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LB FOURTH QUARTER 2018 EARNINGS COMMENTARY
FEBRUARY 27, 2019

Introduction
 L Brands is providing this fourth quarter commentary ahead of its live
earnings call scheduled for February 28th at 9:00 a.m.
 We remind you that any forward-looking statements made in this
commentary are subject to our safe harbor statement found in our SEC filings.
 Our fourth quarter earnings release and related financial information are
available on our website, www.LB.com. Also available on our website is an
investor presentation.
 All results discussed in this commentary are adjusted results, and exclude the
significant items detailed in our press release.
 Also, as you know, 2017 was a 53-week year. All of the sales dollars, margin
and operating income results discussed for the quarter are on a 13-week basis
this year compared to a 14-week basis last year and for the year, are on a 52week basis this year compared to a 53-week basis last year. Comparable sales
are on a comparable calendar period … 52-to-52 weeks for the year and 13-to13 weeks for the quarter.

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Fourth Quarter and Full Year Commentary
 Our fourth quarter adjusted earnings per share of $2.14 were above our initial
guidance of $1.90 to $2.10, principally driven by a strong performance at Bath
& Body Works.
 Our performance continues to be mixed … growth in operating income at
Bath & Body Works versus last year and our forecast was more than offset by
a decline at Victoria’s Secret.
 Turning to our fourth quarter results …
 Net sales for the quarter were $4.852 billion, and total comps increased 3%.
 The gross margin rate decreased by 170 basis points to 40.6%, driven by a
decline in the merchandise margin rate and buying and occupancy expense
deleverage.
 SG&A expenses deleveraged by 20 basis points, principally driven by the
reclassification of Angel credit card income resulting from the new accounting
standard and the incremental investment in wage rates announced in early
2018.
 Operating income dollars declined 9% (13 weeks compared to 14 weeks), and
the rate declined by 200 basis points.

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 For the full year 2018, net sales were $13.237 billion, and total comps increased
3%.
 The full-year gross margin rate declined 160 basis points to 37.7%, driven
principally by a decrease in the merchandise margin rate.
 SG&A expenses deleveraged by 130 basis points for the year, principally
driven by the reclassification of Angel credit card income resulting from the
new accounting standard and the incremental investment in wage rates.
 Adjusted operating income (52 weeks compared to 53 weeks) decreased 17%
to $1.437 billion and the rate decreased by 280 basis points to 10.9%.
 Adjusted EPS for the 52-week full year decreased 12% to $2.82 versus $3.20 for
the 53 weeks last year.
 Turning to the balance sheet, inventories per square foot ended the year down
4% to last year.
 We repurchased 5.4 million shares of stock in 2018 for $196.1 million. At yearend, we had $78.7 million remaining under our current $250 million program.  

2019 Outlook 
 Moving forward, at the end of year, we made some tough decisions that will

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enable us to increase our focus on our core businesses and our highest growth
opportunities. These significant decisions included:
 Closing Henri Bendel;
 Selling the La Senza business; and
 Resetting our dividend and committing to balance sheet deleverage.
 These were the right choices that will strengthen our company and help us
deliver positive results.
 Turning to 2019, we are very focused on improving performance in the
Victoria’s Secret business … staying close to our customer, improving the
customer experience in stores and online and improving our assortment. We
have new CEOs at Victoria’s Secret Lingerie and PINK – John Mehas and
Amy Hauk, respectively – who are focused on getting closer to our customers
and improving our merchandise assortments. They will have an impact on
our assortments toward the end of the year, and our earnings guidance
assumes gradual improvement in the Victoria’s Secret segment performance
as we move through 2019.
 We will continue to be disciplined in the management of inventory, expenses
and capital.
 We're announcing today that, consistent with retail industry practice and with
input from our shareholders, we will report sales results quarterly and

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discontinue the reporting of monthly sales results. We believe that monthly
variability in results, which can include impacts from Holiday timing, the
shifts of the fiscal calendar and timing of marketing events, can lead to
misinterpretations of business performance.
 Turning to the specifics of our earnings guidance, we forecast first quarter
comps to be down low-single digits. The change in total sales in the first
quarter will be about 1 point lower than comps, driven by the loss of La Senza
and Henri Bendel sales.
 We expect the first quarter gross margin rate to be down compared to last
year, driven by a decline in merchandise margin rate.
 We expect the SG&A rate to deleverage on the sales decline. We expect overall
SG&A dollars to be about flat, as an increase in wage rates will be offset by the
La Senza and Henri Bendel businesses.
 We expect first quarter net non-operating expense, consisting primarily of
interest expense, to be about $95 million.


In 2017, we adopted Accounting Standards Update 2016-09. This accounting
pronouncement requires that income tax effects of share-based awards be
recognized in the income statement when awards vest. Since our stock price
has decreased over the life of the awards that are vesting in the first quarter, a
portion of our share-based compensation expense previously recognized will
not be tax-deductible upon vesting, resulting in a negative impact to our tax
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provision. Therefore, our tax rate in the first quarter will be unusually high …
based on our current estimates roughly 100%. The higher tax rate is putting
about 5 cents of pressure on our first quarter EPS versus 2018.
 We expect earnings per share to be about breakeven in the first quarter
against last year’s $0.17 result.
 We expect to end the first quarter with inventory per square foot about flat to
last year.
 For the full year 2019, we are projecting comps to be up low-single digits.
Total sales growth will be about 2 points lower than comps due to the loss of
La Senza and Henri Bendel sales.
 We expect our full-year gross margin rate to be down to last year, driven
principally by a decline in the merchandise margin rate.
 We expect the full year SG&A rate to increase and dollars to increase in the
low-single digit percentage range, as wage rate and inflation pressures will be
partially offset by the La Senza and Henri Bendel businesses.
 Non-operating expenses, consisting principally of interest expense, are
projected to be about $375 million.

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 We estimate our tax rate will be approximately 30% compared to 25.6% in
2018, with the increase principally driven by the previously mentioned sharebased compensation expense accounting, which will impact primarily the first
and second quarters. The higher tax rate is driving a negative impact of about
14 cents to 2019 earnings per share versus last year.
 We are forecasting weighted average shares of about 279 million in the first
quarter and full year.
 Assuming all of these inputs, we expect earnings per share for the full year
2019 to be between $2.20 and $2.60.
 We are projecting 2019 capex of about $575 to $600 million, versus $629
million in 2018.
 We will continue to actively manage our real estate portfolio … we have
opened 820 stores, closed 673 stores and sold 130 stores over the last 10 years,
and as a result we have high profitability across all mall types, with about a
third of our stores in non-mall venues.
 Given the decline in performance at Victoria’s Secret, we have substantially
pulled back on capital investment in that business versus our history. We are
also closing more stores in North America … 30 in 2018 and an estimated 53 in
2019, versus an average of 15 stores per year historically.

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 At Bath & Body Works, we will continue to invest in the White Barn concept
in 2019, which continues to yield strong returns. Consistent with the last 3
years, we have about 200 White Barn projects planned for 2019.
 Our overall spending on stores and real estate will decline from about 75% of
total capex in 2018 to roughly 55% in 2019.
 Victoria’s Secret square footage in North America is projected to decline by
about 3%, and Bath & Body Works square footage in North America will
increase by about 3%, yielding a total company square footage decrease of
about 1%.
 Our investment in technology and logistics will increase substantially in 2019,
for initiatives supporting our digital business and other retail capabilities.
 Turning to liquidity, we expect 2019 free cash flow of about $700 million.
 Our free cash flow and strong year-end cash balance of $1.4 billion, along with
the additional availability under our revolving credit facility, result in very
strong liquidity, which is more than sufficient to fund our working capital,
capital expenditures, dividends and any other foreseeable needs.

Victoria’s Secret
 Fourth quarter results at Victoria’s Secret were below our expectations.
Comps decreased, and the merchandise margin rate was down significantly

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across all major merchandise categories as we increased promotional activity
to drive traffic and successfully clear inventory.
 Fourth quarter sales for the Victoria’s Secret segment were $2.532 billion, and
comp sales decreased 3%, including a 7% decline in store comps. Total digital
sales increased by 8%.
 The total segment gross margin rate decreased significantly, primarily driven
by a decline in the merchandise margin rate as mentioned above.
 SG&A expense deleveraged, driven principally by the reclassification of
Angel credit card income and incremental wage investments.
 Fourth quarter operating income (13 weeks compared to 14 weeks) declined
by $155.8 million to $300.7 million, and the rate decreased by 520 basis points.
 In the lingerie business, fourth quarter comps were about flat, and the
merchandise margin rate decreased significantly. Substantial growth in
sleepwear was offset by a decline in intimate apparel. 
 Turning to PINK, comps decreased in the low-double digit range for the
fourth quarter, with the most significant dollar decline in the loungewear
category. The total PINK merchandise margin rate was down significantly to
last year.
 Victoria’s Secret Beauty comps increased in the mid-single digit range.
Holiday performance was below our expectations. The merchandise margin
rate was down significantly, driven by incremental promotions and higher

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levels of clearance in the semi-annual sale.
 For the full year 2018 (52 weeks compared to 53 weeks), sales for the Victoria’s
Secret segment were $7.375 billion, about flat to last year, and comps
decreased 2%. Sales in the direct channel increased 16% (52 to 53 weeks) to
$1.747 billion.
 Operating income (52 weeks to 53 weeks) declined 45% to $512.4 million. The
operating income rate declined 570 basis points.
 As mentioned earlier, our new CEOs in Lingerie and PINK are most focused
on our product assortments, where we believe we have clear opportunities to
improve. We have new product launches throughout Spring in Lingerie,
PINK and Beauty, including a limited, curated digital-only Swim assortment
in March, and we will continue to leverage the speed we have in our supply
chain to test, read and react.
Bath & Body Works
 At Bath & Body Works, we are pleased that our fourth quarter results built
upon last year’s record performance, exceeding our expectations.
 Total Bath & Body Works segment sales for the 13-week quarter were $1.951
billion. Comps increased 12%; store-only comps increased 8%.
 Sales across the quarter were driven by strong growth in all three of our main
categories of body care, home fragrance and soaps.
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 Within the quarter, we saw strong product acceptance in both our Fall and
Holiday assortments. Holiday performance was strong across all key
timeframes throughout the season. Lower comp performance in January was
the result of a shorter sale period due to less distressed inventory which
negated the need for deep promotions.
 The merchandise margin rate for the quarter was up to last year, and the
business was less promotional than last year.
 For the quarter, operating income was $607.2 million. Our operating income
rate for the quarter was up 10 basis points to last year at 31.1% as the higher
merchandise margin rate was partially offset by continued investments in
direct channel fulfillment, our store real estate initiative and higher store wage
rates.
 During the quarter, we continued our real estate initiative by opening or
remodeling 30 additional stores in our fleet, bringing the number of new
concept stores to 637 at the end of the year. We continue to be pleased with
the overall results of these stores, both in a shop-in-shop or side-by-side
format.
 We continue to see strong performance in our BBW direct channel, which
grew sales by 30% for the 13 weeks of the fourth quarter versus the 14 weeks
last year.

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 Inventories were well-managed through the quarter and ended down to last
year on a per-selling-square-foot basis.
 For fiscal 2018, total sales (52 weeks versus 53 weeks) grew by 12% versus last
year’s reported result, and comps increased 11%; store-only comps increased
8%, and our direct channel grew comparable sales by 31%. The 52-week
operating income was $1.077 billion, up 13% versus last year’s 53 weeks. Our
operating income rate increased by 30 basis points to 23.3%, driven mainly by
growth in the merchandise margin rate.
 In 2018, BBW achieved a significant milestone as we surpassed $1 billion in
operating income for the segment. We built off key learnings from our 2017
performance, executed against our fundamentals of read and react as well as
speed and delivered a great result.
 Looking toward 2019, we will continue to see pressure on occupancy costs
with the impacts of our continued real estate initiative and our expansion of
direct channel capacity and capability. Additionally, we expect some margin
rate pressure from ongoing supply chain impacts specifically related to global
trade tariffs and sourcing costs.
 As always, we remain focused on staying close to our customer and their
needs while delivering compelling products. We will remain disciplined in
expense and inventory management, and we will continue to make

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appropriate investments to drive sustained growth in the business.

International
 We ended the year with 753 stores in the International Segment, delivering
2018 retail sales of about $1.5 billion, up 16% to last year. We now have stores
in 73 countries around the world.
 About 25% of retail sales and 60% of our recorded revenue come from our
wholly owned stores in the U.K., Ireland and Greater China. Roughly 55% of
retail sales and 20% of recorded revenue comes from our franchise business,
which is a royalty-based business. The balance comes from our presence in
Travel Retail.
 Our international business is made up of four main components:

o 83 Victoria's Secret full assortment and 14 PINK freestanding stores. We
added 29 new stores in 2018 with notable openings in Hong Kong,
Australia, Costa Rica, Indonesia, Italy, Malaysia and Thailand. 

o Victoria's Secret Beauty and Accessories (VSBA) stores in local markets.
We opened 19 stores and closed 32 stores, primarily due to fullassortment stores opening in the same center, to end the year with 257
locations.

o Victoria's Secret Beauty and Accessories stores and counters in Travel
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Retail and military installations. We added 8 net new stores this year,
ending the year with 164 stores and about 380 counters.

o And finally, we added 50 net new Bath & Body Works stores this year to
end the year with 235.
 As we look back on 2018 at a high level:
o The partner-based businesses are doing well, with good operating
income growth for the quarter and the year at a high operating income
rate.
o We continue to invest in China, which is a significant growth
opportunity. VSBA stores and ecommerce, through the TMall platform,
are doing well. We now have 15 full assortment stores open. We have
tested and will continue to open smaller-sized mall-based stores, and we
are optimistic about the opportunity for further growth in that format.
o The U.K. business continued to be challenged in 2018. Operating losses
moderated in the back half of the year, and we are very focused on
improving performance in that market.
 Fourth quarter revenue in the international segment increased by 12% (13
weeks versus 14 weeks) to $190.7 million, driven by growth in sales in both
Victoria’s Secret and Bath & Body Works.

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 Fourth quarter operating income (13 weeks versus 14 weeks) increased by
$14.7 million, driven by lower pre-opening rent expense in China and growth
in our franchise business.
 For the full year (52 weeks versus 53 weeks), revenue increased 20% to $605.3
million, driven primarily by growth in China and the Victoria’s Secret and
Bath & Body Works franchise businesses.
 Full-year operating income (52 weeks versus 53 weeks) declined $11.6 million
to a loss of $6.6 million, driven by our investment in China and the decline in
the U.K., partially offset by growth in our franchise business.


In 2019, we expect to open around 50-75 net new stores.



We continue to be confident about our prospects for growth in international
markets… and of course, we remain focused on the fundamentals: great
execution of our brands wherever we go.

 We invite you to join us for our live earnings call tomorrow morning at 9 a.m.
Eastern by dialing 1-866-363-4673 (international dial-in number: 1-973-2003978).

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