Timothy Johnson: Yes. Simeon, on the Adore Me piece, I just want to clarify, I would think about it this way. I would think about their model is different than the VS & Co. model. From the perspective of it’s a digitally only — digital-only business, in large part, they have five or six stores more in test mode than anything else, but it’s a digital business for the most part. Their margins from a gross perspective are in the mid-50s. So that would be slightly rate accretive to the company, which means given their operating margins are similar to ours, their expense levels are going to be in the mid- to high 40s. I’m more comfortable with that. That’s been successful for them. They’ve grown their business consistently year after year in the 20-plus percent range, and we’re forecasting mid-teens here again in 2023.
So, we’re comfortable with the financial model. The point in mentioning it here as it relates to expenses is obviously, it shows up in our P&L for the first time here in first quarter. So, their expense levels also tend to be a little more front loaded from a marketing perspective in to two steps. First off, Valentine’s Day, obviously, as it relates to the biggest holiday of the year in the first quarter. They’ve appropriately been aggressive going after the customer when there’s a high intent to buy. Additionally, from a marketing perspective, a high intent to buy and a high level of interest in the first quarter with their customer gives them an opportunity to really kind of feed the pipeline for the balance of the year when you think about their model being a high subscription model basis.
So earlier they can get customers in the funnel better, similar from a try on a home perspective. So, we’re very comfortable with the model we acquired. It’s just helping new industry understand that the expense profile is a little bit different than ours. The balance of the company, the VS & Co. portion of the expense base, I’m very happy with how the teams are managing that and how it’s performing. In terms of the buyback and debt question, yes, we are assuming the full $250 million share repurchase in our weighted average share count. I’ll just point out that the ASR is predominantly the activity for spring. As we mentioned in our release, the agreement runs through the second quarter. The second piece to that is, as you know, we — coming out of the spring season, we’ll head into our kind of peak borrowing time or cash trough debt peak in terms of purchasing inventory for holiday season, predominantly in the third quarter.
So, the point in mentioning that is the balance of the share repurchase activity will likely happen later in fiscal ’23 and therefore, not have a significant amount of weighting on the way out for the year. The last part of your question, from a debt perspective, our model assumes for the most part throughout the year, we’ll be carrying the balance of the ABL that we came into the year with the $295 million of ABL balance. We came into the year with. We’ll largely carry that for the majority of the year until we get to holiday cash season. And the importance in understanding that is really the first quarter of this year, Simeon, is actually a cash outflow quarter for the business in two or three respects. I think first off, 401 (k) matching bonus payouts withholdings get paid out in the first quarter.
Additionally, the ASR execution that I mentioned happened early in the first quarter. And then the third component that we’ve described in our filings is really a, I’ll call it, a real estate or legal settlement that we anticipate paying out in the first quarter as it relates to our property in New York City. So, all of those items suggest that the first quarter is a cash outflow quarter. And therefore, again, we’ll be carrying the ABL for the majority of the year until after we get holiday cash coming in. Hope that helps.
