.70. At this point, we believe this guidance represents a floor for Q4 performance, and we are working with urgency to improve upon it. For the full year, we are lowering our net sales guidance from 1.5%-2.7% growth to a decline of low single digits and are lowering our adjusted earnings per diluted share guidance range from $3.35-$3.60 to at least $2.87. You can find additional details of our guidance in our slide presentation. Now, for an update on capital allocations. We are planning for capital expenditures of approximately $240 million during the year, down from previous guidance as we prioritized highest return projects. In the third quarter, capital expenditures totaled $81 million, bringing the year-to-date total to $174 million. Our full-year free cash flow expectation is now approximately $650 million, reflecting our current performance trends, partially offset by our ongoing inventory management actions and reductions to capital expenditures. In Q3, we've returned $41 million to shareholders through dividends and repurchased three million shares of common stock for $87 million at an average price of $29.25 per share. Year-to-date, we have returned $126 million to shareholders through dividends, and we have repurchased 11.5 million shares of common stock for $343 million. In closing, we are focused and moving with urgency against the actions we must take to return our brand to growth. On our Q4 earnings call, we will update you on our 2026 outlook and the strategic KPIs to measure our continued progress. I'd like to extend my gratitude to our teams across the company for their hard work. Let's now open it up for Q&A. Thank you. If you'd like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. To allow for as many questions as possible, we ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question. Hey, good morning, Daniel, Eva, Luke. I guess, Daniel, my question would be, can you help us understand bigger picture, kind of what changed between when you first joined the company? I believe you kind of talked to an expectation to accelerate growth while expanding margins. Obviously, today's expectations for fourth quarter revenue to be down, margins to compress goes against that. Can you maybe just walk us through what exactly has changed, what you've learned since you've been there, and exactly how should we be thinking about what Q4 guidance kind of means to next year would also be helpful? Thank you. Good morning, I can. Thank you for the question. Let me start by reemphasizing that the third quarter results and the lower expectations for the fourth quarter do not live up to the expectations that we all have for this brand. The brand is not fulfilling its potential. I joined to accelerate growth, and I remain confident that we will do so. Directly to your question, what's changed? If we unpack our Q3 performance, we declined in each of our core categories, and that really underscores the diagnostic I gave in our opening remarks. That focus on adjacencies has resulted in underinvestment in our core and not keeping pace with our consumer. Again, this strategic reset is the result of months of detailed analysis in every part of our business. It is not a reaction to the quarter. If we look across the last few years, and you guys all know this, while we have been able to drive some growth in some quarters, we have lagged the market. We have lagged the beauty and fragrance sector, and the growth that we have delivered was not durable. I have talked about that since I arrived, and now is the time to address that. We have laid out the diagnosis clearly. We've laid out a very clear plan how we're going to put the consumer back at the center, reignite the brand, begin creating innovative, coveted, disruptive products in our core categories again. Those four pillars of our strategy have already been communicated to the whole company. Work is well on the way. What gives me confidence, honestly, in this plan is that this is a pattern I've seen many times in my career and many other places, many other companies. This is really about going back to what made this company so great, but evolving to meet the needs of today's consumer. We will deliver coveted product. We will deliver elevated experience, but that change isn't going to happen overnight. Now, to the next, what this means for Q4, an excellent question, and the macro is a significant factor in our Q4 guide. Eva, can I hand to you for some more color on that? Sure. Sure. Good morning, Ike. I guess I said in my prepared remarks, the outlook we're providing for Q4 reflects what we believe is the floor. We saw material changes in trends affected by the macro coming into the quarter. We've seen some modest improvement since the government reopened, and we're further taking actions to improve that. That said, our underlying core performance was weak, as Daniel said. If you looked at our Q3, we were down 1%, but if you were to normalize for the expansion of the fall sale extension, we were probably down closer to 3%. If I look forward to 2026, our current view is that we do not expect to deliver growth for the full year. These initiatives that we've laid out today will become visible to consumers throughout the year, but realistically, we don't expect it to impact the business in any meaningful way until the second half of the year. Digital is the fastest growing space in beauty. We know those enhancements are underway. As Daniel said, evolving our core product, which is critical to attract that new customer, that will start to become visible in the second half of the year. We are here. We are working with urgency, driving the changes we need to drive that durable growth, and we'll have more details on our Q4 earnings call. Thanks so much. Thank you. Our next question comes from the line of Matthew Boss with JP Morgan. Please proceed with your question. Great. Thanks. Daniel, maybe to pick up on that, on the new strategy, the last two years, the company's talked positively about adjacencies and collaborations, but now that strategy is wrong, and the focus is on the core to drive durable growth. Could you provide maybe some of the key KPIs that you're watching to gain confidence in this new strategy? While you cited the change won't happen overnight, I mean, what do you see as a reasonable timeline for stabilization? Great. Thank you. Thank you, Matt, for the question. First, I'm going to say that this strategy has been communicated to the whole company. Work is, as Eva said, underway. Teams are working feverishly against those four priorities, but let me show some progress that is already evident. Firstly, let's take a look at talent. In a very short amount of time, we've added tremendous talent to our team where we saw gaps and where we saw a need to improve our executional ability. We've moved with speed. A couple of moves I would highlight. We've brought in Véronique Gabai. She obviously brings global beauty experience, creative vision, and has worked at iconic brands across Estée Lauder and L'Oréal. Craig Smith in digital, two decades of building digital transformation at Burberry, Apple, LVMH. Dan Koudreau, unrivaled wholesale experience for more than 30 years at brands like L'Oréal and BIC. As you'll have seen in the press release last week, Maly Bernstein, a transformational retail leader who has a track record in driving incredible results across beauty and omnichannel businesses. Where we saw gaps, we've already addressed that. Next, when you think about the things that we talked about on the call that we expect to be delivering in the short term, winning in the marketplace, we know we need to be more convenient to consumers. We know that we need to be in their path, and you'll see us launch on Amazon early next year. I mean, frankly, we already know that we're doing somewhere between $60-$80 million of gray market sales in that channel that is brand dilutive and product dilutive. Launching there is an incredible sales opportunity, but also an opportunity to reignite the brand, that second pillar of our strategy. From day one, we have recognized the digital opportunity, and we are moving with pace there. We relaunched our app. We relaunched the website. We have new product photography coming in on roughly about 500 of our current SKUs, elevated claims and messaging. We know we have got so much further to go. We are working with pace, but the opportunity there is enormous if we think about just the penetration of digital sales. Eva and I were talking about this just last week. In soaps and sanitizers, the percentage of e-commerce sales in that category is about 40%-45%. Our current e-commerce penetration is 20%. That just represents the incredible opportunity that we have to drive growth and acquire new customers in the digital channel. Now, when it comes to metrics, of course, there are all the normal metrics that we are going to be tracking and delivering revenue, operating income, EPS. Where I am really focused is in total active consumers and growth in our core categories. Underneath that, of course, we are measuring the retail equation. If you think about digital in the most recent quarter since we've made some of the modest changes already, we're seeing an increase in traffic. We're seeing an increase in dwell time. These are good leading indicators for the progress that we are making. Daniel, if I could just add, Matt, to your question about stabilization, I'll just say again, we don't expect growth in the full year next year, but we certainly expect business to improve as we progress throughout the year. In the second half of the year is where more of our consumer-first plan initiatives will come to fruition with new products, with further time under our belt in terms of digital. We'll continue to update you as we progress on this plan. Helpful color. Best of luck. Thank you. Our next question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question. Thank you. Good morning. Daniel, it's clear that the underlying business is worse than you thought when you first joined, and it will take time to return to growth. Does your plan require more investment than you had originally thought? How should we think about margins in 2026 as we balance these investments with cost cuts? Good morning, Lorraine. Yes. The reason we did such a comprehensive diagnostic right across the business, it was about discovering and laying out exactly what is holding this incredible brand back. It is clear to me that the core is weaker, and some of that was masked by promotions and collabs and anniversary and some of those adjacent product launches. 2026 will be absolutely about investing behind our brand and our product, investing in the things that the consumer sees to strengthen our fundamentals and position this brand for long-term sustainable growth. Now, as Eva mentioned in her opening remarks, the teams are already hard at work in unlocking $250 million of additional savings to help fund these investments. We have, and before I arrived, this team has a strong track record in looking for efficiencies to fund investments. They've done that successfully over the last few years. Of course, until we see that top-line growth, which we are pursuing with vigor, we will be pressurized by deleverage. Thank you. Our next question comes from the line of Alex Straton with Morgan Stanley. Please proceed with your question. Great. Thanks so much. Maybe just on the cost savings program, that $250 million in the next couple of years, can you just go through where exactly you're trimming and how they're different from the cost reduction that was pursued under Gina? Does all that get reinvested so we're sort of in the same margin place? Maybe just help us with how we should think about SG&A and how it should grow in relation to sales over time as we're thinking about the out-year margin trajectory. Thanks a lot. Sure. Good morning, Alex. This is Eva. We're really proud of the savings that we've delivered over the past couple of years, delivering about $300 million in savings. We're targeting our goal is another $250 million, as Daniel said. As I think about where that will come from, continued activities like value engineering, opportunities, we have further opportunities in sourcing optimization, also logistics operations. Daniel spoke about SKU simplification. That simplification will bring cost reductions over time, and we'll continue to optimize our overall operations to drive cost savings as we prioritize focusing on high-value consumer-focused areas. We're working hard to fuel and fund the investments that are required over the next couple of years. I would think about the savings that we're driving are offsetting the investments and are not flowing to the bottom line. In the shorter term, there could be some mismatches that investments outpace savings. We'll have more details there. Our focus is to make the right investments to drive the durable growth and do that in a responsible way. Thanks a lot. Good luck. Thank you. Thank you. Our next question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question. Hi, this is Kelly on for Paul. Thanks for taking our question. I just first, I got a two-parter here, one on the Amazon partnership. If you could just elaborate on sort of the product that's going to be in that channel versus the store, and if that makes you the expanded distribution, whether that makes you rethink your store growth and your store base. Secondly, on free cash flows, still very strong free cash flow this year despite weakness in the business. Any color on how we should think about free cash flow for F2026? Any kind of floor you could provide there would be great. Thanks. Thanks so much, Kelly. Let me just give I'll start by just touching on the Amazon partnership. Obviously, that's part of our third strategy, winning the marketplace, and that is about being in the path of the consumer. As I said, in answer to an earlier question, we know our consumer is already there. We are doing millions of dollars of sales in that channel. We're going to start with a small assortment. It's really going to be some of our evergreen products, and we're really going to make sure that we get that absolutely right, that we test and learn, that we build the right PDPs, the right ratings in the reviews, that we're offering the right fulfillment services before we start to thoughtfully expand that assortment with new products that will be targeted at acquiring a new consumer. We're feeling very optimistic about that component of our strategy. Maybe, Eva, if I hand over to you on the free cash flow. Sure. Thanks, Kelly, for the question. I'll just reiterate. We are a strong cash-generating business, and overall, our capital allocation priorities remain the same. Investing in the business, and you've heard us say that those investments will increase next year to support our transformation, maintain a strong balance sheet, and return cash to shareholders, which we've done over the last three years, returning $1.5 billion. We are headed into our biggest quarter of the year. As I think about cash for next year and projections for next year, we'll come back to you in February on that. We've remained focused on continuing to focus on working capital and driving cash out of the business. Thank you. Our next question comes from the line of Mark Altschwager with Baird. Please proceed with your question. Good morning. Thank you. As you pivot back to the core categories, can you talk about the innovation pipeline over the next 12 months to 18 months and how you're thinking about the balance between legacy franchises and then some of the ingredient letter or efficacy demands for the younger consumers you're targeting? Yeah. Thanks, Mark. Let me start by saying that in our core categories, we remain the market leader. It is, without question, where we have the greatest right to win. We started this work for our strategy in designing those two consumer muses. It is not about leaving our current customer behind and reaching for a new consumer. It is about serving both. If you think about Jen, she is probably more atypically the kind of customer that we have today. We believe that we can elevate our product proposition and continue to attract more of those customers, as well as reaching for a new, younger consumer, the Zoe, if you like. What she requires is, as you say, more ingredient-led, cleaner, more stylishly, or more sophisticated design and packaging. That is where our investment is headed. Without question, we have underinvested in our core. Let's take a look at our packaging. Some of our core forms, I do not think, have been restaged for a decade, right? That will change. We are already building a very strong pipeline of innovative new concepts, and we expect them to come to life in the back half of the year. I am excited about what I am seeing from the product design and merchandising teams. Daniel, if I could just add, in addition to the innovation, we are taking immediate actions on the innovation front. We have changed, and we are involving consumer testing much earlier in the process to ensure as we shape this innovation to attract that new consumer, we are hitting the mark. As Daniel said earlier, we are making choices to exit categories that have not been successful for us, that increase complexity, such as men's grooming and hair. We will continue to work to optimize our portfolio as well. Yeah. Mark, I just want to follow up on your question. You talked about the new product, and you also talked about, let's call it the core or the carryover product, which in some ways, I think, hints at what we have to do. As I said in my opening remarks, we have these iconic fragrances. It's been one of the big things that was an upside on what I thought when I arrived. Some of those biggest fragrances are doing over $250 million a year annually, and they sit on a shelf in the left-hand side of our store, and they operate somewhat like an annuity. Customers come in, and they buy them, but we haven't treated them with the reverence and with the marketing they expect. Part of that second pillar of our strategy is reigniting our brand. Part of that is about showing the reverence for those iconic franchises, those iconic fragrances, building a world around them, taking them out to new consumers in alternative distribution channels. I'm sure that future Zoes and future Jens are going to love some of the products that we already have, and it's just about making the big bigger. Thank you. Quick follow-up for Eva. Just with the earnings reset here, the leverage ratio is edging higher. How comfortable are you with the leverage ratio, medium term, and just any shift we should think about in how you're balancing buybacks with potential debt reduction? Thank you. Sure. We've made tremendous progress over the last couple of years bringing the leverage ratio to our target, two and a half times level. This challenging period will put pressure on that. You should expect we will pay our debt down that comes due in January of 2027, and we'll work vigilantly to bring our balance sheet to the position that we want to. As I said earlier, our capital allocation priorities are the same. Thank you. Our next question comes from the line of Adrienne Yih with Barclays. Please proceed with your question. Great. Thank you very much. Daniel, thank you so much for the detail. It's really refreshing to hear the strategy and the movement of the business. In doing so, I guess, can you help us understand the timing of the exit of the non-go-forward categories? Is that sort of like a Q1 thing? I'm sure there's some hangover inventory. What's the best method of exiting those categories without kind of further putting kind of brand pressure, right, as you kind of exit those? Within the core categories, we had talked about SKU rationalization, and obviously, you're talking about focusing on fewer of the things that mean something. How many of the kind of alternative scents and kind of that newness that you bring to the seasonal scents will now go away to help focus? Thank you. Okay. Thank you so much for the question. Look, let me just underscore that everything that we do at this company is subject to rigorous testing. That is something that we have instigated, as Eva said, as part of our product development process, and that is true about the way we think about our assortment. We are not pursuing a SKU rationalization target for the sake of having a target. We are pursuing it because the customer tells us that our proposition in store is too overwhelming and confusing. The outcome that we want is to be able to entice new consumers into our stores and onto our digital platform. They can find what they want easily and fall in love with what they like easily. I think about it less as a number to hit and a set of categories to exit than I do about reaching a consumer outcome. That said, we will begin to rationalize our SKUs and begin to exit these categories in spring, so in the first quarter of next year. We will ramp that up with testing and exits as we move through the balance of 2026. It is really test, learn, and make sure that we are bringing the new products to market, that we are elevating, as I said, some of those new, some of those core franchises that are already large so that we are filling the gap. It is less about, I would say, hitting the number. Adrian, your question on hangover of inventory. As you know, we have two seasonal, two semi-annual sale periods that we are able to use to clear inventory. The company has a long history of successfully doing that. Despite the pressures in Q3, we were able to exit Q3 with clean inventory as we used that fall sale period. We will be really thoughtful on our inventory management and our decisions around timing and when to exit. Okay. Helpful. Then, Eva, just a little bit of help on the exit categories. What is the aggregate dollar amount that they contributed in 2025? How should we think about the wraparound tariff pressure into 2022? Thank you. Okay. I will take the tariffs. I will take the tariffs first. Overall, the tariffs, I would think about on a full-year basis, it is basically comparable to 2025. In 2025, we had about a 100 basis point impact to the year. Expect that to be pretty comparable in 2026. Now, the timing of that first half will have a bit more of a headwind, given when tariffs started with the reverse impact in the second half. In terms of the dollars of the exited categories, we'll have more to say as we build toward 2026. We don't expect that to be a meaningful drag. They're not. The problem is those adjacencies haven't grown in the way that we had expected, and they are not significant, the ones that we are starting to take out. We are looking at every merchant that are SKUs that are not contributing that much and SKUs that are not productive, and that's where we're starting in that long tail. Thank you. Our next question comes from the line of Jonna Kim with TD Cowen. Please proceed with your question. Thank you for taking my question. Daniel, just on the competitive dynamics within the fragrance and body mist category, I know a lot of new entrants have entered the category in the last few years. How are you assessing the competitive dynamics there? You also mentioned shortening lead times. Which category needs more wo rk in your view? Thank you so much. Great. Yeah, we operate in a very competitive sector. I love the sector. It still continues to grow. It's a young sector with sort of youth and innovation at its heart. I think that, obviously, we operate as the market leader in these categories. We have a right to win. We're building on a solid base. For me, some of the problems that we have in our product are what I would call perception problems. We have fantastic formulations that are clean, but we have not communicated those benefits consistently and effectively. We know in our product testing with consumers and some of the blind testing that we do that we far outperform some of those competitors that are often talked about, but we do not market it correctly. We do not put it in elevated packaging. As a result, the consumer does not see us as having the attributes that they need. In some of the areas that we are looking at, we will launch new forms and new vessels and those types of things and new formulations. Those sort of things take longer than just chasing into demand, which is what our supply chain is really good at. Together, the teams at Bath & Body Works and our fragrance house partners and our manufacturing partners, we are all working day and night to make sure that we are bringing this new innovation to market, and we are looking forward to starting that journey in the back half of 2026. Daniel, could you just add one thing? As you look at these categories that we are in, that we are all excited about and are growing categories, growth in digital is outpacing the market. The strategies that we are talking about today and the investments we are making in our own digital experience, as well as alternative distribution and our presence on Amazon, we think are key elements to capturing and bringing that new consumer in as well. Part of the we've talked about being in the path of the consumer, and that, of course, is what drives everything in this business now, putting the consumer at the center. I'm looking forward to competing with those competitors on that playing field, right? We have left Amazon wide open for competitors to play. That is changing. We have left other wholesale partners wide open for those competitors to play. That is going to change also. To me, I'm looking forward to putting our product front and center, telling bold and emotive stories, and winning in the full marketplace. Got it. Thank you. Thank you. Our next question comes from the line of Jay Sole with UBS. Please proceed with your question. Great. Thank you so much. Daniel, I wanted to just follow up on that last question. Is there a tension at all between entering Amazon and potentially other mass market channels and sort of maintaining an iconic brand image? If so, how do you feel about navigating that? No. I think about it not as either/or. I think you look at some of the world's luxury brands that are on Amazon, and I think it is as much as a sales opportunity as I think it is a brand opportunity. I cannot wait to tell an elevated story about this brand in third-party channels, and in particular, on the largest shop in the world on Amazon. What I believe to do to change product perception will be in all channels, and particularly on social channels, actually. That work, that what I call brand reignition work and brand reigniting work, is well underway. By that, I mean we have seen visuals. We have seen photography. We have seen tone of voice. And everybody who's seen it is blown away by it. Customer testing just this week, and our consumers, both current and future, love the direction that we are taking this brand. I understand. And maybe if I can just follow up on that, I mean, what about just the concern that entering Amazon will cannibalize traffic into the stores and obviously create a separate issue? Our product is already on Amazon. We're doing $60 million-$80 million roughly in sales on that product of our product from gray market on Amazon today. Just going there and making it a brand accretive experience, making it a profit-accretive experience, is the first thing that we look to do. Actually, I think that telling the story of our brand across digital channels will drive traffic in stores. And then finally, we have a very wide assortment, maybe too wide an assortment in places. We have an opportunity to use that assortment thoughtfully across multiple channels to drive differentiated propositions to acquire different types of customers. I think that this strategy is wholly accretive. Thank you. Our next question comes from the line of Olivia Tong with Raymond James. Please proceed with your question. Great. Thanks. Good morning. Really helpful diagnosis of the areas of improvement. I know Amazon was something you've been hinting at for some time, so I'm sure you're excited to get going on that. A couple of questions with that. Can you talk about the sales expectations and the margin profile of launching on Amazon? You obviously mentioned the $60 million-$80 million in sales already. Clearly, your hope is to go above that, but just trying to think about the arc of building on that and then the margin profile as well, whether you expect that to be similar margins, dilutive, accretive. That would be helpful. On the exit of the categories, the ancillary categories that you launched into a couple of years ago, could you help us understand a little bit of the decision-making as to why not continuing to run the business? Of course, it is a distraction, but it is offering some sales. And a lot of the heavy lifting, more importantly, has already been done. I would imagine that that is something that could work in other channels. Eva, one for you is just around how we should think about the cash flow progression next year. You talked about earnings, but would love to hear your views in terms of the working capital in particular, given launching continuing channels, clearing out the old inventory, how you think about the arc in working capital. Thank you so much for those questions. Great. I'll start on Amazon and then move to adjacencies, and then I'll hand to Eva for cash flow. On Amazon, we're very excited about the opportunity, as I'm sure you can hear. We believe it's the right thing to do for our consumer, and it sits squarely in our third pillar of our strategy. The plan is to go slow to go fast, right? We're going to launch with a tight assortment. We're going to make sure that we are optimizing those pages for the Amazon consumer, that we're providing the right level of product description, that we're providing the right level of PDP, that we build up a really incredible bank of ratings and reviews. As we start to gain success in that channel, we will build out the assortment over time. As I said in my opening remarks, our own channels will remain the widest expression of our assortment and the purest expression of our brand. We will be very careful to make sure that we're using that channel to attract a new consumer or a lapsed consumer, and we're not just taking the assortment, handing it over to a different channel, and expecting and taking a margin here as a result of doing that. It is a go slow in the first half to speed up as we move sequentially through the year. When it comes to adjacencies, I want to just clarify what I've said. We are no longer going to invest in adjacencies. We are going to invest in our core. We have told you of two categories that we plan to exit in hair and men's grooming. We haven't, at this point, signaled that we are exiting whole adjacencies. I actually agree with your question. What is the most thoughtful way to use the money that has been spent in these areas to potentially build this business over time? It won't be something that we're continuing to invest in formulas, in packaging, and in other ways. We've got to get back to the core, but we aren't simply just abandoning those adjacencies. We intend to maximize the sales opportunity from those. Yeah. On your cash flow progression for next year, as a reminder, and I'm sure you know this, Olivia, right? We generate all of our cash in the Q4 period. We typically like to start the year with about $500 million of cash to fund the business through the first nine months, investing in inventory throughout the year. We're building our plans for 2026 now. As I spoke about, there will be greater investments related to this transformation. That could put a little bit more pressure on that first nine months of next year, but we'll manage our cash effectively throughout the year. On the margins for our adjacencies and Amazon in particular, it's our goal to have a comp margin structure over time. We're going to test and learn our way into this, as Daniel said. Thank you. Our final question this morning comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question. Hi. Good morning, everyone. And good to hear of the plan. As you think of the loyalty customers, which I think numbered 39 million the last time we heard, how do you break them down through the transformation strategy that you put in place and the diligence you've done? What are you seeing about that consumer? What are you learning? Who's coming? Who's going? Any updates there? Yeah. Thanks. I'll start. And maybe, Eva, you can follow up with a little bit more detail. As I've always said, our loyalty program and that loyal consumer that we have today is a competitive advantage, and we're going to continue to build on it. In fact, I think in the recent queue, we're now up to 14 million loyalty customers. It is a competitive advantage. We're going to continue to leverage it to drive sales, to drive building the basket of our existing consumers. Eva, maybe if I can ask you for a little bit more detail. Yeah. Sure. Sure. I think that loyalty customer, we've continued to drive the strongest retention rate. With our changes in our loyalty program, we've seen an increase in reward redemption that brings along with it an incremental spend. We're seeing good visits, good spend across all of our deciles. The team, the marketing team, the loyalty team really continues to focus on how can we continue to engage and excite those very valuable loyalty members that drive 80% of our sales. Got it. With the reset going on, collaborations has been a big focus over the past few years. With the refocus on the core, how do you see the opportunity for collaborations? How do you maximize the strength of the product with the opportunity to enhance with sales or margins with collaborations? Right. I appreciate the question so I can clarify what our collaboration strategy is. Make no mistake, we love collaborations, right? They are a way to drive energy, equity, and excitement and buzz into the brand. We actually have lined up for the next fiscal some really, really exciting collaborations. Strategically, collaborations should be used to drive energy into the brand and energy into some of those franchises and collections. Energy that builds everyday luxuries. Energy that builds White Barn color on. Energy that builds a seasonal collection like for not necessarily something that sort of stands alone and is there to carry the quarter. We do not want to get into positions where a collaboration like Villains was something that was the difference between where we guided our Q3 and where we ended our Q3. We want to use them more tactfully, more thoughtfully to drive long-term brand equity into our brands, into our franchises, and into some of those iconic fragrances that I have referenced in today's call. Thank you. Ladies and gentlemen, that concludes our question and answer session. I will turn the floor back to Mr. Heaf for any final comments. Thank you, everybody, for joining us this morning. Thank you very much for your thoughtful questions. Just let me restate. I came to Bath & Body Works to accelerate growth, and I remain absolutely confident in our ability to do so. Work to restoring our brand and achieving sustainable growth, as you've heard on today's call, is already well underway, but it will take time and focus. We've aligned our teams to the vision and the strategy, creating disruptive and innovative products, reigniting our brand, winning in the marketplace, and operating with speed and efficiency to attract a new and younger consumer to the brand and unlock what I know will be the next era of growth for this brand. You've heard today that we are driving early progress across those priorities, and we look forward to sharing more updates in the quarters ahead. I want to say a special thank you to our associates and our store teams for delivering joy this holiday season. We have the platform. We have the plan. We absolutely have the team to win. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.