Good morning. My name is Ivy, and I will be your conference operator today. At this time, I'd like to welcome everybody to the Victoria's Secret & Co. Q3 2023 Earnings Conference Call. Please be advised that today's conference is being recorded, and all parties will remain in a listen-only mode until the question and answer session of today's call. I would now like to turn the call over to Mr. Kevin Wynk, Vice President of External Financial Reporting and Investor Relations at Victoria's Secret & Co. Kevin, you may begin. Thank you, Ivy. Good morning, and welcome to Victoria's Secret & Co.'s Q3 Earnings Conference Call for the period ending October 28, 2023. As a matter of formality, I would like to remind you that any forward-looking statements we may make today are subject to our safe harbor statements found in our SEC filings and in our press releases. Joining me on the call today is CEO Martin Waters and CFO Tim Johnson. We are available today for up to 45 minutes to answer any questions. Certain results we discuss on the call today are adjusted results and exclude the impact of certain items described in our press release and our SEC filings. Reconciliations of these and other non-GAAP measures to the most comparable GAAP measures are included in our press release, our SEC filings, and the investor presentation posted on the investor section of our website. Thanks, and now I'll turn the call over to Martin. Thanks, Kevin, and good morning, everyone. Before we dive right in, I want to first share my appreciation and gratitude for the hard work and dedication of our associates and partners around the world. I'm especially thankful for the team's continued commitment and for all they're doing as we move forward throughout the holiday season. I speak to you today very energized, with our holiday season now in full swing, and with excitement about our sales performance in November to start the Q4. In North America, both in stores and online, the November sales and margin result was our best monthly performance in nearly two years, which we believe is evidence our initiatives are working and is led by strong response to holiday, giftable merchandise assortment, improving customer experiences, a powerful marketing message with Mariah Carey. Our international business has great momentum. Our footprint is growing, both in stores and online. Our partners are performing very well, and we continue to be excited about performance in China. As I have consistently talked about, our teams have been working tirelessly on multiple growth initiatives designed to create momentum as we enter the second half of the year and into the holiday season, and we're delivering on those key initiatives. Initiatives such as new multi-tender loyalty program, new customer experience enhancements in our digital business, product improvements and launches to enhance Victoria's Secret brand and accelerate our beauty business, a reimagined merchandise strategy for our PINK brand, and of course, the return of the iconic fashion show with the Victoria's Secret 2023 World Tour. Now, turning to the Q3 for a moment, we delivered results within our guidance range, and our sales trend in North America continued to improve as planned each month throughout the quarter, with October being the strongest month of the year, now happily exceeded by November, of course. Outside of North America, our business continues to provide profitable growth across stores and digital, with international System-wide Retail Sales up high teens in the quarter, driven by growth in China and globally with our franchise partners. Our teams are doing an excellent job of managing selling margins, diligently controlling costs, and delivered inventory levels at Victoria's Secret and PINK down 9% to last year, and we have agility heading into the holiday season and into the new year. Overall, sales declined 4% in the quarter compared to last year, which was at the midpoint of our guidance. In North America, sales trends improved in the quarter in both stores and digital, driven by sequential improvement from last year in average basket size and in traffic. Conversion in our digital channel also improved as compared to Q2, and it was roughly the same in our stores business. Adore Me sales were up year-over-year, again this quarter, and represented about 5 percentage points of total sales growth for VS & Co in the quarter. From a merchandising perspective, external market data indicates that sales for the intimate market in North America as a whole decreased mid-single digits in the quarter compared to last year. Importantly, we remain the leader in market share for the intimates category, including both bras and panties. Our share remained essentially flat, with digital share up slightly and stores share down slightly. From a merchandise category perspective, starting with Victoria's Secret, our beauty business continues to be our best-performing category. We also saw significant trend improvement in panties, bras, and sleepwear in the quarter. Within PINK, intimates and sleepwear outperformed apparel. Our new reimagined PINK apparel assortment began delivering to our stores and digital customers during the quarter. We acknowledge that it will take time to turn around that business and believe we're on a path towards improvement with some definite green shoots of recovery. We estimate that the apparel challenges in PINK negatively impacted the Q3 sales result by approximately 3-4 points. Aside from the financials, over the last 90 days, we've executed several key actions in support of our strategy and brand positioning for the long term. For example. Our loyalty program now has more than 22 million members, who drive approximately 75% of our sales on a weekly basis. We kicked off the holiday season with new product arrivals and a powerful marketing message featuring Mariah. From a technology perspective, we launched over 50 new releases, impacting the overall customer experience on our digital platforms and apps. And we expanded our Store of the Future fleet to 71 stores, or approximately 8% of the fleet in North America, and we'll be at 85 stores by the end of the year. Looking forward, our outlook for the Q4 embeds results from November, and overall, for the quarter, we expect sales to increase in the range of 2%-4% compared to last year. Quarter to date, through Cyber Monday, we estimate we have generated roughly one-third of our Q4 sales, and obviously, we have many very large days and weeks to come in December. We're forecasting an adjusted operating income in the range of $245 -$285 million for the Q4. For the full year 2023, we're forecasting sales to decrease in the range of 2%-3% compared to last year, and we expect adjusted operating income to be in the range of $290 -$330 million. At our Investor Day in October, we discussed three strategic priorities. 1, accelerate the core, 2, ignite growth, 3, Transform the Foundation, and in particular, spent lots of time on our plans for our key area of focus, which is obviously the North American business. With the long-term health of business in mind, we're energized by the start of the holiday season and the positive signs in the business, and remain committed to our initiatives designed to leverage our market leadership position and unlock our opportunities to convert significant cultural influence into long-term financial growth. Thank you, and that concludes our prepared remarks. At this time, we'd be more than happy to take whatever questions you might have. Thank you. We would now like to open the phone lines for questions. If anyone does have a question, please unmute your phone, hit star one, and record your name clearly when prompted. Excuse me. Again, that's star one to ask a question. Our first question is coming from Simeon Siegel. Please go ahead. Thanks. Hey, guys. Good morning, and congrats on the progress quarter to date. So Martin, the quick growth in the loyalty program is really great to see. Can you elaborate on what you're seeing in terms of the revenue impacts from that multi-tender loyalty program? Maybe just speaking to any changes or just early learnings you're seeing. And then congrats on the ongoing success in beauty. Just what is the beauty margin versus the other categories? Thanks, guys. So thank you for the question, Simeon. Not much extra that we can give you, I'm afraid, at this point. I'll go to TJ on the margin question, but, you know, loyalty, as I said, we're over 22 million customers now. It's 75% of our revenue. It's kind of the bedrock of the business. The most important aspect of that program is the data that it gives us and our ability to match data about sales with data about customers, which enables us to personalize experiences and personalize marketing. The upside for that will really be in 2024 rather than in December of this year. But, you know, it's laying the foundation for the future. And, you know, that program was a long time in the build, so we're super excited to have it launched and so well received. It also will be the basis for many new customer experiences that will come in 2024, the first one being, leverage from the Adore Me acquisition, try on at home. But there will be other member services that will be linked to the loyalty program that we'll be excited to launch in 2024. TJ, do you want to take the margin question? Yeah, I think on the second part, Simeon, the beauty business tends to be favorable margin rate, relative to the company average. I think it's important to note that as we move through the Q3 and on into the Q4, we expect beauty to be a leading category in the store. It is one of several contributors to why we believe Q3 was a bit of an inflection point for us in seeing merchandise margin rates go higher year-over-year. So, we're excited about the beauty business. We've got big plans for it for the holiday season. Margin accretive and, based on everything we've seen and read, was very top of mind during the Black Friday week with customers. Might also say, I agree with all that, TJ, that the strength in the beauty business is coming across all areas. It's in fragrance, it's in mist, it's in all areas really, pulling forward. So very pleased about that. Next question, please, Ivy. Next, we'll go to the line of Dana Telsey from Telsey Advisory Group. Please go ahead. Nice to see the progress. As you think about PINK and apparel, any update on the progress there, timing of some of the, the newness? I think some of it was coming in the Q3 and what you're seeing. And then just on the Store of the Future, how did those stores perform relative to the base, even, even during the weekend? Thank you. Yep, thanks for the call, Dana. As you know, we identified a year ago that the PINK business had some challenges, had some difficulties, and we recommitted to the role and purpose of the PINK brand being the on-ramp for Victoria's Secret, and we talked about that at our investor conference. We also clarified the market that we're serving and the market that we're not serving, and both of those two statements require a significant adjustment in the merchandise that we were offering. We identified four chapters that we'll focus on, The Play, The Code, The Base, and Wink, and we've had some really good hits in our first run at merchandising to that new agenda. You know, some of the green shoots that we've seen have been in bras and bralettes, in basics, in skin tones and nudes. Some of the fun and whimsical product we put out for Halloween just blew out, was gone by the end of September. The Chlöe and Halle merchandise is a very clear hit. Specifically, the fold-over cotton flare pant has been a very big hit and sold out straight away. So we know we're going in the right direction, but as I said at investor conference, we decided to buy PINK very cautiously. It didn't make sense to me, to us, as a leadership team, to swing for the fences and assume recovery straight away. So we've been very cautious in our buys, and we look forward to chasing into what's working for spring 2024. So don't expect an enormous amount of recovery in the balance of this quarter. Do expect us to continue to make progress into 2024. I hope that helps. We also made progress in reducing the size of the inventory in PINK, which had got away from us a little bit, so significantly higher productivity coming out of a smaller number of choice counts. TJ, do you wanna take the Store of the Future? Yeah. On Store of the Future, Dana, we haven't necessarily broken things out, I'll say, by quarterly performance. I would just suggest to you that the overall trends of Store of the Future that we called out at Investor Day, at particularly around store remodels, getting a low double-digit lift, that is holding and actually building as we move through the Q3, so I would take that as a good early indicator from a holiday perspective. And then, the teams have done a very nice job of keeping us on track for 2023 in terms of both new store openings and store remodels. So feel very confident by the time we get to the end of the quarter, we'll have about 10% of the fleet, or about 85 stores, as Martin mentioned, in the new Store of the Future format. So, um- International. Yes, and good point. Martin's whispering to me here. International. I would be remiss if I didn't mention that Store of the Future has been equally well received around the world from our international partners and also our customers, as we continue to grow out the store fleet there. And as you know, we have plans for upwards of 100 stores a year over the next two to three years to build out the international fleet. So, all signs pointing green on Store of the Future performance and opportunity. Thank you. Next, we'll go to the line of Alex Stratton from Morgan Stanley. Please go ahead. Great. Thanks a lot for taking my question, and congrats on the acceleration you're seeing. I wanted to focus in on that. Like, how do you think of it in aggregate? Is it a function of just the initiatives flowing through? Is the category at all improving? And did you change your promotional strategy at all? Like, I'm just wondering if that's factoring in. Thanks a lot. Yeah. Thanks, Alex. Good question, and of course, a question we ask ourselves continuously. I'll tell you on the... I'll repeat what I said on the market size. So for the quarter that we just completed, the market declined at a very similar rate to the decline that we saw in Q2, so low to mid-single digits decline. We held our share during that period. The way we see it is that we've seen receptivity to newness that we've brought into the business, and that shouldn't be a surprise to anybody who's followed the company for a long time. This category respond, or our categories respond well to newness, and we've seen that in beauty, we've seen it in PJs, we've seen it in core bras, we've seen it in panties, we've seen it in, in novelties. So when we get new product that resonates with the consumer, that's the, the biggest single thing we can do. You asked about promotionality. Our promotionality in the quarter was about the same as it was year-over-year. Our adjusted product margins were up slightly, and I will tell you that in November, we had a strong performance in November, that our margins were up slightly in November. So even though we appear to have been really quite promotional, we were more surgical and more targeted, and I think, think the team did a really good job of managing the big moments very aggressively, and preserving margin. We've also seen digital enhancements helping our position, so our digital business is now 35% of our total system. It was 30% last year. That's coming from growth in our North American business with VS and PINK. Many of the enhancements that Chris Rupp has been working on with her team, so lots and lots of digital enhancements, plus, of course, the great performance from Adore Me weighing in to help net with 5 points of our, of our growth. And also, I'd be remiss if I didn't mention store traffic. The store traffic, particularly in November, was strong for us and ahead of where mall traffic came in. So, you know, across the board, there are lots of things that are coming together to help that momentum, and perhaps most importantly, I should say, is the team. Under Greg's leadership and Chris's leadership and the entire leadership team, things are really starting to gel. We feel like we have the right people at the table, and we're making good choices and, and planning well for 2024. Hope that helps. Yeah. Thanks a lot. Good luck. Next, we'll go to the line of Matthew Boss from JPMorgan. Please go ahead. Great, thanks. So Martin, what would be your best assessment, or maybe just an update on the health of the North America intimates category? Maybe what inning would you call your initiatives today? And then, TJ, how best to think about the balance between driving top line relative to profitability, given the elevated marketing and technology investments? All right, I think that's three questions. I'll take the first two. So, how do I feel about the category? You know, it's, it's difficult to know. We were very surprised by the decline in the category that we saw in Q1, that we hadn't seen that coming. You know, during good times and bad, the intimates category has been very stable over the long run. So to see a high single-digit decline in Q1 and then mid-single digits in Q2 and Q3, it's unusual. And I, I've talked a little bit about this at Investor Conference. Do we think that it's structural, that somehow women are going to be wearing bras less often or replacing them less frequently, that there is a structural decline in the market? I have a hard time believing that that's so. There is definitely some fashion trend around young women to not wear bras all of the time, and there's definitely a trend towards more sports bras and more lounge bras, less constructed bras. But none of those things I see as being structural threats to our business. I think we're in a good position to take advantage of whatever the trends are in the market and to respond to them accordingly, whether it be with bralettes or with the rebirth of our sport business. I think just innovation is the most important thing that will drive the category. And you know, as we're the largest player in the category by some distance, it's up to us to drive the market as a whole, and we used to do that in the old days, and we're determined to do that in the new days. What innings are we in, in terms of, you know, the health of the company and the rebuild of the company overall? Probably mid innings, I would say. I think we've made good progress. We feel good about the foundational work that we've put in place in transforming the way in which we do business. I think we feel very good about our growth initiatives. Our international business is on fire. The Adore Me business is fantastic and bodes incredibly well for the technology we can borrow from them and leverage from them. The team there are working incredibly well, so feel really good about that. But there are so many things ahead of us. You know, we've only just begun the journey on personalization. We're only just beginning to look at how AI can dramatically impact the way we go to market. We're only just beginning to look at how this new team and the new merchandising initiatives can show up, and how the House of Victoria can come to life, and how the Store of the Future and all the digital enhancements that we're making can make a difference to the customer. So there's a lot more to come for us. So I think my, probably my best assessment is mid-order. TJ, do you want to take the last question? Yes. So from a top-line perspective, Matt, I, I think, you know, building on Martin's comments, I think in terms of identifying the opportunities and executing against them, we are - we're probably middle innings, as he mentioned. I think in terms of seeing the benefits start to flow through the P&L, which I think is where your question was going, I'd say, from our perspective, Q3 is some of the early innings of that. So we've been working on a number of the initiatives throughout this year, and investing in them, particularly around technology and some of the, you know, the brand repositioning efforts, and seeing an inflection point in Q3 in terms of growth and merchandise margin rate, seeing an inflection point in terms of the trend of the business in North America, and seeing that continue on into the early holiday season, I think tells us that we're on the right track. I think the challenge has been and will continue to be seeing the North America business continue to build into Q4 and build into spring season. I think we've demonstrated a willingness and an ability to hold cost, and we've got new cost initiatives coming online here just in the Q4 around cost of goods that you know Chris and Dein and their teams have been working on. So I feel like we are right where we want to be in terms of that inflection point and seeing the flow-through happen in the business as we start to see improvements in North America business. So you know again some of these initiatives are just now starting to show up in the top line and starting to flow through in the P&L, although we've been working on them for months. Thanks, Abby. Next, we'll go to the line of Alex Zhao from Bank of America. Please go ahead. Hi, thanks for taking my question. On your strategic focus in reclaiming the sports bra category, can you talk about how the category did in the quarter versus the market? Have there been other notable launches since the Featherweight Max? What is your sports bra launch calendar like compared to your core bra launch calendar? And then just lastly, you know, in your view, what differentiates or is most attractive about a VS sports bra versus a pure offering? Thank you. Oh, thanks for the question, Alex. You know, this is a very sore subject with me, because as the team hear from me just about every day, banging the table on sport, we need to be better at sport. You know, one of the missteps of the Victoria's business back in 2016, 2017, and beyond, was not participating in the sports bra market. We had back in 2015, we had 16% share of the sports bra market. Today, we have 3.5% share of the sports bra market. So we're not really, you know, in the top ten, and we've got to rebuild. We have got to be right at the top of that list, and that will take that will be a multi-year endeavor. The very first meaningful change that we made was the launch of the, Featherweight Max, as you mentioned, and it was very successful. The next phase is to expand that color multipliers, line expansions, and we'll be facing into that in January and pulling forward as much sport as we can for the new year, new you momentum that there is in the market. So some more newness coming in January. But honestly, the big relaunch of sport for us will be later in the year, and that's just because it takes time to make a really good product. We're not looking to compete with tubes and with unstructured, you know, sports bralettes. That's not where we will win. We will win by leveraging technology with the best vendors in the world. So you asked the question, why, you know, why would we be good at it? Or I'm paraphrasing slightly, but, you know, what gives us confidence that we can be good at that? Well, you know, bras is a technical product. It's particularly a technical product when there's excessive movement required, and that's what sports bras are for. We know more about bras than anybody else on the planet. We have better and longer relationships with the best manufacturers in the world. They have the access to the best technology, and they'll give it to us first. We have access to the best raw materials. You put all of that together with our design capability, it's a category where we should be the best, and we know we can do it because we've done it in our history. So for us, it's a full court press to get after sport in the broadest sense, starting with sports bras, but I wish I could wave a magic wand and happen more quickly. It will be through the balance of 2024, and we're taking a long-term view of the opportunity rather than just rushing to newness for the sake of newness. So that's probably not the answer that everybody wants, 'cause we'd all like to click our fingers and see us be aggressive in sports bras quickly, but it will take some time to get back to full strength in that business. Hope that helps. Very helpful. Thank you. Next, we'll go to Ike Boruchow from Wells Fargo. Please go ahead. Hey, Ike, okay. I guess two questions for TJ, or Martin, actually. Just first, when we think about the improvement in comps, both digitally and in store, and let's take out the extra week for 4Q. Your down—you know, when you take out Adore Me, your digital comps are down roughly high single, the store, the download doubles. Which of those channels would you expect to improve the fastest or improve the most as you guys continue to work on improving the business? Is there a reason why one channel would outperform the other? And then the second question would be, TJ, on the $250 million of COGS benefit that you have spoken to at the Analyst Day, can you remind us the timing of that? What, when, when will those start to flow in to the P&L? Do those start to benefit you into next year? Is there anything at this point you can talk about next year on margin as it pertains to those cost savings? Thank you very much. Morning, Ike. You sounded surprised that the question came to you. I'm happy to take the first, and TJ will take the second. So, you know, as it relates to the difference between the two channels, and two channels is kind of an old-fashioned way of thinking about it, as there are more channels emerging all the time. But let's take it as digital and stores. You know, historically, we were in a very strong position in digital. We got there early. However, over the last four or five years, other people developed capabilities in digital that we didn't have. And when this management team took over, one of the first things we identified is that we were not world-class in digital experiences. Other people were further ahead of us. We had to catch up. Also, as you know, most of the new competition that has come to market in the last five years is digital. There aren't many new store entrants, but there are loads of digital entrants. So the focus for us has been in the digital arena for those two reasons, stronger competition, and our offering was substandard and underweight. So in building new capability, our biggest area of focus is that digital channel, and we've been adding things like fewer clicks to get to product, removing category landing pages, visual search, shoppable video, barcode scanning, I don't know, non-crawlable text, enhanced linking capabilities, you know, all that kind of stuff, using AI-powered personalization, those sorts of things we're getting into. And that's some of the stuff that's been in the 50 releases that we had during the Q3. So just really accelerating the pace. It's starting to work in that, as I mentioned in prepared remarks, our share in digital increased slightly during the quarter. So I, I think overall, in terms of the market, the forecast, industry experts forecast is that the category will move from 31% in digital, where it is now, to about 41% over a 3-5-year period. We expect to at least keep pace with that, maybe accelerate faster. We certainly expect to gain share in digital. Let me address stores. Stores is an area where we were kind of overweight. We feel that we had a better store experience than anybody, still do. So how come we've lost a little bit of share? That's a surprise to us. It's a significant area of focus for Becky Behringer, who leads that business, and we're leaning into it to be the best that we can possibly be. I see no structural reason why we should give an inch of share away in stores. We have a better store fleet than anybody else in the market. We're renovating that fleet as fast as we possibly can. We're adding new technology like Crave, now in 181 stores... So both channels are important to us, and I'm expecting that we will gain share in each of them. TJ, do you wanna take the other question? Absolutely, and I agree with Martin's comments on the different channels. Ike, you're referring to the Transform the Foundation goal that we put out at Investor Day, that was $250 million over a three-year period, 2023, 2024, 2025. That was a combination of both expense and cost of goods. We did comment that cost of goods would be the majority of it. As it relates to 2023, we did say about a third or a little less than a third, so think $80 million of benefit in 2023. We did mention that the majority of that would be expense, particularly through the first three quarters of the year. And then as we get to the Q4, which is where we are now, that's when the cost of goods sold benefits would start to show up, and that is happening. So the teams are delivering as expected on timeline, on target, from a dollars perspective, and that was one of, you know, a couple of different enhancers in our Q4 forecast. So as we move into 2024, the large majority of the benefit from a Transform the Foundation standpoint, will be cost of goods, and is, again, one of the reasons why we believe the margin inflection point at Q3 will continue through fourth and on into 2024. So we're on track, feel good about $250 million over a three-year period. Feel good about how it's cadencing through the P&L as expected. Thanks so much. Yep. Next, we'll go to the line of Mauricio Serna from UBS. Please go ahead. Thanks. Good morning, and thanks for taking my questions. I guess just wanted to understand first if you could talk about what was the underlying sales growth in the Adore Me brand in the quarter? And then on PINK apparel, I think you know the previous quarter the drag on sales was 2-3 percentage points, and this quarter was 3-4. So just wanna understand what was the driver behind that. And then just very lastly on the SG&A front, I think if I look at the guidance for 4Q, I think it implies SG&A dollars will be up mid-teens in 4Q. So and that seems you know elevated compared to what the growth rate was in the first half of the year. I know, like, Q3 was, like, the fashion show, but just wanna understand what we're—what is, you know, embedded in that, you know, in SG&A dollar growth in 3Q. Thank you. Yeah, we can be very quick on the first two, and then TJ, you can take the third, if you wouldn't mind. Mm-hmm. So we're not pulling out the underlying sales growth for Adore Me. We're not giving that level of specificity of the business at that size. Suffice to say that Morgan and team are running the business in a very smart and intelligent way. We're seeing growth year-over-year. We're seeing profitability. We are, Morgan and I had a conversation about this earlier this week. We're seeing very smart investment in marketing. If the investment makes sense, if the ROAS is there, then we'll make it. If it's not, we won't. So I feel very good about that management team and the capability that we have in that team, and we can learn an enormous amount from them. So super excited about Adore Me, but not breaking out any specificity for that business. As it relates to PINK apparel and the drag, there isn't really a material difference between Q2 and Q3. You know, there's maybe a point either way, but it's not material. The extent of the decay in that business is a significant cause for concern. It was identified a year ago. We've been putting strong steps in place. As I said earlier, we've seen some green shoots that we're focused on. The main recovery will come in 2024, when we can really start to be more aggressive with our buys. TJ, on SG&A? Yeah, on SG&A, Mauricio, the growth year-over-year in the Q4 is a combination of probably four or five different factors. I think the first one is obvious, in that Adore Me is in our numbers this year, was not in our numbers last year. I think the second one is also pretty clear, that we have an extra week of both selling and expense that flowed through the Q4 this year, compared to last year. Next, continuing the trend of the year, investments in technology, which are showing up in enhanced digital capabilities and also completing separation efforts. That's an ongoing activity. I think the next item of note would be, based on the improvements in trend in the business in Q3 and in early Q4, we do believe that incentive compensation expense will be up year over year. Again, last year at lower levels. This year, performing closer to our internal budgets and expectations. So those are probably the four or five biggest items, Mauricio, and then some other items down below or smaller in nature would be timing between third and Q4 or going into next year. So feel very comfortable that the core operations of the business from an expense standpoint, so how we operate stores, how we operate our distribution centers, how we're managing headcount and costs, I feel very good about those disciplines throughout this year and as we head into next year. Yep. Abby, yep. Next, we'll go to the line of Jonah Kim from TD Cowen. Please go ahead. Hi there. Thank you for taking our question. This is Katie on for Jonah. Just first, on the holiday season, you know, what do you believe will be the key drivers there, and how much of that is related to promos versus newness and just category strength? And then, my second question is on the beauty category. You know, what do you think is driving the strength in that category, and how do you see that assortment fitting into the larger, Victoria's Secret and PINK brands over time? Thank you. Hi, Katie. Thank you for the question. Great question about what are the key drivers in the holiday season. You know, it's a really interesting period we're in because, I don't know if everybody knows, but this particular calendar year has the longest number of days between, Thanksgiving and Christmas, which is 31 days. So we have kind of a long season. Is that a good thing or a bad thing? I think it's a good thing. It gives us opportunity to really tell multiple stories, and the truth is, between the balance of the two things you mentioned, newness and promotions, it's some of both. It's some of each. You know, generally speaking, when people are looking for gifts, they go to tried-and-tested categories, like PJs, but they want new PJs. They want different PJs. They want something different, something they've not, they've not seen before. And so, you know, carefully adjusting the assortment to bring newness that's skillfully done, that represents something that's new and different, maybe in fabrication or fit or design, to a category that's an established gift-giving category, is a good place to be, and we feel very strong about, feel very good about the assortments that we have. I was in store last night looking at, what we have and seeing the customer reaction, and I think we're very well positioned, and we've seen early strength in those giftable categories. The second part is that, you know, times are tough. We are in a difficult economic environment, and when those kind of conditions exist, people do lean more into value for money. And so being at the kind of in the ring for the fight, so to speak, is important to us, and we're not just competing against other people in our category. We're competing against jeans, against apparel, against beauty, against, you know, all sorts of different players. So our goal is to balance the mix of storytelling between newness and innovation and hard-hitting value for money, get it now while it's here, promotions, and we should tell both of those stories equally well during December. Your question about beauty. You know, beauty has always been a big part of the Victoria's Secret business. We have over a billion-dollar business in beauty. It has a very close... Fragrance has a very close adjacency to lingerie. We're genuinely really good at it. We have the number one selling fragrance in North America. The line extent in Bombshell, the line extensions that we've had of Bombshell, the seasonal extensions have been terrific, really, really strong. And the team continue to bring newness to the category, particularly in mists and lotions. So we have a great team with great capability and a really good, strong brand. And by the way, that's a global business. The strongest part of our international business is our beauty business. It was the foundation, the start of the international business with beauty, and we know that the brand competes against the best brands in the world. When we put Victoria's Secret Beauty, and Arun and his team are responsible for this, when we put Victoria's Secret Beauty into department stores worldwide against the best brands in the world, we're right up there in the top one, two, three brands. Beauty isn't in any way an afterthought for us. It's absolutely central to what we do, and I'm very proud of the team that's leading that. TJ? Very helpful. Thank you. Welcome. Yep. Okay, I think next question, Ivy. Next, we'll go to the line of Janet Kloppenburg from JJK Research Associates. Please go ahead. Good morning, everyone, and congrats on the progress. I was encouraged at the Analyst Day or the Investor Day that you had seen some green shoots in PINK apparel, but maybe your inventory levels were too light, Martin, and I was just wondering if that's a constraint right now, or if you're still working through some of the merchandising challenges there, and if you're pushing out the turn in PINK apparel to later in 2024, as opposed to earlier in 2024. And then I think you're calling for comps in December to moderate versus where they are right now. And I'm wondering if that's because you think that, oh, if you have tougher comparisons or if you think that you'll have AUR pressure because of promotions picking up. Thank you so much. Thank you, Janet. Good to hear from you. I'll take the second part, and then TJ, I'll maybe ask you to take some of the second part. You know, in terms of our plan for the year, it's not unusual after a very strong Black Friday and Cyber Monday to see a kind of a lull during the early part of December and things to slow down. As we look at historical patterns, we've seen that before. So you know, we're not being overly optimistic about what we see for December, but equally, there's opportunity in that. So that's probably all I can tell you about the outlook for December. TJ, feel free to add in a minute. As it relates to PINK, your two observations are yes and yes. I mean, both right. Are we constrained on inventory on the best product? Yes. The best stuff that we put out blew out really quickly, and we wish we had more, and we can't get any more. Are we still working through what the assortment should be? Yes, we are. It's not 100% right. It's better, you know, as I look at the assortment, I feel significantly more proud of the way we show up now. I think it's more relevant to the Gen Z consumer. I think it's a better fit with Victoria, but there's still significant areas for opportunity, and the team that are responsible for it see that completely, and we're all aligned on where it is that we need to go to get after it. I don't think we're pushing back the timeline to late 2024. You know, our expectation is that all through 2024, we should be making continuous improvement. You know, some of the things that have worked well are actually relatively short lead time, like panties. So, you know, we should expect to be quickly into those businesses in spring. Other items are longer lead time, as you know, may take a bit longer. So it's a work in progress. I'm pleased with the progress that we've made. It's kind of a no regrets decision that we didn't go full on and buy too aggressively for the fall season. I think that would have been a mistake. So, you know, we live and learn, and thank you for your encouragement. TJ, anything else to add on December? Yeah, absolutely, Janet. So after a slightly positive November in North America, we do expect that December will be down year over year. As Martin mentioned, we come off of Cyber Monday, and typically the customer takes a bit of a break. And we do have a longer period between Thanksgiving and Christmas this year, so we do expect the customer to come back in abundance as we get closer to Christmas. So from a planning perspective, we think it's prudent to set our expectations accordingly with that in mind. I think additionally, just setting our operational expense plans at that lower level of sales also helps us. And you know what? If we're a little bit off, and the customer comes back sooner and stronger than we think in December, then, the flow-through will be very high, and we'll be very happy with that. I think additionally, what you might also be seeing in the guidance is we do have expectations that the month of January will also be down to last year. And part of that, Janet, is because, Semi-Annual Sale is such a large part of what happens in the month of January, and coming into the quarter with inventory levels in our VS and PINK business is down high single digits, we think sets us up well to have a very profitable, Semi-Annual Sale and not have to move as many units, and maybe have some opportunities, to be a little less promotional on Semi-Annual Sale. So that does have an impact on the top line. So I feel as if we've set our expectations, very diligently for the balance of quarter and positioned the business that, you know, in the event that things are more robust than we think, the flow-through would be very high, and that's a good position to be in. The other opportunity that we have, Janet, is, as TJ said, we're expecting our inventories to be clean, is to pull forward spring fashion. So we're actively looking at ways in which we can pull forward newness to help that January period with full price selling. I think we have time for one more, Kevin Duffy. Yep. Thank you, Janet and Ivy. I think, let's go with one more question, please. Thank you. And our final question comes from Marni Shapiro from Retail Tracker. Please go ahead. Thanks, guys, and congrats to the stores. It was a pleasure having to wait online to get in on Black Friday, I have to say. You have made some big investments in the Q3, marketing moments, I would call them, you know, from the show, Netflix, et cetera. I'm curious if you could just talk a little bit about the halo effect. Did you see a bump in traffic around those events? Did you see the sell-through that you were expecting? And, you know, curiously, millennials grew up with Victoria's Secret. It was where they went. It was their be all, end all. PINK was their baby brand, but Gen Z, less so. As they were growing up, Victoria's Secret was sort of, you know, hitting a lot of speed bumps, I guess, is the way to put it. So I'm curious if you're now starting to win over Gen Z now, and is PINK the vehicle to do that? If you could just talk about that under the guise of marketing. Yeah, great questions, Marni, and thank you for asking. Look, we did a lot of resetting of the marketing agenda during Q3, particularly in September and October with the World Tour. You know, our objectives on the World Tour, as I said at Investor Day, were create a media frenzy, mission accomplished. Be part of the conversation of what popular culture looks like now, where we were outside of that conversation previously. And thirdly, to create assets, marketing assets that we could use over a consistent period of time, and we've been able to do all of that. We then followed that moment, quickly with the My Wings, My Way campaign, which was kind of a different articulation. Then Mariah, you know, popped out with a very big moment, and so a lot of attention to the Victoria's brand. The key metric that we look at is brand sentiment, and we're sitting at about 80% positive in brand sentiment, which is good. We look at and we track independent research on all of the other metrics, like relevance, like intent to purchase, like gets me, you know, there's a whole series of ways in which we measure those, and we're much more focused on how those are moving over time than we are about, did you see a lift in traffic? You know, did you see a lift in traffic is really more about promotional marketing and about performance marketing in the digital arena and in social channels. The moments I just spoke about are more tent-pole moments, where we're looking to grow, you know, the halo that there is around the brand for the long term. And the, you know, decision about whether those have been good investments or bad investments will take time to reveal themselves. And we're now at the point of deciding what do we wanna do for 2024? So we're actively thinking about what the anniversary moment for the World Tour will be in 2024, and we'll make some choices about that in the, in the coming weeks and months. You know, you asked about Gen Zs and millennials. I'm delighted to say that we're over-indexing with Gen Zs. So we're strong with Gen Zs. Gen Zs like Victoria's Secret. We're under-indexing with PINK, for reasons that we've spoken about. So that just brings even more opportunity. When we get PINK back on its game, I'm super confident that we'll get Gen Zs and Gen Ys to come in strong. The area of opportunity for us has been millennials, where we've been underweight with young millennials, and we continue to look very hard at that cohort. Our personalized marketing capability will enable us to market differently, not just by generation, but also by psychographic behavior. And as we talked about at Investor Day, we've identified specific target customers that we want to reach, and we'll be marketing to them differently, depending on their preferences. I think we'll call that a wrap, and thank you for that question, Marni. Thank you all for your interest in our brands. Wish you all a very happy holidays! Thank you all for participating in today's Q3 2023 earnings conference call. That concludes today's conference. Please disconnect at this time and enjoy the rest of your day.