VSXY 10-K & 10-Q changes, risk factors and insider trading

Investing in our common stock or other securities involves risk. You should carefully consider each of the following risks and all of the other information contained in this Annual Report on Form 10-K.10-K Somewhen of these risks we face relate principally toevaluating our business and operations, while others relate principally to our outstanding indebtedness or to ownership of our common stock.business. Our business, prospects, results of operations, financial condition or cash flows could be materially and adversely affected by any of these risks, as well as additional risks and uncertainties that are not described in this Annual Report because they are not presently known to us or we currently deem them immaterial.

Adverse economic conditions in the United States and globally hashave had and may continue to have an adverse effect on our business, results of operations, and financial condition. Adverse economic conditions may include weakened consumer demand, persistent inflation, supply chain challenges, labor shortages, high interest rates, foreign currency exchange volatility and risk of recession. Geopolitical instability, actual and potential shifts in U.S. and foreign trade, economic and other policies, as well as other global events, have increased macroeconomic uncertainty. Depending on their duration and magnitude, these and other adverse economic conditions could continue to adversely affect our business, financial condition, results of operations and cash flows. Future economic deterioration, market disruptions, or changes to fiscal and monetary policy or trade policy, including the imposition or threatened imposition of tariffs and potential retaliatory actions, could negatively impact our business. An economic downturn or a recession, or the perception that any of these events may occur, or continued or increased economic uncertainty may also lead to increased credit risk, higher borrowing costs or reduced availability of capital and credit markets, reduced liquidity, asset impairments and adverse impacts on our suppliers and the financial institutions with whom we transact.

Our sales are impacted by discretionary spending by consumers, which tend to be adversely impacted by unfavorable local, regional, national or global economic conditions. Purchases of our products may decline during periods when economic or market conditions are volatile or weak. Declines in consumer spending have and may continue to result in reduced demand for our products, increased inventories, lower revenues, higher promotional activity,activity and lower gross margins. Continued volatility in the availability and prices for commodities and raw materials we use in our products and in our supply chain could have an adverse effect on our costs, gross margins,margins and profitability. In addition, we may be unable to access financing in the credit and capital markets at reasonable rates in the event we find it necessary or desirable to do so.

Our financial performance couldhas and may continue to be adversely impacted by inflationary pressures, which are subject to market conditions and impacted by fiscal and monetary policy as well as domestic and international trade policy, including the imposition or threatened imposition of tariffs or other trade restrictions. Inflationary pressures on the products we sell could impact our revenues and profitability, especially if we are unable to increase our retail prices to reflect increases in our costs. When levels of inflation are higher than typical, as we have experienced in recent years, consumer confidence and spending patterns are negatively impacted, which impacts our sales and profitability. We are unable to predict future economic conditions, the extent to which consumer behavior may be impacted by negative economic conditions, or how those trends will impact our business, results of operations and financial condition.

Our revenue, results of operations and cash flows are sensitive to consumer confidence and spending patterns, and may be adversely affected by negative political or economic trends,conditions, geopolitical conflicts, significant health hazards or pandemics, severe weather or other market disruptions.

Our revenue, results of operations, cash flows and future growth may be adversely affected by negative local, regional, national or international political or economic trends or developments, including global trade policy, the effects of national and international security concerns such as war, terrorism or the threat thereof, to the extent such developments reduce consumers’ ability or willingness to make discretionary purchases. Ongoing geopolitical conflicts in Europe and the Middle East, uncertainty in the global trade environment, as well as economic sanctions and other measures imposed in response thereto have created, and may continue to create, market disruption and volatility, supply chain disruptions, inflationary pressures, and geopolitical instability. These events and similar events in the future could have a material adverse effect on our customers, our international partners and our third-party suppliers, and may negatively impact our international sales in stores and digital channels.

In addition, market disruptions due to natural disasters, significant health hazardshazards, epidemics or pandemics, or other major events or the prospect of these events could also impact consumer spending and confidence levels. Similar to the disruption we experienced from the COVID-19 global pandemic, future pandemics, epidemics, disease outbreaks or other similar widespread public health concerns may disrupt our business, human capital, supply chain and production processes, which could have a material adverse effect on our results of operations and financial condition. Extreme weather conditions in the areas in which our stores, corporate offices, or production and distribution facilities are located, particularly in marketsareas where we have multiplesignificant storesproduction or productiondistribution facilities,operations, could adversely affect our business. PurchasesMarket ofdisruptions ourand products may decline during periods when economic oradverse market conditions arecaused volatileby orthese weak.and Inother such circumstances, we also may decide to increase our promotional activity, whichfactors could have a material adverse effect on our profitability, financial condition and cash flows.

Changes in trade policies and tariffs imposed by the United States government and the governments of other nations could continue to have a material adverse effect on our business and results of operations.

Our operations rely on the global sourcing, manufacturing, and sale of products, and our supply chain is subject to the risks inherent in international trade, including potential changes in trade policies, increases in import duties, anti-dumping measures, quotas, safeguard measures, trade restrictions, restrictions on fund transfers, and currency fluctuations. Additionally, geopolitical instability and other geopolitical factors may further impact our ability to source and distribute products efficiently. Changes in laws or policies governing the terms of trade, and in particular increased trade restrictions, tariffs, or taxes on imports from countries where we source materials and manufacture products, such as China,products could have a material adverse effect on our business and financial results. For example, in recent years, both the U.S. and China have imposed new tariffs on each other related to the importation of certain product categories, including imports of apparel into the U.S. from China.

In FebruaryThroughout 2025, the U.S. presidential administration imposed avarying 10%levels tariffof tariffs on nearlyseveral allcountries importswhere fromwe China,source materials and inmanufacture Marchproducts. 2025,We anestimate additionaltariffs, 10%net tariffof wasmitigation imposedefforts, onnegatively nearlyimpacted allour importsoperating fromincome China.during Additionally,fiscal 2025 by approximately $85 million and resulted in Marchincreased 2025,expenses, asupply 25%chain tariff on certain imports from Mexicodisruption, and Canada went into effect.uncertainty. We are closely monitoring this evolving situation and evaluating our responses, which may include shifts in sourcing strategies, price adjustments, or other cost-mitigation measures. However, there can be no assurance that we will be able to fully mitigate the financial and competitive impacts of such tariffs or trade restrictions. At this time, the overall impact on our business related to these tariffs remains uncertain and depends on multiple factors, including the duration and potential expansion of current tariffs, future changes to tariff rates, scope, or enforcement, retaliatory measures by impacted exporting countries, inflationary effects and broader macroeconomic responses, changes to consumer purchasing behavior, and the effectiveness of our responses in managing these challenges.

If the U.S. decidesgovernment tocontinues imposeor increases existing tariffs or imposes additional tariffs on products imported from China or other countries where we source materials or manufacture our products, or if new or additional retaliatory trade measures are taken by China or other countries in response to U.S. tariffs, there can be no assurance that we will be able to offset all related increased costs. This potential increase in costs and our efforts to mitigate such increase in costs could be materialmaterially adverse to our business and results of operations or harm our competitive position. We cannot predict if, and to what extent, there may be changes to international trade agreementspolicies or the resulting impact of any such changes on our business and results of operations.

We are in the process of executing a long-term strategic plan to grow our business, increase our revenue and operating income, and build long-term sustainable value for our stockholders. To support achievement of our plan, which we refer to as the strategicPath plan,to Potential, we are implementing a significant number of strategic initiatives, including initiatives focused on building a customer-centric company,performance culture, improving our products,product development processes, operating with efficiency, evolving our brand projection, how we go to market, and our customer experience, and expandingupgrading our globaltechnologies footprint.to support speed and innovation throughout our business, especially our supply chain and merchandising functions. There can be no assurance that these or other future strategic initiatives will be successful to the extent we expect, or at all. In addition, we are investing significant resources in these initiatives and the costs of the initiatives may outweigh their benefits. We cannot give assurance that our management will be able to manage these initiatives effectively or implement them successfully. If we fail to implement our strategic plan effectively, if we invest resources in initiatives that ultimately prove to be unsuccessful, or if our competitors are more successful in implementing their strategic plans and initiatives than we are, our business and results of operation could be adversely affected.

Seasonal fluctuations also affect our cash and inventory levels, since we usually order merchandise in advance of peak selling periods and sometimes before new fashion trends are confirmed by customer behavior. We typically accumulate a significant amount of inventory in the months preceding the holiday season selling period. If we are not successful in selling that inventory,inventory at desired prices, we may have to sell the inventory at significantly reduced prices or may not be able to sell the inventory at all, which could have a material adverse effect on our results of operations, financial condition and cash flows.

We believe one of our key competitive advantages is providing a positive, engagingpositive and satisfyingengaging experience for eachour customer,customers, which requires us to have highly trained and engaged associates. Our success depends in part uponon our ability to attract, develop and retain a sufficient number of qualified associates, including talented store personnelpersonnel, designers and talented merchants. The turnover rate in the retail industry is generally high, and qualifiedwe individualsmay ofhave thedifficulty requisite caliberhiring and numberretaining neededenough toqualified fillindividuals, these positions may be in short supply in some areas andespecially during certain times of the year. Competition for such qualified individuals or changes in labor and healthcareemployment laws could cause us to incur higher labor costs. As certain jobs and employers increasingly operate remotely, traditional geographic competition for talent may change in ways that cannot be fully predicted at this time. Our inability to recruit a sufficient number ofenough qualified individuals in the future may delay planned openings of new stores or affect the speed with which we expand.grow. Delayed store openings, significant increases in associate turnover rates or significant increases in labor-related costs could have a material adverse effect on our results of operations, financial condition and cash flows.

Most of our stores are located in retail shopping areas, including malls and other types of retail centers. Sales at these stores are derived,derived in part,part from the volume of traffic in those retail areas. Our stores benefitoften fromrely on the ability of the retail center and other attractions in an area, including “destination” retail stores,area to generate consumer traffic in the vicinity of our stores. Sales volume and retail traffic may be adversely affected by factors that we cannot control, such as economic downturns or changes in consumer demographics in a particular area, consumer trends away from brick-and-mortar retail toward online shopping, competition from digital and other retailers and other retail areas where we do not have stores, significant health hazards or pandemics, the closing of other stores or the decline in popularity or safety in the shopping areas where our stores are located, and the deterioration in the financial condition of the operators or developers of the shopping areas in which our stores are located.

Part of ourOur future growth isand significantlysuccess dependentdepend on our ability to operate stores in desirable locations with suitable lease spaces and capital investment and lease costs providing thean opportunity for us to earn a reasonable return. The market for prime retail real estate is competitive. We cannot be sure as to when or whether suchdesirable desirablestore locations will become available to us at reasonable costs and on satisfactory lease orand other terms. Some of our store locations require significant upfront capital investment and have material lease commitments. If we determine that it is no longer economical to operate a store and decide to close it,a store, we may remain obligated under the applicable lease for, among other things,for payment of the base rent for the balance of the lease term.term and other expenses. A dispute regarding our leases may result in litigation with the respective landlord, and any such dispute could be costly and have an uncertain outcome. Additionally,These werisks arecould dependenthave upona thematerial suitabilityadverse effect on our ability to grow our business, as well as our results of theoperations, leasefinancial spacescondition thatand wecash currently use.flows.

Our continued growth and success will depend in part on our ability to open and operate new stores and right-size and remodel existing stores in a timely and profitable manner. Our ability to open new stores depends uponon a number of factors, including the ability to partner with developers and landlords to obtain suitable sites for new stores at acceptable costs, the availability and cost of materials and contractors, the hiring and training of qualified personnel and the integration of new stores into existing operations. Our ability to remodel existing stores depends on a number of factors, including the ability to partner with developers and landlords to secure satisfactory lease terms and the availability and cost of materials and contractors. There can be no assurance we will be able to achievesuccessfully implement our initiativesplans regarding opening new stores and right-sizing and remodeling existing stores, manage our growth effectively, successfully integrate new stores into our operations or operate our new, right-sized, remodeled and existing stores profitably. These risks could have a material adverse effect on our ability to grow and results of operations, financial condition and cash flows.

Our international operations and our plans for international expansion include risks that could negatively impact our resultsreputation and reputation.results of operations.

We intend to continue to grow our international operations and further expand into new international markets through partner and/or joint venture arrangements. The risks associated with operating in international markets are numerous and include difficulties in attracting customers due to a lack of customer familiarity with our brands and our lack of familiarity with local customer preferences. Any of these risks may lead to disruption in the overall timing or profitability of our international expansion efforts. Further,We entrymay intoexperience difficulty identifying new or underpenetrated markets where our products and brands will be accepted by customers, lack of customer familiarity with our brands, our lack of familiarity with local customer preferences and new markets may bring us into competition with new competitors or with existing competitors with an established market presence. Other risks include general economic conditions in specific countries or markets, volatility in the geopolitical landscape, restrictions on the repatriation of funds held internationally, disruptions or delays in shipments, occurrence of significant health hazards or pandemics, changes in diplomatic and trade relationships, political instability and foreign governmental regulation. These risks could have a material adverse effect on our results of operations, financial condition and cash flows.

Our results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates. In fiscal 2024,2025, approximately 12%15% of our total net revenuesales waswere derived from markets outside the U.S. We also began distributing and shipping product throughutilize a distribution facility located in the Netherlands in 2024.Netherlands. Currencies other than the U.S. dollar are utilized for mostsome of our international operations. We are exposed to foreign currency exchange rate risk with respect to our sales, profits, assets and liabilities denominated in currencies other than the U.S. dollar. In addition, our royalty arrangements are calculated based on sales in local currency, which exposes us to foreign currency exchange rate fluctuations. From time to timetime, we use foreign currency forward contracts to hedge certain foreign currency risks; however, these measures may not succeed in offsetting all of the short-term negative impacts of foreign currency rate movements on our business and results of operations. For example, hedging would generally not be effective in offsetting the long-term impact of sustained shifts in foreign exchange rates on our business results. As a result, the fluctuation in the value of the U.S. dollar against other currencies could have a material adverse effect on our results of operations, financial condition and cash flows.

Our licensees, franchisees, wholesalers, and joint venture partners could take actions or omissions that could harm our businessreputation and reputation.results of operations.

We have global representation through independently owned stores operated by our third-party partners. Although we have criteria to evaluate and select prospective partners, the level of control we can exercise over our partners is limited, and the quality and success of their operations mayis besubject diminishedto byrisks anyand number ofother factors beyond our control. For example, our partners may not have the business acumen, experience or financial resources necessary to successfully operate stores in a manner consistent with our standards and may not hire and train qualified store managers and other personnel. Further, we have limited control as to whether our partners comply with federal and local law. The image and value of our brands and our reputation may suffer materially, and our sales and operating income could declinematerially if our partners do not operate successfully.successfully, ethically, and in compliance with applicable law. These risks could have an adverse effect on our results of operations, financial condition and cash flows.

Our direct channel business is subject to risks that could have an adverse effect on our results.results of operations.

In fiscal 2025, approximately 31% of our total net revenue was derived from our digital channels, including our websites and mobile applications. Our ability to successfully operate and grow our digital operations is subject to numerous risks that could have a material adverse effect on our business and results of operations. Risks inherent in our digital operations include the difficulty in recreating our unique in-store experience through our direct channels; domestic or international resellers purchasing merchandise and reselling it outside our control; our ability to anticipate and implement innovations in technology and logistics in order to appeal to existing and potentialprospective customers who increasingly rely on multiple channels to meet their shopping needs; our ability to keepanticipate upand withrespond to shifts in customer preference and demand; and the failure of and risks related to the systems that operate our digital infrastructure, websites and the related support systems, including cybersecurity incidents, computer viruses, theft of customer information, privacy concerns, telecommunication failures, cybersecurity incidentsfailures and similar disruptions.

OurDisruptions failureand other factors that impact our ability to maintain efficient and uninterrupted order-taking and fulfillment operations could also have a material adverse effect on our business and results of operations. The satisfaction of our online customers depends on their timely receipt of merchandise. Our operations may be jeopardized if we encounter difficultiesDifficulties with our distribution facilities, orincluding if the facilities were to shut down for any reason, includingsuch as a result of natural disaster, severe weather or labor stoppage.stoppage, may materially disrupt our operations. Supply chain or product transportation challenges have caused and could continue to cause us to incur higher costs and longer lead times associated with distributing our products to our customers. Any of these issues could cause customer dissatisfaction, reduced sales and profitability and have a material adverse effect on our operations, financial condition and cash flows.

We may, from time to time, evaluate and pursue acquisitions and other strategic investments. These activities involve various risks that could result in unanticipated or increased liabilities and contingencies and hinder our ability to achieve expected benefits. InWith 2022,respect to any acquired company, we acquiredmay Adorefail Me.to The ultimate success of that acquisition, including achievement ofrealize the anticipatedexpected benefits and synergies,synergies willfor dependa invariety partof onreasons, our ability to successfully integrate and grow the Adore Me business.including:

Further, integration efforts could disrupt both companies’ existing operations and divert managementmanagement’s attention and resources. If we experience difficulties with the integration process, the anticipated benefits of the acquisition, including anticipated sales and growth opportunities, may not be realized fully, or at all, and may take longer to realize than expected. The acquisition of Adore MeAcquisitions or other strategic investments or acquisitions may not create value and may harm our brands and adversely affect our results of operations, financial condition and cash flows, decrease or delay the accretive effect of the acquisition, and negatively impact the price of our common stock.

If we are unable to incorporate artificial intelligence and other emerging technological applications into our business operations successfully and ethically, our business, reputation and results of operations may be adversely affected.

Our long-term strategic growth plan and strategic initiatives include investments in information technology, data science and artificial intelligence (“AI”). The use of AI and similar technologytechnologies presents risks, challenges and ethical issues that could adversely affect our business. Generative, agentic, and other AI algorithms or training methodologiestechnologies may have flaws and be prone to cybersecurity incidents or service interruptions. Data sets used by AI or similar technologies may be overbroad, insufficient or contain biased information. AI or similar technologies may generate biased, offensive, illegal, inaccurate,inaccurate or otherwise harmful content. If the work product that AI or similar technological applications assist in producing is deficient, inaccurate or misleading, we could be subject to competitive harm, legal liability, regulatory action, and brand or reputational harm. Use of AI and similar technologies by our associates could increase the risk of exposure of confidential or competitively sensitive information. Privacy concerns and risks related to intellectual property rights of inputs into the program and AI work product are also present. There is uncertainty regarding evolving laws and regulations at the federal, state and international levels regarding AI and other emerging technological applications. If we enable or offer AI solutions or other technologies that have unintended consequences, unintended usage or customization by our associates, customers or partners, or are controversial because of their impact on human rights, privacy, security, employment, or other social, economic or political issues, we may experience reputational harm, regulatory action and legal liability. Further, we may be unable to quickly and successfully execute our AI and other technological initiatives, adapt to rapid change resulting from advancements in AI and similar technology, or our competitors may have more success implementing and utilizing such technology than we do. Any of these risks could have an adverse effect on our business, reputation and results of operations.

Our ability to maintainprotect and refineelevate our reputation is critical to the image and value of our brands. Our reputation could be jeopardized if we fail to maintain high standards for merchandise quality and corporate integrity. Any negativeNegative publicity, including information publicized through traditional media or social media platforms, blogs, websites and other forums, may affectnegatively impact our reputation and brandsbrand image and, consequently, reduce demand for our merchandise, even if such publicityinformation is unverified or inaccurate.

Failure to comply, or the perception that we have failed to comply, with ethical, social, product, labor, privacy and environmental standards, or related political sentiment, could also jeopardize our reputation and potentially lead to various adverse consumer actions, including boycotts. Additionally,Unfavorable ratings or assessments by organizations that provide information to investors on corporate governance and other matters have developed rating systems for evaluatingevaluate companies on their approach to environmental, social and governance matters. Unfavorable ratingsmatters may also negatively affect our reputation and the perception of our brands. Failure to comply with localapplicable laws and regulations, to maintain an effective system of internal controls, toprovide accurate and timely financial statement disclosure and maintain the security of customer, associate, third-party and Company information or to provide accurate and timely financial statement disclosure could also hurt our reputation. Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our business, results of operations, and financial condition, as well as require additional resources to rebuild our reputation.

Customer traffic and demand for our merchandise are influenced by our advertising, marketing and promotional activities, including flagship events like the VSVictoria’s Secret Fashion Show, and the name recognition and reputation of our brands. We use marketing, advertising and promotional programs to attract customers through various media, including social media, influencers, websites, mobile applications, email, printemail and television. Some ofIf our competitors mayare more effective with their programs than we are, expend more resources for their programs than we do, or use different approaches than we do, whichthat may provide them with a competitive advantage. Our programs and events may not be successful, effective or could require increased expenditures, which could have a material adverse effect on our financial condition and results of operations.

We believe that our intellectual property rights, including trade names, trademarks, copyrights, patents and proprietary informationinformation, are important assets and an essential element of our strategy,strategy. Our ability to maintain, enforce, and protect our intellectual property rights is critical to the image and value of our brands, our competitive position, and our business operations, especially with respect to expanding into new markets and innovative new products and maintaining the integrity of our brands.products. We routinely apply forseek and obtain registration of our intellectual property protection in the U.S. and in many foreign jurisdictions. However, there can be no assurance that weapplications or registrations will obtainbe suchgranted, that registrations will provide adequate protection, or that the registrations we obtainthey will prevent the imitation of our products orimitation, infringement or other violationunauthorized ofuse. ourIn certain countries, intellectual property rightslaws bymay others.offer Inweaker particular,protection than in the laws of certain foreign countries may not protect intellectual property rights to the same extent as the laws of the U.S., particularly in regions where such laws are less developed.U.S. Counterfeiting, piracy, or unauthorized use of our intellectual property by third parties could haveadversely a material adverse effect on our results of operations, may decreaseaffect our revenue, and dilute the value of our brands, ourand reputation andharm our competitive advantage.position and results of operations.

Third parties may challenge our rights, assert rights in or ownership of oursimilar trademarks andor other intellectual property rights, or trademarks that are similar to our trademarks,property, or claim that we are infringing, misappropriatinginfringe or otherwise violatingmisappropriate their intellectual property rights. These type of conflictsdisputes may not be resolvedlead to ourunfavorable satisfaction,outcomes, may result inincluding costly litigation and settlement costs, which may requirelitigation, licensing agreements,obligations, paymentroyalty ofpayments, significantsettlements, royalties,damages, settlements costsinjunctions, or damages,the or injunctions, which may require usneed to rebrand our products or be prevented from selling some ofdiscontinue our products. Further, the rapid pace of technological innovation may renderdiminish the value or relevance of certain intellectual property less valuable or obsolete.property. Any of these risks could materially and adversely affect our business, financial condition and results of operation.

The retail industry is highly competitive, especially with respect to the intimates, apparel and beauty markets. We compete for sales with a broad range of other retailers, including individual and chain specialty stores, department stores and discount retailers. In addition to the traditional store-based retailers, we also compete with direct marketers and retailers that sell similar merchandise and target customers through onlinedigital channels. Brand image, marketing, design, price, service, assortment, quality, image presentation and fulfillment are all competitive factors in both the store-based and onlinedigital channels.

Some of our competitors may have greater financial, marketing and other resources available to them or use their resources more effectively. Trends across our product categories may favor our competitors, including the shift in customer preference to digital and omnichannel shopping. We rely to a greater degree than some of our competitors on physical locations in shopping malls and retail centers andcenters, so declines in traffic to such locations may affect us more significantly than our competitors. Some of our competitors sell their products in stores that are located in the same shopping malls and retail centers as our stores. In addition to competing for sales, we compete for favorable store locations and lease terms.

Increased competition,competition combined withor declines in mall or online website traffic,traffic could result in reduced sales, increased promotional activity, increased marketing expenditures, and loss of pricing power and market share, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.

Our ability to manage the life cycle of our brands and to remain current with fashion trends and launch new merchandise,merchandise and product lines, and brandslines successfully could impact the image and value of our brands.

Our success depends in part on our ability to effectively manage the life cycle of our brands and to anticipate and respond to changing fashion preferences and consumer demands and to translate market trends into attractive, salable product offerings in a timely and effective manner. We are dependent on certain product categories, including brasbras, panties and other intimates products, and a decline in consumer demand in these product categories could negatively affect our results of operations, financial condition and cash flows. We may choose to launch new product categories or brands, and our ability to successfully introduce new merchandise, product lines, and brands will impact our results of operations and the image and relevancevalue of our brands. Customer demands and fashion trends change rapidly. If we are unable to successfully anticipate, identify orand react to changing styles or trends or we misjudge the market for our products or any new product lines,lines or brands, our sales may decrease, potentially resulting in significant amounts of unsold inventory. In response, we may be forced to increase our marketing and promotional activity. These risks could have a material adverse effect on the value of our brands and our reputation as well as our results of operations, financial condition and cash flows.

We source materials and produce merchandise inwithin internationalthe marketsU.S. and in our domestic market.internationally. We distribute merchandise globally to our partners, stores and customers in nearlyapproximately 70 countries. Many of our imports and exports are subject to a variety of customs regulations and international trade arrangements, including existing or potential increases in or new duties, tariffs or safeguard quotas. We also compete with other companies for production facilities.

•significant health hazardshazards, epidemics or pandemics, which could result in closed factories, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in affected areas;

We also rely uponon third-party transportation providers for substantially all of our product shipments, including shipments to and from our distribution centers, to our stores and to our customers. Our utilization of these delivery services is subject to risks, including increases in labor costs and fuel prices, which may increase our shipping costs, and associate strikes and inclement weather, which may impact our transportation providers’ ability to provide delivery services that adequately meet our shipping needs. Further, the growth in demand for online shopping has led to increased pressure on the capacity of our fulfillment network. These risks could have a material adverse effect on our results of operations, financial condition and cash flows.

A significant portion of our intimates and apparel products are produced in Southeast Asia. In addition, most of the production and distribution of our beauty products occurs in close proximity to our headquarters in central Ohio. AsDue a result ofto the geographic concentration of theour production and distribution facilities that we rely upon,facilities, our operations are susceptible to local and regional factors, such as accidents, system failures, economic andconditions, extreme weather conditions,and natural disasters, demographic and population changes, and other unforeseen or uncontrollable events and circumstances. Any significant interruption or adverse impact to the operations of these facilities could lead to inventory shortages, supply chain disruptionor fulfillment disruptions or increased costs, which could have a material adverse effect on our results of operations, financial condition and cash flows.

Third-party vendors produce the vast majority of our products. Factors outside our control, such as production or shipping delays or product quality problems, could disrupt merchandise deliveries and result in lost sales, cancellation charges or excessive markdowns. In addition, quality problems could result in product liability litigation or a widespread product recall that may negatively impact our reputation, sales and profitability. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertions could adversely impact our reputation with existing and potential customers and the image and value of our brands.

Our business could also suffer if our third-party vendors fail to comply with our guidelines and policies or applicable laws, regulations or ethical standards. The violation of our guidelines and policies or labor, environmental or other laws by our third-party vendors, or the divergence of a third-party vendor’s or partner’s labor or environmental practices from those generally accepted as ethical or appropriate, could damage our reputation, result in increased costs or liabilities, or disrupt the shipment of finished products to us or damage our reputation.us. These risks could have a material adverse effect on our results of operations, financial condition and cash flows.

Energy costs may fluctuate as a result of inflation and other factors, including geopolitical conflicts and related economic conditions and sanctions. These fluctuations may result in an increase in our transportation costs for distribution, utility costs for our retail stores and costs to purchase products from our manufacturers. A rise in energy costs could adversely affect consumer spending and demand for our products and increase our operating costs, both of which could have a material adverse effect on our results of operations, financial condition and cash flows.

Climate change and other sustainability-related matters, and related legal, regulatory and market responses to climate change,change and other sustainability-related matters may adversely impact our business.

There is increasing concern that a permanent rise in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere has caused and will continue to cause significant changes in weather patterns around the globe, an increase in the frequency, severity and duration of extreme weather conditions and natural disasters, and water scarcity and poor water quality. These events could adversely impact the cultivation of cotton, which is a key resource in the production of our products, disrupt the operation of our supply chain, increase our production costs, and impact consumer behavior. These events could also compound adverse economic conditions and reduce consumer confidence and discretionary spending. As a result, the effects of climate change could have a material adverse effect on our results of operations, financial condition and cash flows.

In many jurisdictions, governments are considering or enacting new or additional legislation and regulations to reduce or mitigate the impacts of climate change. If we or our suppliers are required to comply with these laws and regulations, or if we take voluntary steps to reduce or mitigate our impact on climate change, we may experience increases in energy, production, transportation and raw materials costs, capital expenditures, insurance premiums and deductibles, and compliance-related costs, which could adversely impact our results of operation. Inconsistency of legislation and regulations among jurisdictions and increasing enforcement measures may also affect the costs of compliance with such laws and regulations.compliance. Any assessment of the potential impact of future climate change legislation, regulations or industry standards, as well as any international treaties and accords, is uncertain given the wide scope of potential regulatory change in the countries in which we operate. Any failure on our part to comply with regulations related to climate change-relatedchange regulationsand sustainability could lead to adverse consumer actions and investment decisions by investors, as well as expose us to government enforcement and private litigation.

Execution of our sustainability-related strategiesinitiatives and achievement of our sustainability-related goals is subject to risks and uncertainties, many of which are outside our control. IfFurther, there is risk associated with conflicting expectations from different stakeholder groups regarding climate change and other sustainability-related matters. We may not be able to meet the diverse expectations of all our stakeholders, which could harm our reputation and reduce customer demand for our products. Further, we announcemay not be successful in executing our sustainability-related initiatives or achieving our sustainability-related goals and targets,certain there can be no assurance thatof our stakeholders willmay not agree with our strategies,goals andor anystrategies. Any perception, whether or not valid, that we have failed to achieve,achieve our goals, or to act responsibly with respect to such matters or to comply with new or additional legal or regulatory requirements regarding climate change and other sustainability-related matters could result in adverse publicity and adversely affect our businessbusiness, reputation and reputation.results of operations.

Our success depends in part on the secure and uninterrupted performance of our and our third-party services providers’ and vendors’ information technology systems. Our information technology systems, as well as those of our service providers and vendors, are vulnerable to damage, interruption or breach from a variety of sources, including cyberattacks, ransomware attacks, telecommunication failures, malicious human acts and natural disasters. Moreover, despite protective measures, some of our systems, e-commerce environments, serversand servers, and those of our service providers and vendorsvendors, are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Such incidents could disrupt our operations, including our ability to sell and deliver products, and lead to interruptions or delays in our supply chain. Additionally,In theseMay types2025, ofwe problemsexperienced coulda resultsecurity inincident an actual or perceived breach of confidential customer, operational, financial, employee or other important information (including personal information), which could result in damage toinvolving our reputation, costly litigation, customer complaints, negative publicity, breach notification obligations, regulatory or administrative sanctions, inquiries, orders or investigations, indemnity obligations, damages for contract breach or penalties for violations of applicable laws or regulations. The increased use of artificial intelligence, smartphones, tablets and other mobile devices may also heighten these and other operational risks. Unanticipated or uncontrollable problems or events may cause failures in, or unauthorized access to, our and our third-party service providers’ and vendors’ information technology systems. Sustained or repeated system disruptionssystems that interruptdisrupted the operation of our abilitywebsite tofor processseveral ordersdays and delivernegatively products toimpacted our customersfiscal 2025 net sales by approximately $20 million and stores,operating impactincome ourby customers’approximately ability$14 to access our websites, or expose confidential customer, operational, financial or other important information (including personal information) could have a material adverse effect on our results of operations, financial condition and cash flows.million.

In addition, from time to time, we make hardware, software and code modifications and upgrades to our information technology systems for point-of-sale, e-commerce, mobile applications, merchandise and financial planning, sourcing, logistics, inventory management and support systems, includingsuch human resources and finance. Modifications involveas replacing existing systems with successor systems, making changes to existing systems or acquiring new systems with new functionality. We are subject to risks associated with replacing and modifying our information technology systems, including risks relative to cybersecurity, data integrity and system disruptions. Information technology system disruptions or data corruption, if not anticipated and appropriately mitigated, could have a material adverse effect on our operations, financial condition and cash flows.

We caution that any forward-looking statements (as such term is defined in the U.S. Private Securities Litigation Reform Act of 1995) contained in this Annual Report on Form 10-K or made by us, our management, or our spokespeople involve risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements, and any future performance or financial results expressed or implied by such forward-looking statements are not guarantees of future performance. Forward-looking statements include, without limitation, statements regarding our future operating results, the implementation and impact of our strategic plans, and our abilitygoals, tointentions, meet environmental, social,beliefs and governance goals.expectations. Words such as “estimate,” “commit,” “will,” “target,” “goal,” “project,” “plan,” “believe,” “seek,” “strive,” “expect,” “anticipate,” “intend,” “continue,” “potential” or the negative of these words and any similar expressions are intended to identify forward-looking statements. Risks associated with the following factors, among others, could affect our results of operations and financial performance and cause actual results to differ materially from those expressed or implied in any forward-looking statements:

•uncertainty in the global trade environment, including the imposition or threatened imposition of tariffs or other trade restrictionspolicies;

•consumer acceptance of our products and our ability to manage the life cycle of our brands, remain current with fashion trends, and develop and launch new merchandise,merchandise and product lines and brands successfully;

•our ability to incorporate artificial intelligence and other emerging technologies into our business operations successfully and ethically while effectively managing the associated risks;

•our ability to maintain the security and privacy of customer, associate, third-party and company information;

•our ability to maintain our credit ratingratings;

•our ability to comply with legal and regulatory requirements; and

All forward-looking statements are made only as of the date of this Annual Report on Form 10-K. Except as may be required by law, we assume no obligation and do not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this Annual Report on Form 10-K to reflect circumstances existing after the date of this report or to reflect the occurrence of future events, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Additional information regarding these and other factors can be found in “Item 1A. Risk Factors” in this Annual Report on Form 10-K.

Our operating results are generally impacted by economic changeschanges. and, therefore,Accordingly, we monitor the retail environment using, among other things,using certain key industry performance indicators including competitor performance and mall traffic data. These metrics can provide insight into consumer spending patterns and shopping behavior in the current retail environment and assist us in assessing our performance as well as the potential impact of industry trends on our future operating results. Additionally, we evaluate a number of key performance indicators including comparable sales, gross profit, operating income and other performance metrics such as sales per average selling square foot and inventory per selling square foot in assessing our performance. To evaluate our net sales, we utilize traffic, conversion (which we define as the percentage of customers who visit our stores or digital sites and make a purchase), units per transaction, average unit retail (which we define as the average price per unit purchased) and average transaction value (which we define as units per transaction multiplied by average unit retail).

Our merchandise is available throughin our digital channels, incompany-operated retail stores across the U.S., Canada and China, through our company-owned digital channels, and internationally through international stores andstores, websites and mobile applications operated by partnersour under franchise, license, wholesale and joint venture arrangements.partners. With a presence in nearlyapproximately 70 countries, we benefit from strong global brand recognition, a compelling product assortment and a deep, lasting connection with our customers.

We face some near-term headwinds and ongoing uncertainty in the macroglobal trade environment, which we have and will continue to manage aggressively. AtWe thisestimate time,tariffs, thenet overallof impactmitigation onefforts, ournegatively businessimpacted relatedoperating to the newly imposed tariffsincome by theapproximately U.S.$85 presidentialmillion administrationin on imports from China, Mexico and Canada as well as any retaliatory measures by impacted exporting countries remains uncertain and depends on multiple factors.2025.

Victoria'sWe Secret & Co. isare operating from a position of strength. As the world'sworld’s largest intimate apparel company, we have a powerful foundation for growth with a leading market shareshare, intens the industry,of millions of active and loyal customers and one of the most engaged brand communities on social media.

We build on this strength by evolving our business, leading the industry and unlocking new opportunities. Our strategygrowth plan, which we call “Path to Potential,” is built around four key priorities that we believe will allow us to strengthen ourVictoria’s core,Secret expandand into high-potential categoriesPINK and evolve how we go to market and connect with our customers. These priorities are designed to accelerate growth, differentiate our brands and reinforce our authority in the market both in North America and internationally.

2.Supercharge Bras: Reasserting1.Supercharge Our Bra Authority

We will leanbuild on our industry-leading bra expertiseauthority to be her number one destination for all bras:

3.Fuel Growth in Lifestyle Categories: Beauty, Sport, Lounge & SwimBeauty

•LeaningWe intoare ourinvesting Beautyin authority—continued growth of beauty by building on our industry-leading fragrance business and expanding into new opportunitiesopportunities, whichincluding includesa differentiated beauty atoffering for PINK.

As culture, technology,technology and shopping behaviors shift, so must our go-to-market strategy. By staying true to our brandidentity while adapting how we engage, inspire,inspire and serve, we will deepen connections with existing customers and attract new customers while strengthening loyalty and driving long-term growth:

•We mustare createcreating stronger differentiation between Victoria'sVictoria’s Secret and PINK in everything from product to marketing to experience. We will ensure that each brand is distinct but complementalso one anothercomplementary in a single ecosystem.

•We willare elevateelevating Victoria'sVictoria’s Secret as sexy, glamorous and accessible luxuryluxurious while modernizing PINK'sPINK brandto identitybe bold, playful and evolving the way we communicate with the customer.irreverent.

•ByWe are becoming more agile and culturally connected, we will createcreating real-time moments that resonate with our customers and keep us at the center of conversation.

•We willare leverageleveraging the full marketing funnel and build abuilding brand centric, best-in-class omnichannel experienceexperiences to engage with her on her terms.

To successfully reignitefuel growth, deepen customer loyalty,loyalty and elevate our brands, we must operate with focus, agility,agility and excellence. We are reinforcing three essential capabilities that we believe will empower us to move faster, innovate more boldly,boldly and deliver a seamless experience across every touchpoint. These enablers will ensure that our strategy is not just aspirational; it is actionable, sustainable and built to drive results.

•A Customer-Centric Performance Culture: By deeply understanding our customers, including how they shop, what they value,value and what inspires their loyalty, we will create stronger connections, drive repeat engagement,engagement and fuel sustainable growth. A culture centered on the customer empowers associates to innovate and to deliver experiences that not only meet her expectations but exceed them, turning transactions into lasting relationships.

Net sales in the firstsecond quarter of 2026 increased 15%,10%, to $1.560$1.611 billion, compared to the firstsecond quarter of 2025. In North America, net sales increased 11%9% in the stores channel and increased 8% in the direct channel compared to the firstsecond quarter of 2025. Traffic and average unit retail increased in our stores and direct channels compared to the firstsecond quarter of 2025. Additionally, we estimate the website closure due to the security incident involving our information technology systems in May 2025 negatively impacted net sales in the second quarter of 2025 by approximately $20 million. Net sales in our international channel increased 45%20% compared to the firstsecond quarter of 2025.

Our operating income in the firstsecond quarter of 2026 increased $56$216 million, to $76$257 million, compared to the firstsecond quarter of 2025 and our operating income rate (expressed as a percentage of net sales) increased to 4.9%15.9% from 1.5%2.8% in the firstsecond quarter of 2025. The increase in operating income compared to the firstsecond quarter of 2025 was primarily driven by an increase in net salessales, a $135 million benefit from the recognition of IEEPA tariff refund recoveries in costs of goods sold and improved merchandise margins.

For additional information related to our firstsecond quarter of 2026 financial performance, see “Results of Operations.”

Beginning in February 2025, the U.S. administration imposed tariffs on a broad range of imported goods under the International Emergency Economic Powers Act (“IEEPA”).IEEPA. On February 20, 2026, the U.S. Supreme Court ruled tariffs imposed under the IEEPA were not authorized, and on March 4, 2026, the U.S. Court of International Trade directed U.S. Customs and Border Protection (“CBP”) to refund amounts previously collected, including applicable interest. The CBP has established a phased administrative process for submitting refund claims for certain IEEPA tariffs. We are in the process of requesting refunds for the IEEPA tariffs paid, however, the amount and timing of recoveries remain uncertain. As a result, as of May 2, 2026, we did not record a receivable related to potential IEEPA tariff refunds.

Following the Supreme Court’s decision relating to the IEEPA tariffs, the U.S. administration announced a new 10% global tariff under Section 122 of the Trade Act of 1974, subject to certain exceptions.exceptions, Wewhich estimatecommenced tariffs,on netFebruary 24, 2026 and expired on July 24, 2026. In July 2026, the U.S. administration imposed new tariffs ranging from 10% to 12.5% under Section 301 of mitigationthe efforts,Trade negatively impacted operating income by approximately $85 million in fiscal year 2025. We estimate tariffs, netAct of mitigation1974, efforts,effective negativelyJuly impacted24, operating income by an incremental approximately $14 million in the first quarter of 2026 compared to the first quarter of 2025.2026. It is unclear at this time what impact these decisionstariffs will have on our future results of operations, including the amount of refunds for the IEEPA tariffs previously paid, any changes in tariff levels or the imposition of new tariffs throughor other means.trade policies. We continue to identify and execute mitigation strategies as the tariff environment evolves.

In addition to our results provided in accordance with GAAP above and throughout this Quarterly Report on Form 10-Q, provided below are non-GAAP financial measures that present operating income, net income (loss) attributable to Victoria’s Secret & Co. and net income (loss) per diluted share attributable to Victoria’s Secret & Co. on an adjusted basis, which remove certain non-recurring, infrequent or unusual items that we believe are not indicative of the results of our ongoing operations due to their size and nature. The intangible asset amortization excluded in the firstsecond quarter ofand year-to-date 2025 from these non-GAAP financial measures is excluded because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised. We use adjusted financial information as key performance measures of our results of operations for the purpose of evaluating performance internally. These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Instead, we believe that the presentation of adjusted financial information provides additional information to investors to facilitate the comparison of past and present operations. Further, our definition of non-GAAP financial measures may differ from similarly titled measures used by other companies. The table below reconciles the most directly comparable GAAP financial measure to each non-GAAP financial measure.

(a)In the firstsecond quarter of 2026 and 2025,2026, we recognized pre-tax net expenseincome of $4 million and $6$140 million ($3$105 million and $4 million after-tax, respectivelyafter-tax), $2 million and $2$135 million included in buyingcosts of goods sold, $4 million included in other income and occupancy expense and $2 million and $4$1 million included in general, administrative and store operating expense, related to activitiesIEEPA totariff continuerefund torecoveries, restructureincluding ourinterest executivereceived, leadershipnet teamof related costs and organizational structure, as well as other one-time items.

(bc)In the firstsecond quarter ofand year-to-date 2025, we recognized amortization expense of $6 million and $13 million ($5 million after-taxand $9 million after-tax, respectively) included in general, administrative and store operating expense, related to our definite-lived intangible assets.

The following table compares U.S. company-operated store data for the firstsecond quarter of 2026 to the firstsecond quarter of 2025 and year-to-date 2026 to year-to-date 2025:

The following table represents store data for the first quarter ofyear-to-date 2026:

(a)Includes twelvethree partner-operated stores as of MayAugust 3,1, 2025.2026.

FirstSecond Quarter of 2026 Compared to FirstSecond Quarter of 2025

For the firstsecond quarter of 2026, our operating income increased $56$216 million, to $76$257 million, compared to operating income of $20$41 million in the firstsecond quarter of 2025, and the operating income rate (expressed as a percentage of net sales) increased to 4.9%15.9% from 1.5%.2.8%. The drivers of our operating income results are discussed in the following sections.

The following table provides net sales for the firstsecond quarter of 2026 in comparison to the firstsecond quarter of 2025:

(a)Results include consolidated jointChina ventureJoint salesVenture in China,sales, royalties associated with franchise partners’ sales, wholesale sales, and beginning in the third quarter of 2025 direct sales in the European Union. Prior to the third quarter of 2025, direct sales in the European Union are reported in our Direct channel. Direct sales in the European Union reported in the International channel were $17$22 million in the firstsecond quarter of 2026.

The following table compares the firstsecond quarter of 2026 comparable sales to the firstsecond quarter of 2025:

(a)Comparable sales results for the second quarter of 2026 and 2025 exclude the impact from lost sales from our direct channels during the period of time the direct channels were closed as a result of the May 2025 security incident involving our information technology systems. The percentage change in comparable sales represents comparable store and direct sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. The change in comparable sales provides an indication of period over period growth (decline). A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Individual stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more and direct channels are excluded from the comparable sales calculation if they have been closed for 24 consecutive hours or more. Upon re-opening, the stores and direct channels are included in the calculation. Additionally, stores are excluded if total selling square footage in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.

Net sales in the firstsecond quarter of 2026 increased $207$152 million, or 15%,10%, to $1.560$1.611 billion compared to $1.353$1.459 billion in the firstsecond quarter of 2025.

In the stores channel, our North America net sales increased $82$73 million, or 11%,9%, to $803$898 million compared to the firstsecond quarter of 2025 driven byas increases in traffic and average unit retail,retail whileand traffic were partially offset by a decrease in units per transactiontransaction. andConversion conversionwas remainedapproximately flat.flat compared to the second quarter of 2025.

In the direct channel, net sales increased $36$33 million, or 8%, to $469$439 million compared to the firstsecond quarter of 2025 as increases in traffic and average unit retail were partially offset by decreases in conversion and units per order. Additionally, we estimate the website closure due to the May 2025 security incident negatively impacted net sales in the second quarter of 2025 by approximately $20 million.

In the international channel, net sales increased $89$46 million, or 45%,20%, to $288$274 million compared to the firstsecond quarter of 2025. The increase in net sales in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 was primarily driven by increases in net sales in China, sourcing sales to our partners, our wholesale arrangementsChina and royalties earned associated with franchise sales in many countries outside of North America.America, partially offset by a decrease in sourcing sales to our partners.

Net sales in the direct and international channels in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 were also impacted by a $17$22 million shift in the reporting of net sales to the international channel due to a change of fulfillment location whereby direct sales to customers in the European Union are now fulfilled by our distribution center in Europe as opposed to our distribution center in the Columbus, Ohio area.

The following table provides a reconciliation of net sales from the firstsecond quarter of 2025 to the firstsecond quarter of 2026:

(a)Results include net sales for all direct channels operated by the Company (in North America and International) and the direct sales in China operated by our consolidated jointChina venture.Joint Venture.

For the firstsecond quarter of 2026, our gross profit increased $111$240 million compared to the firstsecond quarter of 2025 to $585$759 million, and our gross profit rate (expressed as a percentage of net sales) increased to 37.5%47.1% from 35.1%.35.6%.

The increase in gross profit dollars compared to the firstsecond quarter of 2025 was due to the increase in merchandise margin dollars which was driven by an increase in net sales, a decrease$135 inmillion promotionalbenefit activityfrom andthe recognition of IEEPA tariff refund recoveries, an increase in regular-priced selling,selling partially offset byand a $14 million increasedecrease in netpromotional tariff costs.activity. The increase in gross profit dollars was also partially offset by an increase in buying and occupancy expenses primarily driven by increasesan increase in incentive compensation expenses associated with our improved results and fulfillment costs associated with our net sales increase.

The gross profit rate increase compared to the firstsecond quarter of 2025 was primarily driven by IEEPA tariff refund recoveries, leverage in buying and occupancy expenses as a result of the increase in net sales, an increase in regular-priced selling and a decrease in promotional activity and an increase in regular-priced selling, partially offset by an increase in net tariff costs.activity.

For the firstsecond quarter of 2026, our general, administrative and store operating expenses increased $55$24 million, or 12%,5%, to $509$502 million compared to the firstsecond quarter of 2025. The increase in general, administrative and store operating expenses compared to the firstsecond quarter of 2025 was primarily due to increases in store selling expenses, incentive compensation expenses associated with our improved results and marketing expenses.

The general, administrative and store operating expense rate (expressed as a percentage of net sales) decreased to 32.6%31.2% from 33.6%32.8% compared to the firstsecond quarter of 2025 primarily due to leverage as a result of the increase in net sales.

For the firstsecond quarter of 2026, our interest expense decreased $2$3 million to $15 million compared to the firstsecond quarter of 2025 primarily due to our lower average outstanding debt under our ABL Facility and Term Loan Facility and a lower average borrowing rate for our Term Loan Facility.

For the firstsecond quarter of 2026, our effective tax rate was 11.7%24.1% compared to 50.9%25.7% in the firstsecond quarter of 2025. The firstsecond quarter of 2026 rate differed from our combined estimated federal and state statutory rate primarily due to the recognition of excess tax benefits related to share-based compensation awards that vested in the period. The firstsecond quarter of 2025 rate differedwas fromconsistent with our combined estimated federal and state statutory rate primarily due to additional tax expense from share-based compensation awards that vested in the period.rate.