Martin Waters: Hi Katy. Thank you for the question. Great question about what are the key drivers in the holiday season. You know, it’s a really interesting period we’re in because I don’t know if everybody knows, but this particular calendar year has the longest number of days between Thanksgiving and Christmas, which is 31 days. So we have kind of a long season. Is that a good thing or a bad thing? I think it’s a good thing. It gives us opportunity to really tell multiple stories and the truth is between the balance of the two things you mentioned, newness and promotions, it’s some of both. It’s some of each. Generally speaking, when people are looking for gifts, they go to tried and tested categories, like PJs, but they want new PJs, they want different PJs, they want something different, something they’ve not seen before.
And so, you know, carefully adjusting the assortment to bring newness that’s skillfully done that represents something that’s new and different maybe in fabrication or fit or design, to a category that’s an established gift-giving category is a good place to be and we feel very strong about, feel very good about the assortments that we have. I was in store last night looking at what we have and seeing the customer reaction and I think we’re very well positioned. We’ve seen early strength in those giftable categories. The second part is that times are tough. We are in a difficult economic environment and when those kind of conditions exist, people do lean more into value for money. And so being at the kind of in the ring for the fight, so to speak, is important to us.
And we’re not just competing against other people in our category, we’re competing against jeans, against apparel, against beauty, against all sorts of different players. So our goal is to balance the mix of storytelling between newness and innovation and hard-hitting value for money. Get it now while it’s here. Promotions, and we should tell both of those stories equally well during December. Your question about beauty, beauty has always been a big part of the Victoria’s Secret business. We have over a billion dollar business in beauty. It has a very close, fragrance has a very close adjacency to lingerie. We’re genuinely really good at it. We have the number one selling fragrance in North America, the line extension in bombshell. The line extensions that we’ve had at bombshells, the seasonal extensions have been terrific and really, really strong.
And the team continued to bring newness to the category, particularly in mists and lotions. So we have a great team with great capability and a really good strong brand. And by the way, that’s a global business. The strongest part of our international business is our Beauty business. It was the foundation, the start of the international business with Beauty. And we know that the brand competes against the best brands in the world. When we put Victoria’s Secret Beauty, and Arun and his team are responsible for this, when we put Victoria’s Secret Beauty into department stores worldwide against the best brands in the world, we’re right up there in the top one, two, three brands. So beauty isn’t in any way an afterthought for us, it’s absolutely central to what we do and I’m very proud of the team that’s leading that.
TJ?
Kathryn Ann Hallberg: Very helpful. Thank you.
Martin Waters: Welcome.
Tim Johnson: Yes.
Kevin Wynk: Okay, I think next question, Ivy.
Operator: Next we’ll go to the line of Janet Kloppenburg from JJK Research Associates. Please go ahead.
Janet Kloppenburg: Good morning everyone and congrats on the progress. I was encouraged at the analyst day or the investor day that you had seen some green shoots in PINK apparel, but maybe your inventory levels were too light, Martin? And I was just wondering if that’s a constraint right now or if you’re still working through some of the merchandising challenges there? And if you’re pushing out the churn in PINK apparel to later in 2024 as opposed to earlier in 2024? And then I think you’re calling for comps in December to moderate versus where they are right now. And I’m wondering, if that’s because you think that, if you have tougher comparisons or if you think that you’ll have AUR pressure, because of promotions picking up? Thank you so much.
Martin Waters: Thank you, Janet. Good to hear from you. Let’s take the second part and then TJ, I may be asking you to take some of the second part. In terms of our plans for the year, it’s not unusual after a very strong Black Friday and Cyber Monday to see a kind of a lull during the early part of December and things to slow down. As we look at historical patterns, we’ve seen that before. So we’re not being overly optimistic about what we see for December, but equally there’s opportunity in that. So that’s probably all I can tell you about the outlook for December. TJ, feel free to add it in a minute. As it relates to PINK your two observations. Yes, and yes, I mean both right. Are we constrained on inventory on the best product?
Yes, the best stuff that we put out blew out really quickly and we wish we had more we can’t get anymore. And are we still working through what the assortment should be? Yes, we are. It’s not 100% right. It’s better. You know, as I look at the assortment, that I feel significantly more proud of the way we show up now. I think it’s more relevant to the Gen Z consumer. I think it’s a better fit with Victoria, but there’s still significant areas for opportunity and the team that are responsible for it see that completely and we’re all aligned on where it is that we need to go to get after it. I don’t think we’re pushing back the timeline to late ‘24. Our expectation is that all through ‘24, we should be making continuous improvement. Some of the things that have worked well are actually relatively short lead time, like panties.
So we should expect to be quickly into those businesses in spring. Other items are longer lead time, as you know, and may take a bit longer. So it’s a work in progress. I’m pleased with the progress that we’ve made. It’s kind of a no regrets decision that we didn’t go full on and buy too aggressively for the fall season. I think that would have been a mistake. So, you know, we live and learn. And thank you for your encouragement. TJ, anything else to add on December?
Tim Johnson: Yes, absolutely, Janet. So after a slightly positive November in North America, we do expect that December will be down year-over-year. As Martin mentioned, we come off of Cyber Monday and typically the customer takes a bit of a break. And we do have a longer period between Thanksgiving and Christmas this year, so we do expect the customer to come back in abundance as we get closer to Christmas. So from a planning perspective, we think it’s prudent to set our expectations accordingly with that in mind. I think additionally, just setting our operational expense plans at that lower level of sales also helps us. And you know what, if we’re a little bit off and the customer comes back sooner and stronger than we think in December, then the flow through will be very high and we’ll be very happy with that.
I think additionally what you might also be seeing in the guidance is we do have expectations that the month of January will also be down to last year. And part of that, Janet, is because semi-annual sale is such a large part of what happens in the month of January and coming into the quarter with inventory levels in our VS and PINK businesses down high-single-digits, we think sets us up well to have a very profitable semi-annual sale and not have to move as many units and maybe have some opportunities to be a little less promotional in semi-annual sales. So that does have an impact on the top line. So I feel as if we’ve set our expectations very diligently for the balance of quarter, and position the business that, you know, in the event that things are more robust than we think, the flow through would be very high, and that’s a good position to be in.
