- In order to deliver the holiday plan, the firm is focused on executing its planned strategy, executing cost to action marketing to drive additional traffic to stores and increase conversion, and continue to proactively manage inventory levels while providing customers with required levels of newness.
- Other plans include a shift from self purchase to gift things during key holiday timeframe, including lingerie, PINK and Beauty gifting.
- The firm expanded its giftable and impulse purchase assortment to include fun items such as penny pop, penny candy, gift card holders that also serve as luggage tagged along with other highly giftable items.
- The firm has also planned a celebration of the first ever supermodel PJ party featuring a fun, fabulous colorful collection of sleepwear that is perfect for self purchase or gifting.

Furthermore, the company will continue to build the Intimissimi line as intimate apparel, which represents a strong opening price point proposition and an escalated frequency of fashion.

- Intimissimi is expected to be in 240 stores by the end of this year.
- The firm opened 17 new stores and remodeled 52 stores with plans to open or remodel a total of 145 stores by yearend.
- The upcoming fashion show will feature the kickoff of the World Reunion Tour of the Spice Girls.

- In the direct channel results were negatively impacted by the delays in shipping out of the new distribution center though demand for the brand, as evidenced by orders in the catalog and the Internet channel, remain very strong.
- Sales declined 7% due to the increased shipping time and operating income declined significantly.
- The decline in operating income was a result of sales and related shipping and handling revenue decline, the loss of higher margin expedited shipping option and incremental labor higher to staff a DC and work on fixing the issue.

- Bath & Body Works sales increased $16 million over the prior year though this was still below expectations.
- Operating income declined $2 million to a loss of $1 million, driven by increases in sales in margin dollars, driven by real estate activity and a margin rate improvement.
- This was offset by deleveraging a fixed buying and occupancy expenses and start-up costs associated with new store real estate activity, and higher SG&A costs due to ongoing supply chain system support costs.
- The firm experienced a downturn in customer traffic, which has been consistent with mall traffic decline.

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

- In August, the firm ran the annual hand soap event, which focused on antibac and aromatherapy hand soaps and featured the launch of three new hand soap fragrances; Midnight Pomegranate, Japanese Cherry Blossom and Sensual Amber from the Signature collection line.
- In early September, the company launched its fall fragrance theme featuring the new irresistible apple fragrance from the Signature collection and the Perfect Autumn home fragrance collection.
- In late September, the firm moved to the home fragrance theme that continued to focus on the Perfect Autumn and Halloween home fragrance collections and new fragrances from theTemptations body care line.
- In October, the fall home fragrance theme was launched featuring Perfect Autumn and Halloween home fragrance collection, and moved to the Happy Falliday theme, which was a more transitional holiday set.

Strategic initiatives:

- The company will continue to focus on opportunities for growth, including expanding the average Victoria''s Secret store size by 50%, resulting in 8% to 10% square footage growth per year for the brand over the next five years.
- It will also open new BBW stores primarily in non-mall locations, which will result in BBW square footage growing at about 6% per year over the next five years.
- The firm will continue with the expansion of La Senza in Canada, which will result in square footage growth this year and total company owned stores of 15%.
- Additionally, progress is being, made on thecontinued testing and expansion of the new concepts including the VSX, the new sport initiative for Victoria''s Secret, Intimissimi, accessories and BBW direct and the further development of plans to expand internationally including the opening of five to ten new BBW stores in Canada next year.

Over the past three years, the firm has successfully implemented new systems and capabilities in a number of areas, including the PeopleSoft implementation for payroll and HR capabilities.

- Other implementations include the SAP core financial systems implementation, customer data warehouse and customer relationship marketing systems, and the creation of the finance, HR and procurement services organization.
- In addition, in 2006, the firm implemented new supply chain systems at Bath & Body Works.
- It is also investing in a new distribution center and new front-end technology to support the growth of the Victoria''s Secret Direct business, opening the new distribution center for Victoria''s Secret Direct in early August.
- As a result of the challenges experienced with both the implementation of the supply chain systems at Bath & Body Works, and the new direct distribution center, the firm is reevaluating the approach and timing of the supply chain systems rollout to Victoria''s Secret and Mast, and the development of the new front-end technology systems at Victoria''s Secret Direct.

Fourth Quarter Outlook

- Earnings per share expected to be between 90 cents and $1.05 versus the previous estimate of $1.18 and $1.08 last year due to a reduction in projections for Victoria''s Secret Direct.
- Steps taken to reduce demand and sales in order to protect the customer experience, could reduce Victoria''s Secret Direct sales by $150 million.
- In addition, the revised estimate also reflects a decline at Victoria''s Secret stores and Bath & Body Works versus prior estimates in recognition of the difficult environment and negative traffic trend.

Total sales will decline by 15% to 20% driven by the sale of the apparel businesses and the decline at the Victoria''s Secret Direct partially offset by an increase in Mast sales of $70 million.

- Capital expenditures will be between $765 million and $790 million, with over 60% of capital expenditures related to the investments in remodeling and expanding existing stores as well as opening new stores.
- About 20% of the capital expenditure budget relates to investments in technology initiatives and the expansion of the direct distribution center, and the remainder of the budget relates to home, office and other investments, including the consolidation of the majority of the New York offices to one location.

Key questions and answers from the third quarter earnings call conducted by Limited Brands. on November 20, 2007.

Jeff Black (Lehman Brothers): Can you comment on the extend of the reengineering efforts at the distribution center?

Martyn Redgrave: With opening a new centre in August we had expected a slow ramp-up. We did, in fact, ramp up the development pace as were expecting to ramp-up that throughout the end of September and into October.

Over the last four weeks, as we have evaluated the performance of the center, we have concluded that that are some issues there that are going to cause us to have one of the capacity in center that will limit the capacity in center as we are entering a holiday.

The center is a new operation for us and it utilizes a number of new capabilities that we have not had in our other distribution centers before, things like the High Bay reserve storage capabilities that are not in our other centers.