Victoria's Secret & Co. (VSXY) Earnings Call Transcript & Summary

Good morning, everybody. Two-way conversation. Good morning, everybody. Morning, Terrific. Laurie, are we good to shut the door now? Great. Let's pull the door, too, people are and or not. So welcome to our first Annual Investor Conference. It's just 14 months since we took the public -- the company public. So this is our opportunity to talk to you all. And our first opportunity to be together live with many of you since 2019. So kind of a lot to catch up on. To kick this off, let me start with the usual formality, which is that I have to remind you, that any forward-looking statements we may make today are subject to our safe harbor statements, which are in our SEC filings. So, with that said, let's get to the business of the business. So this morning, you're going to hear from myself, and I have 4 colleagues joining me, TJ, our CFO; we've got Amy joining us to talk about brand; we've got Chris Rupp, a new face you haven't met; and then Greg is here as well. And we will be -- our brief is to be as open and transparent as we possibly can be. And at the same time, we're going to be very balanced. So you're not here for a big sales pitch, you're here for an honest articulation of where the company has been, where the company is and where the company is going. And to do that, our agenda looks like this. I'll give you an overview of the strategy of the company at the highest level. I'll take about 25, 30 minutes to do that. Then TJ is going to come up and do the detailed numbers. So you're not waiting until the end of the presentation to know what it all adds up to. We'll take a little break. And then we'll hear from Amy and from Chris and from Greg, and then we'll do Q&A. So you'll have plenty of time for questions at the end. And hopefully, you can all join us for store visits after all of that. So that sounds good? Okay, great. We will -- we have lunch boxes after the Q&A, and then there are 2 buses taking us out to the stores. So hopefully, we'll keep everybody on track and get you all out of here on schedule. So in thinking about where we are as a company, I always think it's good to start with a little bit of context of where we've come from, particularly in the context of what I just said of not having been together for a while. So I think about our place now in history in terms of 3 time phases. There were those fantastic years sort of 2008 after the global financial crisis through until about the spring of 2016. And many of you were here for those years, and you remember them well, some of you were not, but you know about them. Everything was going well. We were opening stores all over the world with thousands of people outside, margins were healthy, sales were healthy, inventory turns were good, it was all terrific during that period, and we call that the sort of growth years. And then we had a really miserable period of about 3 or 4 years that I'd rather politely refer to as the period of execution missteps. And that began in the summer of 2016 and ran through until the spring of 2020. And during that period, you might remember there were some things that happened to the company that were outside of our control. But equally, there are a lot of things that happened to the company that were inside of our control, and we have to take responsibility for those and go about fixing them. And that period ended with spring 2020, with the near sale of the company into private equity. Since then, we've moved to a new management team who are in the room today, and we're 2 years into what I consider to be a 5-year journey of recovery. So we're 2 years in, and we like to call that the rebuilding of the foundation. And if we track the financials to that, they align with the narrative pretty well. And that those peak years at the beginning, and I deliberately haven't put the actual numbers because our accounts were not audited in that way because we were part of L Brands. But Victoria's Secret was north of $8 billion and with a 20% EBIT margin at that period. We then had a really difficult period where the trend was all heading south. And now to bring us more up to date, you see the 2 years, and I'm projecting here -- I'm showing you last year as a statement of fact. And this year is a trailing 12 months. So a lot of consistency around that performance at a sales level, where we are $6.6 billion, and more consistency in terms of the EBITDA margin returning to something like normalized at $1 billion. So what are we? 5 minutes into the presentation, I'll give you the answer to where we think we're going, which looks like this. So over a relatively near period of time, we think it's reasonable to get the company to about $7.3 billion, $7.4 billion worth of sales that's adding about $0.75 billion in sales and getting back to EBITDA in the 20s, which means mid-teens operating income margin. So the same commitment that TJ and I have given you since we were first together 14 months ago exists. We believe that this company should run at a normalized level with mid-teens operating income margin. So let's come back to the present and the here and now, and there are 14 stats on the page, which I kind of like, which talk about where we are now. So we're $6.6 billion. We're $1 billion of EBITDA, which I just said. 4 consecutive quarters of meeting or exceeding our guidance, soon to be 5 if our press release from last night can be included. We're pretty significant in the e-comm arena with over 30% of our sales there, $2 billion. That's 500 million customer visits to our site every year. And we still enjoy a market-leading position in intimates. And in fact, in the last 2 quarters, we've seen an uptick in market share. We have 27 million people in our active customer file, about half of whom are new to the file. And that's built on the back of 80 million followers in Instagram. And our international business is a global business, over 70 countries, with 1,350 stores. And in recent period, we've been putting on north of double-digit growth. So a lot has changed, and we're making good progress from a financial perspective. We're also making good progress in terms of our culture. This company looks very different than it did under previous management. Just recently, we got the data that tells us that 87% of our associates report that they are proud to work for this company. That's 25,000 people, most of whom are female, saying they're super proud to be part of VS&Co. We have a new Board. 88% of our Board, everybody apart from me is female. Our leadership in the company is now nearly 60% female. And we're very proud to say that we've reached 100% pay equity on gender and ethnicity. So those are really important benchmarks. And we've started to lay the groundwork for investing in women-led businesses. We're laying the groundwork for our investments in matters that women care about like The Victoria's Secret Global Fund for Women's Cancers. And for the first time in our history, we've gone public and being transparent about where we stand on ESG. So in the spring, we had our first ESG report, and next month, November, we'll have our materiality assessment go public. So we're being very declarative about all the matters that under previous ownership were not talked about. We want to be on the front foot. And that comes from a strong belief that this management team is incredibly capable. Photos are up on the screen you'll hear from, but they're all here in the room today and are available to you to answer any questions when we're on our store visit. So we have a blend of very experienced, tenured people and some new thinking, some brand-new thinking challenging us, and we have the support of an incredible Board of Directors, who are not just supported, but very importantly, in terms of the history of this company, they are challenging. They are demanding of us, and they're probing and they're pushing. We meet on a super regular basis. And evidence of that commitment is Donna is in the room. Donna, do you mind standing up and give us a little wave. So Donna, our Chair, a round of applause for Donna, is here with us. Thank you, Donna, for being with us here. We have an aligned leadership team, we have an aligned Board, and we couldn't be clearer -- more clear about the extent to which this company has changed in a 2-year period. Now, at the same time, as we've been changing, the market has been changing as well. Everybody didn't just stand still and what shows go through that period of decline and then spend a couple of years getting our act together, the market has changed. So 4 charts to dimension that for you in the context of what is our strategic direction, what are we going to do with this company. So let's understand the market together. So this chart shows players in the intimates landscape, showing brands to the left-hand side of the chart and retail players or aggregates or marketplaces to the right-hand side of the chart. And what you can probably see is it's a very busy space. There is a lot going on in this space. What's important to note here is if you were looking at this chart 10 years ago -- 8 years ago, it would have looked completely different. This landscape was nowhere near as competitive as populated as it was. We pretty much had this place to ourselves. And on the right-hand side of the chart, there were department stores here who had most of the market, but the big box operators and the digital aggregators were not really active in the market. So while we've been going through this turbulent roller coast ride, the market has been changing. That said, it's still a very attractive market. We sized it at about $16 billion, some estimates have it at $18 billion. Within that, the foundation of the market is here in bras and panties at about $11.5 billion. Now that's really good news for us because that's where we're at our strongest. That is the core of our business, and we have a 21% market share, as I said earlier. Other things to note are shapewear and sport bras here where we're pretty underpenetrated. Our share in sport bras is 5% relative to much higher in structured bras. So keep that in mind. Another way to look at the market might be like this, where we divide the market into 5 different segments. So there's us at the top here with $3.2 billion in the intimate space. Remember, this excludes Beauty and sleepwear and Lingerie and swim and those things just intimate space, $3.2 billion. The biggest part of the market is the value brands segment, so the low price, low fashion operators, that's the biggest single part of the market. There's then the digital brands who didn't exist 8, 10 years ago. They've got to about $1.8 billion in overall revenues, pretty significant share of market for lots of companies that individually are quite small, but, in aggregate, it's quite an important part of the market. And then the store brand is relatively small at $1 billion and that repeat of sports bras. So hopefully, that dimensions have the whole thing fits together. One more chart shows brands in total, taking a lens of price, high price to low price down the Y-axis. And across the X-axis, we've got basics to fashion. There's a pretty simplistic 2x2, but I think you get the idea. And we are the big blob right here, with a huge blob trending towards higher price than average, trending towards more fashion than your basic company. Makes sense? Okay. What's interesting about this chart for me is all of this noise around here. There's a lot of stuff around us. And when you talk to those companies, I won't mention them by name, any of them. When you talk to those companies and say, tell me why you exist? What's your USP? What's your point of difference? Why are you here? The first thing they I say typically is a response to what Victoria's Secret is not. So many of these brands that are close to our core exists because we were not what we should have been. That's a really important insight for us in terms of where we take this company go forward. I'm going to return to this chart in a minute, but let me keep going and hit the highlight of, so what should we do? Given the fact that the market has changed in the way that it has, that I've dimensioned that it's mostly bras and panties, that there are 5 big segments, what should we do? And our judgment as a leadership team and as a Board is that our goal should be the world's leading fashion retailer of intimate apparel. It's a big statement. Let me unpack it for you because there are 4 words in there, 4 expressions that I want to just stop on. First is global. This is not a North American business. This is a global business, and Greg is going to talk more about that shortly. Second is fashion. We don't want to be in the basics business. We think our added value as a corporation comes from being a fashion company. Third is retailer. We don't want to be a wholesaler. We want to have control of the relationship with the customer for the most part, more about that in a minute. And then, finally, intimate apparel, where we're defining ever since slightly differently from what we said before. So we talk about a lot about Lingerie, and it's actually quite limiting and quite defining. But as a better term is intimate apparel. Now customers don't care. We're not going to talk to customers about the fact we're in the intimate apparel business rather than Lingerie, not that. But this is investors, this is all of us. So when you think about how we're setting ourselves up for success, how we're building this company to attack the market I've just described, it's with that lens of intimate apparel, global fashion and retail. So here are 6 statements that govern what it is that we think we should do with the company in the coming 3 years or so. This is the most important slide, I think, in the whole morning's presentation. So the 6 things that we believe passionately that we should do. Number one, we should evolve the positioning of Victoria's Secret and PINK to drive profitable growth from the core. So let me step back to this chart and say, so what that means is we should not be taking Victoria's Secret down here to play in the value sector. We're not going to do that. We are going to adapt and flex and expand the Victoria's Secret core offering so that we can take out some of those players that exist very close to us, who only exist because we were lacking in diversity, equity, inclusion, sizing, breadth of offer, et cetera. So the core of Victoria's Secret will not change. It will continue to operate in about the same space that it is. Now, if anything, it will trend in this direction rather than this direction. And the same is true with PINK, and Amy is going to talk more about that in a minute. So of the 6 things we're going to do, the #1, by far and away the most important is grow the core, okay? Second thing we're going to do, second most important, we're going to add new brands to the portfolio by making strategic investments to enhance the customer and category access to new capabilities. And we've already started this, to some extent, with investments in Frankies and for love and lemons. But there are other categories of merchandise where we may think that it's appropriate to make an investment on behalf of VS&Co., and our desire to be the world's leading fashion retailer in that space. Greg will talk more about this in a minute. Third, building on market collection. Let me explain that. We deliberately didn't use the term marketplace. We are not turning Victoria's Secret into an aggregator of everybody else's content. Don't think that makes sense. But with 500 million people coming to our site every year, we believe there is significant opportunity to sell those customers other merchandise that is close to our core, where maybe we don't want Victoria's Secret and PINK to go. So what might be examples of that? For example, sizing. We don't have to carry the burden of big sizes ourselves exclusively if there are other partners who can help us do that. Another example might be Leonisa in shapewear, an absolute category killer -- global category killer in the shapewear space. We could partner with them to have merchandise on our side. Again, Greg will talk more about that in his segment later. Moving across to the right-hand side of the screen, accelerating our international growth. We see big opportunity to at least double the size of our international footprint within the period of time that we're talking about. And we're going to tell you a bit more about that today. And then there's continuing to establish strategic partnerships. And the important word here is partnerships. So you know that we don't have to build everything ourselves. I think in the old days, the L Brands approach was everything is organic, everything is done from the center. We don't believe that, that needs to be so. If other people are doing something better than we are, we can partner with them. And the final statement is really internal speak, pointing at our own associates about the kind of culture that we want to have in delivering this journey. So I don't expect you to remember all 6 components of that strategy. It's kind of a lot. So we frame it up in terms of 3 pillars. And I could have started here, but I wanted to give you the detail first. So the 3 pillars of our strategy are: strengthen the core, that's Amy's heartland; second is ignite growth, that's Greg's heartland; the third is transforming the foundation of the company. I want to talk a little bit more about that. But it's a recognition that this company has operated in ways that are broadly the same today as they were 25 years ago. The way we buy and source merchandise is about the same as it was 25 years ago. In order to be future-proof for the next 10 years, there are processes and systems and ways of working that need to be modernized and refreshed. And that all sits within that third pillar of transforming the foundation of the company. So I want to say a bit more in terms of giving you some detail on the participation strategy. Again, this is not Victoria's Secret brand, this is Victoria's Secret & Co. the company. And I think about these as being guiding principles. So the guiding principles when we define our strategy in terms of brands, we start with the core of Victoria's Secret and PINK. We then have brands that we're invested in, and we then have marketplace brands. In terms of who the customer is, no surprise, it's primarily women. We're not being declarative about going after the men's space, the opposite. We're in the women's business. In terms of the age of the target market, irrelevant. Age doesn't matter. We don't want to talk about age. We'd rather talk about a state of mind and an attitude. In terms of the categories that we'll participate in, intimates is #1. And intimates needs to be north of 50% of our business -- ideally north of 55% of our business. When this company was in the period where things were going downhill at an alarming rate, intimates got as low as 35% of the company. That's not who Victoria's Secret & Co. is. We're an intimates business, and we need to leverage that strength. We'll also be in the beauty business, in the sleep business, in the swim business and in sport and Lounge. And that defines the space in which we'll play. In terms of the channels, reiterate what I said earlier. We want to be direct-to-consumer through stores and through digital commerce. We'll occasionally go into other people's marketplaces where it makes sense to do so. More about that later. We have no intention of being in the wholesale segment. In terms of geographies, I covered it. We're going to be global, that means everywhere is in scope. Values, these are really pointing at our associate population, so I won't go through them now. But I do want to spend a minute on their targets in terms of the financial operations. So we want to move from being a, "Let's just work with the core that we've got and bring out as much money as we can." We want to move to being a growth company. That's definitely part of our objective. Mid-teens operating margin, as I just said, top quartile total shareholder return. And the last point, which is very different from our history. The last point is, we want to be an efficient cost base operator. In the old world, under our previous ownership, we were kind of proud to say we're a high-cost operation. And we used phrases like cost is irrelevant. I don't believe that. I think for us to be at our best, we have to be a highly efficient operation. And TJ is going to talk more about ways in which we see opportunity to make ourselves faster and more efficient as we move forward. Hopefully, that all makes sense. So that's what we want to be when we grow up, and the 6 things we're going to do. That's the principles of how we're going to participate. This is the work, the work of the work. So like what are you going to do in order to deliver all of that? And again, they're aligned under the 3 strategic pillars of strengthening the core, ignite growth. So for us, strengthening the core, the most important thing we can do is continue the journey of the brand revolution. Now today, in this fall of 2022, that feels a bit more like a brand evolution because we've already made a dramatic change. But from where we were, it's a revolution, and Amy is going to talk more about that. That's the #1 thing to do in our core. Second is to continue to be best at bras, the heart of the business is bras. That means new innovation, new launches, the first category we talk about is bras, the category we talk most about is bras. If you ask us a question about swim, we'll answer it. But it needs to be like this much time on swim and this much time on bras because that's where we'll win. And finally, and importantly, the customer experience. Customers' expectation has changed beyond all recognition in the last pickup time period, 8 years. And Chris is going to talk more about how we want to face into that. And that means thinking less about channels, telling ourselves up as distinctly stores and distinctly digital and distinctly international and more about what we're here with the customer wherever she is, wherever she interacts with us. So that's the work of the work within our core. In terms of igniting growth, it's principally about international and market collection. Greg is going to talk about that. Transforming the foundation talent and culture, efficient operating model, it's TJ's sweet spot. And then product to market transformation and ESG. I hope you'll hear references to these 9 pieces of work through everything that you hear today. The one that you won't hear much about is product to market. That means our supply chain. Now Dein is in the room. Dein, give us a wave. Dein is our Chief Operating Officer. He leads this part of the business. He's here to take any questions. He'll be miked up later. He'll be on the store chores. But we didn't have time to fit everything in. So I'm going to cover 3 charts that dimension how we think about supply chain. So chart #1 is, how did we do during the really difficult period of COVID? How do we rate our scorecard? Did we get through it okay? And our view is, we did pretty well. And we did pretty well based on our ability to quickly respond to shifting consumer trends and shifting capacity in the market, we did pretty well. We had impressive reorder speeds, and we have continued to leverage that. I think you all know we have super long-term relationships with our suppliers that are diverse in terms of geographical spread and that helped us enormously to move production around and to ensure that we got the goods, and that our goods were towards the top of the queue, if not at the very top of the queue. So while COVID was challenging, no doubt, and the word delays. And there were costs, I'd mention that in a minute, we actually did okay. In terms of those costs, 2 numbers that this audience often asked about, so I want to get them out of the way first. The first is the investment that we made during fall 2021. It was about $160 million worth of cost. That's principally in moving freight from boats to airplanes and some other elements of cost. In spring '22, the 6-month period of that season was another $140 million worth of cost. So in the trailing 12 months, you've got $300 million worth of mostly onetime costs related to the supply chain disability. Good news is that's starting to ease. Cost of freight recently is down about half on where it was previously. So the 2 big takeaways in the circle are: #1, supply chain challenges will become -- will begin to normalize during Q4 -- not Q3, during Q4; and secondly, we're going to return to our ability to chase. So let me say a bit more about chase. When the business was at its best, we would start the season, the fall season, with 65% of our money spent and 35% of our money opened to chase. That's a really healthy model. It means you don't buy the losers, and you buy more of the winners. During COVID, forget that, tear that playbook up completely. At best, we were 90-10. We were probably 95-5. There was no chase agility in the system. This season, we went into the season with an intent to be at 75-25, 25% open. That's good. Actually, we'll be less than that because as consumer trends have softened and as the outlook has got more and more bleed, we're just taking away some of that open to buy and say, it's not open to buy, it's close to buy. So actually, we're going to be more like 85-15, but if the market turns around and if consumer trends pick up, we'll be there, and we have favored nation status with our vendor base that we'll be able to put more dollars towards it. But we think in this environment, it makes sense to be conservative with our cash. More important side on supply chain is what do we do in the future? Now this very dark slide, you won't have a clue what it is. It could be Manhattan at night. It's actually a bank of supercomputers. And the reason there's supercomputers there is to explain that the future of supply chain for us is transformationally different from where it is today. And that's in 4 of the 5 things that are on the page. Digital design, we don't really do it at the moment, we need to. Best-in-class is adopting digital design. Second is using artificial intelligence in everything that we do, but particularly in merchandise planning and allocation, where we haven't started that journey at all. Third is automation. We have some automation in our warehousing and distribution. There is significant scope for more of that. Improved speed of delivery has always been part of our DNA. So that just continues. But advanced, enhanced visibility of provenance of merchandise and raw materials, that's a new thing that wasn't even thought about 2 or 3 years ago. So 4 of those 5 things on the page will be incredibly important to us as we go forward. So when you think about the third pillar of strengthening the core, igniting growth, transforming the foundation, it's all about this stuff. It's all about reengineering our company to be set up for the next 10 years rather than the last 10 years. Makes sense? So with that, I'm going to hand over to TJ, but I'll leave you with my parting slide, which is, we think we're midway through the journey, 2 years into a 5-year turnaround. We're clear about the vision. It's to be the world's leading fashion retailer of intimate apparel. And we get there by focusing on the pillars of our strategy, 3 pillars of our thesis, you'll hear more about that throughout the day. Makes sense? Okay. TJ, come tell us about the numbers.

Thank you, Martin. Thank you for your leadership and clearly, his passion for the business and what we're doing is contagious throughout the business. And I think you'll certainly get a feel for that as we go through today. I'm excited to be here. As Martin mentioned, about 15 months since we last talked about the long-term strategy of the business and a lot's changed. We've accomplished a great deal. We've pivoted in a number of ways. We had a supply chain challenge that was unprecedented maybe, or at least hasn't happened in many, many years, and now we're in a difficult macro environment. So a lot has happened in the last 15 months. And what I'm excited about is there's been a lot of great work on the part of the company to really position us for the future. So Martin went through a little bit of financial detail in the -- in the earlier slides, but I really want to focus in on kind of where the business was trending and the changes that have been made to stabilize the foundation. 2019, as Martin mentioned, was a tough period of time. And think of it as a trough year, the trends were decelerating. Things were not looking so great. 2020 comes along and COVID joins us, and there's a failed sale process. So the business was in a very difficult place, and you see that on the slide behind me. But it was really during that failed sale process where VS took control of its own destiny, and developed our own profit improvement plan, started to implement that late in 2020 and through 2021. And all you can see that happened on the screen here is sales started to improve, EBITDA performance started to improve, and we stabilized the business with a very firm financial foundation to grow on in the future. A lot of things happened during that period of time, things that we should be doing on a regular basis, managing inventory, reinstituting inventory disciplines that had been successful for the business in the past, closing unprofitable locations, getting to a profitable fleet. You're going to hear a little bit about that from Greg in a few moments. Really looking or starting to looking at cost, and do we have the right amount of people in the business for the size of the business and the thought process going forward? So what I want you to take away from this slide because we get this question often, the business and retail went through this pandemic and a lot of changes happened and a lot of retailers benefited and some were challenged. Is the place that you are today sticky? The changes that you made, are they sticky changes? Are they foundational changes to build on? Or did you get a benefit from COVID like everybody else? What we're here to say is those were foundational changes. There was hard work put in by the part of the business. We changed arguably a little later than we should have, but we changed as a business, and we've got a firm financial foundation to work from. So from a sales perspective, focus on profitable sales. From a margin perspective, margins are well off of the 2019 lows. From an expense standpoint, expenses are well lower than the '19 highs. So a very firm foundation to build on for the future. So now we're ready to move forward. As we think about the moving forward and building from that foundation, you heard Martin mention our commitment to mid-teens operating margin rate has not wavered. We are still there. We do think the way that we'll get there might look a little bit different than we might have thought 15 months ago, and we're going to go through that today. That's the exciting place of where we are today. We can see the vision. We can see the path on how to get there. The starting point, candidly, we could use a little bit of help from the economy. We could use a little bit of help in North America from an economic standpoint, but the future vision and strategy is in front of us. So this is maybe the most important slide I'll cover. So I'm going to pause here for a few moments. But the 4 circles across the screen, just think of kind of working your way down the P&L. So total sales growth. We are focused on delivering mid-single-digit sales growth over a period of time. Again, the starting point of that might be determined by a little bit better economic backdrop. But the point remains that there are strategies in place to drive that kind of growth. What's interesting or what's encouraging is we do have multiple levers today, multiple identified levers, many of which have been tested and proven out in order to be successful. A little bit different than where we were 15 months ago. So when I think about mid-single digits, we're really talking about 4% to 6%, so put a big circle around 5%, let's go right in the middle and be transparent. 1/3 of that growth, we think, will come from strengthening the core. You heard Martin talk about strengthen the core, ignite growth, transform the foundation. Strengthen the core, that's really about North America. That's really about bras, intimates, Beauty, as our leading key categories. Amy is going to go deep there in a little bit after the break. That's about 1/3 of the mid-single-digit growth. So over the 5%, about 1/3 is going to come from strengthening the core, North America, beauty, intimates, et cetera. The remaining 2/3 will be more focused in the ignite growth section of their priorities, and that sits more squarely in Greg's world. That's things like international growth. You're going to hear about our penetration rate, and how we're woefully underpenetrated against other global brands. You're going to hear about new business development opportunities that Martin alluded to a little bit ago. You're going to hear some exciting developments around channel and channel distribution. We're going to go a little bit deeper and share some exciting developments around Store of the Future, and how we're going to build out that concept. So in Greg's world of igniting growth, think of that as the next 2/3 of our 5% growth. So 1/3, strengthen the core, Amy's world; 2/3, igniting growth, more in Greg's world after the break. From a merchandise margin perspective, I think the good news in what's been a challenging environment is we continue to focus on those inventory disciplines that are going to make us successful. We're in good categories. The intimates space is a good margin category. The Beauty category is a high-margin category. The balance of the store, it's good margin categories and they ebb and flow depending on our success in those categories. So we have a stable merchandise margin platform to work from. Alongside of that, finally, we're seeing some relief in the supply chain from a cost perspective and from an availability of goods perspective, opening up with vendors in terms of excess capacity and how can we do more and how can we chase and how can we really look at who are the right vendors for us to be working with. So from a margin perspective, we feel good about the platform that we're on. So sales mid-singles, think about margin mid-singles. That's pretty impressive so far. From an expense standpoint, in the first 5 quarters, I'll include this third quarter that we're in because we shared some information last night. From an expense standpoint, we haven't surprised you. We've gone the other way. We've surprised you to the good. We've been able to be more efficient than maybe we originally thought. So expenses growing at a slower rate than sales is the vision going forward, and I'm going to talk about some specific initiatives in a moment. But really, what we've created here is a profit wedge. Sales and margin growing at a faster rate than expense, we like that formula. In the end, in the end, operating income in the mid-teens is the future vision. Again, the time at which we get there, the starting up point at which we start to see growth in North America, that's TBD that will largely be environmentally driven from an economic standpoint. But mid-teens is the goal. A lot of good things happen on the march to mid-teens. What that really means is $400 million, $500 million, north of $600 million of free cash flow when you get there. So a lot of good things happen when we have cash to reinvest in the business and focus on growth, okay? So it's interesting. One of the first things that Martin and I talked about before I joined the company was, he said, the difficulty has been is, we would not been investing in the business. We were not allowed to invest in the business. We were in capital jail, so to speak, until performance turned. It's kind of a self-fulfilling prophecy, right? You just kind of keep spending. So Martin and I are aligned, we will reinvest in the business for growth. We will reinvest in the business to start to get our store fleet back to current again. We will reinvest in things like Store of the Future. And a common question also is, is the fashion show, when will that return? We will reinvest in and develop our own version of the fashion show. That's all embedded in our operating income goals. So we do not want to be in the place of never reinvesting in the business again, not a good place to be. So that's the long-term vision of the financials of the company in those 4 big circles. And hopefully, that goes a little bit lower from a detailed perspective and helps you understand. As Martin mentioned, strengthen the core. So when I think of strengthening the core, I think of sales, I think of sales opportunity, I think of ignite growth, I think of sales opportunity. When I think of transforming the foundation, there are some elements of transforming the foundation that will help from a sales perspective. But I think more about the margin opportunity and the expense opportunity in the business. Going a little bit deeper, when we transformed the foundation, we're thinking of 3 big buckets. And these 3 big buckets, we believe, over time, over the next 2 to 3 years, there's roughly a $250 million opportunity to reduce the cost structure of our business. A portion of that will show up in margin in terms of increased margin, lower cost of goods. A portion of that will show up in lower expenses, but a $250 million opportunity. I won't go through the details of each one of these in terms of the dollar in sizing, but just understand that, from left to right, is from biggest opportunity to smallest. So our biggest opportunity we see is in the sourcing and product cost initiatives in the business. Dein and his team working with Amy and his team will be leading that effort. That looks like looking at raw materials, production, freight and duty, taking complexity out of our business, the move that we announced in July to a new org structure where we have Amy leading brands, working together. We have Greg focused on growth, working together. We have Christine with the channels together, one view of the customer. That takes complexity, lowers complexity in our business and ultimately ends up in lower cost all the way through the supply chain from beginning, all the way through the customer. An efficient operating model. Again, modernizing the company, the downstream implications of one view of the store, one view of the customer, one view of growth has tentacles that work its way all the way through the business through people, process, stores, distribution, and we're going after that. And then the third bucket that we have been talking about a little bit is non-merchandise procurement. So, to us, non-merchandise procurement, if you think about all the costs of being a retailer, you buy merchandise, you have rent, and you have people. It's not that. It's everything else you spend money on in the business. It's marketing, technology, professional services, maintaining our stores, distribution centers. Non-merchandise procurement is a focus, and we know that there's cost opportunity there. So in transforming the foundation, over the next really out through 2024, almost into 2025, we see a $250 million opportunity in our business. So let's step through. What does all that mean? How do we get to 15%, 9% plus 1%, plus 2%, plus 3% equals 15%. So the best -- the better side of our guidance for 2022 is a 9% operating margin rate. When we achieve that, from that point forward, strengthening the core, we think, is the next point. The next 2 points are igniting growth. Again, that's in Greg's world. The final 3 points are in transforming the foundation or the $250 million opportunity. So let's step through those for just a moment. Strengthen the core. Strengthen the core at 1%. That is sales growth. That is North America. That is the categories we talked about in terms of intimates and Beauty leading and others following. You might look at that 1% you say, why wouldn't that be a bigger number? We're going to reinvest. We're going to invest in Store of the Future. We're going to invest in our version of the fashion show. We're going to invest in those opportunities that we see that are most important to keep the brand relevant and keep the brand moving forward and not taking a pause. That's really focusing on the core. That core does move outside of North America and have positive impacts in international and our ability to attract strong new business development partners. So there is, again, an umbrella impact of strengthening the core. But if I just think about the sales opportunity and where we're going to be reinvesting, that's how we get to the point of growth there. The next 2 points, international and new business development. Again, low cost structure that we're going after those opportunities, but margin accretive. So those 2 areas, in particularly, tend to be already close to or maybe slightly better than mid-teens operating profit rate. So those are highly accretive growth opportunities. And then the third piece, the last 3 points is really just the math of $250 million at the end, on a little bit over $7 billion of sales. So 9% plus 1% plus 2% plus 3%, 15%, that's how we will get there. When we get there, and even today, we have a very firm financial footing to build from. Our liquidity is strong. Our leverage is light. Our balance sheet is in great shape. The teams have done a wonderful job kind of navigating a very difficult environment. And even though we've had bumps along the road, and our inventory might look a little high in this quarter or a little low in that quarter, we're on a glide path to having inventories at the end of the year that look like lower than the prior year. Lower than the prior year when you exclude some of the model mix impacts that we've been experiencing in our business. So liquidity, leverage, strong balance sheet allow us to do a lot of good things for the business and position it for future growth. From a growth perspective, we are being declarative here that we will start to lean in a little bit heavier in terms of CapEx. So CapEx that has historically been more around 3% of sales will start to go up towards 4% of sales or slightly higher. Why is that? You're going to hear from Greg in a little bit about the success of the Store of the Future program. Hopefully, you'll see the store at Harlan, Mervin today, and you'll also see the store up Brooklyn you'll imagine what's possible as we start to roll out Store of the Future in a more robust way across the fleet. We're being declared about wanting to do that. The results suggest that we should do that. Also, we are still moving through the separation process from our former parent LB. So once we move through that process, we do need to lean into understanding our technology and systems better, both from a digital perspective, but just more a forward-looking perspective to support the business, again, making sure we're staying current or staying ahead. So we do expect that we will be leaning into CapEx in a more robust way going forward, but we believe that we have the test results and the information to support it Additionally, one nice element of strengthening the core and the more efficient core throws off that strong cash flow. It allows us to pivot-in and invest more in the growth opportunities. So externally, looking at new business development partners will continue to be a focus. That's the & Co. piece of VS & Co. that you heard Martin mentioned. We're going to do all of that but in the end, we typically have cash left over. What are we going to do with that cash? Management is aligned with our Board. We understand that's our shareholders' cash and absent a better return initiative we will return it to our shareholders. To date, that has looked like share repurchase. In the future, a likelihood continues to look like share repurchase, especially given where the business is currently valued and how we see our growth opportunities going forward. So until such time as our valuation matches our performance, our valuation looks more like top quartile, we'll continue to lean into share repurchase activity. So very firm financial platform to work from a strong view on how we want to invest in the business going forward and plenty of cash left over to return to shareholders. So kind of my wrap-up slide, if you don't remember anything else that I said today, I'd like you to remember these 4 things. We're in a very solid financial position, and we're focused on modernizing the company, and pivoting to growth. We have growth drivers that are identified and clearly easy to understand and go after for the business, strengthen the core, ignite growth through international and new business development. We're focused on delivering mid-teens operating margin rate from 9% this year to 15%, evenly split between growth opportunities and transforming the foundation. And the sum result of that is a strong free cash flow and liquidity continues to be a strength of the business and allows us to do all these wonderful things. So with that, we're going to take a short break. And after the short break, Amy is going to come up and talk about the brand strategy.

Thank you. We're going to take a 15-minute break. Please be back in your seats by 10:05. [Break]

Okay. So that's a little loud. So we're going to go ahead and get started, and we'll move off of my picture. So my name is Amy Hauk. I am proud to represent the brands of Victoria's Secret and PINK here today. I've been with the company for 14 years in its previous life, I was at Bath and Body Works for 10 and have been at PINK and Victoria's Secret for the past 4 years. So I wanted to kick off because we just had a break with kind of talking about, again, the company's strategic priorities that Martin and TJ spoke about today, really about strength in the core, and that means strengthen and grow the core, of course, which I'm going to dig into more today. And then ignite growth, again Greg will talk about that and then transform the foundation. And I think it's critically important to remember that, that leaves itself through everything that we're talking to you about today. It's doing more with less. It's about being efficient. And part of this new structure really allows that to thrive and we plan to take full advantage of the opportunity that, that creates. So today, it's all about the power of the brand, performance, the product pipeline and critically the positioning, and that's what we're going to talk about today. If you can't tell I do have a fondness for the letter P and I do love good alliteration. So you'll see that pop up through here. But first, before we get into more details, let's set the landscape and talk about business. So $6 billion North America, you can see the breakout here. intimates making up over 50%. And when you add beauty and TJ talked about the power of those 2 areas in our business, to position ourselves for growth, that's close to 70% or over 2/3 of the business. And those are the areas we will really be focused on as a brand in pushing this business forward and growing it. Sleep at 12% and other, which does include apparel, which historically has run in the low double digits, and we're going to talk about rightsizing apparel a little bit later in order to fund some of these ideas. #1 intimates brand dominant market share, 21%. In our peak, we were over 30%. So I'm going to talk a little bit more later about why we see that as opportunity to grow, that's ours for the taking. And then 2/3, 1/3 as far as digital and bricks and mortar. So a new organization. So for the first time in our history, we have united our brands as a single collaborative organization, and this is pretty exciting. And I am so proud to be the CEO of this united brand standing here today. I think it really helps us to better connect with our customers where they are. And if you think about it, we haven't probably been doing ourselves a service. So this new structure really liberates us. 80% of the PINK brand and VS brand share a physical footprint in our stores. They have a shared digital experience. And over 1/3 of our customers are multi-brand customers. They shop in both -- under both brands and across multiple categories. This structure allows us to better streamline the organization and focus on the few that drive the many, which is really going to be about best at bras, growing intimate share and then maximizing beauty. Okay? So let's talk about how we're going to win. So we're going to lead with the customer-first approach. This business is about listening to the customer and being where the customer is. We need to think about her as our best friend. We know what they want, when they want it, and we also know what's going to surprise them. We also know what they don't want yet and we're here to think about every decision we make through that lens. We need to be where our customers are. That means being in our stores, that means shopping and experiencing the digital experience on a consistent basis. That means being out on college campuses, watching people in the mall. Patterning around the world to see what's happening in fashion and what she wants as well as experiences. We also need to deliver best-in-class product and productivity. Critically important, best at bras is everything, and that's going to be led by innovation. A solution-oriented assortment, we are reclaiming our innovative position in bras. And I just got back from Vietnam. I'll talk about it a little later, but so exciting to be back in factories, back at talking innovation and really making sure we're at the forefront of that. And then productivity Growing dollars per square foot is critically important in maximizing profit and flow through. Our dollars per square foot are above the mall industry average, but we need to keep pushing that to be world-class, and we are committed to doing in our current real estate. We also need to maintain an innovative product pipeline. And I think we have an opportunity to do even a better job with the products we currently have. And I'm going to walk through some of those franchises in explaining the technology that is proprietary in these products. But we have tenured relationships with our vendors. I just got back from a summit in Vietnam, where we looked at some technology for pads that is second to none when we think about what is next in bras. And we're moving quickly realize that, to test it and make it happen. As stated before, we are committed to a spring and fall bra launch built around that innovation. And that is getting back to our playbook of when we were at our best. And so building these pillars and building these franchises and then understanding the incrementality sets us up to lead in this industry and continue to grow in market share. I can't reiterate enough about the last point, though, continue to transform the brand in line with our values. That is critically important in putting our customer first. When I think of ourselves as a brand, we should think about ourselves in terms of holding up that mirror and our customer sees themselves reflected in that mirror and the choices they make when they participate and purchase from Victoria's Secret. So strengthening the core is where I'm going to start and modernizing the brand through the filter of innovation and a customer for [indiscernible], which is growing intimates and growing that market share. Okay. So strengthening our core is to continue to be best intimates by focusing on innovation and therefore, growing market share. I think it's really at 21%, our peak was in the 30s for every point of growth in market share in intimates, that equates to $150 million. While I can't commit to where that's going to get, there's a clear path that says what we have done. We can do again. Martin showed some in his bubble chart, some of the small bubbles around us, this is a clear strategic path forward and a goal that be shooting for in not only strengthening the core, but growing the core. Okay. So let's talk about the how. So we'll grow our intimates business by anchoring to inclusivity, which will be the foundation and face of this category. We have a very robust test-and-learn agenda, and I can't tell you how passionate about testing and learning I am and how critically important it is in listening to the customer and getting that assortment right, so we can maximize sizing opportunity, especially in digital. We are currently testing size expansion in our stores and in digital. We are understanding incrementality and we are understanding the benefits to our customer. And these tests are critically important in order to maximize profitability dollars per square foot and most importantly, give the customer what they want in the way they want it. Okay? So we also offer a range of nudes in both VS and PINK and again, we'll continue to test expansion in nudes across multiple frames. As I mentioned earlier, we are also committed to 2 new innovation bras per year. And I think that there is a lot happening in innovation and from inclusivity, we also know there's opportunity, for example, in the adaptive market. So continuing to test new ideas and understand incrementality and who we're appealing to from a customer base. We're also excited about optimizing good, better, best pricing across the box. We've never done that before. It's the first time we're aligned across both brands. So if you think of where everywhere, which is the #1 franchise in the box, that really sits in our good positioning that's a PINK franchise bra. And so we think about PINK is covering that good, better and then Victoria's Secret intimates really covering that better/best and then pushing and testing against elasticity into the higher price points. We have seen with the success in sexy sleep that she is definitely willing to pay more for high fashion and highly traditionally sexy garments. So we'll continue to mine there, especially in some of the online categories, which we've seen some pretty exciting recent success in. Okay. So I wanted to talk about innovation in some of our recent bra launches. So we talked about our commitment to those 2 bra launches. So I wanted to go through some of those. So Infinity Flex launched in August of 2021. It's pretty innovative in that the wire is completely flexible but it also molds to the body and can adjust creating a unique and perfect fit. So in other words, if you lose a little weight and your breast size decreases, it will adjust back. It can also expand. It's not overly dramatic, but it does customize and adjust to shifts in your body. Pretty exciting stuff. We continue to see success in this franchise. We're very excited about the innovation there. Love Cloud, unbelievably, the softest collection really best represents our new VS customer, and this was from customer insights data. The new -- this launch really reflects what our customers see as the new face of Victoria's Secret. And it's all-day comfort with the benefits of a constructed bra. So it was also our first campaign and Bare feels a lot like this in the -- from a Fragrance perspective, where we used 18 women to really show the diversity and the range of coverage that we give with the bra franchise. Wear Everywhere collection, #1 franchise in the entire box from a volume perspective. We relaunched that with recycled materials in all core frames. So again, from an ESG standpoint, and working with our supply chain, making sure that we're doing good by the planet, wherever possible. And then the Sos, the Very Sexy So Obsessed Wireless. We have 2 frames in this, one with a wrapped wire cushion, but the most exciting, and you probably saw it flash up here is the wireless push-up. It adds actually a cup and a half of lift without wires. It is the most comfortable bra, you will have ever worn that gives you lift and it's with swans wire. It's absolutely unbelievable. I can't say enough about it. So next, we're going to talk about elevating beauty as an extension of intimates, and I have a real soft spot in my heart from beauty because of my background. And so when we merged VS and PINK together as one collective organization, it was really an opportunity to better position beauty as an extension of the brands. Helping us to really elevate the customer journey with beauty as the perfect complement to lingerie. We love beauty. She's loyal. They are high-value customers. They are high spend. They spend the most. They're also a basket builder, converter and a trip driver because of replenishment she shops more frequently, they shop more frequently than other customers. And there is a big growth opportunity, and it's a perfect avenue to sync up and link in our growth around intimates. So we'll grow the beauty business, the how by extensions -- extensions and adjacencies. And you see a picture of Bare here, which is an unbelievable fragrance. This is the first new pillar in 5 years, right, Greg? It's an amazing fragrance. It is growing rapidly, exceeding expectations. And it's innovative in that the fragrance actually adjust your body chemistry to give each person that wears it a unique scent that stands on its own. This is the second franchise where the customer has told us through consumer insights that this fragrance and this launch represents the new modern Victoria's Secret. Very, very exciting. So we will continue to launch innovative fragrance pillars, which are rate accretive. And we know drive visits and drive loyalty in growing our intimate share. We are also testing personal care, body, hair and home fragrance aggressively in 2023. So I think that's important to know. We will also be increasing our point of view around sustainability with both product and packaging, including initiatives to transition away from virgin plastics to those made of recycled materials. We are eliminating phthalates, sulfates, parabens. And then we're reformulating with clean bases in 2023, free of dyes and parabens. And in 2024, we're again, our natural beauty line will have no artificial dyes, no sulfates, no phthalate, parabens. So we are on this journey. We're committed to this journey. And 2023 is going to be a pivotal year for beauty at Victoria's Secret as we move into more of these natural ingredients. So I wanted to close out. Next, I wanted to talk about really our opportunity around adjacent categories and then the why, which is our mission and vision. And this is the last area of focus. So we have grow intimate share critically important, one point a share, $150 million. Elevate Beauty, our most valuable frequent visitor, rate accretive nice flow-through and she visits frequently. And then what are those strategic opportunities in adjacent categories. So Expand Sleep. Big opportunity in PINK specifically. This is a big part of our business, but VS intimates is 8x more volume than PINK and Sleep. We see this as an exciting opportunity for the box as well as PINK we have amazing productivity in Sexy Sleep, which I mentioned earlier, so continuing to grow that arm of the business. Rebuild sport. We are going to rebuild sport anchored around the sport bra. So I talked about best at bras, and we're going to reimagine it by leaning into bras, into technology into outfitting and into seamless. We have lost 2 points of contribution in sport, and we feel like there's an opportunity to recapture that market. And in fact, we just got a sample of this unbelievably maximum support bra, that weighs less than 8 ounces in your hand, but it delivers maximum support. It's unbelievable. So continuing to lead with innovation is very exciting. Okay, Reclaim Swim. I think this conversation has been had quite often, but $0.5 billion business that we kind of walked away from. And we -- this year, we'll do less than 1/3 of what that is. And so we know we have opportunity in the swim business, and we're going to anchor that around our best at, which is the frame of the bra and making sure that we have technology integrated into our swim and that it fits the best in the industry and that the color point of view reflects what's happening from a fashion perspective. We easily think that this is another opportunity for us grow, and we love what this customer does for our brand. Now rightsize apparel. So when we look at the total box, apparel contributes about the low double digits to our total volume. We have had some misses in apparel that's been softer. And if we look at the competitive marketplace and we look at the initiatives that we're focused on, there are a lot of players in that field. We have a lot of ideas really enhance the core of who we are, where we can sit in order to get strategic growth. we will be tightening up our apparel presentation to be in the high single digits from contribution standpoint and really chase into the upside. Every time I get asked questions about the business, we give the customer what she wants when she wants it. And that's about being agile and speed, not only in our thinking, but in our actions. So when Martin talks about really that chase percentage, that keeping that open, as we hit on wins, we want to continue to think about opportunities to chase the upside in any of these categories. So while it's a strategic position, it doesn't mean that we're not always reacting to where we have wins in our assortment. So I want to wrap the ribbon up on the assortment in adjacent categories by saying we're constantly focused on consciously designing positive change. It's important for all of us to do what's right in our industry, for our communities and for the world. So we continue to be focused on sustainable products and packaging materials. Greenhouse gas emissions, and we are going to have a report out in November and then a full action report proxy statement out in April with our goals and objectives from a corporate position. And really inclusivity is the foundation of what we're doing from a size and shape, race and ethnicities as well as adaptive. We think it's important that Victoria's Secret represent all of our customers in an equitable manner. So the why, so important why. So I wanted to share with you our vision and our mission and then the pillars that support that. So our vision at Victoria's Secret intimates is to be the world's leading advocate for women, creating meaningful relationships intimately and the how is through people promoting diversity, equity and inclusion for both our internal and external customers. And our purpose, invest in the well-being of women and to amplify their voices and then for the planet, always thinking about what can we do to our products that customers can feel good that they're making a difference. And of course, all of what underpins that is the product because if we don't have compelling, exciting fashionable product, we're not going to grow and strengthen that core. So let's talk about accelerating that awareness. So 97% customers are aware of Victoria's Secret. That's a pretty incredible data point. And we know loyalty has grown. So she is seeing a difference. Martin talked about our share growing for brand equity, why Pulse study, we've grown 2 points in the brand tracker. So she is noticing, but we want to accelerate that. So we are repositioning the idea of sexy from a look to a feeling. So I mentioned earlier that mirror so that when she sees herself and she sees herself in our product, she feels strong. She feels powerful. She feels sexy on her own terms and how she defines it. Last year, the collective we launched a group of trailblazing women, right? Who share a common goal to drive positive change. Through collaborations, creating compelling and inspiring content, the VS Collective will continue to be an important part of our brand transformation. And we're excited not only to work with them externally but internally within our own company as well. And then as I mentioned, inclusivity will be woven into what we do. From our product offering to our marketing and to our creative, our store experience and creating that winning culture that Martin talked about earlier. It's at the forefront. Right? So the last coming soon, one of the questions we get asked most is about the fashion show and if and when we'll bring it back. We knew when we exited the fashion show several years ago that we would come back, but we wanted to do it in a new, modern, bigger and better way. We've always been an entertainment brand. That's part of the magic of making the movies of the storytelling. And we are excited to evolve and innovate and lead in that space. And really, that has to be aligned with our values and our commitment to welcome and champion all women. We can't wait to show you what's next but that's all you're getting, okay? Work is underway around Victoria's Secret global celebration of women. So stay tuned, you'll be one of the first to know, but more is coming, and I can't wait to share it with you because it's really exciting stuff. Team's done amazing work. Okay. So PINK, we're going to move on to PINK. The vision is to empower and support all young adults in everything they do while the mission is to outfit the world in optimism. And the brand positioning pillars, more Ps, more alliteration right, of people, purpose and planning. And again, the what is the product. That is the critical foundation of everything we do. We know brands have to be more than just selling product. They have to represent a culture, a lifestyle and a point of view about their environment that resonates with the customer. as they think about us in terms of product. So critically, critically important for us here at PINK. So I'm going to be back after this video, but I really, really, really wanted to close with our undefinable campaign, which launched a couple of weeks ago. And you may have seen it, but just to give you some data points before I roll this video. With consumer insight work prior to this launch, this scored 11 points higher than any previous campaign over the past rolling 12 months with our customer. And I think none of us can remember a score this high in recent memory, so the people that are with the brand. It is powerful. It is strong. This is Victoria's Secret. [Presentation]

So every time I see it, I get emotional about it. I think it's so powerful. I think the suck in your stomach is the best line ever, and Paloma is absolutely an amazing ambassadress of this brand in so many spirited ways. So before I hand it over to Chris, who's waiting over there, I just wanted to leave you with a few closing thoughts and wrap this up, right, the power of the brand. It's about performance, strengthening and growing that core and the 2 focus areas for us is growing intimate share. We talked about that $150 million per point and growing the beauty-based business, okay? Over 70% of our business sitting there. The product. Product is everything that we do. Martin talked about it earlier. We are a fashion brand. It's all about compelling product and innovation in supporting that. the pipeline, robust test-and-learn. We need data and facts to move this brand forward and to make the right decisions for our customer and then positioning what more can I say than the undefinable video. So thank you very much. Chris?

Thank you. Hi, everyone. My name is Chris Rupp. And in September, I took on the newly created position of Chief Customer at VS & Co. Now this is an exciting new role focused on listening to the customer and bringing the customer needs to the forefront. And as Amy said, all of us are focusing on the customer and putting the customer first. So I'll tell you a little bit about background first. I've spent 30 years in retail, starting with May Company Department Stores, and that was in the apparel department and then I moved to Sears, where I was in merchandising roles for 10 years, culminating and running the tractor division. Then I moved to Amazon, where I ran a retail vertical in electronics and then I ran the fulfillment by Amazon business for 6 years, growing that to scale. And then I launched the first Prime Day. After that, I moved to Microsoft, where I ran the Microsoft store, and I ran the Xbox store for a while. That's where I was in 2019 when I thought it was a good time to move to grocery just ahead of the pandemic, and I worked for Albertsons for 3 years. And that's where I was when I heard about this amazing opportunity at VS & Co. I'm delighted to be here with the team helping to change the way we look at the customer and change the way we invent on her behalf. So the first and most important thing that I think about in strengthening the core is how we focus on the customer. So as Amy alluded to, putting her at the center of all that we do is the first thing that we can do. And in addition to that, providing every customer with the world's best intimate shopping experience. That's what the work of my organization will be. Now historically, we took a channel approach in doing that, which means we thought about stores and we thought about digital. But that's not the modern way to think about the way the customer shops. The modern way to think about that is the customer is constantly moving between experiences that serve her needs. And so what we need to know is who are these customers and what are their needs so we can better serve them. So let's think about who is today's intimates consumer. Now as Martin said at the beginning, it's predominantly female when we think about purchasers, it's 92% female, 8% male. It's an omni shopper spending, as Amy said, about 2/3 in the store channel and about 1/3 in the digital channel. And she's invested in intimates. She's spending about $150 annually in this category. And the bulk of the spending is coming from millennials at this point. This customer spans every demographic. Think about age. Think about socioeconomic status. Think about the geography in which she lives. Think about ethnicity. Think about size. She spans every one of those things. And she has more options than ever before, but she is shopping fewer brands. What this means to us is that she is more diverse and her needs are more diverse than ever before, and she is very demanding. Now let's think about who the customer for VS & Co. is. Martin mentioned 27 million customers in our customer file. That's delightful for an organization focused on the customer, a rich file of customers, including the data about how those customers shop. That's a great place for us to start. Those customers, 45% of them are shopping multiple lines of business, 37% of the business is coming from omnichannel customers that are shopping both channels the customer is making 2 to 3 trips per year. Our upper decile, the top 10% are shopping 8x per year. There's 200,000 active daily customers, 25% of which -- 25% of the revenue is coming from the app channel, 60% of our top decile customers are engaged in our Victoria's Secret credit card. And we have 80 million followers on Instagram, 435,000 on TikTok. All of these places are a great place to start. Now another way to look at this is the opportunity space that this provides. There's over 100 million potential customers in North America alone. So I see a ton of upside in that number. And with 2 to 3 shops per year, I see upside in the number of times she's coming to us. I also see upside in the her basket size and our ability to help connect her with the right products to fill the baskets fuller. In order to do that, we're going to need to know her better. So what does she need? Well, this is a category where she has a vast variety of needs, and we need to know her intimately. She has a lot of questions. She's not always confident about asking them. She needs help. And every customer deserves a shopping experience that's tailored to her needs. Every purchase in this category, it's more than a transaction. This is an emotional purchase. And so we are not just serving a transaction. We're in a relationship with our customer. And so we're going to develop that relationship even deeper, knowing her needs better and meeting her in the right places in right moments to serve her better. Now when I think about her needs in this category, we think about what we've done historically to server in stores and online. And we're meeting a lot of the table stake needs for her. For example, in stores, that's fast checkout, easy returns, functional benefits on signing. In online, it's also a fast checkout and easy returns, but a variety of payment options. What we have moved into is how do we differentiate our experience. Our store experience has long been differentiated. We have profit experts that can help connect women to the right products for them every time someone enters the front door. Now in the digital space, we can start to learn from everything that we've done on the store floor to serve her better there as well. So as we think about differentiating our online experience, we already have the ability to have fast shipping. We already have easy-to-find products, but what we don't have is journeys designed for the experience she's looking for right now. We could be better at fast shipping. We could be better at navigation. And one thing I'm super excited about is digital-fit because as the expert in digital-fit in store, becoming the expert at digital-fit online will help us help her better in those online experiences. Beyond that, we'll get extra credit with the customer for a great loyalty program. We'll talk to you more about that in a second. Now we've already made significant investments in this space. We have 830 points of distribution. 20,000-plus associates practicing consultative selling. We have bra fit experts across stores and now digital data from 27 million customers, which allows us to personalize, we've got a lot of great assets to draw from. And the newest thing that we're rolling out, we've just launched it in a closed group test. It's a fantastic non-card loyalty program. This program has more rewards, member exclusives, community and engagement benefits. It combines 2 strong apps into 1, and we're going to be able to personalize experiences as we get to know these members more and more intimately. It's a great step forward, and there's still so much more opportunity. So we are going to deepen our relationships with our existing customers, and we're going to broaden and attract new loyal customers. And the way that we're going to do that is, first, we're going to meet our customers where they are. We know her journey starts well before she steps foot into the store or goes to our app or website. The journey starts the moment she starts thinking about the occasion. The occasion, it could be a formal occasion, homecoming, a wedding, and executive presentation. It could be a casual occurrence like watching the game or hanging out with friends or going to work. Could be anything on the spectrum in between. But when she thinks about serving her need, she's starting with friends and family or social media, sometimes she's walking into a store. We need to be where she is thinking about this purchase, the moment she starts thinking about it. And sometimes, it's even when she's planning her outfit. So homecoming, people are going to TikTok to start thinking about that purchase. They're not going straight to a store. They're looking at fashion trends, they're thinking about what everyone else is wearing. We need to meet customers where we are throughout the digital ecosystem. When we say digital-first, it's thinking like our customers thinking in her shopping experience. Then we need to leverage data so that when she arrives in our store or in our web or app, we already have a great experience for her because we know her when she shows up. And we get a signal from her immediately about what she's looking for and can take her to the right products to convert her immediately and then add to our basket. When she comes to our site or our store, we need to be inclusive, authentic and helpful in how we support her shopping experience. It's a lot of the things Amy talked about with offering sizes that are important to her, offering products that are important to her, colors that are important to her. And while we're working on all of those things, we're also going to be working on how we serve those up to her in a way that's intuitive and easy for her to shop. We need to also offer more convenient shopping options to support our customers' busy lifestyles. For example, fast shipping, easy returns. Many ways that the customer can get our products in time for her occasion. And we're thinking about how to do all of that and finally, expanded loyalty to give our customers a reason to return again and again. And as I've previewed the loyalty program coming out, there's many more opportunities to develop loyalty programs. Loyalty programs today come in many flavors. Subscriptions or buy it again without having to click more buttons or free shipping if you own a membership. There's lots of elements to loyalty, and we are exploring them all. So what I want to make sure that you have heard me say is that we're going to be listening to consumers and finding out ways we can make better connections with her when she starts the journey at the very top of the funnel and making it a convenient shopping experience throughout knowing whether the best shopping experience is going to be online or in-store and helping her navigate that to get to what she needs quickly. So let's go back to our homecoming customer. So I can imagine in the future, that she'll start on TikTok. And right there with the outfits that she's finding we'll have them already paired with what should go underneath. And what if after she finds them, she could go to Google and know whether our store in her neighborhood has them in stock. And what if she doesn't want to go to the store, so she comes to our online web or app and we can tell her how fast we can ship it to our and it's pretty darn fast. In time for her event and she knows exactly where that package is all the time. what if we could use technology to make those experiences better, right on through the returns experience. And while we've got her in this great experience, let's sign her up for our loyalty programs so that she comes back over and over again. And so when I'm envisioning the future, I'm thinking about all of those things and I'm really excited to be working here with this team to bring those things to life. Our job is to end up having the world's best omnichannel experience for buying intimates. Thank you. And I'm bringing up Greg Unis to talk about growth.

Thanks Chris. How's everybody doing? I couldn't think of a better place to be than right here right now. talking about the transformation of this brand. So we've talked about the brand transformation. I'm now going to talk about the transformation of VS & Co. as a growth player. It's a really powerful place to come at this. So we've talked about strengthening our core, Amy outlined that very nicely. Without a strong core, we know that, we know how physics work. When you think about building a house, you have to have a strong foundation. So that's number one. So what I'm going to talk about is leveraging that core, leveraging that core to ignite growth, to ignite outpace growth. TJ did a nice job of outlining what that looks like. I want -- he led with the numbers, so I'll just tell you the story. So what are the story I'm going to tell you is about how we're going to deliver 2/3 of that growth, right? So 1/3 coming from strengthening in the core, 2/3 of what I'm going to talk about today, 3 things that I'm going to talk about. Number 1 is accelerating our international growth. Number 2 is channel expansion. 3 and 4 kind of combined building the market collection Martin alluded to earlier today, did a nice job of explaining the difference between our marketplace and a market collection. So I'll go a little bit deeper on that. And then lastly, kind of the cousin to that related is investing in strategic partners we see incremental value. Those 2 things, so 1/3 of the growth coming from international and 1/3 of the growth coming from the combination of the channel expansion and building the market collection and the strategic partners. And then I'm going to close it out with a prelude to building the store of the future, building a fleet of the future. You'll get a chance to see it in real life, but I'll give you the story behind it and how we're thinking about that. The way I think about the fleet of the future is really an enabler that unlocks growth across everything that we do. So jumping in pillar number 1, igniting and accelerating our international growth. This is the biggest -- the largest growth pillar for us. The way that I think about this is in kind of simple language. It's positioning us -- transitioning us from being a U.S.-based mall retailer, best-in-class, but a U.S.-based small retailer to a global brand leader. Seems pretty simple, but it's a big change. And we have the power to do it within our own 4 walls within our brands. The strategy, a 3-pronged strategy that we'll talk about that's going to -- the how of -- How we're going to get there. Number 1 is go where the customer is. Number two, market like a local and number three, do it in an omni way, do it where they are. Similar to the way that Chris talked about that unlocking that in the U.S. business, North America business, same applies globally. We have a great business. So here's the good thing about our international business today is we have momentum. Double-digit sales growth is what we're seeing today. It's a $1.3 billion business in sales, $500 million in revenue. It's about 15% of our sales today, which I'll talk about later in a bit because I think it's an important number to anchor on. And lastly, on TJ hit on this, it's margin accretive. So we love what's not to love about this business, okay? A bit of context on it, how do we run that business. So Martin mentioned, we love partnerships. So most of our international business is run through partnerships, half of it from franchise partners to joint ventures in China and the U.K. We have a very robust travel retail business that brings our products to customers when they're traveling in airports. And then lastly, we have a direct-to-consumer business, a digital business from the U.S. to customers around the world. In total, we hit 7 -- more than 70 countries -- about 75 countries and in 500 stores and growing. So where are we going? That's what we heard today to talk about, right? That's the big unlock. So the way that we think about this is -- and I'm going to break this down, and I'm going to give you the case as to why I think that this is possible. right? These are not just numbers that we picked out of that. There's a methodology to this. So aspiration would be to go from $1.3 billion in sales to 3. Aspiration would be to go from a 15% penetration that we are today to 30%. Aspiration would be to go from a 1% market share today to 5% in digital continuing to accelerate that and to be truly omni. We'll do this. It's a margin accretive thing. So as we think about that growth, it's not dilutive, it's actually accretive to our total margin that TJ laid out. So why do we think it's possible? By the way, I think it's possible. Number 1, number 1 is that we have incredible global brand awareness. Amy shared the stat of that figure in the U.S. That figure outside of the U.S. is in the neighborhood so it's really, really impressive. When you think about the power, the knowledge of our brand, one person I was talking to earlier today, described it in the use of -- the picture of our brand is this big. The scale of our brand in reality is a bit smaller. So we are -- what we're talking about today is just expanding that orbit. When you think about some great brands that are in -- that are U.S.-based brands, here's another way to think about it. So we -- in our -- our international business is 15% of our sales. When you look at some of these great brands that have been at this for a bit longer, they're in international sales. Sales outside of the U.S. range in the kind of 30% and the upwards of 50%. So 15% is underweight. 15% is underweight, especially when you combine it with the fact about that our brand has incredible global brand awareness. So in fact -- point 1. Point 2 is our market share. So we have really impressive market share in the U.S., 21%. You've talked about -- we've heard about that today. But around the world, we're underweight. When you look at this map, and it's hard to read the numbers. So I'll walk through it in a second with you. The 2 biggest markets outside of the U.S. are China and Western Europe, Western Europe as a whole. Western Europe we are just at the beginnings of, China we're also relatively a newcomer into that market. This is our goal where the customer is strategy. So we have studied this map, and we have plotted out how we're thinking about going after the -- going after and growing our international business. So strategy number one, go where the customer is. So the goal from a market share would be to go from the 1% that we have today to 5%. That would equate to about a $3 billion business. By the way, they're on that map, I'll just turn back for one second. In markets, select markets that we've been in for longer, we actually have a much higher than a 1% share. So we know that it's possible. Three things that are going to get us there, 3 things that are going to get us there. Number one, is the go where the customer is strategy. So expanding into markets where we are underweight, where the -- with the -- has the largest demand. And then combined with this idea around marketing like a local. So compete from a position of a global brand, but when by marketing like a local win by partnering with franchise partners who know the markets because they are locals and they are the ambassadors who bring the brand to our customers in each of these markets. Second is fleet of the future. So the evolution of the fleet of the future impacts not only our North America business, very directly, we'll -- I'll talk about that at length at the end. But it's also really important globally. So building smaller stores that are easier to operate, more cost-effective. That's an enabler number 2. And then three, this is a bit of the kind of the behind-the-scene stuff. So supply chain initiatives that unlock growth for us. So having centralized inventory that's closer to markets, really important project that's underway to do that. And then second is kind of a shift in how we're buying thinking about smaller stores, a broader network. So a bit of a shift in kind of tiering and bringing product to customers. So when you think about those 3 things, huge opportunity, 1/3 of our growth to go from a 15% penetration of international to 30% 1% market share to 5% which would bring us from a $1.3 billion business to a $3 billion international business, shifting us from a U.S.-based mall retailer that competes really well to a global brand leader. Second thing. So second pillar for us is channel expansion. So I think I'd like to think about this as it's sort of a cousin of growing internationally because it's growing outside of our own 4 walls. The filter that we have here, and it's really important to have a filter with this is, number 1, as we think about opportunities, are they bringing a new customer? And number 2, is it brand enhancing. Okay? So I'll talk about our most recent expansion has been with Amazon. So in late April, we launched our beauty assortment, so a very focused assortment of beauty products sold Amazon through their Fulfilled by Amazon model. And we're very, very, very pleased with the results there. It's been -- they've been great partners to us, and the customer has responded really well. It's attracting a new customer and really exciting. So we've expanded. We've now expanded into offering PINK, the PINK apparel product on Amazon. And again, very similar to that what we saw in beauty, bringing new customer and customer's responding very well. So we are very excited about that relationship, and we'll continue to grow it over time. And then we'll think about other opportunities that, again, so they bring in a new customer and now they're brand enhancing. Okay. So next, the third pillar of growth is the market collection. So building the market collection and investing in partners through M&A. So I break this down. So our goal is to be the world's -- VS & Co.'s goal, to be the world's leading fashion retailer of intimate apparel. How are we going to get there? So the market collection and the invested partners is a key enabler to get us there, and I'll break down why. So the market collection, Martin did a nice job of queuing this up, as in the distinction between a marketplace and a market collection. Market collection is a curated selection of intimate apparel brands that cover occasions, solutions, sizes, customer needs, that we can't necessarily cover with the 2 brands that we have, VS and PINK are great brands. But you can't -- it's really hard to be everything to every single person. So thinking about this network, this complementary portfolio, complementary collection that surrounds us of great brands that we would sell in our channels that are the complement and that's [indiscernible] filling in waits. So I'll talk a bit more about that in a second and break that down. The second piece is investing in brands where there's a strategic advantage, there's a strategic reason that either because of the positioning of the brand, the capabilities that, that brand or company has to make us better and as a united force, we're stronger. So that's how we think about the investor partners, okay? Two examples that we're just -- we're at the very beginning of this are Frankies bikinis and For Love & Lemons. And we're getting a really nice response from our customers on those. So just walk through the rationale of why I believe in this opportunity. So 3 key insights as we studied the market and really thought about it. Number one, sort of state the obvious, is Victoria's Secret is a dominant player in a highly fragmented landscape. I'll show a map of it. You saw a couple of views earlier today, but to articulate the point. Second is when you think about the business from a customer lens, as Chris talked a lot about the customer, when you think about how the customer shops, they are shopping by occasion. They have needs. They have solutions -- they're looking for solutions, and those come in lots of different things. It could be the right fashion. It could be the right size. It could be a specialized product that has specialized functionality. It could be a special occasion. And when we think about -- so that's a customer-lens. So we're a dominant player. Customers are really thinking about the world from a, I have needs, and I want to solve them. And then lastly, we have this incredible strategic advantage of a store network. So 830 stores with the best sales associates and the best retail leader in the industry leading at all. That's a huge advantage. And when you -- we use that as a complement to our digital channel. We are -- we come at this from a very strong place. So with that in mind, so the guiding principles for the market collection strategy has the customer at the core. So it is capitalizing, so we have more than 500 million customers who come to our state every year, 500 million. That's a lot. So we'll capitalize on their visits. They're coming on to VS, clicking on vs.com. And we will lead with occasion, solution, sizes and needs they're looking for and fill in, in a very, very curated and pointed way, third-party brands that fill in for those white spaces that we're not necessarily covering in our own 2 brands, okay? So that's the idea. We have lots of visitors. They have a broad range of needs, and we'll fill in the gaps in our needs with what we don't cover in our own space with complementary brands. I'm going to give you 3 examples. So Martin mentioned Leonisa, it's a great shapewear leader. We have a great partnership actually with them right now. When a customer searches shapewear on our site, they'll be served up, maybe a VS option and also Leonisa option, and they get to choose. When they're searching for their size, we have a partnership with a great brand called DeLome. That -- when a customer is shopping for the size, maybe the DeLome option is the best option for her. So those are 2 examples. And then you could go -- I could go through others, and you can spend time on our site and get a sense of it yourself. So a bit of context on the U.S. internet market. So it's a -- we know it's a $16 billion market. It's really bifurcated. So Martin walked you through this slide from -- to paint one picture. I'm going to paint a complementary picture in this. So key insights here. So on the left, we got this, are brands. On the right are marketplaces. On the top are more fashion brands. On the bottom are more value players, respectively, across brands and marketplaces. We are a dominant player in the market. On the marketplace side, there are not very -- there are highly fragmented players that don't necessarily specialize in intimates. And the ones that do don't have a ton of traction. On the brand side, there's a wide range of brands that cover a full spectrum of fashion offerings, but most have relatively small market share. Our opportunity is to leverage our scale, to leverage the 500 visitors that we have on our site per year, leverage our brand recognition. And you could use that market collection to expand our reach to be there for all of her needs through all of the phases of her life, building our strength from not just 2 brands, but a portfolio of complementary brands that fill in those gaps, okay? That's the opportunity. Why do I love it? I'll close out here. Why do we love this opportunity? Because when we think about it from a customer lens, when we look at the economics of it from a customer lens, it's really favorable. So while we're at the very beginning of this with selling third-party brands on our site, Chris talked a bit about the customer. And if you remember some of the attributes and some of the stats around the customer, it's the 27 million customers. A subset of those buy third-party products from us. Their behavior is amazing. We love this customer. Why? Because she spends more. So she spends 3.5x more per year when she buys, when she mixes a third-party brand into her basket than if she doesn't. So what's not to love about that? Number two is that she visits us more often. So she makes -- if you remember the stat, what is it? She visits about 2 to 3 times a year. This customer visits more than 5 times a year. And the last there, cause she's more loyal. And I guess -- so maybe the question you'd ask is why. Why is that? My theory is that we're filling all of her needs. When she's searching for something, if she's not finding it within our own brand, she's now finding it with these other brands, and she's -- we're meeting her and filling all of the needs that she has. So really love this, side this. I think it paints a really nice picture of why this is a big opportunity for us. I'm going to move on to a bit of changing gears to talk about how we are moving our fleet of the future into the future, okay? How we're moving the fleet into the future. So this is a good news, bad news story. Good news challenge story, I will say. So the good news, and such great news, is that we have a very, very productive fleet. So you heard the stats on what our fleet looks like today. 95% of the stores in our fleet, they are four-wall profitable. If you think back to 2019, not a great year for us, in 2019, that number would have been 79%. So a significant shift in our productivity. 95 is a very impressive number for four-wall profitability. And as you've heard today, 2/3 of our profit are generated from our stores. So really important. So that's the good news. The challenge is that we have underinvested in the fleet over the years. They don't necessarily reflect the new brand positioning. There are a bunch of different older designs that a customer would see. Some are large, hopefully they're not too big and as a result, unproductive. And lastly, we have been overweight in the mall sector, particularly in the B and C malls. And the customer is shifting in how they are shifting their shopping patterns. And so we need to get ahead of that. Good news is that we have a very productive fleet. The more challenging thing is that we need to invest in it. And we are -- that's what we're focused on today. That's what we're focused on talking about today. So with that, so with an aging fleet in mind and with the shift in shopping venues, a four-pronged strategy. Number one is to diversify the fleet away from these B and C malls into outdoor power centers. So that's number one. Number two is increase the productivity of our stores by reducing square footage. So as lease terms come up, we assess the footage, the size, the location of the store and are making adjustments on the margin to -- with better economics in mind. Third is updating the fleet to reflect the store of the future. I'm going to -- I'll talk about that in a second, but that's a really important thing. It's a huge step forward for us in the transformation of the brand. And so we have something that our customers are planning to be really excited about. And then lastly, we are a global brand, right? So we're not just a U.S. mall, [indiscernible] mall retailer, we're a global brand powerhouse leader. And as a result, many of the new stores that we will open will actually be outside of the U.S. So store of the future. You're going to actually see this store. If you are going out to stores this afternoon, this will be one of the stores that you'll see in real life. So far, we have opened 21 new stores of the future, 8 in the U.S., 13 outside of the U.S. By the end of this year, so by the end of 2022, we'll have opened 58 new stores of the future, 31 in the U.S., 27 internationally. Here's the great news is that the new store is working. So we're seeing high single-digit sales increases versus a control group, so not versus the TYLY compare, but versus a statistically significant control of stores that have similar attributes. So a single -- high single-digit sales increase, which is matched by a more significant increase in traffic. Why is that a big deal? Because that's a metric about how the customer is responding. That's a metric of when she's walking the mall, is she stopping? when she's walking the mall, is she attracted to what she sees? When she's walking the mall, does she want to go in? Seeing that number outpace, that's a really helpful number to have. So what I like about this is that the customer, who's at the center of all that we do, is responding well. When you see the new store, so a couple of things to keep in mind. So Harlem Erving is a store that we today full renovation on. So we closed the store for a period and as we got renovation and a full remodel. In the last year, we took some of the learnings, and we knew where we are going with the Store of the Future esthetically, and we applied some of those things to the existing fleet. Things that we -- the way that we approached it was on a good, better, best approach. So in all of our stores, we've removed all these sort of "timeless imagery" that was decorating the stores. We replaced it with a new imagery. We painted the stores. We lightened them. And so they have more of a simulated feel of the sort of the future without being in full renovation, okay? So that's what we've done. What will we do? What lies ahead for us to -- in addition to -- so we will continue to roll out new stores of the future, new full remodels. That's one piece. The second piece is applying the -- some of the key learnings that we've seen in the sort of the future in a bigger, bolder way in the balance of stores. So one example of that is this great new fitting room technology that we have, you'll see in the new store in Harlem Irving, called Crave. It's Crave technology. It's an RFID reader. It's a great way for the customer to interact in an omni way with our full assortment. We are applying that to a broader range of stores in the existing fleet. So we're not waiting until we renovate the store. We're investing, making that investment upfront in kind of the balance of this year into next, okay, as one example. There will also be enhanced digital presence in our store, to name a few. So as we look into the future and as I think about kind of that in mind, where are we going? So the top is the numbers that you saw before and the bottom is directionally where we would see the stores going by 2025. So while I would say that we'll roughly have the same number of stores in North America, it would be a remix, right? So that was one of the strategies is to be less dependent on malls and more -- have a more mixed portfolio in outdoor centers -- outdoor power centers. So that's what I would say to look for there. Second is that we'll have smaller, more productive stores. So directionally about 1 million square feet less square footage. And then lastly, TJ talked about this, we'll be making the appropriate investments in the stores to bring them up to date in the future. All right. So I'm going to bring it home here to begin. Incredible place to be to talk about growth, to talk about VS & Co. as being a growth player. Three growth pillars: number one, international growth, accelerating that; number two, channel expansion outside of our 4 walls; and #3 and 4 combined is developing the market collection, investing in strategic partnerships with other brands that have bring new capabilities to us. That represents 2/3 of the growth for VS & Co., really exciting. Second piece is -- and you could see this in real life this afternoon, is moving our fleet into the future, which will be a key enabler to unlocking global growth for us profitably. So with that, I thank you guys for your time today. It's been a pleasure, and I'm going to pass it back to a break. Yes, thank you.

We're going to take a short break. Please be back in your seats by 11:35. [ Break ]

Very important message for Jamie. When my coffee arrives, you can bring it up Okay. Okay. Welcome back, everybody. Thank you for being so timely. As you may have noticed, we're running a little ahead of schedule, so that's good. Our plan is to have lunch ready for noon and to have the buses available for 12:20, okay? On the buses, there are 2 very large buses. So while you've been allocated to one particular group, that's on the assumption that you're going to be able to come to both stores. If you can only do one store, please just ensure you get on the right bus that's going to the store you want to go to. Does that make sense? So just ask any of the folks that are helping, we'll make that happen. One thing I should have said at the beginning, and I only noticed when I saw some of you taking photos of the screen, on the place card on the table is a little QR code, down the bottom. If you scan that QR code, it gives you all the slides. Maybe I didn't forget. Maybe I just didn't want you to read ahead. But anyway, you've got all of the slides there, and please feel free to take away and share. So we've got about half an hour for questions. TJ and I are obviously on the stage. We've got Greg and Amy and Chris mic-ed up. Ready to take questions. Dean, you're also in the room. We've got Ish, leads our digital channel; Becky for stores. We've got the whole team. And when you would like to ask a question, if you'd kindly just pop your hand up, and then just hold until the microphone is firmly in your hand. Why? Because the online streaming doesn't pick up the volume in the room. So we need to wait for that, if you would. So just bear with us on the microphone for the benefit of the online folks. Before we start that Q&A, I have 2 slides just to bring home the summary of what we talked about. I hope it's obvious. So what we've been trying to demonstrate is that we have a very strong management team, Board of Directors and a company culture that's completely transformed from where it was in the old days. Our global brand awareness is unparalleled, and we're in incredibly good categories that are growing and have global potential. We clearly loot the U.S. market, and we're growing share in a really difficult environment. So that's incredibly positive. And we have a strategic road map that gets us back to being a growth company with mid-teens operating income margins. So that's the kind of the headline overall. Reminder, we think we're midway through. We are not the finished article. We're 2 years into a 5-year journey. So midway through our goal to the new vision of being the world's leading fashion retailer into apparel by delivering on the 3 categories of strengthening the core, igniting growth and transforming the foundation. So with that said, wow. Wow, that was good. There's lots of questions. So Christy and Jamie, you go wherever your energy is.

Alex Straton, Morgan Stanley. I think some may -- the biggest piece of pushback we get on the turnaround is just people want to see it show up in sales and see a sales reacceleration. But that could prove tricky, as you guys mentioned, with this macro backdrop. So could you perhaps talk to us about the signals or signposts you're watching for as you evaluate the turnaround progress regardless of the financial results?

Yes. I would never say regardless of financial results. We're here for financial results. It's the most important thing. So have the financial results changed? Of course, they have. You saw that line that was saying this company was heading into a very steep decline. The last 2 years, management team has got it back to a respectable level, and we see growth. So we're not walking away from sales growth at all. Sales growth is what we look at every day, multiple times a day. It's the most important thing. What are the indicators beyond that? We look at market share. I asked myself the question all the time. Donna know this. I say it to the Board on a regular basis, how are we doing? We need to be in touch with a barometer of how we're getting on. And it's really difficult in times like this to know if we're doing good, bad or indifferent. And so market share helps us with that. The other one that Amy mentioned is the receptivity that we hear about the brand. One of the great things about being so well-known as we are is everybody has a point of view. And they're not shy about sharing it with us. So it's not like we need to put out a campaign and then wait and see what happens. We know instantly. If it works, do more, send more social media in that direction. If it doesn't work, do less. So it's a very agile environment responding to instant triggers of consumer feedback. So those are the key highlights, I think. Yes, throw your hands up. And then Jamie, you just pass -- there you go. Great.

It's Omar Saad from Evercore Partners. A couple of quick questions. Can you maybe talk about international? Maybe why it wasn't more successful historically? And then what's different now? And then maybe quickly touch on kind of off-mall real estate. I think another pushback we get is the mall exposure. I think you saw 60 kind of off-mall stores that I saw on that plan. Why not more? Does this format -- are these formats working off all.

Yes. Great. So I'll let Greg take the second one, but it's not reasonable to go to Greg on the first one because he wasn't in charge of international, I was. So let's blame the idea who was in charge before. So there were a couple of 2 things that were significantly impairing the top line growth of international, and I'll tell you about that. Before I get there, what was happening in international during the last 10 years was spectacular growth in sales and profitability of the franchise network, never missed a beat. That business has been rock-solid for over a decade, growing very nicely and very profitable. Travel Retail business was similarly in great shape until COVID came. So what was really dragging international down was China and the U.K., the 2 wholly-owned operations, that ate up all of the profitability of the franchise network. We've fixed that now. So what were the 2 things that were holding back outsized growth? Number one, we had a belief previous management had a belief that stores needed to be about 10,000 square feet in size, and they needed to be in AAA locations, and the cost of the rent is irrelevant. So it was really difficult to get space. When partners are using their own money and we say, no, we're not going to approve that real estate. We need you to get 10,000 square feet on the 50-yard line in the best [ mine ] country kind of restricts growth. Second is the economic model was -- sorry, part 2 of the first point, is the economic model was poor. And that if you're building stores at, let's say, $700 a square foot at 10,000 square feet in size, that's $7 million. $7 million a copy, that's expensive. If you're building stores at 4,000 square feet in almost every country around the world outside of North America, you're going to be the biggest lingerie store in town at 4,000 square feet. If you're building at 4,000 square feet at $400 a foot, you're in for $1.6 million a copy. That's a lot more scalable. So that's reason number one. Second reason was there was a belief previous management that we should keep digital commerce separate from stores commerce. Now actually 11 years ago, that was not an unreasonable proposition, I don't think. In the modern day and age, you go and sell a franchise and say to them, "All right, here's the franchise. It's just stores, okay? We'll do the digital piece, don't concern yourself with that." And don't worry about what customers think about when they want to match their screens to their -- come on. It has to be an integrated experience. And so that -- those 2 very big changes are game-changing for the international business. Greg, tell us about off-mall.

Yes, so I'll tell you -- so in off-mall so far in the 8 stores that have opened in the U.S., most of them actually are in off-mall locations. And so the -- you can find them out there. They're doing very well. We're really pleased with the results. I'll give you one anecdote on one store in particular. So one store that we opened was in a geography or a catchment area where we had a store that closed with the group of stores that closed the 250 stores that closed several years ago, couple of years ago. It was a, call it, a B or C mall, kind of a mall that wasn't doing all that great. Our store closed. We were out of the market for a bit, reopened recently in the last couple of weeks. And that store is off to a really strong start. So it's really an interesting anecdotal proof that it wasn't about the area where there wasn't an opportunity, it was where we were. And so one great example. As we think out into the future, the remixing that we -- so we work through it every day, the real estate portfolio strategy. But it will definitely evolve to be less dependent on the kind of the B and C malls in total.

So it could end up being as ours, we don't -- we would just test our way into it, right?

Yes. Yes.

We'll just wait and see. Yes.

Thank you for saying, this has been helpful and excited to see the stores. And it feels a little bit like we're at a pivotal point for VS. It feels like you guys took this company in. You stopped the bleeding, the gushing, we could say. You've now healed it. You've put in place, I think Greg used the term, the building blocks so that the foundation is solid. And now you're pivoting towards like the next phase of the new Victoria's Secret as an organization. And it also sounds like that includes a lot of investments. So behind IT, you outlined a bunch of things, even just check out the way consumers see online and in-store together. I'm assuming you're already working with digital twins and things like that. So there's investments behind IT. There's investments behind stores, renovating stores, downsizing. And then it feels like there's going to be investment behind marketing. Because I think, again, as Greg had mentioned, but as I feel, your brand is significantly bigger than the business today. And you've made really good progress to keep up with, I guess, a modern Victoria's Secret, yet, I don't feel like the consumer is quite there. I think all of us in this room see the work you've done, but I'm not sure the customer is there along with you. So can you just think -- explain to us, over the next 2 or 3 years, what this investment? What these investments look like? What gets priority? How do you think about all that? Because there's a lot of work to be done even though you've done a lot of work already.

Yes. I'll go to TJ to give us some color on the investments. I would say you've characterized what we talked about very well. So thank you, Beth. It's a really, really good playback of where we are. And I appreciate the fact that you acknowledge that while the building blocks are in place, actually, the transforming of the foundation of the company is in front of us. And that will require a lot of change, and it will require some reinvestment. We're not going to give you any more detailed guidance than we gave already. But TJ, how do you think about it?

Yes. I think in the financial model, if you think about a couple of hundred million dollars, or actually we're turning a little lower than that this year, I'd imagine in the future, something that looks more like 4% to 4.5% of sales approaching $300 million or more in our initial sites, though it's clearer to us to see the opportunity in store of the future not just building out new stores or off-mall locations, but candidly addressing a fleet that hadn't been invested in many, many years. So I think that's the easier piece for us to see near term. I think you heard Chris talk about digital and digital capabilities. We're still in kind of early understanding of what that might look like as she's been on the job about 30 days or so. But that's definitely a priority that's in our sights. Investing in new partners is definitely in our sights as well when they bring capabilities or product that we don't have. I think looking at the overall free cash flow generative nature of the business, clearly, we have the flexibility to go where the returns are. I'll just leave it at that. And most of what we're talking about would be return-generating initiatives even the remodel and relocation. We don't think of that as maintenance. We think of that bringing the store to a new level, and we're seeing sales results that could support that. So I think that being able to lean into those items, where we would had historically maybe played on the back foot, is where we're going to be heading. But we look forward to being able to articulate a more comprehensive investment strategy as we move forward. But the good news is that we have a great starting point.

One other point you mentioned marketing. So we're committed to -- in the Victoria's brand, the Victoria's PINK brand spending 5% of sales on marketing. That's about consistent with what it was at its peak. We came down a little bit during the down period. We're committed to a 5% spend.

Lorraine Hutchinson from BofA. My questions are for Amy. Amy, you talked about bra launches and having -- going back to a spring and fall cadence. A few questions around that. First, will that be across intimates in total PINK and Victoria's Secret? Or will there be additional? How much are you able to test these launches before making a big bet on inventory? And then if you could just comment a little bit around the attachment rate for some of your recent launches and how you've been fulfilling match-back demand?

So I was speaking specifically to VS intimates. So PINK would also have its own launch cadence. We traditionally do that in the back-to-campus and a spring time period as well. I think what's interesting around PINK is how do we -- with the Wear Everywhere franchise, are there -- what is the reimagination of the date bra, which used to be about a $75 million, $85 million bra and a [indiscernible]. So I think we're looking at innovation and how we might expand intimates and PINK as well. So that would be separate cadence. Yes, we do test. So right now, we're working -- we just received in the DC this week for next fall's launch. Test quantities to be testing now. We do consumer insight workwear testing as well as testing in stores. So we do test all of our bras. In some cases, the test might look like different size tests, depending on how bullish or how much experience we have with new technology. So we do try to test everything. And then attachment rates as far as match-back panties, we've seen growth in our [ 3 for 30 ] match-back panties. And actually, with our [ ladies so obsessed ], we were offering a $6 a panty, $6 we had test going. $6 for majority of match back, and we were seeing 2.5 units go out. Anecdotally, what we hear from consumer insights, how she's thinking now she bought this because it was a deal is she thinks about 3 match-back panties per bra. That's how she kind of sees the relationship and ratio. We just rolled out new merchandising where the match-back panties, and you'll see it in the stores that we walked through today are merchandise directly with the bra on fixtures, but I think we still know we have opportunity to maximize the matchback business, and that's where we see the growth in panties.

Thank you.

No problem. Thanks.

Hello. Okay. There we go. I actually had a couple of questions for Greg. First, on international expansion. I noticed when you put up the map of the world, that there are some markets like I think it was the UAE where you have like 7% market share. And you talked about going where the customer is. I'm just wondering that in the calculus of deciding where you want to go and where you want to compete, are you considering how wide open the competitive landscape is versus how crowded it might be? Do you want me to ask the other 2? Or should I pause there?

[indiscernible]

on the second initiative, wholesale, I know your experience so far has been that it's revenue accretive, because I don't think you're seeing much overlap with your existing customer base. Is it margin accretive? And then the third question is on Store of the Future, if you sort of think about your existing fleet of stores. And I don't know if maybe this is more of a question for TJ or for Greg, but there are stores that you may want to do a full remodel on. There are maybe a subset of stores that you wanted to -- that you do more of the light touch, right, more of a capital efficient sort of but an updated view for the customer. And then there's a group of -- I don't know if there are any that you want to sort of be maybe not investing in that where if you're concerned about the health of the mall over the next 3 to 5 years, maybe you just sort of sit on the existing capital on the ground and you don't make a lot of new investment. Have you done the analysis? And have you broken down your fleet into those various buckets? And could you share with us sort of how if 10 years from now, how should we think about what the fleet looks like?

Okay. So in international one. Okay, got it. So international one, so we put the map up of our market share. These numbers are very small. So if you download this, you'll be able to see it more clearly. So the one example of a market is, if you look at the Middle East as a total, 7% share. If you were to break that down by country, it is not democratically 7%. I won't give you the exact numbers, but it's countries where we've been in longer, where we have the strongest business is much more significant than that. So as we think about the competitive set globally, absolutely. I mean we always think about that. And we also contemplate what are we good at, what are we best at? The approach of marketing like a local, I think, is one of the ways that we think about -- it's very different than what Martin talked about, about going in with a 10,000-plus square foot store in a flagship location and expecting to dominate an entire geography or entire country, right? I mean that's a great way of creating buzz in a city, but it's very different than actually going into a country and sort of into each of the sub nodes of where demand is. So that's the market like a local approach. And then behind that is backing up with all the logistical stuff that actually make it happen smoothly. Second question was around.

Wholesale?

Wholesale, yes. So specifically, Amazon has been margin accretive for us. And so I should have maybe added on, does it bring a new customer? Is it brand enhancing? And is it margin accretive? And the third would be a check, yes. Third question is around Store of the Future. So yes. So what I would say is 1 thing when you're in Oak Brook today, for those who good to see both stores, that's an example of a store that we invested money in, but it wasn't a full gut renovation. So that's a group. When we made the determination of which stores to invest in, we took into account the lease terms, the longevity of the mall, all of those things influence what we -- the decisions around the level of investment that we put in. That's why we had it. If you remember on that slide, there was a -- we had a good, better, best approach to the renovations or the refreshes that were done in the past year. As we think ahead to this year, yes, we'll be selective. I mean, there would be stores that we would do very selectively, do more enhanced renovations that are similar to the refresh. We're much more focused on the kind of the broader rollout of the Store of the Future, honestly. The go-forward approach, yes, exactly. The one thing I was just -- the last thing I would note is that just to reiterate, one, the other point is there are also attributes or there are things, features like Crave, the fitting room technology that you'll see in the stores in Harlem Irving that we're making a bigger investment to roll out to a broader network of stores that are not going to get a full renovation in the next year or so, yes. Okay. Great. Thank you.