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Bath & Body Works (BBWI)

Participants
Amie Preston Chief Investor Relations Officer
Stuart Burgdoerfer Executive Vice President & Chief Financial Officer
Susan Anderson B. Riley FBR
Mark Altschwager Baird
Lauren Frasch Wells Fargo Securities
Kimberly Greenberger Morgan Stanley
Kate Fitzsimmons RBC Capital Markets
Jamie Merriman Bernstein
Paul Lejuez Citi Research
Alexandra Walvis Goldman Sachs
Dana Telsey Telsey Advisory Group
Roxanne Meyer MKM Partners
Marni Shapiro The Retail Tracker
Paul Trussell Deutsche Bank
Call transcript
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Operator

Good morning. My name is Natalia, and I will be your conference operator today. At this time, I would like to welcome everyone to the L Brands' Fourth Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator turn over now Ms. the will to call I L Relations Amie Investor of Brands. Preston, Chief Officer

You may begin.

Amie Preston

the February Thanks, to quarter for L and Brands' ending Natalia, good fourth earnings morning, conference XXXX. X, everyone. Welcome period Saturday, call

to our As any you SEC today subject filings. forward-looking I Harbor Safe make that to may remind our a we statements formality, matter are of need statements found in

the discussed presentation on quarter in over Our Stuart. Burgdoerfer, call significant All additional are earnings available today. joining is call release, the lb.com. the on and on earnings EVP adjusted fourth the our to are the Thanks. and results the today exclude turn Stuart results call website, our now commentary, And CFO, me press and release. described items I'll

Stuart Burgdoerfer

good an reducing the said, in basis. forecast intensely the Thanks, guidance those we we results. and on everyone. both we focused XXXX, for not Amie, our After on are quarters in adjusted beat improving fourth and own of middle expectations met overall reduced performance have That third and morning,

for year that Lingerie PINK. We assume guidance the as and external through trends early XXXX reflects Secret set is in year for pretty improvement move we purposes, at have Victoria's that the well-balanced current and

and dividend the the PINK to Victoria's to a to everything you, the continued near-term table debt capital Bendel; sale over Lingerie lead highlight of addition disciplined Thanks. half and events In Amy and reduce of to and up the appointment our the want normalize and closure ongoing expenses, reducing of of Hauk for an focus assortment and the finally, funds to And is and of PINK; Victoria's of customer Henri free structure; of regular on on business, to real including at our management would mindset review merchandise I by owning levels; the run proactive our change. important estate John to ongoing Lingerie; Secret Senza; the decisions hiring Amie. payout and inventory Secret the and heightened Mehas the La

Amie Preston

our interest others, this time, take the yourself and And Thanks, we'd of consideration Stuart. In any to comments. And be reminder, over to time to your of to questions. please Heidi. I’ll to That concludes it happy question. a one turn limit back at prepared

Operator

first comes Susan question [Operator Anderson the FBR. Your of Riley Instructions] with line from B.

Susan Anderson

gain Good obviously the business morning. curious industry. thoughts wondering their Hi. some only give the been for are can it's time players your some if guess the popping not in more think department And Thanks pop I players maybe stores on, kind but of on I'm they also I But and competitive? up when market taking -- and it pressure? I market being share making are lot making difficult, impact and we've them kind is to industry not maybe the you up pricing more intimate departments. pricing pressure more with with share? online it then for was on seen guess, category, tough all add new some seeing I of and adding of of we've terms price in and individually, my up maybe just you seen taking a question. you Obviously, intimates an struggled

Stuart Burgdoerfer

the Susan. question, for Thanks

are category apparel intimate the on that a thoughts it's Our great category.

be they're underwear category. attractive in created participants emotional apparel have differentiation. an when It versus because companies would on value I doing category it's category. that entering opportunity reflection for intimate observation one the is inherently it's It's has economic for got the the so And of others from a content. -- the think lot I can

a great So category. we think it's

is back to opportunities special, commoditization, in of unique, technical the the of fashion, merchandise category. newness, terrific day reflects pressure, the at merchandise. mean, pricing terms comes I the has are In recent it benefit, end If has developments, there the

I that entrance And, very category. category. about an would characterize the of the that and it's good of feel as attractive new we So again, a participants sign frankly

meeting obviously said, now expectations business We're category? we and in with improving on merchandise. So right particularly, and our not. the focused Amie, And very our John focused of Mehas the most that the are trend improving on we're

great category. think we overall, So, it's a Thank you.

Susan Anderson

you. Thank

Amie Preston

Susan. Thanks,

please. question, Next

Operator

the Your from Altschwager next is of Baird. Mark question with line

Mark Altschwager

you're speaking later last at the plan, Thank up And everything quarter today year. remarks, VS. you. assortments you've X% discussed the really in about basically that Stuart, the the to reduction VS the in improved square morning. Good prepared footage, looking it everything announced at in

change can the then in that's us the happening the brand. I'm on Just if bigger-picture a you help on speak us as to what specifically curious give can structure, or year. brand today, if cost wondering you the on within And assortment, marketing, a there's will any be contemplated to later perspective changes follow-up, more the changing that bit additional contextualize positioning, just actions plans, being

Stuart Burgdoerfer

all detailed aspects we of that's and online and stores have in all merchandise. have review structure our and the in changed is stores, where the spending Well, Amie that John deep review And in in estate the real and agenda of the those again, said, customers think market, cost and of footprint experience we remarks, format business, are things. and embarked business Secret, the you business. their the are Victoria's majority as should, substantial we will Greg, the that's your of how they the of view customer. the of as understanding significant prepared online, form the I and time of our question the we've on sell in And, continue the Secret merchandise of to Victoria's important most at how that recognizing whether the terms thing in With

the XXXX. in over seat last our Amie since substantially couple new closure But new store several on stores pulled remodeling estate, has years. John's of remodeling everything we the been October real weeks and a are on plans just in and in on back the table. just investing truly of Specifically heightened in. And stores -- and is

they with activity sure rise a with truly on of make business said, our a for truly in they the and that deep merchandise. and all the engaged and So of quarter, XXXX the focused situation is to our example, review more But for customer XXXX, on activity table. and, everything of you seen that But appreciation did to the than again, prior table fourth dominant can intensely they have But focus appreciate on on changes. most is again, they're before active we in major solidified on everything closure very And, real estate that make full in about want we've which the the in Thanks. the years. plans spending capital gave the merchandise. plan a the

Mark Altschwager

you. Thank

Amie Preston

Thanks Mark.

Next question please.

Operator

next Your is question the Wells with from of Fargo. line Ike Boruchow

Lauren Frasch

on ask AUR promotions is how about about you're for inventory the This year. Frasch we should versus your And And at Ike. thinking morning. how last XXXX today? positioning Lauren Wanting plan Thank you. What's thinking XX months this versus ago? of you're year? about think as to Good how VS in

Stuart Burgdoerfer

Bath discussion I'll with Well, a Works. Sure. of & promotions at Body start

bit I'm particularly, to in reduce nice It's actually XXXX part that as part But our sorry activity fourth business. and of little of important -- of have promotional in humor know, a able a the So, I you here. Brands business quarter. tend to that's L was

a down, in that really come right of promotional merchandise has same With these to a which is had the levels more of what the promotion. running And merchandise record fresh, than the promotional is Body & manner. strong drives up, in XXXX Secret, are or the the mindset inventory is you're and that the are that and when in when respect merchandise in strong. So businesses you the we incremental margins reduce to the wrong; right compelling, progress AURs Bath And healthy, able of level turns quality business quality disciplined reducing of terms thinking promotion. get go get Victoria's

more appreciate, you than assortment front change occur half XXXX the of the of As XXXX. back the in substantial half in can will in

several we'll promotional through as promotional move take of like in answers time. little So, inventory, able going bit that management questions. been Hopefully, merchandise expect reduce we the forward. disciplined be With would improvement levels to the your assortment. last of we we a would years it's we more Thanks. But that ongoing to have over than

Lauren Frasch

Great. Thank you, Stuart.

Amie Preston

Thank you.

Next question.

Operator

Your Stanley. of Morgan next with Kimberly from Greenberger line question is the

Kimberly Greenberger

introductions. product momentum it so Thank back My lapping of look Great. much. you by XXXX. question's of momentum, bralette backslide first I'm the half XXXX, to XXXX over half some a launches of a half some of business And of the in new the wondering And half, Good than in XXXX, little on and back had from sort it can to then Lingerie. gaining other the a the morning. if and be largely year driven of Lingerie seemed bit bit. back last those half of in little the seemed new like it seemed second you

a can happened had can you've look understanding starting to - time it and you I'm to if wondering that at Now, if into have my repair some if deeper so points for And I'm what much. least wondering not you correctly. how correct exactly little I'm Stuart, recapping Thank back so you business. dig that

Stuart Burgdoerfer

Yes. Thanks Kimberly. the question. Thanks for

what a that, these weren't got a through not our innovation through and Body differentiation. what of is you with add cycles in question to move that is and one really the cycle. particularly got that create occurred in the core in a that And moved and that Everything's we franchises terms is to, got And John got priority XXXX. pressure Body have some bit performance, drove as are in be life that intensely front, that existed XXXX, bra those sub-brands deceleration that a moved that innovation. by think And big to and And it on obviously, had in Victoria as big innovate can behind core later -- core and you're by for were, insight, comes we opportunity, there I would frankly. And or as deceleration asking I of drove to life sure strength. franchises. the their Kimberly. that and fashion that update But the what to what year-on-year And more call, in gets framing of big that's I'd more a franchises time again what very focused your big we updated on but of sufficiently be team XXXX. continue to to principally back we is and long that further of going some business books pressure you Victoria is as thing change pressure limited a for some core significant

Kimberly Greenberger

so much. Thanks

Amie Preston

Thanks Kimberly.

please. question Next

Operator

Markets. Capital question Your from of Kate is Fitzsimmons RBC next line the with

Kate Fitzsimmons

was of in me-day with show you I to fitting versus morning. Good if were reexamine self-empowerment wondering on of the evolving hi. into equation all dig you're how year doing some speak more of do that? to to V-day communicating at angle What the VS. were that's we Thank the the And have into side more the as positioning a bit just And the you. Yes, you how what's learnings see marketing view you on evolved any you brand customer how this position? example? the of can fashion last a year? the for work the Could of

Stuart Burgdoerfer

we've as at everything the business. are taking about, clear Sure. be hard look a Well fresh in we tried to

to So the that would register. be point first

focus involved articulate have year, just We we're to in we the all hard is significant of as this taking other of the fresh would is specific at time time assortment. we're that any typically announcements that taken a on don't I all thing, We normally make look understanding taking And a fashion fresh dominant through look this don't show but in aspects we've show hard year. leaders show. the but of to at the And merchandise everything. making we marketing. comment improvement But at about of lot customer about a heavily announcements the at our those things. at look marketing the fashion second we're at of looking time the the fashion And spending move business. the there'll as the And business. report fresh and XXXX, John's don't of a more be The all

Kate Fitzsimmons

are speak to with And on first negative digits. thus that is Great. up the how far? should quarter follow one just swim if low-single launching quick with we inventories I you trends contextualize then the guess month also I guidance clean? thought question next Could that could and February And

Stuart Burgdoerfer

Yes.

we what timing. So from been choppy because February of refund little to believe a tax be has some effect

we're on written well But going that's as think being comment beyond I understood to that. otherwise. -- February specifically not and about

based commentary, we from promotional often for in we calendar results. feedback reporting highlighted of -- sales going and quarterly on shareholders key of out to a QX we our to year-on-year noise move As and minimize circulated results are changes. based results our the on holidays we've shifts the And misinterpretation laid and assumptions to and trying

February has because of Thank the but little timing tax of -- So choppy, been you. a refunds.

Amie Preston

Thanks.

please. Next question,

Operator

Your question of next with from is Jamie Bernstein. the line Merriman

Jamie Merriman

Thanks much. Thanks. very

two quick me. Just ones from

Secret The the to one for you those you of second still close? And And little wave when re-launching Thanks. first impact Victoria's identifying a And years? past to this of talk happen? stores would expect about can process year. what that Is is, financial first track? talked is, What in you terms you I in just the about would few think, for expect next closures do is the your this just digital that bit on be? the over then the

Stuart Burgdoerfer

What's the last question? part of your

Amie Preston

Re-launching digital.

Stuart Burgdoerfer

Yes.

Okay.

closures, on how So on. store do it and go so about we like,

saying this you're asking that I wave. every little You first that humor. this what I'd asked I our is actually bit subject was is, It's this wave important we XXth intended about. of an would stores a -- And close by mean and I'm year. the is about assert

area the We on and store the store it extent, for go current to historic our in trade and performance, So that's and online business. closings look stores is lesser sales, cash how profit, How part results, an based flow. we affect and dynamics of at what and for make on openings projected business. stores projected we ongoing would question, nearby we we And at look close a and exit running judgments based results about not we we Bath just to be, the to cost every a stores but And year, every And it in year. stores, relation those open And Works also projected & Body may cash about what fact, flow close profit stores. Victoria's. store. at nearby also in criteria, at those sales

It's the Secret We stores But rigorous. closing on in it. It's than Victoria's do multi-unit meeting in good go XXXX, running But good years. the fact-based. ongoing a have in and detailed. based are business. -- business, overall did or a I expected ongoing to over or the result about Victoria's year-on-year retail of again, we it's not want part business declines. that's few XXXX at it's you the more of our that last of It's business. wouldn't And It's part closing business, performance more stores we having we think we're a we an expectations it the restaurant in Whether the how again, is, of a waves.

in our terms. have lot We a flexibility of real estate

no no vulnerable So for lot the -- those malls, malls with exit at situations very little a cost. most we to opportunity or cost are of that those have with

that real basis, We have our our we've of an on the an And I portfolio recognized was think, cost of shape. a in that's as lot we in of flexibility. it re-launching is do. overall estate's But some an Victoria's part pretty overall respect basis, question. With shape. is got estate real Do business. this opportunities? results good We our very an because to in the on ongoing And website, actively the year. good running So impairment managed your

good over is We on in last The working have several the shape. years. been that project

a customer-facing conversion capabilities for function for have we to will about to testing we very doing expect will us than of live in testing, in new system, at things do year But which, likely April this create next doing many good capability live again, -- over terms a on to April. and do legacy it We do that as able that probably well, platform, that the challenges if to online roundly two the are -- we be testing, But be that the a go have any in currently others is enthused lot cutover. to broadly timeframe. today we're will And point, things of project's cutover we or us going will the back Thanks. revert but of the the do. in to that of ability and shape consumer-facing

Amie Preston

Guys, just a of question, a one the reminder, please. queue. folks lot We've got in

So next question.

Operator

Your next question is Paul of from the Lejuez Citi Research. with line

Paul Lejuez

Hey, thanks, guys.

big are And to shot related things considered some table, seen on maybe Secret big closures swim of view? already being I'm there the already regarding shut have store the bigger still what if whether things we've that in today. come and been to Just down? talking everything your curious, we're or about curious, the Victoria's changes brand down Are the that Thanks. I'm

Stuart Burgdoerfer

be. dynamic as be will It it Yes. Paul, should

Greg's So by, or constrained decisions with more the considered. starting Obviously in not in goes a business dominant isn't we're judgment. mindset. the is of hard results that clear the be will have But And consider. this dominant the to best merchandise. we business financial there the And script, judgment options and merchandise And considered take everything. on constraints. along things in mindset are time way. clear very and we'll that possible remarks we it's Amie's, report we'll which and and and be make could we're different learn customer because there's of for for on financially should a been look the through the of the the that trying as use trying also at appropriate or customer running think we but we're important is our perfect, the that But pretty no what focus morning focus; producing said, we best the the But already our on We're the aren't the Thanks. lot a through our dominant and focus but got my that's has the reasonable be constrained thing, such I about matters most. certainly to thinking our With to we've shareholders can not And to John's, continue constrained. business. have no

Paul Lejuez

about And in definitely said change. to have Like All not already way? down? to any or you -- how how thought that things shot have been But right. change going you considering you're maybe you're

Stuart Burgdoerfer

Those know the know well. mean together we And may There while. Paul. are -- worked the right but consideration, the thing? we've that, of right? who The legal what's not obviously? pretty not legal for other is, are from constraints or a that's constraint an right? are a truly, But call Paul. constrained. What's or important what's There only we're otherwise to not, we're listening are not law, constrained. it constraints, customer, not no there to each apart But relevant I None. not What's

Paul Lejuez

luck. Good Thank you.

Amie Preston

Paul. Thanks

question. Next

Operator

is of next Your line Walvis Sachs. from question with the Alexandra Goldman

Alexandra Walvis

Great. taking Thanks question. for the so much

on comp for we of is if year. businesses. the continue us we're low parse in to interested as two what's can could give are between you slightly business, question what against some the how In you Our out particular tougher the to Works color compares comps that single that expecting you're Bath giving wonder digits. guide go business into the & on some next I Body that confidence the comp and

Stuart Burgdoerfer

part well. assumption are most recent & as the guidance most important it year. comps the XXXX Victoria's Body but improvement we with asking that in their believe headline the the the we're line very in Beauty. what success results they in success. fully important to we're of XXXX? a extent. Care got very you're tough assumption. the Victoria's of they guidance. the can very and very numbers of of business trying Bath as terms the of in trends same important assuming and and dollar we we continue can category year. that in And a the move Lingerie margin have the judgment for OI we the it's business. XXXX in retailing. then as good through or expecting and dollar & in reasonable a of It's Are That's in And Separately, in But most particularly important produced is move year, a retailing confidence Body PINK, It's our ultimately generally is in income, Secret strong to in little The lap about assuming It's we of for progress is category thing moderation OI in through That's that in there's the to Yes. No, early the continue the this can assumed most Personal operating terms summarizing, most and well-led. Bath They've current well-led that good same results. results. degree dollars bit degree perform

as won't any to retailing. with the & assumptions And The So, and good. business we've improvement that that's a you but by Body But we've fundamental a is easy a we the think deal Lingerie respect appreciate more rate very degree Works. to for category Thank it's made reasonable appropriately. judgment to be of recent can stretch, and very PINK. been hard Bath It make. you. well-led tried have and assumption with great results And

Amie Preston

Thanks Alex.

question. Next

Operator

is Group. question next of Dana Advisory Telsey line from Telsey Your with the

Dana Telsey

Good morning everyone.

and XXXX about as are compared in the to As international in you expectations international how planning investments international think Thank for you. you business, XXXX?

Stuart Burgdoerfer

Yes.

morning. good Dana, So,

as there appreciate. First international multiple are you business components the all can of of

the of the in company-owned company-owned and stores. would to business between in also roundly the meaningfully and we this So, the international stores count and between first terms expect partner-owned think investment businesses, opening and franchise through businesses I own then partner-owned say our describe we and about XXX how store in of XXX XXXX grow combination

of skewed full our good we're do not U.K. the between we as growth we stores expiration because the adding in the China in to roundly base in open based growth international the lease But total assortment good at good that business. businesses towards geography. on North of again our strong close stores business also in we're nearby company-owned It growth But terms that's America, stores in XXX is We'll continue international. as either the So, stores this and in that as XXX of we'll stage well partner-owned an for business part growth business part and online growth. -- and for store count ongoing store in or moderating digital for

overall a size Thanks. In think as growth good we right in store appropriate as to in but now profile growth with adjustment more U.K., drive sales XXXX. we online there, we growth about an So, have. in footprint China existing more well and format store the in the the strong that learn China through the opportunity is

Amie Preston

Thanks Dana.

Next question.

Operator

is of line question Meyer Partners. next Roxanne Your MKM the from with

Roxanne Meyer

Great. comp Good meet My strong that didn't the perhaps out Secret a more on mid-single quarter it It you digits. for question question. Beauty. expectations morning. was and Thanks promotional. But had fourth pretty it Victoria's did taking is in my call

So on and for you. how hindsighting just about Beauty looking some you're XXXX. it Thank thinking in

Stuart Burgdoerfer

somewhat had a prestige XX agenda top fragrance the was a got question, year the With on Beauty focused had business. and think, your of that's part the Roxanne that business. from you XXXX And Greg either as of shaping in more fourth further fragrances said, capable. than the have particularly in I -- business opportunity the last that prestige the the And is United is solid that. or the count, very differential are four to mentioned the and globally team or hindsight XXXX XXXX for on of -- opportunity to part improvement And Beauty the sold, in Yes. really that very perfume fragrances we've States. success particularly He in stronger by focused of the in is the for in quarter. his -- first pursuit growth

strong from a four of have most we're base. And probably don't top we XX. that know So starting people the

in opportunity, business business. So particularly opportunity profile. it's terms But to growth in a the margin growth good that part of accelerate Thanks. we the in see good of with strong --

Roxanne Meyer

Thanks. Great.

Amie Preston

Thanks, Roxanne.

question? Next

Operator

line with Your next is Tracker. question The Marni from of Retail the Shapiro

Marni Shapiro

everybody. Hey,

a Roxanne that the promotional the and there what's you as different an it should guess, little drive on we It's asked, vehicle and to thinking of a as I a you've Secret update down bit forward what what segment, actually dovetailing expect up Could a used going been Just Victoria's though. brand? from on Sport? And today? traffic. part give little

Stuart Burgdoerfer

Yes. Thanks, Marni.

but an So segment. in about is that confident business, table, is about apparel the I'm it. is take fresh segment. look fresh will it to part retail. at will further And And apparent a of what on everything sport an at But anything announce -- of taking the a of the leisure. key John obviously, taking look that spirit sport fresh are category of intimate a important part bras fresh I John have a We hard that hard John at at don't is today, be it's important And look know it.

Marni Shapiro

right. Great. All

Stuart Burgdoerfer

you. Thank

Marni Shapiro

Best of luck.

Stuart Burgdoerfer

you. Thank Yes.

Amie Preston

Marni. Thanks,

one take last we'll think I question.

Operator

Deutsche with from question is the line Paul of Bank. Your Trussell final

Paul Trussell

thank VS XQ maybe year that takes more details that's the a the to and wanted to puts just expectation margins. at on continue Stuart, in around promotions get morning incremental guide. -- maybe to have the mentioned I you. Good and the few start at least you

you progresses. understand other the leading single guidance what are what to the here maybe of gross see some of the us there to stabilization that initiatives are get on just low increase improve help takes puts And or SG&A, as margin any rate Thanks. that and same the opportunity of Just digits? at as the will the year an

Stuart Burgdoerfer

Paul. Thanks

all that very opportunity points the one. in of progress would opportunity XXXX, at get the won't we and we we're expect of the percentage make in in as XXXX, go opportunity of five or PINK Victoria's to through substantial six Lingerie record a Beauty is And versus the just we But margin year So but the mention XXXX. to year. order versus rate

the of opportunity. XXXX? I there's get comment through the that customer on going in I the all merchandise on merchandise that suggesting understanding But with that ends and substantial focus not. very Am that this the assortment. and starts a business. a for So we're ongoing am very disciplined from substantial management focus to of it margin inventories, and on strong with And there customer opportunity management in is

the answer that's answer or big-picture question my in your to most to view So the your important question.

As through assortment, move would on to we we how would improve as in some very see result improvement substantial year-on-year address the opportunity. question, Paul. merchandise expect I the XXXX we But rate. really Thanks that's margin

Paul Trussell

Best of luck. you. Thank

Amie Preston

Brands. Thanks your us you for continuing to morning L for all Thanks interest thank Paul. and this joining in

Operator

This concludes you today's earnings call. for your participation. Thank

disconnect. may You now