VS&CO FOURTH QUARTER 2022 EARNINGS COMMENTARYMarch 2, 2023

Introduction• Victoria’s Secret & Co. is providing this fourth quarter commentary ahead ofits live earnings call scheduled for March 3, 2023 at 8:00 a.m. EST.
• We remind you that any forward-looking statements made in thiscommentary are subject to our safe harbor statement found in our SEC filings
and in our press releases.
• Our fourth quarter earnings release and related financial information areavailable on our website, www.victoriassecretandco.com/investors under
Financial Information, Quarterly Results. Also available on that portion of
our website is an investor presentation.
• Certain results included in this commentary are adjusted results and exclude
the impact of certain items as described in our press release, our SEC filings
and the investor presentation posted on our website. Reconciliations of theseand other non-GAAP measures to the most comparable GAAP measures areincluded in our press release, our SEC filings and the investor presentation
posted on our website.
• As a reminder, results prior to our separation from L Brands in August 2021
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are on a carve-out basis and include the Victoria’s Secret Segment and a
portion of the unallocated overhead costs as part of L Brands.
Fourth Quarter and Full Year 2022 Results• We delivered adjusted operating income and adjusted earnings per diluted
share results in the fourth quarter above our most recent guidance despite amacroeconomic environment that remained challenging for our customer
throughout the holiday quarter. We controlled what we could control whilenavigating a highly promotional retail landscape by aggressively pursuing
our share of consumer spending to optimize sales and margin, and at thesame time being extremely diligent on costs and inventory management. In
our core Victoria’s Secret and PINK businesses, we exited the year withinventory levels down double digits when adjusting for the modal mix shift
impact and are prudently positioned as we begin 2023.
• Today’s announced results represent our sixth consecutive quarter since theseparation that we have delivered adjusted operating income and adjusted
earnings per share results within or above our guidance range. We continue
to believe this type of performance demonstrates the stability of our businessand progress of our brand repositioning, our domestic market shareleadership position in the intimates category, and our new, more agile
operating structure that allows us to deliver solid operating profit
performance in a challenging environment.

2• We reported fourth quarter adjusted earnings per diluted share of $2.47,
which was above our most recent guidance range of $2.25 to $2.35 per diluted
share. This result compared to earnings per diluted share of $2.70 in the
fourth quarter of 2021.
• Net sales for the quarter were $2.021 billion, a decrease of 7% compared tofourth quarter of 2021 sales of $2.175 billion, and were in-line with our mostrecent guidance of down 7% to 8%. During the quarter, traffic was up in ourstores and online as compared to the fourth quarter last year. Our conversion
rates were down in the quarter compared to the fourth quarter last year but
remained above pre-pandemic levels. As a result of the positive response to
our aggressive promotional position and the strength of peak selling periods,
our average unit retail was down in the quarter as compared to the fourth
quarter last year, but remained healthy and at or near record highs in mostcategories. We were encouraged by our sales performance during peak time
periods during the quarter. In particular, from Black Friday through Cyber
Monday and during the semi-annual sale period, we experienced our best
traffic and conversion trends in the quarter, both in stores and online, as ourcustomers responded positively to our marketing messages and targeted
promotional activity, highlighting a customer who is very cautious and cost
conscious in this current environment.
• From a merchandising perspective, we remain the leader in domestic market
share for the intimates category, and on a rolling twelve month basis, we
experienced slight growth compared to last year. From a category3perspective, starting with Victoria’s Secret, beauty was our best performing
business followed by sleepwear and bras. Within PINK, intimates
outperformed sleepwear and apparel which had a difficult quarter.
• Our international business continues to perform very well. The business has
been in a period of significant growth over the past several quarters as it
recovered from COVID-related restrictions. The business has been profitablein each of the last four quarters and continues to experience momentum, withmost countries performing very well. We continue to be optimistic aboutsales and profit growth for our partners around the world.
• The adjusted gross margin rate for fourth quarter 2022 was in-line with our
guidance of 37% to 38% and decreased 160 basis points to 37.6% compared to
the fourth quarter of 2021. The decrease in the gross margin rate wasprimarily due to targeted promotional activity, in particular during peakholiday moments, to remain competitive and to help mitigate pressure on the
consumer along with deleverage in buying and occupancy expenses on the
decline in sales. As anticipated, the impact of supply chain and raw material
cost pressures were less than the fourth quarter last year by approximately$65 million.
• Adjusted SG&A expense dollars in the fourth quarter decreased 8%, or $40
million, compared to last year driven by improvement in our store labor
model, lower incentive compensation expense and our ongoing disciplined
expense management initiatives. The SG&A rate was 23.7%, better than our
4guidance of 24% to 25%, and leveraged by 20 basis points compared to thefourth quarter last year. We believe SG&A rate leverage on a 7% sales decline
in the quarter demonstrates our proactive, planned initiatives to improve thecost structure of our business.
• Fourth quarter adjusted operating income was $280.5 million, or 13.9% ofsales, and was above our most recent guidance range of $265 million to $275
million. This result was lower than the $333.2 million in the fourth quarter of2021 due to the previously mentioned decrease in sales and gross margin
dollars, partially offset by lower SG&A expense dollars.
• Our tax rate for the quarter of 23.2% was favorable to our forecasted rate of
approximately 25%.
• Fourth quarter adjusted net income was $203.0 million compared to $246.1
million in 2021.
• Turning to the full year 2022, net sales were $6.344 billion, a 6% decrease from2021, and total comparable sales decreased 8%.
• The full year adjusted gross margin rate decreased 430 basis points to 36.4%
compared to 2021, primarily driven by increased promotional activity driven
by the challenging economic environment the last three quarters of the year,
buying and occupancy expense deleverage on the decline in sales and the net
impact of supply chain and raw material cost pressures.
5• Adjusted SG&A expense dollars for the full year decreased 8%, or $147
million, compared to 2021. The full year adjusted SG&A rate was 27.5% andleveraged by 40 basis points despite the decline in sales.
• Adjusted operating income for the full year was $565.7 million compared tooperating income of $869.5 in 2021. The adjusted operating income rate was
8.9% for the full year 2022.
• Full year adjusted earnings per diluted share were $4.95 compared to earnings
per diluted share of $7.18 in 2021.
• Turning to the balance sheet, we ended the year with total inventories in ourcore Victoria’s Secret and PINK businesses, or excluding Adore Me, of $947
million, or flat compared to last year. Excluding the modal mix shift impact,
total inventories in our core Victoria’s Secret and PINK businesses ended theyear down low-teens, better than our guidance of down in the mid-single
digit range. Including the recent acquisition of Adore Me, total VS&Co
inventories were $1.052 billion as of the end of the year.
• From a liquidity standpoint, we ended the year with a cash balance in ourcore business, or excluding Adore Me, of $405 million. Free cash flow
(operating cash flow less capital expenditures) for the year was $273 million.
We ended the year with $295 million in outstanding borrowings on our $750
million ABL credit facility.
6• Capital expenditures for the year were $164 million, or about 3% of sales, andbelow our guidance of approximately $200 million, primarily driven by thetiming of certain store capital projects sliding into 2023. Capital investments
for the year were focused on our store capital program, along withinvestments in technology, distribution and logistics capabilities.
Depreciation for the year was $274 million and in-line with our guidance ofapproximately $270 million.
• Weighted average diluted shares at the end of the fourth quarter were about
82 million. During the fourth quarter, we invested $36 million to repurchase
0.9 million shares, which completed the $250 million share repurchaseprogram that we announced in March 2022. For the year, we invested $250
million to repurchase 6.0 million shares at an average price of $41.77.
• In January 2023 we announced a new share repurchase program providing forthe repurchase of up to $250 million of the Company’s common stock throughthe end of fiscal year 2023. In February 2023, as a component of the broader
share repurchase program, we entered into an accelerated share repurchaseagreement (“ASR”) with Goldman Sachs to repurchase $125 million of theCompany’s common stock. Under the terms of the ASR, the Company madea payment of $125 million to Goldman Sachs on February 2, 2023 and received
an initial delivery of approximately 2.4 million shares of the Company’scommon stock. The final number of shares to be repurchased will be based on
the volume-weighted average price of the Company’s common stock during
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the term of the ASR, less a discount and subject to certain adjustments. The
final settlement of the ASR is expected to be completed in the second quarterof 2023.
• Aside from the financials, over the last 90 days, we have executed several key
actions in support of our strategy and positioning for the long-term,
including:o We completed our acquisition of Adore Me, a digitally-native,
technology-first intimates brand. We believe the deal will strategically
position us for growth by allowing us to leverage Adore Me’s expertiseand technology to continue to improve the Victoria’s Secret and PINK
customer shopping experience and to accelerate the modernization of
the VS&Co digital platform;o We announced the launch of our new Victoria’s Secret and PINK
customer loyalty program which is the Company’s first rewards
program to allow customers to earn rewards regardless of payment
method. The new loyalty program is the latest step in ourtransformation journey as we aim to create lifelong relationships withcustomers, while bringing them exciting new opportunities to engage
with the brands and one another;o We recently launched the new Victoria’s Secret x Naomi Osaka collection,a first design collaboration with Victoria’s Secret Collective Partner
Naomi Osaka. The collection, which includes our first ever pad that canbe recycled in a closed loop system, is inspired by self-love, and includes
8a variety of casual sleepwear pieces and intimates that celebrate thebeauty of embracing your dreams;
o We expanded our Store of the Future fleet to 52 total stores (25 in the
United States and 27 internationally);o We continued to make progress on our ESG journey and are planning to
publish our 2022 ESG Report in April;o And, we were recently named one of America’s Greatest Workplaces for
Diversity by Newsweek.
Outlook for First Quarter and Full Year 2023
• As we begin 2023, we recognize the domestic economic environment
continues to be challenging and continues to pressure our customers.
However, we are evolving and innovating our business focused on our three
key pillars: 1) strengthening our core; 2) igniting growth; and 3) transforming
the foundation of the company. We have organic growth strategies and newcustomer experiences well identified for 2023, including the recent launch of
our new Victoria’s Secret and PINK customer loyalty program. Ourinternational business has momentum with partner expansion plans for new
stores and new countries planned out through the next two years. We
recently acquired Adore Me, a technology-led growth vehicle. We plan toleverage some of their technology on our scaled platforms starting in thesecond quarter and continuing through the fall season. And mostimportantly, we are a bra company and the market leader in the intimatescategory positioned for future growth, both in our core and with Adore Me
now in the family.
9• For the full year 2023 forecast, while the macro environment remains
uncertain, we are assuming sales trends and comparisons will improvethroughout 2023 as we anniversary softer sales trends which began in thesecond quarter of 2022, and as we begin to benefit from our new growthstrategies and new customer experience initiatives being rolled out this year.
For the full year 2023, we are forecasting sales to increase in the mid-single
digit range compared to $6.344 billion last year. Forecasted sales for 2023
assumes our Victoria’s Secret and PINK business is relatively flat year overyear for 52 weeks, approximately 1 to 2 points of growth due to the 53rd week
in fiscal 2023 (fourth quarter 2023 will consist of 14 weeks), and Adore Me
which is new to our results in 2023 and forecasted up mid-teens compared toapproximately $250 million recorded in their most recently completed fiscal
year.
• At this level of sales, we expect our adjusted operating income rate for 2023 tobe similar to 2022. Given the challenging economic environment, we believe
an adjusted operating income rate in the high-single digits demonstrates
stabilization of our business and represents a solid base we will leveragewhen more normal macro trends return in North America.
• At our Investor Day in October, we discussed an opportunity to drive
operating margin expansion through our initiatives to transform thefoundation of the company by modernizing the operating model. These
initiatives are well under way and we remain committed to the total $250
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million opportunity that we discussed at our Investor Day. We will begin
realizing benefits related to these initiatives in 2023, with more than twothirds of the total savings expected to be realized in 2024 and 2025.
• Non-operating expenses, consisting principally of interest expense, areprojected to be about $75 million to $80 million for the year.
• We estimate our tax rate will be approximately 24% to 25% for the year.
• We estimate shares outstanding of approximately 80 million for the firstquarter and full year 2023. These estimates include the February 2023 ASR
activity as well as the assumed completion of the share repurchase agreement
announced in January 2023.
• Given these inputs, we are forecasting full year adjusted earnings to beapproximately $4.90 per diluted share compared to $4.95 per diluted share in
2022.
• We estimate capital expenditures of approximately $275 million for the year,
or about 4% of sales. Capital investments will be focused on our store capital
program along with investments in technology related to our strategic
initiatives to drive growth and technology investments relating to theseparation activities. Depreciation is estimated to be approximately $260
million for the year.
11• We continue to closely evaluate our store real estate. In North America we
opened 16 new stores during 2022, mostly in off-mall locations, and closed 13
stores. We also renovated 7 stores in the Store of the Future design. At theend of fiscal 2022, we had 25 stores in the Store of the Future format in North
America. Square footage in our North America stores in 2022 was flat to lastyear.
• In North America in 2023, we plan to open approximately 15 to 20 new stores,
mostly in off-mall locations, and estimate approximately 15 to 20 store
closures. We also expect about 50 renovations in the Store of the Future
design in 2023, with more than half consisting of square footage reductions or
consolidations of co-located Victoria’s Secret and PINK stores. Square footage
in our North America stores in 2023 is expected to decrease approximately 1%
to 2% compared to 2022.
• Turning to liquidity, we expect 2023 free cash flow (operating cash flow lesscapital expenditures) of approximately $300 million to $350 million. This levelof cash flow coupled with availability under our ABL credit facility results invery strong liquidity, which we expect is more than sufficient to fund ourworking capital, capital expenditures and any other foreseeable needs.
• For the first quarter of 2023, we are forecasting sales to decrease in the midsingle digit range compared to sales of $1.484 billion in the first quarter of
2022.
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• At this forecasted level of sales, first quarter 2023 adjusted operating income isexpected to be in the range of $55 million to $85 million compared to $116
million in the first quarter of 2022.
• We are forecasting first quarter 2023 adjusted earnings to be in the range of$0.30 to $0.60 per diluted share compared to $1.11 per diluted share in the firstquarter of 2022.
• We expect the first quarter 2023 adjusted gross margin rate to beapproximately 37% to 38%, up compared to last year’s rate of 36.6%. We
expect to benefit by approximately $60 million from lower supply chain and
raw material cost pressures compared to the first quarter of 2022. Given thechallenging environment, we expect higher promotional activity than the firstquarter last year, and we are forecasting deleverage in buying and occupancy
expenses on the lower forecasted sales.
• We expect the first quarter of 2023 adjusted SG&A rate to be approximately
32% to 33%, deleveraging compared to the first quarter of 2022’s rate of 28.8%
principally driven by the forecasted mid-single digit decline in sales, and as aresult of investments in technology related to our strategic growth initiatives,to support the technology separation activities from Bath & Body Works, thelaunch of our new customer loyalty program, the introduction of Adore Me
SG&A expenses and forecasted higher incentive compensation expense
compared to the first quarter of 2022. Since the spin-off, we have beenworking to separate the information technology capabilities in support of two
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independent companies. The majority of costs related to the separation will
be incurred by the end of 2023, which is when the separation of thetechnology systems is expected to be predominately completed.
• We anticipate net non-operating expense of approximately $20 million in thefirst quarter of 2023.
• We estimate a tax rate of about 25% for the first quarter of 2023.
• We expect inventory levels in our core Victoria’s Secret and PINK business at
the end of the first quarter of 2023 to be down high-single digits to low-double
digits compared to the first quarter of 2022. Including the recent acquisitionof Adore Me, we expect total VS&Co consolidated inventories to be down
low-single digits at the end of the first quarter of 2023.
• The Company’s financial guidance for first quarter and full year 2023 includes
forecasted operating results for Adore Me subsequent to the acquisition on
December 30, 2022. The Company will reflect the operating results of Adore
Me on an approximate one-month reporting lag in its consolidated financial
statements. The guidance excludes the financial impact of purchaseaccounting items related to the acquisition, including the amortization of
acquired intangible assets, recognition in gross profit of purchase fair value
adjustments to acquired inventories as it is sold, and expense (income) related
to changes in the estimated fair value of contingent consideration andperformance-based payments.
14• Our focus as leaders, and as a company, is on ensuring we continue to be a
future facing business that becomes more and more culturally relevant in thisshifting consumer environment. We are committed to optimizing our
performance in the current challenging environment by focusing on what’s
within our control, and we are confident in our strategic growth plan andremain committed to delivering long-term sustainable value for ourshareholders. Led by our two category-defining brands (Victoria’s Secret andPINK), a merchandise leadership position in intimates and beauty and a
global business positioned to increase market share … our goal is clear – to be
the world’s leading fashion retailer of intimate apparel.
• We invite you to join us for our live earnings call tomorrow morning at 8:00
a.m. Eastern by dialing 1-800-619-9066 (international dial-in number: 1-212519-0836). The conference ID is 5358727.

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