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Good morning. My name is Amanda, and I will be your conference operator today. At this time, I would like to welcome everyone to the Victoria's Secret & Co. Fourth Quarter and Fiscal 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. All parties will remain in a listen-only mode until the question and answer session of today's call. I will now turn the call over to Priya Trevetti, Senior Vice President and Global Head of Investor Relations and Treasury of Victoria's Secret & Co. Priya, you may begin.

Good morning, and welcome to Victoria's Secret & Co. Fourth Quarter and Fiscal 2025 Earnings Conference Call. For the period ended January 31. Joining me on the call today is Chief Executive Officer, Hillary Super, and Chief Financial and Operating Officer, Scott Sekella. We are available today for approximately 30 minutes to answer questions. I would like 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. Certain results we discuss on the call today are adjusted results and exclude the impact of certain items described in our press releases and in our SEC filings. Reconciliations of these and other non-GAAP measures to the most comparable GAAP measures are included in our press release, our SEC filings, and in the investor presentation posted on the Investors section of our website. I will now turn the call over to Hillary.

Thanks, Priya. Good morning, everyone, and thank you for joining us today. This is a standout year for our business. We returned to growth mode in 2025 with full year comp sales up 5%. Fourth quarter and full year results exceeded top and bottom line guidance reflecting strength across brands, channels, and geographies. In the fourth quarter, we grew comp sales 8% to deliver our highest fourth quarter revenue since becoming an independent public company. Brand momentum is building, our customer file is growing, and we are gaining market share. Eighteen months ago, I joined Victoria's Secret & Co. because I saw one of the compelling transformation opportunities in retail. To capture that opportunity, we put in place a clear road map for the business. Our Path to Potential strategy. Built on four pillars. Supercharging our bra authority, recommitting to PINK, fueling growth in beauty, and evolving our brand projection and go-to-market strategy. Throughout the year, we executed this strategy with focus and discipline. We assembled a leadership team that has rallied around the new direction for our business, re-centering the organization around what matters most. Creating emotionally compelling product, building brand heat, and deepening our connection with the customer. While still early in our transformation, the results to date are clear. We reasserted our leadership in bras, restoring the category to growth for the first time in four years. We reignited PINK, delivering its strongest growth year in a decade. And we steadily grew our nearly $1 billion beauty business. We also expanded our customer file for the first time in years. A signature brand moment in 2025 was the fashion show, which re-established Victoria's Secret & Co. at the center of the cultural conversation and translated directly into business momentum. It also marked a meaningful step forward in our new era of sexy. Defined not as a single look or standard, but as a feeling of confidence and authenticity. The progress we made in 2025 reflects a deliberate evolution in how we operate. When we combine great product, powerful storytelling, and an elevated experience, our customer responds. I would like to spend a few moments discussing our holiday and Valentine's Day execution, which reflects marked improvement versus the prior year. I will then cover our international performance followed by the progress we are making against our strategic pillars. Scott will then walk you through our detailed financials and 2026 outlook. As we reflected on last year's holiday and Valentine's seasons, we saw an opportunity to further strengthen our position and translate learnings and insights into growth. In 2025, we amplified the fashion show to drive sustained traffic and engagement through November and into Black Friday, delivering our highest customer turnout since 2021 with strong participation from new customers. In December, we maintained a consistent cadence of fashion newness, especially in bras and sleep. We supported key categories with deliberate inventory investments, targeted digital and social marketing, and refreshed store windows and merchandising. In particular, sleep significantly outperformed expectations and became a key growth engine for the business during the quarter. For Valentine's Day, we reinforced Victoria's Secret & Co. as the destination. We shortened the semi-annual sale and set the assortment earlier, extending the selling window and broadening the lifestyle offering. For VS, this was my favorite floor set since joining the business. Elevated, beautifully executed, and undeniably Valentine's Day. Anchored in bras, the floor set was powerful and offered a range of sensibilities from glamorous to casual. We supported the launch with a high-impact campaign featuring Hailey Bieber, driving engagement and new customer acquisition. At PINK, we built on the viral fashion show moment featuring the K-pop group TWICE with a bra-centered Valentine's Day campaign. The campaign focused on self-expression, friendship, and empowerment in a way that was unmistakably PINK. The campaign resonated and drove continued acceleration in the PINK bra business. The VS and PINK Valentine's collections outperformed our expectations, delivering double-digit sales growth. The week of Valentine's Day, store traffic increased significantly year over year, meaningfully outperforming the mall. Turning to international. For the fourth quarter, net sales increased 43% year over year with growth across channels and geographies, led by continued strength in China. In that market, social commerce and live streaming are critical to the purchase journey and powerful drivers of engagement and conversion. This year, we took a more coordinated global approach to product, marketing, and storytelling. We aligned our merchandising to our strategic pillars to ensure each market delivers the right assortment and messaging and complemented our global assortment with exclusive local product, allowing us to move quickly to meet demand. We also benefited from a more global approach to the fashion show, resulting in a brand halo that extended internationally. During my recent visit, I saw firsthand the work our teams are doing to drive outsized results, and I am confident we have significant runway to grow digitally and in stores. International remains a significant long-term opportunity for us. In fiscal 2026, we expect to deliver double-digit growth by expanding in existing markets, entering new markets, and maximizing our digital and social commerce opportunity. Now let us turn to the progress we have made in each of our four pillars of the strategy. We begin with supercharging our bra authority. Over the past year, we put bras back at the center of the Victoria's Secret & Co. brand while strengthening our operating muscle. Recognizing that bras are not typically a holiday gifting category, we focused on our core franchises. We delivered a steady flow of newness as well as fun in the assortment, supported by digital storytelling and the right inventory levels to meet demand. Our disciplined execution drove outsized growth across our top bra franchises and sustained customer engagement through the holiday. As a result, the Victoria's Secret & Co. bra business grew mid-single digits in the fourth quarter. We continued reducing promotions throughout the year, which drove a mid-single-digit increase in our bra AUR. This performance was partially enabled by our industry-leading bra fitting experts, who build meaningful connections that deepen customer loyalty in our stores. Our efforts returned the Victoria's Secret & Co. brand bra business to annual growth for the first time since 2021. When we win in bras, we see a halo across the brand. That effect was evident in panties as well as in sleep which I noted earlier. We made panties more fun and playful. We introduced more newness, balanced our silhouette offering, and expanded fabrics. The results were strong. VS panty AURs increased and the business significantly accelerated in the fourth quarter, driving our best performance in panties since 2021. This momentum is particularly meaningful since this is our number one new customer acquisition category. We leaned into sleep this quarter, an important gifting category and a meaningful driver of Q4 performance. Sleep is highly visible. Customers wear it, share it, and signal their affinity for the Victoria's Secret & Co. brand. Our social channels were flooded with real moments as our sleep assortment was celebrated in posts from holiday gatherings, family photos, theme parties, and festive occasions. Our iconic sleep assortment was a standout through the holiday and into Valentine's Day led by hero styles in logo and heritage stripes. Applying insights from the last year, we were better positioned with inventory and digital activation to capture demand. As a result, sleep delivered outsized growth and became our third largest new customer acquisition category in the quarter. Altogether, the Victoria's Secret & Co. brand delivered low double-digit growth for the quarter, a clear demonstration of the multiplier effect of our strategy. We carried our momentum into the first quarter with the outperformance of our Valentine's Day collection, and immediately followed with the launch of the Victoria's Secret signature collection. Signature elevates the comfortable bra she reaches for every day, bringing new energy to an essential category and is anchored by our best selling wireless T-shirt bra featuring a stylized update to our classic logo. The collection was supported by a thumb-stopping campaign with a cast of fan-favorite VS Angels that drove strong social engagement and cultural buzz. Beyond Signature, we have a powerful pipeline of innovation. Watching our spring floor sets come together genuinely made my heart race. They are vibrant, saturated with color, and completely alive. I cannot wait to see customers step into this experience and feel that same energy. Our second pillar is recommitting to PINK. For several years, the brand had drifted from its core, losing clarity, energy, and cultural edge. In 2025, we reset the foundation and returned PINK to a differentiated, digitally native, socially driven lifestyle brand for 18–24 year olds rooted in its bold, playful, and irreverent DNA. One year into our Path to Potential strategy, PINK has a stronger brand definition, growing awareness and relevance, and renewed affinity. All of this is showing up in the numbers. In the fourth quarter, PINK grew high single digits driven by increased apparel penetration and renewed momentum in bras. Importantly, we pulled back on promotions, driving more regular price selling and double-digit AUR expansion, which benefited margins across PINK's portfolio, showing that the brand is regaining pricing power. On the apparel side, PINK won the holiday season with core icon styles and fashion newness. Our Wednesday drops have become highly anticipated as customers check in regularly with growing urgency to purchase, and our second drop from the LoveShackFancy collaboration resonated with our brand fans and drove significant regular price selling in December. PINK's bra business also exceeded expectations for the quarter. TWICE's appearance in the fashion show sparked viral demand and drove two sellouts of the Wear Everywhere bra. We built on that momentum by featuring TWICE again in our Valentine's Day campaign, deepening the emotional connection with our customer. I saw that firsthand during a visit to our Dadeland Mall store in Miami where young customers gathered together to dance and learn the choreography. This is exactly the kind of emotional connection that we have been working towards. The TWICE campaign became our most viewed PINK campaign ever, generating more than 79 million social views. PINK app downloads increased 50% in the quarter as customers sought early access to drops, with downloads accelerating further following the Valentine's Day launch. Importantly, PINK brand equity and consideration among 18–24 year olds are at their highest levels in years. As we enter the first quarter, we are maintaining a disciplined cadence of product newness, activating around spring break, continuing to innovate our ICON styles, and seeing early progress in revitalizing the PINK panty category. Later this year, we will open a stand-alone PINK pop-up in SoHo, New York, bringing the brand to life physically. In 2026, we see a long runway to expand PINK. Our focus is on building relevance with Gen

Thanks, Hillary, and thank you, everyone, for joining today's call. Before I begin, as a reminder, in 2024, we recorded a change in our accounting estimate related to the expected future redemption of outstanding gift cards issued by the company. As a result of this change in accounting estimate, we recognized a one-time cumulative adjustment which increased net sales, gross margin, and operating income by approximately $26 million in 2024. That said, we are pleased to report fourth quarter and full year results that exceeded the high end of our guidance on both the top and bottom line. For fiscal 2025, excluding last year's gift card breakage benefit, net sales grew 6% to $6.553 billion. Adjusted operating income rose 16% to $403 million and adjusted EPS increased 22% to $3.00, all despite $85 million in net tariff pressure. Now let us review our fourth quarter results in more detail. Net sales for the quarter were $2.270 billion, an increase of $164 million or 8% over last year, or 9% excluding the one-time gift card breakage benefit. Comp sales increased 8% for the second consecutive quarter. These results exceeded expectations and reflected broad-based growth at Victoria's Secret, PINK, and Beauty, and across all channels and geographies. We saw increases in sales metrics, including higher comp traffic and average order value, reduced promotions, and increased regular price selling. AURs in the quarter were up 6% compared to last year and up 7% excluding panties. Hillary explained how we accessed the insights from 2024 and applied these learnings across the business. I want to highlight the operational excellence we are building as an organization. Our cross-functional teams have delivered more frequent product newness and bolder marketing and storytelling. This strong execution translated into impressive fourth quarter results. In North America, our total intimates business across VS and PINK grew at a high single-digit rate. We outperformed the intimates market in the quarter, driven by strong performance in bras, and delivered low single-digit market share gains. We exited the year having grown our total intimates business for the first time in four years. Combined with the success in sleep and Valentine's Day that Hillary mentioned, the VS brand grew low double digits in the fourth quarter. At PINK, we invested in-depth behind our key icon styles while delivering fresh fashion newness, returning both PINK apparel and the total PINK brand to growth. Fiscal 2025 marked PINK's strongest growth in a decade. In Beauty, we grew low single digits in the quarter supported by fine fragrance and mists, which continued to perform well. For 2025, Beauty delivered yet another year of growth. Our international business also continued to perform exceptionally well during the quarter. Reported fourth quarter sales grew 43% to $276 million driven by outstanding performance in China, primarily in the digital channel. Adjusting for the shift in the reporting of European digital sales, which were previously fulfilled from our U.S. distribution center and recorded in North American direct sales, international sales grew 27%. International results included high single-digit retail comp sales gains combined with continued new store openings. Fourth quarter adjusted gross margin dollars were $895 million. Adjusted gross margin rate in the quarter was 39.4%, compared to an adjusted gross margin rate of 39.7% in the fourth quarter last year, or approximately 38.9% excluding the $26 million gift card breakage benefit. Excluding the gift card breakage benefit, we expanded our year-over-year adjusted gross margin rate by 50 basis points despite approximately $60 million, or 250 basis points, of net tariff pressure in the quarter. We mitigated this headwind with margin expansion driven by our strong operational foundation, which enabled us to scale effectively, resulting in significant leverage on buying and occupancy expenses. Additional drivers included a pullback in promotions and increased regular price selling. Adjusted SG&A dollars were $579 million in the fourth quarter, and our adjusted SG&A rate was 25.5% compared to 25.4% last year or 25.8% excluding the $26 million gift card breakage benefit. We leveraged on the SG&A line by 30 basis points, driven by the sales beat and continued discipline in expense management across the business. This was partially offset by investments in store labor and higher incentive compensation expense associated with our outperformance in the quarter. Adjusted operating income was $316 million for the fourth quarter, above the high end of our guidance of $265 million to $290 million and up from last year's fourth quarter adjusted operating income of $299 million, or $273 million excluding the $26 million gift card breakage benefit. Nonoperating expenses, consisting principally of interest expense, were $14 million in the quarter, better than our guidance of approximately $17 million and down from last year, driven primarily by a lower level of weighted average borrowings and lower interest rates. Our adjusted net income per diluted share was $2.77, significantly better than our guidance of adjusted net income per diluted share of $2.20 to $2.45, and last year's fourth quarter adjusted net income per share of $2.60 or approximately $2.35 excluding the gift card breakage benefit. Turning to the balance sheet. Our inventories remain in a healthy position. Fourth quarter total inventories were up 12% year over year. Excluding the impact of the Adore Me inventory reserves, inventory growth would have been in line with our previous mid-teen guidance. From a liquidity standpoint, we ended the fourth quarter with a cash balance of $518 million, an increase of $291 million above last year. We generated free cash flow of $312 million for the full year. Included in free cash flow was a $69 million benefit related to the settlement of a long-standing intercompany fee litigation. Excluding this one-time item, our adjusted free cash flow was $244 million, more than $30 million above the high end of our guidance. As planned, we repaid all outstanding borrowings under our $750 million ABL credit facility in the quarter. Our cash balance and the full availability under our ABL agreement leave us in a strong financial position with ample flexibility for continued execution of our strategic priorities. Before moving to our outlook, I want to briefly address the DailyLook and Adore Me businesses. As noted in our press release this morning, we have initiated a strategic review of DailyLook, which operates as a digitally based premium subscription women's apparel and accessory styling service and represents a noncore asset within our portfolio. We are evaluating options to best position DailyLook for long-term success. We also continue to assess the Adore Me business and explore opportunities to optimize it within our portfolio. As a result of this ongoing review, we recently discontinued Adore Me's intimates-based subscription offering and converted it to a loyalty program designed to provide customers with a flexible, improved, and seamless shopping experience. We also decided to exit the Adore Me distribution center in Mexico, and we have transitioned all fulfillment operations to the U.S. In conjunction with these actions, in the quarter, we recorded a noncash pretax impairment charge of $120 million related to the long-lived assets of Adore Me and a $36 million charge related to inventory reserves and other restructuring charges. These charges have been excluded from our adjusted non-GAAP results. Moving to our outlook, which is based on tariff assumptions consistent with the rates in place prior to recent developments. We have not included any impact of any potential changes to tariff rates and will continue to monitor developments closely and remain agile in our approach. As we discussed, we saw outperformance in the fourth quarter and that momentum has carried into 2026. Our spring offering is resonating well. Looking ahead, we have a strong pipeline of floor sets and brand moments. Brand heat continues to build as our product resonates with customers, driving market share gains and growth in our customer base. Our Path to Potential strategy is in its early stages, and we see substantial opportunity ahead to continue to deliver top-line growth. For fiscal year 2026, we expect net sales to be in the range of $6.850 billion to $6.950 billion compared to net sales of $6.553 billion in fiscal year 2025, representing growth of approximately 5% to 6%. We expect fiscal 2026 operating income to be in the range of $430 million to $460 million compared to adjusted operating income of $403 million in 2025. This implies operating margin expansion of approximately 20 to 50 basis points despite the incremental tariff headwinds. We have built a solid operational foundation that enables us to scale effectively and supports growth. As our top line grows, this foundation provides meaningful leverage across our buying and occupancy expenses. In addition, we believe our disciplined expense management, tariff mitigation efforts, and ongoing focus on reducing promotions and increased regular price selling position us to continue to expand our operating margins. Our fiscal 2026 guidance assumes an incremental gross tariff cost of approximately $160 million. We expect to mitigate most of that impact, resulting in an incremental net tariff impact of about $40 million. Our mitigation efforts include optimizing costs with vendors, further diversifying our sourcing, ensuring we have a more efficient air versus ocean freight mix, and implementing strategic pricing actions including more targeted promotions, increased regular price selling, and selective price adjustments where we identify value gaps in the market. We expect tariffs to have the greatest impact in the first half of the year, with the first quarter seeing the largest impact since last year's first quarter was not affected by tariffs. That impact eases in the back half as we begin to lap tariffs and our mitigation efforts increase. Given these inputs, we are forecasting fiscal year 2026 net income per diluted share to be in the range of $3.20 to $3.45 compared to adjusted net income per diluted share of $3.00 in 2025. We estimate capital expenditures in the range of $220 million to $240 million in fiscal 2026, or approximately 3% of sales. Capital investments will continue to focus on stores, the customer experience, and technology and logistics supporting our strategic initiatives to drive growth and operating efficiencies. We estimate 2026 free cash flow of approximately $220 million to $250 million. As for store counts and renovation plans in North America in 2026, we expect store counts to be flat to slightly up this year. By the end of the year, we estimate our Store of the Future presence in North America will be approximately 250 stores or 30% of the fleet, up from 25% in 2025. Internationally, we expect our Store of the Future presence by the end of 2026 to be approximately 55% of the fleet, up from 45% in 2025. By 2027, we expect approximately 50% of our global fleet will be converted to this format. Turning to our outlook for the first quarter of 2026. We are forecasting net sales in the range of $1.490 billion to $1.525 billion compared to net sales of $1.353 billion in the first quarter of 2025. This outlook assumes top-line growth of approximately 10% to 13% based on our continued momentum quarter-to-date in our North America business as well as strength in our international business. With this sales outlook, we expect first quarter 2026 operating income to be in the range of $32 million to $42 million compared to an adjusted operating income of $32 million in the first quarter of 2025. We expect our first quarter 2026 gross margin rate to be about 35.5% compared to an adjusted gross margin rate of 35.2% in the first quarter of 2025. This means we anticipate the first quarter 2026 gross margin rate to expand approximately 30 basis points year over year. Our margins are expanding despite the approximately 175 basis points of tariff pressure in the quarter. We expect to more than offset this based on the strength of our operational model, which continues to deliver leverage on buying and occupancy expenses as net sales grow, as well as our disciplined promotional strategy and more regular price selling. The SG&A rate in the first quarter of 2026 is expected to be approximately 33% compared to the first quarter 2025 adjusted rate of 32.8%. The forecasted increase in SG&A dollars is primarily driven by store labor investments and other costs to support the customer experience and top-line growth, as well as higher incentive compensation expense as the first quarter of last year benefited from a reduced level of incentive compensation expense. Given these inputs, we estimate first quarter earnings per diluted share to be in the range of $0.20 to $0.30 compared to adjusted earnings per diluted share of $0.09 in the first quarter of 2025. We expect to end the first quarter with inventories up high single digits compared to last year. This expected increase reflects growth to support business trends, the impact of tariffs, and timing related to our operations, mostly due to our strategic shift towards ocean freight from air freight, which results in us taking ownership of inventory earlier as compared to last year. In closing, our Path to Potential strategy is delivering tangible results as evidenced by the significant acceleration in our business during 2025. We are entering 2026 with momentum. Despite an uncertain macro environment, our fundamentals remain strong and resilient. We remain focused on managing costs while continuing to invest in product innovation, brand strength, and the customer experience. We are positioned to continue to scale effectively, giving us confidence in our ability to drive sustainable, long-term value. We will now open for questions. Operator?

Thank you. And one follow-up to allow ample time to respond to each participant that may wish to participate in this portion of the call. For our first question, we will go to the line of Matthew Boss with JPMorgan. Your line is open.

Great. Thanks, and congrats on a nice quarter. So maybe, Hillary, could you elaborate on new customer acquisition trends following the inflection in the file to growth last quarter? And just what inning you see marketing and product improvement in today as we think about sustaining momentum into 2026?

Sure. Sure, Matt. So customer acquisition. When you look at our total customer file, we are seeing growth across new, retained, and reactivated, but the highest growth in new. And within that, we are seeing a nice uptick in younger customers. It is a little gray because there is a delayed match in age range, so it is not a precise science, but we do see that and we see anecdotally in our business that we are increasing our count of new customers, which feels great. I would also add that from an income perspective, we are seeing consistent performance across the board in all income cohorts. And we are seeing growth in the customer count across all income cohorts as well as spend. So we are feeling really good about the complexion of customers as we enter 2026. In relation to marketing and what we have planned, you know, the team is just getting started. When we executed Q3 and Q4, the majority of the leadership team on the brand side was new. And so while we are tremendously happy with the success we had in the back half of the year, we are just getting started and we are learning things every day that we are playing forward. I think Valentine's execution is an example of that, where we learned the power, the virality of a K-pop group like TWICE, brought them back to collaborate on Valentine's Day, and just saw record results from that collaboration. So we are moving quickly. We have a number of events planned for both brands. And I think one of the things I am most excited about is we are really starting to find our voice with the PINK brand and what resonates there. I think we were farther along with VS and building brand heat in VS, and I am very excited about some of the things that are in the pipeline for PINK. So all the way around, we are feeling really positive.

Great. And then maybe, Scott, as a follow-up, I think you mentioned momentum multiple times. I lost count in terms of the first quarter to date. But maybe just if you could elaborate on the momentum that you are seeing first quarter to date, maybe relative to the 10% to 13% revenue growth outlook and just drivers of the demand acceleration that you are seeing relative to holiday.

Yeah. I mean, you know, coming off of holiday, which started with the fashion show heat, continued with the product newness. And then when you think about the fourth quarter setting Valentine's Day a little bit earlier and getting the heat around Valentine's Day in Q4. That carried in to February through Valentine's Day, and we saw, you know, impressive traffic, especially the week of Valentine's Day, which has set us up for a strong Q1 with that guide of plus 10% to plus 13%. I will say, you know, February is probably our easiest comp month given, you know, last year the trends were down and then sort of rebounded in March and April. So for Q1, we expect that 10% to plus 13%, but the March–April time frame will probably be a little bit below what we are seeing in February.

And then I will just jump in on the categories. We are really, really pleased in February to see very broad-based success across business units, across channels, and even in the categories that we are really focusing on. So I would say very consistent, very broad-based success. That being said, the things that I am really paying attention to in VS are sleep and intimates. In PINK it is bras, apparel, and collaborations, and in Beauty it is fine fragrance and mists. And I am really happy to report that all of those businesses are performing very well and very consistently.

It is great color. Best of luck.

Thank you. Our next question comes from Simeon Siegel with Guggenheim Partners. Your line is open.

Great. Thanks. Hey, everyone. Good morning. Really nice job. So Hillary and team, obviously, you have this slate here behind you. You are seeing what is working, what is it, maybe it feels like you have a really nice handle on the brand. So just as we take a step back, anything you are willing to share about how large you think each brand can and should be? And then I do not know if it is Hillary or Scott, but just any notable discrepancy in AUR, I think, versus Victoria this past quarter. And do you see greater go-forward opportunity at either brand? Thank you.

Sure. I am just very optimistic about all three business units. I do not see a reason why we cannot hit historical levels of sales in VS and Co. in general. I am not going to point to any specific numbers by brand, but we see tremendous runway in all of them. And we are working towards delivering that. I am feeling great across the board and with PINK, I think we are just really getting started. In terms of AUR, we are seeing broad-based success across removing promotions. But two things I want to highlight are real strength in bra AUR, which just goes back to leaning into our expertise, authority, and storytelling, as well as our in-store service. And then the other thing I would highlight as a real win was PINK apparel, where we saw double-digit AUR increases. And we have been able to, I think, make the most headway with delayering promotions. But we still think there is tremendous room to continue delayering, and we continue to look at that and discuss it and work towards it every day.

That is really great. Great job, guys. Best of luck for the year.

Our next question comes from Mauricio Serna with UBS. Your line is open.

Great. Good morning, and thanks for taking our questions. First, to Hillary, maybe could you talk about, you know, on a higher level, in what inning do you see yourself on the turnaround of VS and PINK? Just curious because, you know, you have had now three consistent quarters of very strong comp sales. So just thinking, like, how far along do you think you are on this turnaround? And maybe could you elaborate on the market share trends you saw in the quarter for the North America bras and panties categories? Thank you.

Sure. What inning are we in? You know, early to mid. I think it is different for each business unit. Victoria's Secret brand, I think, is farthest along. That team has been working together for the longest. I think we, you know, have the clearest view of what we needed to be dominant in there, which is obviously bras being at the heart of that business. It is really just clicking. And there is so much that we can build upon there. I feel great about that. I think in PINK, we are seeing equally strong results, but we are more in learning mode. I would say this customer has changed more than the Victoria's Secret customer. The 20-year-old today is very different than the 20-year-old twenty years ago when this brand started. So we are learning and acting and seeing real success. And one of the things that I would point to outside of TWICE and what we have been able to do with that collaboration is really learning through the LoveShackFancy collaboration, applying those learnings to our PINK by Frankies collab that just dropped a couple weeks ago and seeing that turn into measurable results. And so we are consistently reading, learning, and reacting in PINK, and I think we are in earlier innings because of that. And then in Beauty, Beauty is a very technical business. There is a lot of innovation that is required. We have made some key hires, and we are really thinking a little bit longer term in Beauty. So that innovation and that regulatory element of Beauty takes a little bit of time, so we are going to be a little more conservative with Beauty in 2026 with the intention to start ramping up in 2027. I think you asked me one other question. Market share—yes. Super pleased with market share increases in all of the key categories. The only other thing that I would say to elaborate is it does look like we are taking share from the value sector primarily, which was where we had targeted all along. And so we continue to see that coming to fruition. And we are super excited that we are able to provide the emotional connection without having to drive promotions to entice those customers, and that is also just feeling like a real proof point for us.

Great. And just a quick follow-up for Scott. Maybe could you talk about the cadence of tariff impact throughout the year? You just kind of said that the first quarter is going to be the biggest one, but just more details would be very helpful. And just to clarify on the rates you are using, you are assuming a 20% for, you know, every country except China. Does that include also, like, India being, like, 18% coming down to 18% from 50%? Just wanted to understand that since I think you have exposure to that market. Thank you.

Yeah. Yeah. Let me start with the second and then tackle the first. So we are assuming tariff rates in place prior to the Supreme Court ruling, and so we will continue to monitor the developments with that. With India, we had a good chunk of the 50% mitigated, so going to 18% is a smaller impact for us. So it does not really move the needle in a significant manner. In terms of the cadence of tariffs throughout the year, as we said, it will be heavier kind of in the first half and particularly even in first quarter if you think about tariffs were not in place in Q1 last year. So we will see, you know, about a 175 bps headwind in the quarter on that tariff pressure for Q1. And then it will still be an impact in Q2, but it will be lesser of an impact in the back half as, one, we start to lap tariffs, but two, our mitigation even continues to execute and ramp up through the back half.

Thanks so much, and best of luck.

Thank you. Our next question comes from Corey Tarlowe with Jefferies. Your line is open.

Hillary, I wanted to ask you about what worked well for you in 2025, and then as you think about 2026, if you could, for us, just zoom in on what you are looking to change in the first half specifically. Because I think if you compare what we saw in the back half of last year, some of that product and floor sets had your mark on it, but we heard it in your prepared remarks today about how emphatic you are about the new floor sets that are really hitting. So I was curious about what it is that you really see as the biggest factors of change in the first half of this year. And if you would like to elaborate about back half as well, that would be great too, but I wanted to zoom in there. Thanks so much.

Sure, Corey. Really proud of 2025 across the board. I think both from a product evolution standpoint, a cultural connection standpoint, and from a marketing optimization standpoint. I would say those were the three major levers that we pulled and worked in concert together to create the tangible results. As I think about assortment specifically to your question, Q1, the quarter we are in right now, really starting with Valentine's Day, is the first season that we, as a new team, all worked together from beginning to end, from concept to customer. And so you are seeing all of our insights, all of our conversations, all of our debates and hard work come to fruition with these floor sets. And I think more than anything, we have breathed new life into this assortment. It is more energetic. It is more fun. It is a little more youthful. We are not taking ourselves super seriously. Intimates should not be a serious business. This is about fun and escape and joyfulness. And I think that is really coming through on our floor sets. Particularly in the front half of the year, we have marketing optimization as a huge lever as that team really started to impact the back half of the year. And from our analysis on back-half-of-the-year marketing optimization, the analysis is telling us that, like, there is even more we can do, in particular with how we put the fashion show into the world. So we had a very specific pre, during, and post media strategy that worked very well, much better than it did the year prior, but even more to do there next year. So we have a very robust calendar of deliveries, activation, new ideas, new cultural connections in both brands throughout the entire year. I am not going to tell you what they are. But we are excited. And I think what you will see is the power of this executive team coming together as they all anniversary a year together and they start supercharging their ideas and really driving outsized results.

That is great. So I guess a follow-up for Scott. Given all the excitement that is flowing into the business and sort of circling that square with the outlook for the year. How do you think about the factors of upside to the current guidance? Thanks so much.

Yes. I mean, we feel really good about our current guide. As we have shared with Q1, a plus 10% to plus 13%. We touched on the momentum coming into the quarter and what we are seeing. I think you will see that momentum sort of carry into Q2. And then as we start lapping the higher comps in the back half, we see a runway to growth there, but it probably will not be as high as the growth in the front half is how we are thinking about it right now. But excited for all of these new floor sets. Excited for how the marketing is bringing the story to life, and I think it is setting us up for that sustainable growth throughout the year.

Great. Thanks so much, and best of luck.

Thank you. Our next question comes from Brooke Roach with Goldman Sachs. Your line is open. Good morning and thank you for taking our question.

I was hoping I could follow up on Matt's question on marketing. What marketing spend as a percent of sales is embedded within the plan this year versus last year? Do you expect that rate to move higher on a medium-term basis given that you have with your customer engagement strategy?

Yeah. I will touch on the first part and then Hillary can give some color. But in terms of marketing as a percent of sales, we see it picking up slightly right now. We see there is opportunity to potentially invest more where we can get a return on that ad spend. And so we did invest more through the back half, where we saw those opportunities, last year. And we are planning for a slight uptick this year.

And then I would just add that we have, you know, we have tremendous opportunity in optimization of marketing, especially in terms of segmented marketing. We are in the early stages of really evolving with the customer as she evolves her purchase and sort of consideration journey with agentic commerce. And then we are going to be looking for places where we have opportunities, where we have an absolutely unbelievable idea that is potentially out of the box and something that we want to bring to market. And so we are working to make sure that we have levers we can pull when those things arise. And we can manage it within our budgets. And, you know, those are some of the things I am most excited about, to be honest with you.

That is great color. Scott, as you look at the merch margin opportunity ahead, how much more opportunity do you see from promotional reduction and what are your pricing plans? And how might that change as a result of the dynamic tariff environment that we currently find ourselves in?

Yeah. Great question. As we went through 2025, you know, we had tailwinds from pulling back on promotions pretty much all year, even in Q4, which is a heavier promotional period, and we were still identifying days of promotions that we could shorten. We also increased our holiday GWP buy-in. So we are always looking for those opportunities, and we see those opportunities all through 2026 as well. As these brands become more about emotion versus promotion, we will continue to get tailwinds from pricing and promotions throughout the year. We also talked last year where we implemented some strategic price increases where we saw value gaps. So some of that will lap in the front half. We continue to monitor the consumer reaction, but we have not seen the consumer pull back. So I think you will see AURs continue to tick up throughout the year. And then we continue to monitor tariffs. I mean, as we said, we are planning with the tariffs that were in place prior to the recent developments. We talked about the color of how that is going to weigh on the front half versus the back half. But the other piece I would touch on with margins is just as we grow, we have got that low leverage point. So as we grow north of that 1% to 2%, we are going to continue to leverage in a meaningful way on buying and occupancy, which is what we have seen these last couple quarters. Whereas tariffs have come on in a big way, we have been able to still grow that gross margin rate.

Great. Thanks so much. I will pass it on.

Thank you. Our next question comes from Marni Shapiro with The Retail Tracker. Your line is open.

Hey, guys. Congratulations. And especially on Valentine's Day, I am still shook that you had Hailey Bieber. It looked so beautiful. I do want to focus a little bit on PINK. It feels like PINK is getting its grounding and footing around the balance of apparel versus intimates versus beauty and accessories. I am curious if you could kind of outline what it should look like long term with the hits of fashion from your collaborations, like the denim that you pop in there. And where does active and beauty kind of fit into the PINK assortment now?

Sure. You are right. I think we are hitting our stride, and we are putting the puzzle pieces together here. And Ali said to me last week, she said, you know, it is really feeling great that the business is about 30% intimates, 30% core icons, and then 30% collaborations and fun that is unexpected. So I thought that was a good comment and something that we are really thinking about and refining. So lots of runway here, lots of experimentation. And then the key is when something clicks is how fast we can run with it to the next idea. And I think the team has done a tremendous, tremendous job at that. And then in terms of accessories and beauty, you know, I think—I am an accessories merchant from way back, so I have a lot of passion about that category, and I think there is upside and opportunity there. I think we need to spend some time really brainstorming that. We are not quite there yet, so that will be future upside. And then with beauty, we are actively working on that, so I expect that to be an early 2027 evolution as the team gets in place and starts working on longer-term ideas for PINK Beauty. But, you know, we know that that customer is deeply engaged with beauty, and we certainly think we have an opportunity there.

And so does ACTIVE fall into core icons? And then if you could also touch on VSX, which I feel like also seems to have more consistency and, like, a real home in the stores over the last, you know, four to six months.

Yes. Okay. So active within PINK is actually in apparel. That being said, I think that the trend is moving away from sort of a head-to-toe leggings-bra look, and so we are evolving with that into more of a lifestyle look. So it will not be as pure of an active category as it has been in the past. It will be a bit more mixed. As it relates to VSX, we continue to have great success in our authority with sports bras and really thinking of those as an extension of our bra authority initiatives. I think we have an opportunity to sharpen that assortment, focus it in, and in many cases I think it is more of a digital opportunity than a stores opportunity, and so we are rightsizing that square footage in stores as we move towards the back half of this year. But we have a little fine tuning to do there. And so, as we see the enormous, enormous opportunities in the four pillars, we are really focusing our effort on that. And then we have some of these other secondary opportunities, which we will start pursuing more in the out years.

Fantastic. Thank you, guys.

Thank you. Our next question comes from Ike Boruchow with Wells Fargo. Your line is open.

Hey, everyone. Let me add my congrats. Just wanted to ask about two things, I think, for Scott, maybe for Hillary. Firstly, on the momentum quarter to date, I am sorry if I missed this, did you reference what the U.S. business is comping thus far? Is there any shifts that are impacting the business in the first quarter, Chinese New Year, anything that we should be thinking about? And then a follow-up, Scott, just on the margins, I think you had guided some slight leverage in the fourth quarter, and we saw some slight deleverage even though the revenue was significantly better. Can you kind of walk us through what exactly happened on the cost line and why there was not some better flow through there? Just kinda curious if that was incentive comp or something else, some pull forward of investment. Thank you.

Yeah. So quarter to date, no real shifts, like, in or out of the quarter. So quarter to date, we have got the momentum coming off of, you know, Valentine's Day, super strong set that dropped in January. That momentum, as I said, carried into the Valentine's Day period, and Valentine's Day week the traffic was just phenomenal. So, you know, February is the lowest comp month, particularly of the year but also of the quarter, as things started to turn in that March–April time frame. So for the quarter, we expect March and April to kind of be below what we are seeing in February, but still result in that 10% to 13% guide. There is a little bit of shift between April and March, but that is all in Q1 as Easter shifts from April to March this year. So it does not impact in or out of the quarter. In terms of the margin, so gross margin grew—the adjusted gross margin rate grew year over year. Obviously, we had the tariff headwinds. But then we leveraged on buying and occupancy. And then we had more favorable promos and pricing than we initially thought, because as the quarter progressed, even though it is a promotional period, we found opportunities to continue to pull back. From an SG&A perspective, we did invest a little bit more in marketing to drive some of those outsized sales, but then we have higher incentive comp given the outperformance. So that is sort of the cost drag, if you will, from an SG&A perspective.

Got it. Thanks, Scott.

Thank you. Our next question comes from Dana Telsey with Telsey Advisory Group. Your line is open.

Hi. Congratulations, everyone. Hillary, you mentioned a pop-up for PINK in SoHo happening sometime. What are the markers that you need to see that would make PINK a stand-alone concept for you? And then given the success of the fashion show in 2025, what learnings or hindsight are you thinking about for 2026 that could make it even more impactful? Thank you.

Hi, Dana. Thanks. Okay. PINK stand-alone. We are doing a long-term pop-up in SoHo in the bull's-eye of the traffic pattern in that area. So we are very excited about that. It is going to be a little bit of a laboratory for us as we start to build out some of these additional categories that Marni was asking about. We are going to be looking at the KPIs of, you know, traffic, conversion, store productivity, all of those things. But also, it is a brand-building and marketing moment and a customer connection moment. And what is very interesting about this modern 20-year-old is that, you know, she is living and sort of beginning her connection with a brand in a digital world. Everything is happening off of her phone, but then she is seeking out in-real-life experiences. You know, they refer to her as the lonely generation. She is looking for that third space. And we are seeing a higher penetration of store sales for the PINK brand. So we are looking to create that special space and learn about that. Do I think that we would have a very significant PINK stand-alone strategy that comes out of it? Probably not. We like the side-by-side format, but I do think that there will be specific locations, whether they are college towns, etcetera, where there are particularly high levels of young customers where we may want to experiment with this. And so it is a first step towards that, and I think we are going to learn a lot. And I think we are going to have a lot of fun in the meantime.

We learned a lot with the fashion show. Overall, we were very, very pleased and saw much higher returns on our investment than we did a year prior. Part of that came from the very specific planning of the pre, during, and post media activation strategy. We learned that we could do more. I think we learned that the global approach to talent was an extremely important piece of its success globally. We learned that having a distinctly PINK section was particularly disruptive in a positive way for the PINK business. And I think we really have an appetite to move beyond a singular event a year. It is really an unlock to thinking about how we might be in conversation with our customer in a more evergreen way. And so those are all things that we are thinking about as we enter 2026 and beyond.

Thank you.

Thank you. We have time for one more question. Our last question comes from Adrienne Yih with Barclays. Your line is open.

Great. Thank you so much, and great to see the progress, Hillary, Scott, and the whole team. I guess I will start with it seems like, you know, we have all been on this journey of kind of elevating the business and getting back to your historical strength. This seems like really kind of an acceleration in that journey. When you are kind of getting feedback from customers and the new customers, are they recognizing now how highly complex bras are to make—well-fitted bras? Are they understanding the quality and the investments that you are making there? It was really nice to see the bras returning, the bra segment returning to growth. If you can talk about kind of the cadence of launches and the feedback that you are getting in that particular category. And then secondarily, I have to ask this, Middle East—I know you do franchises there. We are calculating maybe 2% of exposure there. If you can talk about any disruption there. Thank you.

Sure. I will start, and then I will pass to Scott on the Middle East question. So with bras, I think that we are in the very early stages of reeducating and reengaging with our customer on our authority and expertise in bras. The amount of time, energy, resources we expend to fit and perfect bras. The culture that we have in stores around bra fitting and that it is a very personal, very emotional experience and one that I think our teams do very, very well and build long-term connections around. And then thirdly, I would say middle-funnel marketing with influencers' testimonials about bras, their love for bras, has also been really impactful and, I think, something that has been missing. We have not had that authoritative voice for years. I think bringing that voice back while being able to strike a balance of emotion with authority has been the real key because it is an emotional purchase. It is a technical fit purchase, but also an emotional purchase. And I think we are doing a very good job threading that line. In terms of cadence of launches, we have a robust cadence of launches, events, and milestones this year in both brands. And it is something that we are investing more resources and energy around. And really, we have learned that we must be always-on in bras in some way, shape, or form. And so that is our intention this year, and we are excited with what is to come.

Adrienne, in terms of the Middle East, we are obviously staying very close to the situation and monitoring the developments and how long this may last. But there are two areas right now that we are paying close attention to. One is just shipments to North America. We are experiencing some delays, not material, that are going to have a broader impact on the business that way. And then as you said, we have got franchise partners in the Middle East. There are a handful of store closures right now. This is where our business model helps mitigate some risk because even though there are store closures, the impact to us is the royalty rate as that product sells to the end consumer. So the impact is a bit less than if it were our own stores.

And is it fair to assume it is no sourcing there? No sourcing exposure?

No real sourcing exposure. No.

Thank you very much. Best of luck. Great results.

Thank you. Thanks, Adrienne.