Good morning. My name is Madison, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Victoria's Secret & Company’s First Quarter 2022 Earnings Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to turn the call over to Mr. Jason Ware, Vice President, Investor Relations at Victoria's Secret & Company. Jason, you may begin.

Thanks, Madison. Good morning, and welcome to Victoria's Secret & Co.'s First Quarter Earnings Conference Call for the period ending April 30, 2022. As a matter of formality, I need to remind you that any forward-looking statements we may make today are subject to our safe harbor statement found in our SEC filings and in our press releases. Joining me on the call today are CEO, Martin Waters, CFO, Tim Johnson; and EVP, Finance; Brad Kramer. We are available today for up to 45 minutes to answer any questions. Certain results we discuss on the call today are adjusted results and exclude the special items described in our press release and our SEC filings. Reconciliations of these and other non-GAAP measures to the most comparable GAAP measures are also included in our press release and our SEC filings. Thanks. And now I'll turn the call over to Martin.

Thanks, Jason, and good morning, everyone. When we last talked with you 3 months ago, we said first quarter was going to be challenging. Notwithstanding the current operating environment, I'm pleased to report that we delivered on our major initiatives during the quarter. Before we dive in, I want to thank all of our associates and partners for their hard work, commitment and resilience. Our teams have remained focused on execution, enabling us to generate sales at the high end of our guidance and stronger-than-expected adjusted earnings per diluted share. And that's even as we navigated significant supply chain headwinds and left the federal stimulus benefits from prior year. This was our third consecutive quarter since the separation but we've delivered adjusted operating income results in line or above our guidance, which reflects our work to stabilize the business. As a reminder, for the trailing 12-month period, we delivered over $1 billion in EBITDA. Turning to the first quarter performance. Sales declined 4.5%. Adjusted for stimulus benefit last year of approximately $75 million, sales were flat to last year. We saw momentum in our bra business and in our beauty business, and also in international as it recovered from prior year COVID-related restrictions. Our adjusted operating income of $116 million was above the high end of our previously communicated guidance range of $80 million to $110 million. We delivered first quarter adjusted earnings of $1.11 per diluted share, which is above our guidance of $0.70 to $0.95 per diluted share and that's primarily driven by disciplined expense management. We made progress against our profit improvement plan goals to help offset the macroeconomic pressures that we all know about. As we look to Q2 and the balance of the year, we expect the environment will continue to be challenging, and there…

We can take questions now, Madison.

Our first question comes from Ike Boruchow from Wells Fargo.

Just kind of hoping you could talk about the inventory levels ending the quarter, activity you saw during the quarter. Was there a volatility in the sales trend. Did you have to kind of pull the promotional lever? So kind of trying to understand what happened in Q1, how you're feeling about exiting into 2Q and what we should be expecting to see from you guys, maybe semi-annual sale plan and pricing initiatives in the second quarter and beyond?

Great. Thanks, Ike. We'll go to Brad for that question.

I'll start with the inventory part, and then we can try to unpack the sales after that. So total inventory ended the quarter up 37% to last year. about 2/3 of that increase is driven by longer transit times as we've shifted modal mix back to ocean and higher costs from our transportation rate inflationary pressures. The next largest driver of that year-over-year change is related to strategic assortment decisions that the business is making to drive future growth, things like supporting Happy Nation and Amazon, things like size expansion and sustainability. A very small portion is related to carryover inventory that doesn't represent a significant impact on a year-over-year basis, less than 10%. Overall, I'd say we're confident with our ability to manage the inventory levels throughout the year. It's the topic we're paying close attention to, and we have adjusted plans for the back half of the year to better reflect the recent run rates. We expect growth rates from an inventory perspective to moderate in the back end of the year as well. We should see more normalized inventory levels in the fourth quarter.

Yes. And I think I'll jump in here, Ike, also an underline on the inventory perspective, I think coming out of the first quarter and as we move through the spring season, we believe the teams did a very good job of managing flow. We believe the teams did a very good job of positioning us for Paul from the perspective of our mix of ocean versus air is very favorable compared to the prior year. So it gives us more flexibility. Additionally, the teams have also focused on, I'll say, prioritizing East Coast ports so that we feel a little more comfortable on delivery and timing of delivery and assuredness of delivery. So from an inventory perspective, I think the teams have done a very good job managing difficult situations. How that relates to Q1 in terms of sales, and I think the other parts of your question, on the last call, we mentioned February was probably the more difficult month or a difficult start to the quarter, I should say. As we got closer to Valentine's Day and the Love Cloud launch, our business picked up and improved and March was actually the best month of the quarter. April was a challenge for us and across most of retail. I don't think we were unique in that aspect, whether it's macro challenges. I think one of the stats we read was the most challenging weather month in the last 20-plus years across the country. Clearly, there was some shift going on at retail as to where the customer was focused on her spending. So we were not going to be immune for that. So April was a challenging month. But overall, across the quarter to be able to be relatively flat to last year with all the choppiness on an adjusted basis for stimulus, we felt very good about that. From a promotional standpoint, you'll notice, we came in roughly in line with our margin forecast. So things were directionally in line with what we anticipated. We did run in the middle part of the first quarter, a little bit of sale activity around the mid-season sale, but that was really to make sure that we maintained our inventory glide path more than anything else. So we were able to manage the margin for the quarter, pretty much in line with our expectations.

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

I wanted to focus on the EBIT margin outlook for low double digits this year. How much of that is dependent on a decline in freight expense in the back half? What's included for the promotional environment? And then can you expand a bit on the specific initiatives under your profit improvement program?

Yes, Lorraine, I'll start there and then maybe Brad will kick in on some of the profit improvement initiatives, the back half of your question. I think what we were trying to communicate in our guidance, Lorraine, was that first off, we're not stepping back from our goal from the year, a goal to match last year's operating income. We do understand that, that means there's an expectation for the back half of the year that sales trends improve and the operating income performance improves more meaningfully than in spring. I think what we're looking at is really a couple of things, Lorraine. First off, from a margin perspective, we would expect that the back half of the year, the margin rate would be slightly better than the prior year versus spring where it's down for all the freight challenges that we've mentioned. So as we move into the back half of the year, we would expect some relief from a freight perspective, but we're also aware that from a raw materials perspective, and what we're trying to focus on from a sustainability aspect in our product, those are going to put some pressures on the margin. But on balance, we would expect the margins to be improved in the back half of the year. Additionally, as Brad will touch on some of our profit improvement initiatives touch on margin. From an expense standpoint, we would expect the back half of the year, dollars and rate to be flat or down to the prior year. I think we talked about on our prior call, some of the good work that's going on in the business. If you think about your costs in kind of 3 big buckets, what we do in stores and store-related payroll, our investment in people and organization and then our investment in the indirect cost in our business, we have initiatives going on in each of those 3 areas to try to control costs or take costs lower. So I feel very good after 3 quarters as a public company delivering on our expense plans at rates at similar or below the prior year at dollars similar or below the prior year that the business is very focused on the cost side of the equation. Brad, do you want to touch on the profit improvement plan a little bit?

Yes. Lorraine, the business kind of middle of last year began to execute profit improvement actions to help offset some of the inflationary headwinds that we were experiencing. Those actions initially kind of in the middle of last year were focused on very targeted price actions and price ups to look to try to extract more AUR in those areas where we had newness and innovation. We had a lot of testing that was done late last year to try to find those pockets of opportunity from a price elasticity perspective. At the end of last year, we complemented those actions by putting additional plans in place to go after the expense side of the business. And in late '21, we put more focus on those initiatives that TJ referenced, in direct sourcing, the co-brand launch of the credit card program as well as looking at human capital on our stores, efficiency opportunities. We're pleased with the progress we've made against that profit improvement plan and the impact of those actions we would anticipate build meaningfully throughout the year, and we are expecting more opportunity in the back half of the year from that profit improvement plan.

Our next question comes from Matthew Boss from JP Morgan.

So Martin, on the product assortment and these consumer shifts that you cited, what categories are you seeing best resonate with your consumer today? Can you elaborate on some of the softer areas in April and May and maybe just rank the drivers of improvement as the year progresses? And then just quick for TJ. What inning overall would you say the SG&A efficiencies in today? And how much flexibility do you have on this line item in the back half of the year if sales improvement does not play out?

Yes. Great. Thanks, Matt. Thanks for the question. So we're in the merchandise business. So our results are fundamentally based on how good we are generating new product that resonates well with the consumer. And I think we have done a very good job in the category that's most important to us, and that is bras. So we say around here just about every day, we're best at bras. And I'm delighted to say that, that's showing up in our latest market share data where from consistent periods of decline, we have arrested the decline in market share and actually built market share within the last period MPD data. So that's really good. So good strength in bras, strong panty business, less strength in our apparel business. Sleep has been softer. And to some extent, I think categories like lounge and sleep are lapping good performance during COVID times and are now competing with outerwear and where to work and celebration ware and that kind of stuff. So less strength in those categories. Swim has been mixed, very strong swim performance in PINK, with near 20% comp but less strong in Victoria's where we feel less good about fit and fashion year-over-year. So it's a mixed bag. And as always, it's a reflection of our ability to listen to the consumer and give her exactly what it is that she wants. In Beauty, we've seen some terrific responses to our best fragrance. In Bombshell, we had an incredible time with Bombshell and some of our other launches have been very strong as well. So overall, more positives than negatives and about in line with what we would expect from an industry perspective. TJ?

Yes. And I think the second part of your question, Matt, I would characterize our profit improvement initiatives or expense initiatives as being early innings. Clearly, with 3 quarters under our belt as a public company, and as Brad mentioned, many of those initiatives starting late in the fall season. We're still very early in the process. I don't think it's a stretch to say that the initiatives that we've identified currently probably have runway at least through the early parts of next year, if not 2023. So I think the work of the work is to continue to identify new ones so that we can extend that tail even further. But I do want to make sure that we acknowledge that the expense or margin initiatives to improve the flexibility of the business. There is a portion of that, that certainly will go to the bottom line, and I think you're seeing that in our results, but I also believe that over time, there's a portion of that, that will be reinvested back into the business. And Martin and I are aligned that we're continuing to reinvest in the business to continue to improve the health of the brand and improve the brand positioning and improve the experience in our stores is very critical. We don't want to take a step back on that. So there's a balancing act here that we'll be working on, but we do see a runway through at least the better part of next year with current initiatives.

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

Did you guys say what inventory dollars were up ex in transit and then maybe what inventories were up in units? And then TJ, if we can just take a longer-term view on the gross margin, maybe isolating supply chain market, et cetera how are you thinking about the longer-term opportunity there?

Simeon, from a unit perspective on the inventory in the North America business across stores and digital units, we're up low single digits to LY. And then from an in-transit perspective, there was about a 20 percentage point impact from in transit in the quarter. TJ?

Yes. And I think building on your question, Simeon, when you think about margins kind of longer term, I guess, is if we break it up into season, that might be more helpful because we are up against some seasonal challenges. So as we move into fall, I think we would expect that the margin profile improves a little bit. I'd say a little bit because we do believe that some of the activity from the prior year from the supply chain based on all of our forecasts will continue to stick and some of it will come back to us in terms of favorability. I think alongside of that, underscoring that we are investing in the margin from a sustainability perspective and other raw material costs where there are pressures. But on balance, we would expect the margins to get slightly better as we move into fall. As we move into 2023, obviously, we'll be up against the supply chain headwinds that we're facing today. And our expectation would be hopefully, those supply chain costs start to abate a little bit. But I think overall, from our perspective, continuing to focus on the things that we can control from a cost perspective and cost of product from a cost perspective in terms of price ups and the opportunities there, something that we're doing kind of a blocking and tackling that would help from a margin perspective. We've been looking at our return policies, things like that, that we've already actioned candidly with very little noise or very little pushback from the customers. So I think we're continuing to look at all aspects of margins, Simeon, not just being totally dependent on supply chain, but looking at overall cost price and then some blocking and tackling initiatives. Additionally, I think the other item that we've mentioned already, the co-branded credit card, the benefits from co-brand credit card likely show up in margin as well. So I think we've got a number of different levers that we're working on.

Our next question comes from Dana Telsey from Telsey Group.

Can you talk a little bit about the store of the future, how it's performing and what you saw this quarter in digital and store sales and how you're planning going forward?

Thanks, Dana. Over to Martin.

Yes. Thanks, Dana. Good to hear from you. So Store of the Future is very early doors. As you know, we have 3 stores open. We plan to have 15 this year plus 15 renovations that will be in the style of Store of the Future. So the main learnings from Store of the Future are in front of us rather than already in our position. There are some elements of Store of the Future that are really resonating well with consumers, particularly around our use of technology in the fitting room has been very strong and our introduction to the extended assortment that we have on digital being more visible and more evident in Store of the Future are 2 of the wins. Overall, we feel really good about where that program is in terms of getting to a lower cost operating model for us and getting to a solution that we can scale quickly and efficiently around the world. So the first international versions of Store of the Future will be online later this season. So all in all, Store of the Future, we're very happy with, but it's very early days, and we won't be making any decisions about how it impacts capital for '23 and '24 until much later in the year. Your broader question on sales in digital, we continue to see stores -- what I -- the way I say it is roaring back. Stores are roaring back, meaning the customer is getting back into stores, and that is good news for us because we have over 800 points of distribution. We have the best fitting model in the industry, we have superior service. So we're delighted to see that stores are roaring back, and that's helping our business considerably. Digital has declined. And that's not entirely unexpected given that stores have rebounded in the way that they have. Our most productive customer is the customer who shops both channels. That customer is 3x more productive for us than a single-channel customer. So the focus is on the customer, primarily rather than which channel she wants to shop in. I think you should expect to hear us talk less about channels in the future and more about customer. Anyone else want to add anything? Okay. We'll take the next question.

Our next question comes from Omar Saad from Evercore Partners.

I wanted to ask about some of your comments on lounge and sleep kind of benefiting during COVID for obvious reasons. Maybe you could give us some idea how big a business that became during COVID and how much of a rightsizing you think needs to happen or could need to happen? And also I was interested by your comments around stores rolling back. Are you seeing mall traffic getting anywhere near 2019 levels at this point and you expect it to get the next the mall traffic at the pre-pandemic level?

Thanks, Omar. I'll go to Brad to dimension the size of the business, but let me just answer the rightsizing. The relative rightsizing of those categories is not huge. It's not a major shift for us. It's an important part of the business, but it's not the business. We're in the intimates business. That's the most important category. So while there has been some degradation, some deterioration, some lowering of the participation of those categories. It's not a material and meaningful shift. While Brad is just looking at the specifics for you, I'll tell you, on mall traffic, no, we're not seeing mall traffic back to 2019 levels yet. It's significantly up on where it was in '20 and '21, but not yet back to pre-pandemic levels. Brad?

Yes. So from an overall sleep lounge and then the apparel business within PINK within the Victoria business, the sleep lounge business kind of at peak represented about 20% to 25% of the volume. We've lost some share of that in the recent trend. And then from a PINK perspective, the total apparel business and PINK represents about 40% of the overall PINK business.

Yes. And intimates and PINK continues to grow and be the most important cash flow, which is a strategic change for us. It wasn't always that way. We're leaning into intimates and PINK, and we think it makes more sense for the health of the brand overall.

Our next question comes from Kimberly Greenberger from Morgan Stanley.

This is Alex Straton on for Kimberly Greenberger. I just wanted to follow up quickly on the price up opportunities you were discussing. Can you just talk to me about kind of how you assess or there's opportunity and where you've taken price? And then a quick follow-up is just I was wondering if you could give us any color on sales trends quarter-to-date compared to kind of the challenges in April.

So we'll go to TJ on the latter part of the question. But Alex, I think the key thing to know about pricing is that it's a test and learn situation. We're blessed to be able to have agility in our systems to enable us to test consumer reaction before we go full out on it. So we have multiple cells in place that are testing different prices in different categories. And what we find is the market is incredibly dynamic, and that shouldn't be a surprise to anybody. While it feels relatively straightforward to simply add $2 or $3 to the bundle price of panties, we see real impact when we do that and it's different by different geographies around the country. So it's a very sophisticated problem that we're solving for, and we do it as carefully and diligently as we can to protect our margin dollars but also to give the customer the value that she needs and not open us up to undue competition elsewhere. We're also super conscious that with gas prices 42% higher this year than they were last year, there is competition for share of wallet and we have to be relevant. We have to give compelling offers. And if that means leaning into promotionality a little bit more in order to make sure we get our fair share of spend, that's what we will do. So I can't give you a specific because we're not in a commodity business. We have thousands of items. We have many hundreds of them that are on test at different prices at different times. And you got to trust us that we're managing to the best of our ability to meet the needs of the customer and meet the needs of the profitability of the business. TJ?

And I think the second part of your question, Alex, on around second quarter expectations from an early start to the quarter, May looks a little bit more like April, although slightly better than April. Our expectation has always been that June would be the best month of the quarter based on the strength or expected strength around semi-annual sale, our current inventory position, our ability to run semi-annual sale for the full period of time this year compared to last year. So this year's semi-annual sale will look much more like historic semi-annual sales the business has executed. So we see upside opportunity in the month of June. And then July, as newness starts to come in for the new season, we expect to be in a much better in-stock inventory position. You may recall, July and early third quarters, where we started to see inventory dislocation last year with all the supply chain challenges. So we would think that July should be a fairly good month for the business as well and probably in line with the midpoint of our guidance. So again, to summarize, May was always going to be the most challenging month. June is always going to be the best month of the quarter for the reasons mentioned. And July, would probably fall somewhere in the middle or somewhere in the midpoint of our range. Those are our expectations. Obviously, we're going to be working diligently to not just deliver them but hopefully do better.

Our next question comes from Adrienne Yih from Barclays.

It's very nice to see the stores back where they should be. The product looks great. Martin, I wanted to ask you on the comment about promotionality. How much of that is baked into the fiscal year guide? But more at large for the sector, historically, when the apparel industry at large becomes very promotional. So I'm sure you've seen a number of apparel of online retailer print. Does that impact the intimates business that it steals from the wallet, just overall from the consumer? And then TJ, what percent of product is sourced from the Far East, in particular China? And can you give us an update? I know it's a small number, but on the China impact to your stores.

Okay. We'll try to unpack that. So is the level of promotionality that we expect to be in the business baked into our guidance? Yes, it is. So we feel comfortable about the amount of promotionality that we have and what we see. We're modestly more promotional during the quarter, we were modestly more promotional than last year, but it's about flat. And we have a reasonable line of sight to what it will be through the balance of the year. On China, China is a single-digit percentage of our total inflow of merchandise. We're not particularly dependent on China at all. We have not -- we're happy to say being impacted by the tough situation in China other than in our joint venture business where the stores are obviously closed and business is all online. So there's impact to us at the retail level in China, but very little impact to us on the production. So I think there was another aspect to your question. I get both. Okay. No, I know it was. It was the impact of other categories. So yes, we don't have data on this, Adrienne, to say when outerwear categories are promoted intimates. So I can't track that from a mathematical point of view. But from an intuitive point of view, it feels to be so. And we know from being in the malls and knowing our customers as well as we do and listening to our store leaders, teams that yes, the customers go out with a notional idea of how much money they want to spend on a given day when they make a trip. And it's a contest. When in the venue, call it a mall or other venue, it's a contest to see who gets that share, and it could be a pair of jeans or it could be a lipstick or it could be some intimates from Victoria's. And that's the wonderful thing about the retail market, we're all competing for share of wallet. It's not just a category-by-category approach and probably that feels intuitive to people listening on the call that don't always divide up the money we have to spend by category. We just have an amount of money that we're comfortable spending and then we go play. And it's always been that way, and I think it always will be.

Our next question comes from Jay Sole from UBS.

Martin, I was just wondering if you could give us a an update on the international business outside of China, specifically U.K., some of the other key markets, what you see there? And then secondly, can you also just talk about if there's any hesitation to return to a little bit more promotion given that the company and the brand has worked so hard just train the consumer to pay a bulk price and to pay higher price. Are you worried that sort of a little bit of a slippery slope that it's hard to stop once you start promoting again?

Yes. Thanks for the question, Jay. Let's take it in reverse order. Definitely, yes. Are we anxious about being overly promotional in the business? For sure, we know that we can -- we and other retailers can train consumers to wait for sale periods. We get it. It's not healthy for the long-term positioning of the brand to be permanently discounting. The best retailers out there, the best fashion forward retailers are less promotional, not more promotional. So we get it. We understand. And at the same time, we balance the fact that the customer responds well to promotionality. We get it that she's -- we're battling for share of wallet. And so it's a balance, as I say, every day, 100 times a day. It's a balance. It's not 1 thing or another. It's a little bit of everything. So we're very, very focused on it. We're very conscious of it. It's less about the mathematical calculation and more about the overall health of the brand. And we feel good about the health of the brand based on the repositioning work that we continue to do. We're 1 year into that transformation of the brand, which for us in the business feels like a long time, we're kind of like -- we're used to it. But we know from our research that most consumers are only just beginning to notice the transformation of this brand. So we have a lot more to do. We have to get our voice louder. We have to amplify our message of diversity, equity, inclusion of being a brand for all women of being on a mission to improve the lives of people around the world. That is significantly more important than are we 1 point more promotional or less promotional. As it relates…

Our next question comes from Susan Anderson from B. Riley.

I was wondering if you could give a little bit more color on the pink business and the drivers or the categories of strength and weakness there. It sounded like intimates was strong, but maybe apparel a little bit lighter. And then also, are there any early thoughts on Happy Nation or any early reads on how the consumer is responding. And just curious also how you're marketing the new brand to new customers.

Well, I'm so happy you asked about Happy Nation. Thank you for that. I think you answered your own question on in. It is what you said. Our intimates business is strong. We've seen less strength in the apparel part of the business, not much else to add other than it's an incredibly dynamic business, and there's a tremendous amount of newness and change coming. And so what you see at any given point in time is only what you see in the quarter. We've got lots of great merchandise coming for the fall season that we feel super excited about. Amy and the team continue to do an amazing job and we're really pleased with our PINK business overall. Happy Nation, super early, as you know, it's really a test market for us, but the response has been overwhelmingly positive. It's the fit and the fabrication and the quality and the wash is all coming out very well. We're getting great customer feedback. We're learning a lot. We are deliberately not putting Keratin on the fire of marketing that brand yet because it's brand new. We need to understand how the consumer interacts with it. So it's very much a slow start and a deliberate start to test and learn. But I'm also delighted to say that we've had significant interest from potential partners around the world who are really, really interested in in what we're doing in that space. And so that's very encouraging when the market at large notices good work and notices good products. So just as you've seen us partner with Amazon for extended distribution in our beauty business. You should expect to see us partnering with other people, be it through our VS&Co-Lab initiative where we're partnering with other third parties, where it makes sense for us to join forces with strong businesses who can add to our overall customer experience, we will absolutely look to do that. And Happy Nation is potentially a good example of that.

Our next question comes from Marni Shapiro from Retail Tracker.

I love Happy Nation as well. But I'm going to ask you a little bit just about Frankies and it's such a great brand. I'm just curious your thoughts behind investing here. And is this something that you guys would -- as a company look to do in either categories you're already in or adjacent categories to invest behind either accelerate the growth of these small brands and participate in that upside or something they even want to bring in-house altogether?

Yes. Thank you for the question, Marni. Good to hear from you. We love Frankies brand. It's a fabulous, fabulous brand, and we've been admiring it for several years. I was fortunate to meet with Francesca last week. Was it last week? Yes, last week, we had an amazing meeting with her. She's a real dynamic creative force. And I think it's brilliant for us to have a partnership with her. It models the partnership that we have with For Love & Lemons, also female-founded business. very strong customer affinity in both of those brands, and we have a minority stake in them both. It enables us to participate in the upside, but more important, it rounds out our customer experience. So there are 3 reasons why we would partner with third-party brands. One is if it helps us get to customer groups where we're currently underweight, the second is if it helps us to get to categories of merchandise where we're currently underway. And the third is if an affinity with that brand overall brings a halo to the house of Victoria. And in all -- in both of those cases, Frankies and Love & Lemons, it's a check, check, check. They do all of those things. And we are very proud to partner with them. We think they bring a lot to our family overall. And I think there's potential for Victoria's Secret & Co. to do more of that style of investing in third-party brands. and it's a really good nod to the VS&Co-Lab initiative that we announced last week, where, yes, building on the foundation I just talked about of the 3 reasons for partnering, we would anticipate building a pretty significant business there. So I'm glad you asked, and I'm glad you like the brand, Marni.

Such a cool brand. Best of luck for the summer season.

Thank you.

Our next question comes from Corey Tarlowe from Jefferies.

You mentioned Amazon. Can you just provide a little bit more color as it relates to the strategy around selling the VS and PINK beauty products on Amazon and what that could mean for your business? And then can you just briefly highlight the co-brand credit card launch and how that's enhancing your offering and attracting new customers?

Yes, happy to. So on Amazon, just a reminder, we have an incredible beauty business. We have a $1 billion beauty business in Victoria. We have I think I'm right in saying 3 of the top 10 fragrances in America. We have the #1 fragrance in America. And that's from only distributing that product -- those products through 800-plus points of distribution and a single website. How much more business could we do if we partnered with other people who are in the category? And is that business if we were to access it going to cannibalize what we already have? That's the question. We think it makes sense to test the proposition. We are delighted to be working with Amazon who've been an amazing partner for us. Our initial results indicate it gets us to a new consumer who is not currently shopping with us. that it's additive to our mix that it's not cannibalizing our existing business, but we'll continue to test and learn. We haven't gone full bore on that initiative by any stretch of the imagination. We're testing our way into it. But I think it's really interesting, and I think it offers a model for how we might be able to partner with other people where it makes sense to do so. So early days. We'll update more at our investor meeting in October, later in the year, and we'll have more data points. But we're delighted with the partnership. Brad, do you want to pick up the second part of that question?

Yes. Corey, with respect to the loyalty programs, today, we have 2 large loyalty programs that are in place and very dominant and run at scale. We have a PINK Nation loyalty program. We have a credit-based loyalty program with Brad, who is our financial credit provider. Both of those programs, they provide high customer engagement, and we see very accretive results from the members of those 2 programs. The reference that Martin made earlier is that we are on a pathway to modernize both programs this year. The first step of that modernization was a launch of a co-brand Mastercard product with Red that occurred in the first quarter. And early results of that are very successful, and we're optimistic that, that will build and become more accretive throughout the year. And then the second part of the modernization road map relates to a noncredit loyalty program that will we'll begin piloting later this year and very excited about adding an overlay of a noncredit based program to the business that we have not had historically. And again, I would expect that, that is a more meaningful impact to fiscal 2023.

I think we have time for 1 more question.

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

I'm glad I am on. Martin, nice to hear your voice. I wanted to see if you could talk just a little bit more about PINK for me. A lot of concern around it around the apparel business. And I wondered if you see it, it sounds like you plan on it becoming a smaller part of the business. Maybe you could give me a picture of what your goal is there. And if that -- if the whole fleet component of the business is looking to shrink. And in intimates, as that builds, where should we see the uptick in category development. And just on by launches, I know the cloud was very successful, and we should expect at least 1 more. Is there a possibility that there'll be more than 1 additional bra launch this year.

Thank you, Janet. Please don't be concerned about PINK. PINK is alive and well, that is a great business with an incredibly strong followership, really clear positioning around people, purpose and planet, great merchandise. The stores are busy, business is performing well. There is absolutely no structural issue with PINK whatsoever. It makes enormous sense for Victoria's Secret & Co. to have Victoria's Secret and PINK side by side. It gives us an unfair advantage in getting to young women early in their life cycle. So it has incredible strategic sense for us. The most strategic sense is that it is the dominant player in intimates for young women. That's the real rationale for us owning it and operating it and having it as the little sister to Victoria. So that's our primary focus. If we could grow any single category, if we could wave a magic one and say which category do we want to grow much, it would be the bra and panty business in PINK. That is the lifeblood of bringing new young customers into the business. So if we have a lower participation as a consequence of that from apparel and sleep, I'm absolutely fine with that. We're not deliberately planning those businesses down. That's not the intent. We are deliberately planning to have a higher participation in intimates and swim because those are the core of the offer, and those are the parts of the business that make most sense relative to Victoria's Secret. So I hope that all makes sense to you. I definitely don't want anyone to be concerned about, it's a fantastic business, and it resonates incredibly well with customers. And all of our research that we very carefully track this shows that the health of the brand is very strong, very strong. We've seen very positive momentum. Love Cloud has been excellent for us. Really strong launch. We are committed to at least 2 bra launches per year. So yes, there will be more activity in the back half of the year. You wouldn't expect me to tell you what that is, Janet, for reasons and commercial reasons, but we spend more time talking about bras, more time developing bras than anything else that we do. It's the most important category that we're in, and I'm delighted to say we have incredible talent working on our bra business in both of our big brands.

That concludes our call this morning, and thank you for your continuing interest in Victoria's Secret & Company.

Thanks, everybody.

That concludes today's conference. Thank you for participating. You may disconnect at this time.