Stuart Burgdoerfer EVP & CFO

1

Stuart BurgdoerferEVP & CFO

WHO WE ARE

50+ year history of creating, scaling and managing the lifecycle of successful specialty retail concepts

Operating under 3 global brands, in categories with high emotional content:– Victoria's Secret– PINK– Bath & Body Works

Long track record of successfully weathering macro-economic challenges and evolving our brands and portfolio of businesses

Committed to meeting the needs of our customers, associates and communities, while delivering value to shareholders

3

Note: Total shareholder return data is current as of 8/30/2019; LB stock price closed at $16.51

SHAREHOLDER RETURNS FOR SELECT RETAILERS

4

WHERE WE ARE

1 H&M 61.0 1 Home Depot 22.0 1 Home Depot 22.2 1 Home Depot 26.72 Target 26.9 2 Best Buy 21.0 2 Best Buy 18.6 2 TJX 21.5

Median of 3 Fast Retailing 22.0 Median of 3 Fast Retailing 20.7 Median of 3 Target 16.1 Median of 3 Fast Retailing 20.1quartile: 4 Wal-Mart Stores 21.4 quartile: 4 Wal-Mart Stores 19.9 quartile: 4 Fast Retailing 14.9 quartile: 4 Inditex 16.121.7% 5 Home Depot 16.7 20.3% 5 Target 19.3 15.5% 5 TJX 14.7 18.1% 5 Foot Locker 15.9

6 Inditex 10.4 6 TJX 14.2 6 Children's Place 11.6 6 Children's Place 11.97 TJX 3.0 7 Tiffany & Co. 8.0 7 Wal-Mart Stores 11.4 7 Target 11.78 Buckle (13.6) 8 Children's Place 3.2 8 Inditex 6.9 8 Wal-Mart Stores 11.2

Median of 9 Best Buy (16.1) Median of 9 Buckle 0.9 Median of 9 American Eagle 6.9 Median of 9 Tiffany & Co. 11.0quartile: 10 Walgreen Co. (22.3) quartile: 10 American Eagle (0.2) quartile: 10 Walgreen Co. (1.2) quartile: 10 Best Buy 8.8(19.2%) 11 Foot Locker (23.7) 0.3% 11 Inditex (2.1) 2.8% 11 Tiffany & Co. (1.4) 9.9% 11 L Brands 8.2

12 Tiffany & Co. (29.5) 12 Abercrombie & Fitch (2.7) 12 H&M (4.9) 12 Giordano 7.413 American Eagle (29.5) 13 Ralph Lauren (3.4) 13 Giordano (5.4) 13 Walgreen Co. 6.514 Ralph Lauren (31.5) 14 H&M (6.3) 14 Foot Locker (6.4) 14 American Eagle 6.4

Median of 15 Abercrombie & Fitch (32.5) Median of 15 Giordano (10.8) Median of 15 Coach (7.7) Median of 15 Buckle 5.7quartile: 16 L Brands (33.9) quartile: 16 Gap (11.3) quartile: 16 Buckle (8.8) quartile: 16 Ralph Lauren 4.3(33.2%) 17 Children's Place (36.3) (11.1%) 17 Walgreen Co. (12.0) (8.3%) 17 Ralph Lauren (10.5) 5.0% 17 H&M 3.6

18 Giordano (39.3) 18 Foot Locker (15.9) 18 Abercrombie & Fitch (15.6) 18 Gap 0.519 Esprit Holdings (40.1) 19 Coach (16.1) 19 Gap (16.5) 19 Coach (0.5)20 Bed Bath & Beyond (42.6) 20 Chico's (31.9) 20 L Brands (19.5) 20 Abercrombie & Fitch (4.9)

Median of 21 Gap (45.5) Median of 21 Li & Fung (33.4) Median of 21 Chico's (25.1) Median of 21 Chico's (11.0)quartile: 22 Coach (57.7) quartile: 22 L Brands (36.5) quartile: 22 Bed Bath & Beyond (30.3) quartile: 22 Bed Bath & Beyond (11.6)(57.7%) 23 Li & Fung (58.5) (36.5%) 23 Bed Bath & Beyond (38.8) (30.3%) 23 Li & Fung (32.9) (11.6%) 23 Li & Fung (17.6)

24 Chico's (60.8) 24 Esprit Holdings (44.0) 24 Esprit Holdings (37.6) 24 Esprit Holdings (29.4)25 Ascena Retail Group (94.5) 25 Ascena Retail Group (68.5) 25 Ascena Retail Group (57.2) 25 Ascena Retail Group (29.4)

3-year Total Return 5-year Total Return 10-year Total Return1-year Total Return

5

WHERE WE ARE

Over the last 5 years, enterprise sales growth has been driven by Bath & Body Works, while sales at the Victoria’s Secret segment grew slightly

Note: Other Segment of L Brands not shown.*Victoria’s Secret category exits include apparel, swim and makeup

%$USD Billions 2014 2018 Inc/(Dec)

Total L Brands $11.5 $13.2 16%

Victoria's Secret Lingerie (Go-Forward) $3.2 $3.3 4%PINK $2.1 $2.8 32%Victoria's Secret Beauty $1.0 $1.1 9%Category Exits* $0.9 $0.1 nm

Victoria's Secret $7.2 $7.4 2%

Bath & Body Works $3.3 $4.6 38%

International $0.3 $0.6 81%

Revenue

6

WHERE WE ARE

Over the last 5 years, enterprise sales and operating income growth has been driven by Bath & Body Works. While sales at the Victoria’s Secret segment grew slightly, operating income has declined substantially.

Note: Operating Income are depicted on a Non-GAAP reported basis. *Victoria’s Secret Lingerie Sales exclude Category exits. Category exits include apparel, swim and makeup.

Sales Operating Income

$0.7

$0.1 $0.1 $0.1 $0.3

$0.7

$1.3

$11.5

$13.2

$8.0

$9.0

$10.0

$11.0

$12.0

$13.0

$14.0

2014 VS CategoryExits* /Other

OtherSegment

Victoria'sSecretBeauty

Victoria'sSecret

Lingerie*

International PINK Bath & BodyWorks

2018

$USD

in Billions

$0.8

$0.1

$0.3

$2.0

$1.4

2014 Victoria's Secret International Bath & Body Works 2018

$USD

in B

illio

ns

Victoria’s Secret has the largest share of the intimates market and maintains a large lead over the next closest competitor

7

VICTORIA’S SECRET – LEADER IN THE INTIMATES MARKET

Source: The NPD Group / Consumer Tracking Service 12ME Dec ’18/Women’s Apparel

8

Victoria’s Secret

Approximately $4 billion in global Lingerie retail sales More than 400 million store visits per year Nearly 1 billion website visits per year

– More than 68 million Instagram followers – More than 29 million Facebook fans– More than 11 million Twitter followers

Victoria’s Secret PINK

Approximately $3 billion in global retail sales– 8 million Instagram followers– 14.5 million Facebook fans– Approximately 13 million PINK Nation members

Victoria’s Secret Beauty

Approximately $1.5 billion in global retail sales 6 of the top 20 fragrances in the U.S.

– Bombshell– Tease– Heavenly– Bombshell Seduction– Love– Very Sexy

0

20

40

60

80

100

VS PINK Adore Me Aerie Third Love

Social Media Followers (Millions)

Twitter Facebook Instagram

VICTORIA’S SECRET – HIGH BRAND AWARENESS

9

WHERE WE ARE: VICTORIA’S SECRET SEGMENT

Note: Sales and Operating Income are depicted on a Non-GAAP reported basis. 2012 and 2017 are based on 52 weeks

$5,112 $4,888

$5,576

$6,240

$6,652 $6,884

$7,207

$7,672 $7,781

$7,289 $7,375

$607 $578

$890 $1,095 $1,176 $1,153 $1,271 $1,391

$1,206 $906

$512

11.9% 11.8%

16.0%

17.5% 17.7%

16.7%

17.6%18.1%

15.5%

12.4%

6.9%

5%

7%

9%

11%

13%

15%

17%

19%

21%

23%

25%

$‐

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Net Sales & Operating Income ($M's)VS Segment

Net Sales Operating Income Op. Inc %

Victoria’s Secret Segment (includes PINK)Spring 2019 Comps down 6%; merchandise margin dollars down low-

double digits; operating income down substantially

Fall 2019 We are forecasting an improved trend in the business

versus Spring, driven by a stronger merchandise assortment Merchandise margin dollar decline forecasted to improve

from down in the low-double digit range for Spring to down mid- to high-single digits in the third quarter and flat to down mid-single digits in the fourth quarter

10

WHERE WE ARE: VICTORIA’S SECRET SEGMENT

Our #1 priority New leadership driving change

John Mehas – CEO Victoria’s Secret Lingerie Amy Hauk – CEO PINK

We are: Repositioning product assortment and marketing Rebalancing inventory breadth and depth and pricing

architecture Evolving our promotional strategy Elevating in-store experience Continuing to invest in digital

11

FOCUSED FOR GROWTH: IMPROVING VS PERFORMANCE

One of the largest specialty personal care and home fragrance brands in the world

– Nearly $5 billion in global retail sales– More than 350 million store visits per year– More than 300 million website visits per year– In 2018, Bath & Body Works had ~150 million transactions– 235 stores outside North America with strong customer response

#1 Brand in America for:– Three-wick candles– Electric fragrance diffuser for the home … Wallflower– Body moisturizer (lotion & body cream)– Fine fragrance mist– Men’s body moisturizer– Hand soap– Hand sanitizer

#1 Home Fragrance Retailer in America

BATH & BODY WORKS – LEADER IN THE MARKET

12

WHERE WE ARE: BATH & BODY WORKS

13Note: Sales and Operating Income are depicted on a Non-GAAP reported basis. 2012 and 2017 are based on 52 weeks

Bath & Body Works

Spring 2019 Comps up 10%; operating income up 15%

Fall 2019 Lapping tougher comp and margin comparisons On a one-year basis: a more moderate view of comps and

merchandise margin dollar gains versus Spring On a two-year basis: comp and merchandise margin dollar

increases that are similar to the Spring result

14

WHERE WE ARE: BATH & BODY WORKS

FOCUSED FOR GROWTH: BATH & BODY WORKS

Beauty and Home are excellent categories with strong market growth

Growth opportunities in our core segments of fragrant body care, home fragrance and soaps, as well as emerging categories

Continued opportunity for White Barn store remodels, with strong returns

Continued investment in fulfillment capacity to support Direct business growth

Enhancing close connection to our customers

15

WHERE WE ARE: INTERNATIONAL

2014 2018 2014 – 2018CAGR

Total VS & BBW International Segment ($ US millions)

Store Count 394 753 18%

Retail Sales¹ $790 $1,507 18%

L Brands Recognized Revenue $336 $605 16%

Operating Income (Loss)² $78 ($7) NM

1Represents total retail sales from company-owned and partner-owned stores; partner-owned sales may be unaudited and/or non-GAAP.²Operating Income results are non-GAAP. 16

Franchise business is highly profitable; operating income decline driven by losses in the U.K. and China

FOCUSED FOR GROWTH: INTERNATIONAL

17

Franchise:• Excellent execution of our brands• Improvement opportunity for Victoria’s Secret driven by changes in domestic

business• Continued opportunity for store and digital expansion

Company-owned businesses:United Kingdom:

• Significant erosion in VS UK business over the past three years• Performance is consistent with North American market and further compounded

by challenges in UK economy• We are determined to get the UK to breakeven by focusing on the fundamentals

China • Enormous potential still on the horizon• Having entered 19 markets and prototyped 7 formats, we’ve learned a lot• We will now rationalize our go-forward formats and focus on a path to profitability

Digital• We anticipate accelerated growth enabled by planned infrastructure upgrades:

• Re-platforming our e-commerce site• Enabling European fulfillment

WHERE WE ARE: LARGE, PROFITABLE AND GROWING DIGITAL BUSINESS

18

% Sales Growth

Sales

($US

) in

Millio

nsPenetration

12017 is based on 52 weeks.

18% 29% 13% 18% 21%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

$500

$1,000

$1,500

$2,000

$2,500

2014 2015 2016 2017 2018

Digital Sales (Go‐Forward) and Penetration 2014 ‐ 2018

Digital Sales Digital Penetration

Total L Brands: $2.5 Billion; 20+% Operating Income Rate We have made and will continue to make substantial investments

in our digital businesses to support growth

1

We have strong enterprise capabilities through Mast: Make

– Close relationships with suppliers– Speed sourcing

Move– Transportation and logistics

Enable– Technology

19

WHERE WE ARE: STRONG CENTRALIZED CAPABILITIES

1. Appointed new talented leadership– John Mehas, CEO of Victoria’s Secret Lingerie– Amy Hauk, CEO of Victoria’s Secret PINK

2. Closed Henri Bendel

3. Sold La Senza

4. Significant investments in digital

5. Reduced regular dividend by half to normalize the payout and free up capital to reduce debt levels

6. Delivering growth and strong performance at Bath & Body Works

WHERE WE ARE: RECENT ACTIONS POSITION US FOR LONG-TERM SUCCESS

Focusing resources on core categories to enhance performance, accelerate growth and drive value20

21

WHERE WE ARE: FINANCIAL OUTLOOK

Total L Brands Earnings GuidanceThird Quarter Comps down low-single digits to up slightly Gross margin rate down to last year SG&A rate up to last year EPS ($0.05) to $0.05

August Total company year-over-year merchandise margin $ decline similar to the

second quarter result. Improvement in PINK merchandise margin $ decline somewhat offset by a deceleration in Lingerie. Bath & Body Works continued to post strong results.

Fourth Quarter Comps up 1% to 4% Gross margin rate down to last year SG&A rate about flat EPS $1.95 to $2.15

WHERE WE’RE GOING: FOCUSED FOR GROWTH

1. Committed to improving performance at Victoria’s Secret Lingerie and Beauty, and PINK

2. Continuing to enhance Bath & Body Works merchandise and market positon

3. Continuing to invest in digital businesses

4. Expanding our core brands internationally

5. Focusing on customer engagement and optimizing the store experience

6. Actively managing our real estate portfolio

7. Increasing cash flow to deleverage and provide liquidity for capital allocation priorities 22

23

WE CONTINUE TO MANAGE THE BUSINESS WITH DISCIPLINE

Increasing inventory turns

Growing expenses slower than sales

Actively managing real estate portfolio

Committed to deleveraging

Increasing cash flow

Aver

age d

ollar

turn

24

3.94.1 4.2 4.3 4.4

2014 2015 2016 2017 2018

Note: 2017 is based on 52 weeks.

INCREASING INVENTORY TURNS

25

GROWING EXPENSES SLOWER THAN SALES

Sales & SG&A Expense Growth

-2%

0%

2%

4%

6%

8%

10%

12%

2014 2015 2016 2017 2018

Sales SG&A Expenses

Expense growth in 2018 was driven by an incremental $100 million investment in increasing hourly wage rates

Notes:– As a result of the adoption of the revenue recognition standard in 2018, income from the Victoria’s Secret private label credit card, which was historically

presented as a reduction to expense, is now presented as revenue. 2014 through 2017 sales and expenses have been recast for this change in presentation.– 2017 is based on 52 weeks.– Catalog expense has been adjusted to be within marketing expense (SG&A) instead of B&O expense where it is reported externally.

1. Performance based investment – we adjust investment levels based on performance

2. High sales per foot productivity

3. Strong financial profile– Project IRR’s of ~20%– 99% of stores are cash flow positive

4. Diverse real estate portfolio across venue tiers and types

5. Minimal exposure to vulnerable venues due to strong lease termination rights which provide flexibility

6. Actively managing the store fleet

26

ACTIVELY MANAGING REAL ESTATE

Disciplined Execution of Real Estate

Profitability across all mall types in North America

33% of stores are not in malls

Leases provide significant protection based on occupancy and co-tenancy provisions

25% in C malls with above fleet average profit rates and remaining average lease term of less than 3 years

Minimal exposure in vulnerable venues due to strong lease termination rights which provide flexibility

PROFITABLE REAL ESTATE EXPOSURE

27

CASH FLOW POSITIVE STORE FLEET

28

Note: U.S. stores Sales per Selling Square Foot. 2017 is based on 52 weeks.

Victoria’s Secret Bath & Body Works

$836 $864 $844 $774 $757

2014 2015 2016 2017 2018

$774 $815 $831 $835

$891

2014 2015 2016 2017 2018

STRONG SALES PRODUCTIVITY

29


Store Closures

Store Openings

Since 2008: Opened 888 stores primarily in top tier and off-mall venues Closed 765 stores primarily in lower tier venues and sold 130 stores in the La Senza fleet

30

North America SSF Growth (CAGR)2013 - 2017 2018 2019F

Victoria’s Secret / PINK

Gross 5% 1% 0%

Net of closures 4% (1%) (3%)

Bath & Body Works

Gross 3% 5% 4%

Net of closures 2% 4% 3%

L Brands1

Gross 4% 2% 2%

Net of closures 3% (3%) (1%)

We are closing stores more aggressively at Victoria’s Secret, and investing in growth at Bath & Body Works, where we are earning strong returns


3112018 excludes Henri Bendel and La Senza

Victoria’s Secret / Pink North America

Closed about 10-30 stores annually from 2015 to 2018 (fleet of ~1,200 stores)

Accelerated store closures in 2019 to about 55 stores and projected to close 40-60 stores in 2020

About 40% of sales transfer from closed stores to nearby centers and the digital business

Overall market profitability improves following a store closure


32

Victoria’s Secret / PINK and Bath & Body Works real estate investments in the U.S. generate a profit rate of 18% and projected internal rates of return of 24%

Financial Returns1

Victoria’s Secret

Bath & Body Works

L Brands U.S.

Number of Stores 667 740 1,407Projected Internal Rate of Return 18% 35% 24%Profit Rate 2 11% 30% 18%

1 As of year-end 2018. Includes store investments since 2012.2 Calculated as Four-Wall Profit / Sales

PROFITABLE REAL ESTATE INVESTMENTS

33

PERFORMANCE-BASED12018 ROIC of 13.8% uses the new lower tax rate of 26%. If we used previous years tax rate of 39%, the 2018 ROIC would be 11.2%.

REAL ESTATE MANAGEMENT DRIVING STRONG RETURNS

PERFORMANCE BASED

34

We are committed to deleveraging as demonstrated by:

The reduction in our annual dividend by half, and the deployment of the savings toward debt repayment

The active management of our maturity profile

– In June of 2018 we exchanged $300+ million of 2020 notes for a similar amount of 2027 notes

– In June and July of 2019 we issued $500 million of 2029 notes and used the proceeds and balance sheet cash to retire nearly $800 million in 2020 and 2021 notes

– In August of 2019 we extended the maturity of our $1 billion revolving credit to 2024

We expect additional deleveraging from improving business operating results

COMMITTED TO DELEVERAGING

35

($ in millions)

Maturities are well-spread out and recent debt issuance and utilization of cash refinanced near-term maturities and decreased total debt by close to $300 million

Bonds Revolver

36

MANAGING MATURITY PROFILE

MATURITY PROFILE PROVIDES FLEXIBILITY

$1.8 billion $1.3 billion $2.4 billion

37

CONTINUING TO GENERATE STRONG CASH FLOW

Recent steps taken to increase cash flow: Substantially reduced capital expenditures Closed Henri Bendel and sold La Senza Reduced dividend

($ in millions) 2014 2015 2016 2017 2018 2019F (2)

Operating Cash Flow(1) $1,877 $2,027 $1,990 $1,406 $1,377 $1,300

Capital Expenditures ($715) ($727) ($990) ($707) ($629) ($550)

Free Cash Flow $1,162 $1,301 $1,000 $699 $748 $750

Regular Dividend ($399) ($587) ($683) ($686) ($666) ($335)

Retained Cash Flow $763 $714 $317 $13 $82 $415

(1)Restated to reflect the required change in presentation related to the new accounting standard for stock-based compensation adopted in 2017(2)2019F reflects Mid-Range of August 22, 2019 earnings guidance ($2.45 EPS)

38

FOCUSED FOR GROWTH: FINANCIAL OUTLOOK

Long-term GoalsVictoria’s Secret Segment Stabilization and improvement with a longer-term goal of a 10-15% operating

margin

Bath & Body Works Consistent sales and operating income dollar growth in the mid- to high-single

digit percent range, with an operating income rate in the low-20’s

International Franchise financial profile very sound on an overall basis; significant opportunity

to reduce operating losses in the U.K. and China

Total L Brands Consistent growth in sales and operating income dollars in the mid-to high-single

digit percent range; operating margin rate in the mid- to high-teens

APPENDIX

Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures

This presentation contains certain unaudited “Adjusted” financial information which represents non-GAAPfinancial measures. The adjusted financial information should not be construed as an alternative to the reportedresults determined in accordance with generally accepted accounting principles. Further, the Company’sdefinition of adjusted income information may differ from similarly titled measures used by other companies.While it is not possible to predict future results, management believes the adjusted information is useful for theassessment of the ongoing operations of the Company. The adjusted financial information should be read inconjunction with the Company’s historical financial statements and notes thereto contained in the Company’squarterly reports on Form 10-Q and annual report on Form 10-K. The following pages contain reconciliations ofcertain reported results to the adjusted results used in this presentation.

40

APPENDIX

41

Reported Adjustments Adjusted

Net Sales 13,237$ -$ 13,237$

Gross Profit 4,899 95 4,993

General, Administrative and Store Operating Expenses 3,563 (7) 3,556

Operating Income 1,237 200 1,437

Earnings Per Share 2.31 0.51 2.82

The "Adjustments" column includes the following:

˙˙˙


2018(in millions except per share amounts)

A $99.2 million ($55.1 million net of tax of $44.1 million) loss on the sale of La Senza to an affiliate of Regent LP.

An $80.9 million charge ($72.7 million net of tax of $8.2 million), included in buying and occupancy expenses, related to the impairment of certain Victoria’s Secret store assets.

$20.3 million ($15.0 million net of tax of $5.3 million) of Henri Bendel closure costs, included in buying and occupancy expenses ($13.8 million) and general, administrative and store operating expenses ($6.5 million).

APPENDIX

42


Net Sales 12,632$ -$ 12,632$

Gross Profit 4,959 - 4,959

General, Administrative and Store Operating Expenses 3,231 - 3,231

Operating Income 1,728 - 1,728

Earnings Per Share 3.42 (0.22) 3.20


˙˙



A $45.0 million pre-tax loss ($28.8 million net of tax of $16.2 million), included in other income (loss), associated with the early extinguishment of our June 2019 notes.

A $92.2 million tax benefit related to changes in U.S. tax legislation.

43

APPENDIX


Net Sales 12,574$ -$ 12,574$

Gross Profit 5,125 11 5,136

General, Administrative and Store Operating Expenses 3,122 (24) 3,099

Operating Income 2,003 35 2,037



˙˙˙˙



Pre-tax charges of $34.5 million ($21.4 million net of tax of $13.1 million) related to actions at Victoria’s Secret, including severance charges, fabric cancellations and the write-off of catalogue paper.

A $108.3 million pre-tax gain ($70.2 million net of tax of $38.1 million), included in other income, related to a $124.4 million cash distribution from Easton Town Center.A $35.8 million pre-tax loss ($22.4 million net of tax of $13.4 million), included in other income, associated with the early extinguishment of our July 2017 notes. A $41.7 million tax benefit related to the favorable tax settlement of a discrete tax matter.

44

APPENDIX


Net Sales 12,154$ -$ 12,154$

Gross Profit 5,204 - 5,204

General, Administrative and Store Operating Expenses 3,012 - 3,012

Operating Income 2,192 - 2,192



˙



A $78.1 million pre-tax gain ($69.0 million net of tax of $9.1 million) included in other income related to the sale of our remaining interest in the third-party apparel sourcing business.

Stuart Burgdoerfer EVP & CFO

Documents

Transcript of Stuart Burgdoerfer EVP & CFO