This summary is based on the second quarter fiscal 2008 earnings call conducted by Limited Brands Inc. (LTD) on August 21, 2008.

Management:

- Chief Executive Officer, Victoria’s Secret: Sharen Turney
- Chief Executive Officer, Bath & Body Works: Dian Neil
- Executive Vice President and Chief Financial Officer: Stuart Burgdoerfer
- Senior Vice President Investor Relations: Tom Katzenmeyer
- Executive Vice President and Chief Administrative officer: Martyn Redgrave
- Vice-President of Investor Relations: Amy Preston

Key Investors Issues

- Earnings of $102 million or 30 cents a share were down 61.4% from $264.4 million or 67 cents a share in 2007.
- Net sales were $2.284 billion, down 13% from $2.624 billion last year and comps were down 7% against the positive 1% cost increase excluding apparel last year.
- The firm repurchased 1.5 million of shares for $27.4 million.

Half Year Highlights:

- Sales dropped 14.7% to $4.21 billion from $4.9 billion in 2007.
- Net income was $200 million or 58 cents a share, down 37% from $317 million or 79 cents a share in the prior year.

Second Quarter Highlights

The firm reported earnings of $102 million or 30 cents a share, down 61.4% from $264.4 million or 67 cents a share in 2007 due to weaker sales.

- Net sales were $2.284 billion versus $2.624 billion last year and comps were down 7% against the positive 1% cost increase excluding apparel last year.
- The gross margin rate increased 230 basis points to 33.3%.
- By segment, the gross margin rate was up at Victoria’s Secret and up significantly at Bath & Body works.
- The improvement in merchandized margin was partially offset by buying and occupancy de-leverage at both segments.

Total operating income increased $42.8 million to $185.2 million.

- By segment the Victoria’s Secret segment increased by $20 million to $182.4 million; Bath & Body works increased by $26.6 million to $40.6 million, the other segment expense decreased by $2.8 million to a loss of $37.8 million.
- Retail inventories ended the quarter down at 18% per square foot at cost.
- The firm completed the $500 million repurchase program with the repurchase of 1.5 million of shares for $27.4 million.

Update on Victoria’s Secret:

- Operating income was up $20 million on a $41 million sales increase to $182 million and inventory is down and merchandised margin is up.
- The firm achieved overall total sales growth of 3% to $1.4 billion as a result of sales growth for new and expanded stores and 7% growth in the direct channel partially offset by negative 7% comps.
- The gross margin rate was up to last year as a significant increase in the merchandise margin rate was offset, while buying and occupancy expense de-leveraged; SG&A expenses also de-leveraged on the 8% negative comp.

The re-launch of BioFit in May beat expectations and the firm is pleased with the results of the 350 stores of Swim test and are evaluating how to make this a bigger opportunity for next year.

- Beauty missed expectations for the quarter due to a lack of newness and anniversary may clearance of Garden last year.
- The Semi-Annual Sale was a success as margin dollars were up significantly driven by fewer redline units and increased sales of full-priced product.
- The firm launched Pink’s back-to school assortment, which included the co-brand and collegiate lines and is pleased with the results of the collegiate lines and excited about the opportunity for further growth.

In the direct channel, sales were $423 million up 7% to last year driven by strengthened spring merchandize, such as swimwear and dresses as well as bras and shoes.

- Operating income dollars were up and the operating income rate increased significantly driven by significant leverage in SG&A and marketing, probably offset by a decrease in the gross margin rate.
- Direct continues to aggressively manage the fundamentals, the client file is healthy and has continued to grow and inventory is at an appropriate level.

Update on Bath and Body Works:

- Comps were down 8% versus a 4% decrease last year primarily driven by continued softness in store traffic.
- Total sales were down 2% or $9 million versus last year, with the 6% spread between comps and total sales representing sales from the new store.
- Despite the sales decrease to last year, gross margin increased significantly versus last year driven by the 2007 impact on inventory-related charges associated with the write-off of excess component inventory and shrink.

The firm continues to view the direct channel as both a revenue generator and marketing vehicle for the brand in collection of sub-brands.