Revenue Recognition

12 Months Ended

Feb. 01, 2025

Revenue Recognition and Deferred Revenue [Abstract]

Revenue Recognition

Revenue Recognition

Accounts receivable, net from revenue-generating activities were $112 million as of February 1, 2025 and $103 million as of February 3, 2024. 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, merchandise credits, loyalty and credit card programs and direct channel shipments, which are all impacted by seasonal and holiday-related sales patterns. Deferred revenue was $269 million as of February 1, 2025 and $310 million as of February 3, 2024. The Company recognized $163 million as revenue in 2024 from amounts recorded as deferred revenue at the beginning of the period, which includes the impact from the change in its accounting estimate relating to outstanding gift cards. As of February 1, 2025, the Company recorded deferred revenues of $256 million within Accrued Expenses and Other, and $13 million within Other Long-term Liabilities on the Consolidated Balance Sheet.

The following table provides a disaggregation of Net Sales for 2024, 2023 and 2022:

	2024		2023		2022
	(in millions)
Stores — North America (a)	$	3,428	$	3,480	$	3,909
Direct (a)	2,042		2,015		1,843
International (b)	760		687		592
Total Net Sales	$	6,230	$	6,182	$	6,344

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(a)Results in 2024 and 2023 include Adore Me sales.

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

Gift card breakage revenue is recognized in proportion, and over the same period, as actual gift card redemptions. The Company determines the gift card breakage rate estimate based on historical redemption patterns and reviews the breakage rate periodically throughout the year. In the fourth quarter of 2024, the Company recorded a change in its accounting estimate relating to expected redemption of outstanding gift cards issued by the Company, as the Company has experienced a sustained decrease in redemption rates, leading to increased breakage rates. As a result of this change in accounting estimate, the Company recognized a cumulative adjustment which increased net sales, gross profit and operating income by approximately $26 million and increased net income by approximately $20 million in the fourth quarter of 2024. Estimating future breakage rates requires judgment based on current and historical patterns of redemption and the actual breakage rates may vary from the estimate.

The Company has a Victoria's Secret and PINK multi-tender loyalty program along with a co-branded credit card and a U.S. private label credit card through which customers can earn points on purchases of Victoria's Secret and PINK product and through the co-branded credit card can earn points on purchases outside of the Company. A third-party financing company is the sole owner of the credit card 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 $75 million, $95 million and $123 million for 2024, 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.