Victoria's Secret & Co.

Good morning. My name is Cedric, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Victoria's Secret and Company's third quarter 2021 earnings conference call. Please be advised that today's conference is being recorded. All parties will remain in the listen-only mode until the question-and-answer session of today's call. At that time, to ask a question, please press star then 1 on your phone and record your name at the prompt. I would now like to turn today's call over to Mr. Jason Weir, Vice President of Investor Relations at Victoria's Secret & Company. Jason, you may begin.

Thanks, Cedric. Good morning and welcome to Victoria's Secret & Co.' 's third quarter earnings conference call for the period ending October 30th, 2021. As a matter of formality, I need to remind you that any forward-looking statements we may make today are subject to our safe harbor statement found in our SEC filings and in our press releases. Joining me on the call today are CEO Martin Waters, CFO Tim Johnson, and EVP Finance Brad Kramer. We are available today for up to 45 minutes to answer any questions. All of the results we discuss on the call today are adjusted results and exclude the special items described in our press release. Thanks, and now I'll turn the call over to Martin.

Thanks, Jason, and good morning, everybody. We're very pleased with our third quarter performance, which saw us achieve growth in all core categories. Our work to deepen our connection with the customer while improving our operational fundamentals is gaining traction, and the customer is responding positively to our brand transformation. We continue to improve our merchandise assortment and expand our already strong file. I'm so proud of the commitment and resilience demonstrated by our teams who delivered these results in obviously challenging circumstances, and in doing so are demonstrating the power of a happy and healthy culture. Turning to our third quarter performance, we delivered sales, margin, and operating income growth on top of solid results last year, and that in spite of significant supply chain headwinds this year. We reported third quarter earnings of $0.81 per share ahead of our previous guidance of $0.60 to $0.70. The per share result was similar to last year's adjusted earnings per share of $0.82 as the impact of operating income dollar growth was offset by the interest costs associated with the debt from our public company spin-off from L Brands. Sales growth of 7% combined with significant growth in merchandise margin rate and disciplined expense management drove these results. Compared to 2019, sales actually decreased 9%, and that's reflecting the net closure of about 260 company-operated stores since the third quarter of 2019. However, comparable sales increased by 4% compared to 2019. Operating income in the third quarter was $108 million, which is an increase of nearly $11 million, or 11% compared to last year, and an increase of $204 million compared to 2019. As shared in our written commentary, we believe the supply chain pressures will significantly impact our results in the fourth quarter. Operating income for the fourth quarter is expected to be in the range of $295 to $335 million, which is down to last year's result of $388 million, driven by those same supply chain headwinds, but we're estimating $100 million of cost from those, and lapping one-time rent abatements last year, which were about $65 million. Thank you. That concludes our prepared remarks and at this time we'd be more than happy to take any questions that you might have.