Q1 2021 L Brands Inc Earnings Call

Good morning, My name is Cedric and I'll be your conference operator today at this time I would like to welcome everyone to the L. Brands first quarter 2021 earnings Conference call. Please be advised that today's conference is being recorded if you'd like to ask a question. Please press Star then 1.

I'd now like to turn today's call over to MS. Amy Preston Senior Vice President of Investor Relations and company Affairs at L. Brands. Thank you you may begin.

Thank you.

Good morning, welcome to L brands first quarter earnings conference call for the period and E Mail for 'twenty 'twenty, 1 and.

It's a matter for them at Libbey and remind you that any forward looking statements we may make today.

Subject to of Safe Harbor statement, and sound, and our SEC filings and and or perhaps for at least 6 joining.

Joining me on the call today are Andrew and that's low C. E. L. F L brands and Bath and body works Martin waters CEO of Victoria's secret to the store for a door for CFO of the L brands.

The results we discussed that at the call today are adjusted results and exclude special items described in our press release.

Thanks, and ill turn the call over to Andrew.

Thanks, Amy and good morning, everyone.

We delivered record results and the first quarter and we could not have done so without the continued dedication and extraordinary efforts of our team of associates and partners.

Our adjusted earnings per share of $1.25.

And we exceeded our of our initial earnings guidance of 35 to 45, driven by stronger sales and higher merchandise margin rates and we initially forecasted.

Performance was strong across the whole quarter.

March benefited from stimulus payments hit and customer bank accounts, and we ended the quarter strong with good mother's day holiday performance at both businesses.

At Bath and body works, we continue to deliver record results.

Our U S and Canada stores increased sales by 47% compared to 2019, and our direct channel sales increased 123% versus 2019 and.

All categories achieved solid growth and strong sales demand continued to allow us to pull back on promotional activity.

Operating income and the first quarter was $380 million, an increase of 127% compared to 2019.

Our operating income rate for the quarter of 25, 9% increased 760 basis points compared to 2019, driven by merchandise margin rate expansion and leverage and both buying and occupancy and SG&A on the high sales growth.

As we announced last week, our board has unanimously approved the plan to separate the company into 2 independent public companies.

Bath and body works, 1 of the world's leading bath and body and home fragrance of retailers and Victoria's secret, including Victorias secret lingerie, Pink and Victoria's secret beauty of leading retailer of intimates and beauty products.

We expect to create these companies through a tax free spin off of Victoria's secret to L brands shareholders.

We believe the spinoff will enable each company to maximize management focus and financial flexibility to thrive and in an evolving retail environment.

And to deliver profitable growth.

The board evaluated the possibility of either of spin offs or a sale of Victoria's secret with input from its financial advisors Goldman Sachs and J P. Morgan.

Throughout the review process. The company received significant interest from and held substantive discussions with multiple potential buyers.

Ultimately the board concluded that the spin off of Victoria's secret into a separate public company will provide shareholders with more value than of sale.

This decision follows the significant progress we have made over the last 12 months and the turnaround of the Victoria's secret business and <unk>.

Momentum merchandise and marketing initiatives to drive top line growth as well as executing on a series of cost reduction actions, which together have dramatically increased profitability.

As a result of these efforts Victoria's secret is now well positioned to operate as a standalone public company.

We expect that the balance of 2021 will not be easy as the world the retail environment, and our enterprise and business continue to evolve and we lap extraordinary results.

But with continued smart and disciplined management of the business I know, we can proactively accelerate to our next phase of growth.

We're excited to share the details of our vision for both companies as we get closer to the targeted spin off date in August.

Thanks, and now I'll turn it over to Martin.

Thanks, Andrew and good morning, everyone.

At the Victoria's Secret business continued its transformation with an exceptional first quarter performance total comparable sales increased by 9% compared to 2019, and our gross profit rate increased by more than 1100 basis points.

Compared to 2019 operating income increased by $213 million or 665% to 245 million with and operating income rate of 15, 7%.

Customers are noticing and applauding our efforts to reposition the brand.

We began that work by listening both to our customers and to our associates.

We heard from them, what they love of batch L, Brian, including the unmatched beauty quality fit and innovation and all products and we also had clearly what they want from us as the brands, which is all about representing and celebrating all women and being there for every moment of the life, including supporting and advocating.

The things that matter most to them and that's exactly what we're doing.

We're committed to creating lifelong relationships with customers by reflecting them. The stories the journey and everything we do and you're starting to see those changes come to life most.

And most recently with our mothers day campaign.

On the shelf because campaign and the pink mental health month campaign, which are all great. Examples of how we're reflecting celebrating and championing our customers and the different moments and dimensions of their lives.

Our team is fully dedicated to this repositioning what and we could not be more excited about where we're going I look forward to sharing more details as the work progresses.

We're also heavily focused on the great work, that's being done to rebuild of happy and healthy culture at Victoria's.

While much has already been accomplished I'm highly energized by the opportunities that we have in front of us to reposition and grow this iconic brand as a standalone public business.

With that I'll, Thank you and pass it over to Amy Thanks.

Thanks, Martin that concludes our prepared comments at the time, we'd be happy to take the main question she might have and the.

The interest of time, Inc. Iteration to others. Please limit yourself to 1 question, thanks, and I'll turn it back over to the operator.

Yes, there's another quick reminder, if you'd like to ask a question. Please press Star then 1 of my first question comes from Kimberly Greenberger with Morgan Stanley. Your line is open.

Fantastic good morning, great quarter, and and <unk>.

Before we launch and I just wanted to say congratulations to Stuart and I.

Think this is your last call with us is that correct.

Probably so Kimberly I will say, probably so thank you very much and [laughter] and.

And the real Joy and pleasure at real honor. Thank you. It's a it's been a really really impressive career steward and we've enjoyed the the journey with you and the only ask is if you could add of T or Instagram. So we can live vicariously through all of your future the.

Acacia and travel and all of the fun.

And now blushing.

That's the business [laughter]. Thanks Kimberly.

I I I wanted to know if.

Andrew If you could just talk to us about the new Bath and body works fulfillment Center, obviously, you've had and explosives digital business over the last year. It seems like you're sort of planning additional capacity to continue to grow that business and.

Maybe you could just talk to us about the strategy of the rationale and and when you think that's still and he is going to be complete.

That would be excellent. Thanks, so much.

Great. Thank you for the question Kimberly So to your point, yes, we continue to see tremendous growth out of our Bath and body works our online business as we.

Just reported our results on a 2 year basis for the direct channel were up 123% in the first quarter and that's after.

The full year of 'twenty, and 'twenty, where the business essentially doubled so very.

With the momentum we continue to see there and.

And as you reference are we are continuing to and his crew.

Kris dramatically our fulfillment capacity, we were surprised to the upside last year at the beginning of the pandemic and while our partners did a great job of expanding capacity throughout the year.

We referenced in our script that we.

We were a little bit backlogs at the end of the first quarter last year and so we will feel some of that impact on a year over year basis in the second quarter, but as we're looking out to the long term, while we've been very very satisfied with our ability to work with third party providers on our fulfillment capability we.

Also recognize as this business becomes larger and larger and we want the opportunity to also have.

Have some of the capability in the house, which is why we are adding the additional center at that you're referencing.

While we will start to work and that center of through the year. This year at really won't be online for full capacity until the back half of 2020.2 so while we'll get some benefit from it.

In early 2020, 2 it's really preparing for the holiday peak.

At the end of next year that will be reliant on that new capability.

We're also adding a lot of automation into that center, which will be oh.

And will be new and cutting edge for us as we continue to figure out how to operate all of our fulfillment centers as both efficiently and effectively as possible go forward.

Great. Thanks Amanda.

Thanks, Kimberly next question, please and then.

Question comes from Lorraine Hutchinson with Bank of America. Your line is open.

Thanks, Good morning.

The ask a question about the comps driver is for both businesses over the medium term.

And you and Martin can you talk a little bit about your confidence and the pace of innovation that you're developing now to continue to drive consistent same store sales and the coming years.

Thanks, Andrew.

Andrew do you want to start sure.

So thank you for the question Lorraine.

Uh huh.

At the highest level I would reiterate that you know the way we look at our business across all of our businesses is asking ourselves. The question first are we in fact in the right categories and as you can imagine, especially here over the last 18 months the strong answer to that question for the bathroom.

Body works business has been and absolutely yes.

Whether it's the soap and sanitizer business that obviously has gotten a lot of.

The momentum of appropriately here during the pandemic, but then also our home fragrance business as people have shifted their lifestyles to be spending a lot more time at home and then our body care business, which represents a real opportunity for our.

People to treat themselves and to have a you know of spot day, if you will without ever leaving the house and so certainly those have been great product categories to be and in the short term here, but we also look at those categories in terms of where they've been over the last 10 years, which has been consistent growth and each of those.

And 3 big market categories, and as we look out into the future of we continue to see a lot of opportunity for growth across the categories themselves and therefore, our ability to continue to gain and maintain very high market shares and each of them as.

As we think about what innovation will look like within the categories.

And we we are very very reliant on big key items within our big categories and those key items represent a disproportionate share of our business about 75% of our business comes from our biggest 10 or 11 items.

So 1 of the things we're always looking at is the opportunity to launch new key items within our existing categories. So that is certainly something that you'll continue to see us work on whether for example, things like moisturizing body wash or bar soap or additional candle and soap forms beer.

And the big forms that we already operate in.

And then we're obviously very interested and what I'll call adjacent white space.

2 our big 3 existing categories and so we're constantly testing into things like hair care and skin care that are again large market cap.

Areas of opportunity from a mid to long term basis.

The last thing I would emphasize is that across all of our product categories. We're also continuing to focus on innovation and newness around more natural good for you and good for the planet strategies, whether that's around the ingredients for themselves or around the packaging and so those will continue to be.

Efforts that you'll hear it you'll see and hear us.

Focus more on as we go for it so hopefully that helps in terms of how we're thinking about it.

Thanks, Andrew Martin Yeah, sure, so and similar to what Andrew said, we feel very good about the categories that we operate and maybe if I touch on 4 of 5 things that have been really driving the comps and then I'll address your question about innovation. So what's been really working for us to drive those comp so firstly better merchandise, particularly where the focus on.

Good better best structures, and really sharp opening price points.

The second thing would be the improved brand positioning moving from a position of frankly being irrelevant to being relevant for being for him too for her and.

Being more inclusive brother and exclusive and the customers really noticing and voting with her wallet. So that's great.

And I think to at least substantially better merchandise planning and allocation when we're at at best We go into the season only 50% booked and then we chase into real time Windows and that's worked very well for us in the back half of 'twenty and into 'twenty, 1 and then finally I would say our enhanced digital capability and our store teams.

Really showing up to make the best of the traffic that they have traffic is down significantly and stores not store teams of meda.

<unk> effort to build on dollars per foot steps. So those are the things that have driven comp to date and will continue to drive comps as it relates to innovation and we feel really good about lots of things that we've got in the hopper, particularly new bra frames, you know at Victoria's and we Havent had new bra launches at the pace or rate that we should have had in the last 3 years and we're getting back.

And to newness and bras and we also see new technology and fabrication and that's really helping and of course, we like to think we're at the cutting edge of fashion and color and that we've chosen well and each of those 2 dimensions and so that's really what's driving the the business. Thanks for the question Ryan.

Thanks Martin next question please.

Our next question comes from Dana Telsey with excuse me of Chelsea with Telsey Group. Your line is open.

Good morning, everyone and Stuart certainly has been a pleasure of best of luck.

As you think about the Victoria's secret band and the new marketing that you've put in place you mentioned the strong mother's day that you've had what it means.

Marketing as a percentage of sales how are you thinking about at what do you what of your other initiatives with marketing that we should be looking for way too as we move on this year and both of US was something that was mentioned as initiatives, where are you and each brand and how does that come to fruition. Thank you.

Thanks, Dave.

Yeah, I'll try and remember those questions and order, but you might need to from the Dana So and.

Our intention of over the long run is to get back to investing about 5 percentage of retail sales and the Victoria's secret brand and so if you think about it as a.

The aspiring to a 7 billion dollar brands and we'd be spending 350 million and supporting that brand and across a wide range of activities. What's different about that is the way that we spend money in the modern era is completely different and the way we spend money. Historically, so you should see very significant change.

Change there.

At the second part of the question remind me of me focus, whereas about both of us and so.

So as you know we were late to the party on both of US and ship from store, but we all of that now. So we now have about 100 stores up and running with both of those 2 activities.

And we will be moving that to 200 stores by the end of June that we think covers most of the nation. So both of those initiatives are exciting obviously buy online pick and choose to pick up and store is well regarded by customers, but the ship from store is particularly interesting for us because it enables us to leverage our inventory where it exists.

All of them, where we'd like it to be so very significant and there.

And then I think the third part of the question.

Got it and I was at 2.1.

Of the marketing initiatives I think it was and what.

And what else, we should expect for the marketing initiatives and so.

So you should expect that we will start to invest in our.

Digital media more fully than we have historically you should expect that we will have people representing for all brands, who are more inclusive and more diverse who represent our customer base and a much more inclusive way than we have done historically I think those of the those of the key points to note, thanks, Martin and or.

Hi, Dana.

So in terms of Bath and body works and the buy online pickup and store a capability. As a reminder, we had had that and works Fortunately as a pilot right as the pandemic hit last year. So we were able to.

Roll that out and a limited way la.

Last year, really primarily and markets that were either fully shut down or experienced very very tight capacity constraints and so we got some very critical learning around the capability as we went through the back half of 2020 as we've come into 'twenty 'twenty, 1 now we've been able to roll out.

The bulk of this capability to right around 400 stores as we finish off Q1, and we intend to roll that to an additional 100 stores by the end of the second quarter, primarily as you might as you might imagine. This is the capability that appears to be most effective and boswell rich.

<unk> and our off mall locations, where it's easier for the customer to drive up and and entered the store without having to walk through the mall and we also in general have more space in those locations in order to be able to accommodate.

The the packing and check out required for both of US we're very very pleased and excited we've gotten both great qualitative feedback from customers on the capability and the early financial results are also promising so definitely something that we're excited about rolling out further and as we think.

The future and build out, especially of our off mall locations will be taking into account how.

And how to design stores in order to even better accommodate the bumpers and ship from store capabilities.

Thanks, Andrew next question please.

So next question comes from Matthew Boss with JP Morgan Your line is open.

Great. Thanks, and congrats on another really nice quarter.

So and.

And maybe this one's for Andrew and Martin as we exit the pandemic are you seeing any slowdown in the top line momentum so far at all and the second quarter at at either concept and on profitability could you just help walk through the drivers by concept of what's embedded in the low 40 percents gross margin forecast for the second quarter.

Sure Andrew let's start.

So and the first part of your question, Matt I think we said and our prepare.

The prepared remarks that you know may has gotten off to a good start I'll start then I'll say and Bath and body works is in line with the results that we were seeing in the first quarter and that that is embedded already in the guidance range is that we provided from a category.

Gory standpoint, what we also called out was that we saw a very balanced performance.

Within the first quarter within our big 3 categories and I would say that that trend has also continued so far into the second quarter and we would expect it to continue for the balance of the quarter.

Margin rate.

And I'm, sorry cause margin rate yeah.

Yeah. So when we think about Oh I'll comment on merchandise margin if that's helpful for.

From a standpoint of merchandise margin improvement that we saw through 2020. As you know was very significant as we were able to pull back dramatically on promotional activity and that momentum as we called out also continued into the second quarter, we would not expect the second quarter.

The merchandise margin on a year over year basis to improve and that's really because last year.

We had essentially no semiannual sale activity versus this year, a more normal year with more normal.

Approaches to the business, we will have that so historically, if you look back at margin over Q2 compared to Q1 of our merchandize margin has tended.

Tended to decline quarter over quarter by about 4 to 500 basis points.

And when we look back and compare to 2019, which is really what we're trying to do as a more normal year. That's the type of a.

Relationship that we would expect here and the second quarter great.

Great. Thanks, Andrew Yeah substantially similar picture to of Andrew described in terms of the first quarter. So we accelerated into the back half of the first quarter, meaning the the latter 2 months was stronger than the first month and May has been about at the same as we saw from April and that's really encouraging given the the stimulus effect.

The obviously being done and is behind us. So we're seeing very good momentum that we expect to continue well. It's also very pleasing is that of store traffic has started to pick up a digital momentum has not slowed down so all in all the feeling very positive about both channels of growth.

Margin has been exceptional as I said in my opening remarks up about 900 basis points and merchant merchandize margin for Q1, and we expect Q2 to be about the same level of increase year over year and all major categories margin growth is outpacing sales growth. So feeling good across the board as it relates to the.

The very back half of the year don't know, we could expect to see some cost pressure, we might expect to see some impact from COVID-19 and our base of supply. So we're deliberately not giving guidance on the back half of the year at this time, but what we can see for Q2 looks absolutely fine.

Thanks, Matt next question.

The next question comes from Simeon Siegel with BMO capital markets. Your line is open.

Thanks, Good morning, everyone and congrats on the ongoing strength and Stuart I'll Echo the the well reserved build deserves congrats and best wishes on the next chapter.

And so the flow through on the stimulus sales was really impressive for both brands. So interesting the higher at Victoria's and can you speak to the right way to think about incremental margins at this point, maybe what did that math is 1 time versus more structural and sustainable reset and then the V. S International operating loss shifting to breakeven was great to see congrats on those initiatives how are you.

And about international profitability or pressure going forward. Thanks.

Thanks, Jim and Martin Yeah. So the stimulus effect and was about 1 third of our beat to the guidance that we gave at the beginning of the courts and so we think about where we were at the beginning of the courts and where we ended up about a third of that beat was due to stimulus. We estimate we have pretty good techniques for our estimation. So we feel pretty confident.

And the number.

As it relates to the international business. The the pickup is primarily due to 2 very significant areas of restructure that we put in place during the back half of the year and the early part of 2020, 1 and these are obviously and the U K and China in both cases, we have exited the losses in those businesses through some.

Very very good work and.

To put them on and much more sound footing going forward, so with those losses behind us we can really focus on the best bits of the business, which are in 2 areas. Firstly, the digital meaning direct to consumer where we currently ship to about 200 countries and territories around the world and that business has been booming during COVID-19 and we saw.

Lots of opportunity for growth, the particularly moving to new languages. So we launch and Japanese and Korean within Q2 should be good opportunities for us.

And then secondly, and the franchise business, where we feel very good about the partners that we have operating businesses for us around the world they've been through a tough time with many markets closed, particularly thinking about continental Europe very difficult, but the the.

And the the signs for the future all at very strong.

And those regards the 1 area of international at hasn't come back yet and I'm not sure at well anytime soon as travel retail, but happily that room, that's a relatively small part of our business and not 1 where we feel exposure from an operating income point of view.

And so across the board feeling pretty optimistic I mean.

Thanks, and alright, good Thanks to me and next question. Please.

The next question comes from Roxanne Meyer with Kim.

Hey, Gale partners. Your line is open.

Great. Thanks, Let me and my congratulations to them for a phenomenon at quarter end and dramatic improvement over the past year.

And my question is for both Andrew and Martin and I'm, just wondering any initiatives or of general updates around customer loyalty and loyalty programs that you can share for each brand and I know that you know for BBW, It's something that you are testing the.

Probably of the past year hasn't been a great environment to expand that but curious to get an update as you are thinking about and generating that customer loyalty program and then any stats that you can share about new customer acquisition over the past the air which I'm assuming was fairly robust online. Thanks a lot.

Thanks, Roger and Andrea.

Andrew Let's start sure. Thanks for the question Roxanne So.

And we actually going to answer the second part of your question first just to talk about general customer performance and growth because I think it plays into than our approach on the loyalty program that you were asking about.

So as a reminder, when we talked about customers through the year and 'twenty 'twenty.

Despite very very strong customer response, and reactivation through the back half of 2020 based on the fact that our stores were essentially closed for.

90 days in the first half of 2020, we did actually finish the year and customer accounts at Bath and body works down and the low single digits percentage wise to the last year, what's the great news to be able to report is that tremendously strong performance in Q1 has not only close that gap.

But we're now running up low single digits on a rolling 12 basis to 2 years ago, and so a very nice turnaround based on strong customer acquisition and.

And customer retention that we saw.

And the really the last 3 quarters sequentially.

Sequentially. So as we then think about to your question. The loyalty program. The loyalty program is 1 that we have been piloting for.

For the last several years as a reminder, it's and just under 300 stores that we've been conducting those pilots and and while we've been very pleased with the results and those areas we.

We have not been all of that pleased with the flexibility of our loyalty application of the actual program itself and so as discussed on prior calls we are and the process of updating that program and that application and.

And we will be rolling it out to additional markets about another 50 or so stores later this year and again, assuming a good response to that our intent would be to roll it out more fully sometime in 2020.2 the results that we see with that loyalty program, even as it exists today, though.

It was a better retention, obviously of our customers and better overall responsiveness, both things that we are.

It will really be excited to be able to further leverage once we have that program rolled out more fully thanks.

Thanks, Andrew Yeah, we feel very good about where we are in terms of customer loyalty.

Best customers have been responding very well to the changes that we've made around the brand, particularly in new categories that we've re-entered so and our swim business. We've seen particular affinity for our best customers and our most loyal customers that true really gratifying to see and I'm delighted to tell you. The after several seasons of decline.

And and the size of our customer file and the last third of the year, we've actually seen an increase and our customer file. So that is incredibly encouraging proof points that our repositioning is working as you know I think you know and loyalty is tied to a credit card and that's fine we enjoy.

Success, and great customer advocacy and communication through that too, but we are committed to getting into a loyalty program that will not be tied to the credit card and we will have tests in place on that towards the end of this year stroke early in 2022.

Thanks for the question Simeon Thank threats and Brooks question.

Okay.

Next question please.

I'm sorry, I was on mute. Our next question comes from Ike <unk> with Wells Fargo. Your line is open.

Good morning, everyone and this is Lauren frasch on for Ike.

Congratulations on a great quarter.

I wanted to take a bit more into how you're thinking of has shifted around.

And now that you're managing for mid teens target and.

Could you walk us through how you got to the mid teens as the appropriate level and maybe how quickly do you think you'd be asking that paragon and it.

And trajectory and at quick follow up yes margins are currently on a very robust trajectory right now with all of the changes you've made and there any reason to expect that and margin should not continue to expand and I'll attempt to 2020 for the remainder of the year at or anything and the cost structure of that to normalize and the second half and that might result, and.

Margin being flat maybe down thank you very much.

Thanks, Lauren Martin Yeah, So we feel very good about where our merchandise margin rates and.

I think you've probably have the history, but oh I rate is close to our historical high for Q1. So the operating income of $245 million is about 2 of the way we were in 2017 and.

Only 2016 was higher at 2.8 T. The 15.7 that we proved for that quarter and we feel good about that kind of level go forward. We've said, we've said that we expect to manage the business 2 of mid teens operating income that's below where we've been on the historical high and that kind of reflects the need for some further investments in the business.

We're we haven't made investment and the last few years because times have been tough. So we don't want to over promise on the margin we want to give ourselves some room to be able to reinvest in the business, particularly in marketing strategies, but also of reinvestment in our stores, which have been.

Somewhat light in terms of investment over recent years. The good news that I can tell you is that that margin growth is across all categories and we do expect it to continue into the back half of the year. All of that said, we don't want to get too fascinated with the merchandise margin rates being at peak highs, we wanna be more satisfied with delighting our customers making.

We're reinvesting in the brand and putting our best foot forward for the for the long term, but absolutely no reason to doubt that we can operate this brand and the mid teens.

Thanks Martin next question please.

Yes. Our next question comes from Susan Anderson with B Riley Your line is open.

Hi, good morning, nice job on the corner and I'm curious for the Pink business did you see at all of the pickup in sales do you think related to some students returning to the classroom. This spring and then also just curious what your expectations are for back to school of back to college this year and at the yes, I'm curious at there.

The new plans for expansion of the lounge category and if you expect to continue to grow sport with and that again.

Thanks, Susan Martin, Yeah, I'll take that 1 and so.

So the pink business has been terrific.

And at particularly the pink business, particularly accelerated towards the back half of the quarter and is having an excellent may so super strong performance really good reaction to the new merchandise of the Damian and the team of develops but also to the brand positioning that they are pursuing I think that that strength is driven more by good fashion being and good categories.

And do live and delivering great marketing strategies, rather than a return to campus, so, we don't and and campuses and towns and cities, where we see a higher level of return of students. We don't really see a difference and performance there at the same is true width and.

States, where COVID-19 has been relaxed, we're not really seeing a material difference of what that tells US is the main thing is the main thing and a fashion business, which is having good merchandise and good marketing so feel great about that I think if Amy was on the call. She would remind me to point out the the growth has been particularly strong and intimates because of that telco.

And so double digit comp same store sales growth and our intimates business Super strong performance and the logo business, which is particularly encouraging for the health of the brands and maybe a couple of others and if it's would be shows are and it's a good season for the short it's a good season for tie dye at good season for yellow and we've been all and all of those trends.

And so a big congrats to the pink team.

As it relates to the Victoria's business, Yeah lounge has been great for us during Covid and we intend to continue to invest in that category. The merchants and that area of have just done a superb job and we're starting to get to the point, where we say 1 of our stores are too small again, because there's so much good merchandise coming all of that said.

We are a bra business, we are fundamentally a long jewelry business. The most important category for us to win and is the bra business and that has the most attention around here and we're determined to win back customers in that core category of instruments and what we're seeing in terms of results is that that is working so the mantra that I would remind you of.

Susan is growth from the coal most important sports bras, we've been underweight, it's a category where we've been to life. We haven't had enough investment and we will be close correcting that and the back half of the.

Hope that helps.

Thanks Martin.

Thanks.

Next question.

Our next question comes from Jenna Giannelli with Goldman Sachs. Your line is open.

Hi, there and thanks for taking my question and just as a follow on to the margin question earlier and I'm wondering if you can extrapolate a little bit more and the potential for inflationary and of our supply chain headwinds and the second half of it you mentioned in your prepared comments.

Just a little bit on and the magnitude of them labor of its distribution and freight et cetera, and then really what you feel your strongest levers are cute and mitigate some of these pressures. Thanks so much.

Thanks, Jen and we're gonna get at Stuart.

So just to comment broadly on at and Andrew and and Martin has also mentioned that there are certainly you know of risks out there and potential pressures, but but for the back half of the year, we haven't provided guidance and as we do so we will try to incorporate those views you know as we move through the year, but hard to quantify at this time and obviously the <unk>.

<unk> are taking steps to mitigate some of the pressure. Thanks.

Thanks Stuart next question please.

Our next question comes from Janine Stichter with Jefferies. Your line is open.

Hi, good morning, and congrats on the progress.

And kind of clarification on the commentary on the quarter to date trend I think you said for both brands that had been tracking similar to long queue is this similar to the <unk> rate ex stimulus and I'm. Just curious of your expectation is for consumers. How they spent most of their stimulus and your mind or is there still potentially some benefits that flow of N T. J Kim Thank you.

Thanks, Denise and.

Andrew let's start sure.

To your point, Janine and a clarification basis, we would say it's in line to the stimulus adjusted trend, it's a slightly better and speaking on behalf of Bath and body works. The stimulus benefit that we saw was primarily in March with a little bit of carryover into <unk>.

For all but really not seeing any lingering stimulus benefit through late April and into May so far.

Thanks, Mark Yeah kind of same answer to Andrew the clarification point being that May has been similar to the back half of Q1, which was better than the beginning half of Q1 and so that's good and yes. We think the stimulus is behind us and so we're not planning any benefit from the go forward.

Great. Thanks very much.

We'll take 2 more questions. Please.

And of little early today to get to work and it wasn't meeting.

2 more of the sleep.

Okay and next question comes from Marni Shapiro with retail tracker. Your line is open.

Hey, guys congratulations.

So exciting and welcome back I guess in the way.

Martin if you could just talk a little bit more high level about you know you've been with the company a long time and Victoria's secret at very long time, and you've seen different iterations of the brand and can you just talk I guess high level about the point of view you see the brands taking going forward you know they've had the whole sexy bombshells.

And the everyday thing the active thing just in general I guess big categories and point of view that you see the brand taking going forward.

Yeah, Brian and thanks, Mani I could take up the rest of the Covid. This online.

Good day.

And I'll try and be brief you know at it starts with the notion of redefining our purpose we have a clear the reason why we exist at Victoria's now and that is to inspire women around the world with products and experiences the uplift them and champion the and support their journey as their narrative not ours and so how would we.

We accomplished that well, we think about it in terms of creating lifelong relationships with women by reflecting what's important to them what journey there on what stage and the life there at the perhaps more importantly created put creating positive change for women through the power of our products and our platform and then also our advocacy so advocacy is at.

Big Big word for us going forward and I have of bold ambition the Victoria's <unk>.

Should be the world's biggest and best advocate for women and that's incredibly powerful vision and mission for us to aim towards and it's energizing for all of our people and it does reflect a very significant turnaround from where we've been where we're moving from what men want to what women well, we're moving from sexy for a future sexy for all we're moving from.

Look 2 of feeling it's about including most women, rather and excluding most women and being you know grounded in real life, rather than most of the unattainable. So I.

Couldn't under school, how significant this turnaround and this repositioning is it's a very dramatic change for us and we have significant proof points already at this early stage and our journey. This is what the customer wants from us So expect more.

Hi, Bonnie I'm. So excited about this congratulations and best of luck and its brilliant and and overdue.

Thanks, Marni I'm tempted to end right there at least at.

And it took the market there.

Well take 1 more question.

Yes.

Thank you and our final question comes from William Reuter with Bank of America of your line is open.

Hi, I'll make it quick the first is your leverage target had been 2 and a half. The 3 times is that still what you think with regard to the legacy AR L b or the BBW business and then you've got $2.8 billion of cash which at the time do you have thoughts on what youre going to do with that.

Thanks, Phil Stuart So bill on capital structure of viewpoints to register at the first is the company is in great shape. You know we ended the quarter with $2.8 billion of cash and the maturity profile of our debt is very well spaced out with with not a lot of near term maturity. So I really at.

And on the subject when the start there and we're in a very good place you know the spin decision was made about 10 days ago, we're working with Jpmorgan and Goldman Sachs on the subjects you ask about the yes, there's going to have some debt the proceeds of that debt will be dividend at the 2 L. B.

We want the leverage for both of the S and BBW to be well balanced and to compare appropriately to their respective peers and it's a work and process and it's all worked at the board will review and approve as we move through the next month or 2 you asked a specific question about <unk>.

You go forward leverage the range that you mentioned seems about right, but again its preliminary we've got a little bit more work to do we're going to strike the right balance and more discussion of that come with the board. Thank you Bill.

Thanks, Tom and that concludes our call. This morning, and thank you for your interest and L brands.

Hi.

Thank you and that concludes today's conference you may all disconnect at this time.

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