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Limited Brands, Inc. (



Q3 2010 Earnings Conference Call

November 18, 2010 9:00 am ET


Amie Preston – IR

Martyn Redgrave – EVP and Chief Administrative Officer

Stuart Burgdoerfer – EVP and CFO

Sharen Turney – CEO and President, Victoria’s Secret Megabrand and Intimate Apparel

Diane Neal – CEO, Bath and Body Works


Paul Lejuez - Nomura Holdings, Inc.

John Morris – BMO

Kimberly Greenberger – Morgan Stanley

Jeff Stein – Soleil Securities

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Emily Shanks - Barclays Capital

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Michelle Tan – Goldman Sachs

Brian Tunick – JPMorgan

Neely Tamminga – Piper Jaffray

Randy Konik – Jefferies

Jennifer Black – Black & Associates

Roxanne Meyer – UBS

Marni Shapiro – The Retail Tracker

Dana Telsey – Telsey Advisory Group

Laura Champine – Cowen and Company

Carla Casella – JP Morgan

Erika Maschmeyer – Robert W. Baird



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» Limited Brands, Inc. Q3 2009 Earnings Call Transcript

Good morning. My name is Sarah and I will be your conference operator today. At this time, I would like to welcome everyone to the Limited Brands third quarter 2010 earnings call. All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question-and-answer session. (Operator instructions) I would now like to turn the call over to Ms. Amie Preston, Chief Investor Relations Officer. Ms. Preston, you may begin.



Thanks, Sarah. Good morning, everyone and welcome to Limited Brand's third quarter earnings conference call for the period ending Saturday, October 30, 2010.

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. Our third quarter earnings release and related financial information, including any non-GAAP or adjusted financial reconciliation tables, are available on our Web site, This call is being taped and can be replayed by dialing 1-866-NEWS-LTD. You can also listen to an audio replay from our Web site.

Martyn Redgrave, EVP and Chief Administrative Officer; Stuart Burgdoerfer, EVP and CFO; Sharen Turney, CEO of Victoria's Secrets; and Diane Neil, CEO of Bath & Body Works are all joining us today. After our prepared comments, we will be available to take your questions for as long as time permits. So that we can speak with as many callers as possible, please limit yourself to one question.

Thanks, and now I'll turn the call over to Martyn Redgrave.



Thanks, Amie, and good morning, everyone. I'd like to start by saying that we continue to be very pleased with our performance and also the progress that we've made so far this year.

As you've seen, in the third quarter, our comps increased 10% and our operating income increased by 153% or 420 basis points as a percentage of sales. Our earnings per share of $0.18 exceeded our initial expectations of $0.03 to $0.08. We've also taken further actions in our ongoing program of returning cash to shareholders with our announcements of a $3 per share special dividend and a new $200 million share repurchase program. And of course, Stuart will take you through and discuss gross elements further in his remarks.

This very strong performance in the quarter was the result of our intense focus on execution, staying close to our customers, and increasing speed and agility. Our entire organization is aligned and focused on these key priorities as we enter the all important holiday season.

In addition, we've raised our full year earnings guidance to reflect the third quarter beat. Now with respect to the third quarter, we're continuing to manage this as conservatively in light of the uncertain environment.

Inventories and expenses are well controlled and we continue to pull back on our promotional activity. We're also focused on delivering the best possible holiday result.

As some of you saw in our store tours last week, our product assortments are compelling and include a significant number of new items.

We're also enthusiastic about the opportunity for growth of our businesses outside the United States and we continue to execute against our six-point agenda for international growth.

Now Martin Waters presented an update of our progress at our update meeting in October so I won't spend time reviewing all of this, this morning. Since that meeting though, we have opened our first three BBW Italy stores in Dubai and Kuwait City, under our Alshaya franchise agreement. While it's still very early we're encouraged by the performance of these stores.

Turning to our La Senza business, comps in the third quarter increased 1% and sales declined 9% to $89.8 million, primarily as a result of the closure of the La Senza Girl businesses at the end of 2009.

Canadian Mall traffic levels continue to be negative and La Senza's traffic is lower still, as we have positioned the business to a younger customer and a significantly reduced sleepwear inventory in order to focus more on bras and panties. We're encouraged by the growth of our bra and panties categories and by the significant increase in conversion of the business. However, we still need to lap these traffic declines before we will see meaningful progress.

Merchandise margin rate was roughly flat in the quarter and expenses deleveraged on the sales decline, due to the costs associated with the repositioning of the business.

Operating income dollars and rate were down to last year.

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



Thanks, Martyn, and good morning everyone. So turning to our third quarter performance, our earnings per share increased to $0.18, a share from adjusted earnings per share of $0.02 last year. Our 2009 reported result was $0.05 per share. As detailed in our press release, last year's reported results included income benefit primarily due to the resolution of certain tax matters of $8.8 million or $0.03 per share. All prior year results discussed on this call exclude this significant item.

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