Revenue Recognition

3 Months Ended

Apr. 29, 2023

Revenue Recognition and Deferred Revenue [Abstract]

Revenue Recognition

Revenue Recognition

Accounts receivable, net from revenue-generating activities were $99 million as of April 29, 2023, $101 million as of January 28, 2023 and $100 million as of April 30, 2022. Accounts receivable primarily relate to amounts due from the Company's franchise, license and wholesale partners. Under these arrangements, payment terms are typically 60 to 90 days.

The Company records deferred revenue when cash payments are received in advance of transfer of control of goods or services. Deferred revenue primarily relates to gift cards, loyalty and credit card programs and direct channel shipments, which are all impacted by seasonal and holiday-related sales patterns. Deferred revenue was $284 million as of April 29, 2023, $309 million as of January 28, 2023 and $238 million as of April 30, 2022. The Company recognized $60 million as revenue in the first quarter of 2023 from amounts recorded as deferred revenue at the beginning of the year. As of April 29, 2023, the Company recorded deferred revenue of $266 million within Accrued Expenses and Other, and $18 million within Other Long-term Liabilities on the Consolidated Balance Sheet.

The following table provides a disaggregation of Net Sales for the first quarter of 2023 and 2022:

	First Quarter
	2023		2022
	(in millions)
Stores – North America (a)	$	786	$	931
Direct (a)	464		421
International (b)	157		132
Total Net Sales	$	1,407	$	1,484

 _______________

(a)Results for the first quarter of 2023 include Adore Me sales.

(b)Results include consolidated joint venture sales in China, royalties associated with franchised stores and wholesale sales.

In April 2022, the Company launched a new Victoria's Secret and PINK co-branded credit card through which customers can earn points on purchases of Victoria's Secret and PINK product as well as on purchases outside of the Company. The co-branded credit card is in addition to Victoria's Secret's existing U.S. private label credit card. A third-party financing company is the sole owner of the accounts and underwrites the credit issued under the credit card programs. Revenue earned in connection with the Company's credit card arrangements with the third-party is primarily recognized based on credit card sales and usage.

The Company recognized Net Sales of $23 million and $26 million for the first quarter of 2023 and 2022, respectively, related to revenue earned in connection with its credit card arrangements.

The Company’s international net sales include sales from Company-operated stores, royalty revenue from franchise and license arrangements, wholesale revenues and direct sales shipped internationally. Certain of these sales are subject to the impact of fluctuations in foreign currency. The Company’s net sales outside of the U.S. totaled $200 million and $184 million for the first quarter of 2023 and 2022, respectively.