lb 2015 investor presentation

8/20/2019 LB 2015 Investor Presentation

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2013 INVESTOR HANDOUT


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2

KEY MESSAGES

We have global, category-leading brands with high emotional content thatgenerate substantial income and cash flow

Our overriding focus is on the substantial growth opportunity in North America

We believe there is substantial opportunity for international growth and expect itto be accretive to the total company operating margin

We are targeting 10% annual operating income $ growth (or better) and anoperating income rate in the high-teens

We will continue to manage inventory, expenses and capital with discipline

We remain committed to returning excess cash and generating superior returnsfor shareholders

We continue to emphasize maintaining a strong cash and liquidity position while

optimizing our cost of capital with a balanced interest for both bond and equityholders


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SUPERIOR RETURNS TO SHAREHOLDERS

As of September 4, 2015

1 Fast Retailing 38.2% 1 Foot Locker 43.4% 1 L Brands 23.0%2 Walgreen Co. 37.7% 2 L Brands 38.6% 2 Inditex 23.0%3 Nike 32.7% 3 Starbucks 36.0% 3 TJX 22.6%4 Starbucks 31.7% 4 Home Depot 33.9% 4 Nike 20.8%5 L Brands 31.0% 5 Fast Retailing 33.7% 5 Fast Retailing 19.7%6 Best Buy 30.7% 6 TJX 29.1% 6 Starbucks 17.2%7 Home Depot 29.0% 7 Walgreen Co. 28.1% 7 Buckle 16.9%

8 Foot Locker 28.4% 8 Nike 25.8% 8 Foot Locker 16.2%9 Inditex 19.1% 9 Inditex 23.5% 9 Home Depot 13.9%10 TJX 16.6% 10 Buckle 17.1% 10 H&M 13.2%11 H&M 13.7% 11 Tiffany & Co. 15.4% 11 LVMH 11.8%12 Tiffany & Co. 11.8% 12 Gap 15.2% 12 Tiffany & Co. 9.9%13 Staples 11.6% 13 LVMH 12.8% 13 Ralph Lauren 9.4%14 LVMH 10.6% 14 Chico's 12.5% 14 Walgreen Co. 8.7%15 Target 9.1% 15 Target 10.4% 15 Gap 7.8%16 Buckle 4.0% 16 Bed Bath & Beyond 9.7% 16 Ascena Retail Group 6.9%17 Children's Place 1.0% 17 American Eagle 9.4% 17 Wal-Mart Stores 6.0%18 Gap (1.4)% 18 H&M 9.2% 18 Target 5.6%19 Wal-Mart Stores (2.2)% 19 Ralph Lauren 7.1% 19 Bed Bath & Beyond 4.5%20 Bed Bath & Beyond (2.5)% 20 Wal-Mart Stores 6.8% 20 Children's Place 4.4%21 American Eagle (4.0)% 21 Children's Place 4.5% 21 Giordano 3.7%22 Chico's (5.6)% 22 Best Buy 4.2% 22 American Eagle 3.6%23 Giordano (5.9)% 23 Giordano 4.1% 23 Li & Fung 1.2%24 Ralph Lauren (10.5)% 24 Ascena Retail Group 1.1% 24 Coach 0.5%25 Abercrombie & Fitch (14.3)% 25 Coach (3.4)% 25 Best Buy (0.3)%26 Ascena Retail Group (15.7)% 26 Staples (3.7)% 26 Staples (2.4)%

27 Li & Fung (17.3)% 27 Abercrombie & Fitch (8.7)% 27 Chico's (6.9)%28 Esprit Holdings (17.4)% 28 Li & Fung (18.3)% 28 Abercrombie & Fitch (7.6)%29 Coach (17.6)% 29 bebe (27.2)% 29 Esprit Holdings (16.9)%30 bebe (38.3)% 30 Esprit Holdings (28.9)% 30 Aeropostale (21.0)%31 Aeropostale (58.4)% 31 Aeropostale (46.1)% 31 bebe (21.4)%

S&P 500 13.4% S&P 500 14.1% S&P 500 6.9%S&P 500 Retail Index 23.1% S&P 500 Retail Index 23.8% S&P 500 Retail Index 11.5%

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


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DRIVEN BY EARNINGS IMPROVEMENT

12012 represents 53-week view (52-week estimate is $2.84)22015 represents the high-end of our 2015 EPS guidance

1 2


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OPERATING INCOME - “PATH TO HIGH TEENS”

“ High Teens” Goal

Note: Q4 2012 adjusted to 13 week view

17.3%

12%

13%

14%

15%

16%

17%

18%

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2010 2011 2012 2013 2014 2015

O p e r a

t i n g

I n c o m e

% o

f S a

l e s

T r a

i l i n g

T w e l v e

M o n

t h s


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IMPROVEMENTS DRIVEN BY:

1. Strength of the Victoria’s Secret and Bath & Body Worksbrands and the attractiveness of the intimate appareland personal care/beauty categories

2. A focus on fundamentals:

Customers

Core (“Best At” ) merchandise categoriesInventory management, flow, turn and in-stock

Speed / read and react / chase

Store selling and operations

3. Experienced, aligned and focused management team


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12009 adjusted for third party sourcing business2Sales on likes businesses

(in millions) 20091 2014 $ CHANGE % CHANGE

Sales2 $7,848 $11,454 $3,606 46%

Operating Income $811 $1,953 $1,142 141%

Inventory $1,037 $1,036 ($1) 0%

GROW INVENTORY SLOWER THAN SALES


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-12%

-8%

-4%

0%

4%

8%

12%

16%

Sales Exp ense

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GROW EXPENSES SLOWER THAN SALES

Approximately $580M in savings since Q3 2009

*

* Expense increase due to incentive compensation and store selling initiatives


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HEALTHY REAL ESTATE

10


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THE BUSINESS GENERATES SIGNIFICANTCASH FLOW

($ in Millions) 2010 2011 2012 2013 2014 2015F (1)

Operating Cash Flow 1,284 1,266 1,351 1,248 1,786 1,550 - 1,650

Capital Expenditures (274) (426) (588) (691) (715) (850)

Free Cash Flow 1,010 840 763 557 1,071 700 - 800

Regular Dividend (197) (248) (296) (349) (399) (590)

Retained Cash Flow 813 592 467 208 672 110 - 210

(1) Based on the high-end of our 2015 EPS guidance of $3.73 per share


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Pro formain billions 2005 2010 2011 2011 (1) 2012 2013 2014 2015F (4)

Balance Sheet Debt $1.7 $2.5 $3.5 $4.5 $4.5 $5.0 $4.8 $4.8

Capitalized LeaseObligations (2)

$4.6 $4.1 $4.4 $4.4 $4.6 $4.9 $5.2 $5.5

Total Adjusted Debt $6.3 $6.7 $7.9 $8.9 $9.1 $9.9 $9.9 $10.3

EBITDAR(3) $1.9 $2.2 $2.5 $2.5 $2.6 $2.7 $3.0 $3.2

Adjusted Debt / EBITDAR 3.3x 3.0x 3.2x 3.6x 3.4x 3.6x 3.3x 3.2x

End of Year Cash $1.2 $1.1 $0.9 $0.9 $0.8 $1.5 $1.7 $1.2

Debt Rating at End of Year(S&P/Moody's/Fitch)

BBB/Baa2/NR

BB+/Ba2/BB+

BB+/Ba1/BB+

BB+/Ba1/BB+

BB+/Ba1/BB+

BB+/Ba1/BB+

BB+/Ba1/BB+

BB+/Ba1/BB+

CONSISTENT LEVERAGE

121212

(1) Pro forma the $1 billion bond issuance from February 2, 2012

(2) Calculated as 8 times total rent expense, including all brands owned at the time(3) Adjusted operating income, excluding depreciation & amortization and total rent expense(4) Based on the high-end of our 2015 EPS guidance of $3.73 per share


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NO MATURITIES UNTIL 2017

Debt Maturity Profile


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14Note: Reflects cash distributions from 2010 through August 1, 2015

$8.5 BILLION RETURNED TO SHAREHOLDERS

CASH DISTRIBUTIONS SINCE 2010

Regular Dividends $1.8 billion

Special Dividends $4.2 billion

Share Repurchases* $2.5 billion

Total $8.5 billion

*At an average price of $41.28 per share


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OPERATING INCOME POTENTIAL

16

17.3%18.0%

16.5%

8%

10%

12%

14%

16%

18%

20%

22%

24%

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2009 2010 2011 2012 2013 2014 2015

O p e r a t

i n g

I n c o m e

% o

f S a l e s

T r a i

l i n g

T w e l v e

M o n

t h s

L Brands

Inditex

H&M

(1) L Brands results actualized for the quarter needed 8/1/15(2) Inditex results actualized for the quarter needed 7/31/15(3) H&M results actualized for the quarter needed 5/31/15


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FOCUS ON SPEED AND AGILITY


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3.1

3.6

3.7 3.6

3.9

4.0

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FOCUS ON SPEED AND AGILITY

Trailing Twelve Month Dollar TurnTotal L Brands

YE 2013

YE 2014

YE 2012

YE 2011

YE 2010

Q2 2015


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FOCUS ON STORE SELLING AND EXECUTION

Driving increased conversion rates through abetter store experience

A focus on store selling

― High-quality talent

― Increasing the ratio of full-time to part-timeassociates

― Increased training hours

― Productivity


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SQUARE FOOTAGE GROWTH – VICTORIA’S SECRET

Right size Lingerie

– More than800stores do not

carry the full Lingerie assortment

Right size PINK

– More than650stores do notcarry the full PINK assortment

Adjacent categories

– Victoria’s Secret Sport – Loungewear/Sleepwear

– Swim


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Woodfield MallChicago, IL


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289 EXPANSIONS2007 – Q2 2015

Selling Square Footage Up about 50%

Average Store Size 8,000 ssf

Sales Up about 40%

Productivity About $850 per ssf

Profits Up about 25%

IRR About 25%


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Buckland HillsManchester, CT


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122 U.S. PINK FREE-STANDING STORESOPENED THROUGH SECOND QUARTER 2015

PINK free-standing store productivityis more than $1,000 per foot

Average store size is approximately3,400 ssf

Lingerie store sustains pre-remodelvolume

Expected total center IRR about 25+%


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WE ARE INCREASING OUR INVESTMENTTO DRIVE GROWTH

70% invested in stores; consistent improvement in ROIC

74160


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WE ARE INCREASING OUR INVESTMENTTO DRIVE GROWTH

Note: Company owned stores including La Senza Canada closures

(100)

0

100

200

300

400

2010 2011 2012 2013 2014 2015F

S

e l l i n g

S q u a r e

F e e t ( 0 0

0 s

)

Selling Square Footage Growth vs. LY

0% (0%) (1%)

3%

3%3%


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1. Very substantial sales and profit opportunity

2. At a rate equal to or accretive to the total

3. Outstanding returns on investment

4. Building for long-term, sustainable growthand profitability – operating income dollarcontribution not significant in the short-term

INTERNATIONAL GROWTH OPPORTUNITY

30

Victoria’s SecretNew Bond Street, London


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FOUNDATIONAL PRINCIPLES


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INTERNATIONAL OPERATING MODEL

1. A partnership-based (franchise) business model

2. Small number of world-class partners

3. High control model: we own assortment,pricing, promotions, store design and realestate approval

4. Partners make capital investments, have realestate skills and build retail sellingorganizations

5. We get paid on retail royalty basis

6. We have our people living in country: training,coaching, expediting and escalating


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INTERNATIONAL - WHERE WE ARE TODAY


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INTERNATIONAL PRIORITIES


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Year End 2014 2015 New Stores 2015 Closures Year End 2015 Forecast

Victoria's Secret Beauty & Accessories (VSBA) 290 108-128 (8) 390-410

Victoria's Secret UK 10 4 - 14

Victoria's Secret International 14 4-6 - 18-20

BBW International 80 45-55 (2) 123-133

Total VS & BBW International 394 161-193 (10) 545-577

La Senza Canada 145 1 (16) 130

La Senza International 266 3-6 (28)-(40) 229-244

Total Other 411 4-7 (44)-(56) 359-374

Total International 805 165-200 (54)-(66) 904-951

L BRANDS, INC.INTERNATIONAL STORE COUNT

2015 FORECAST

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INTERNATIONAL - 2015 OUTLOOK


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We have global, category-leading brands with high emotional content thatgenerate substantial income and cash flow

Our overriding focus is on the substantial growth opportunity in North America

We believe there is substantial opportunity for international growth and expect itto be accretive to the total company operating margin

We are targeting 10% annual operating income $ growth (or better) and anoperating income rate in the high-teens

We will continue to manage inventory, expenses and capital with discipline

We remain committed to returning excess cash and generating superior returnsfor shareholders

We continue to emphasize maintaining a strong cash and liquidity position whileoptimizing our cost of capital with a balanced interest for both bond and equityholders 36

SUMMARY


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Reconciliation of Reported Results to Adjusted Results

This presentation contains certain unaudited "Adjusted" financial information which representsnon-GAAP financial measures. This unaudited "Adjusted" information should not be construed

as an alternative to the reported results determined in accordance with GAAP. Further, theCompany's definition of "Adjusted" information may differ from similarly titled measures usedby other companies. While it is not possible to predict future results, management believesthe unaudited "Adjusted" information is useful for the assessment of the ongoing operations of the Company. The unaudited "Adjusted" information should be read in conjunction with theCompany's historical financial statements and notes thereto contained in the Company's

quarterly reports on Form 10-Q and annual reports on Form 10-K. The following pagescontain reconciliations of certain reported results to the adjusted results used in thispresentation.

APPENDIX


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APPENDIX

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Reported Adjustments Adjusted

Net Sales 2,512$ -$ 2,512$

Gross Profit 1,056 - 1,056

General, Administrative and Store Operating Expenses 684 - 684

Operating Income 372 - 372

Earnings Per Share 0.84 (0.23) 0.61

The Reconciliation of Reported Results to Adjusted Results reflects the following:

The "Adjustments" column includes the following:

˙

Reconcil iati on of Reported Results to Adjusted Results

Q1 2015(in mil lions except per share amounts)

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


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Net Sales 10,459$ -$ 10,459$

Gross Profit 4,386 40 4,426

General, Administrative and Store Operating Expenses 2,720 (1) 2,719

Operating Income 1,573 134 1,707

Earnings Per Share 2.54 0.38 2.92



˙˙˙˙ A $12.7 million pre-tax gain ($8.2 million net of tax), included in other income and expense, from $13.4 million ofcash distributions related to the company’s Easton investments.

Reconcili ation of Reported Results to Adjusted Results

2012(in mi lli ons)

A $93.2 million pre-tax charge ($91.2 million net of tax) related to the impairment of La Senza goodwill and otherintangible assets;

A $26.9 million pre-tax charge ($16.6 million net of tax), included in buying and occupancy expenses, related to theimpairment of Henri Bendel store fixed assets;$14.0 million ($14.0 million net of tax) of store closure costs at La Senza; and

APPENDIX

40

APPENDIX


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APPENDIX


Net Sales 10,364$ -$ 10,364$

Gross Profit 4,057 17 4,074


Operating Income 1,238 308 1,546




˙˙˙˙̇˙

A $86 million pre-tax gain ($56M net of tax) related to the sale of shares on Express, Inc. common stock;

$24 million ($24M net of tax) of restructuring expenses at La Senza.

Reconci li atio n of Reported Results to Adj usted Results

2011(in m il lio ns ex cept per share amoun ts)

A $232 million pre-tax charge ($203M net of tax) related to the impairment of La Senza goodwill and other intangibleassets;

A $147 million non-taxable gain and associated pre-tax expense of $163 million ($112M net of tax) associated withour charitable contribution of Express, Inc. common stock to The Limited Brands Foundation;

A $111 million pre-tax gain ($99M net of tax) related to the sale of 51% of our third-party sourcing business toSycamore Partners;

A $56 million tax benefit related to certain discrete income tax matters; and

APPENDIX


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APPENDIX


Net Sales 9,613$ -$ 9,613$


General, Administrative and Store Operating Expenses 2,347 - 2,347

Operating Income 1,284 - 1,284




˙̇˙̇

˙

˙ A $7 million pre-tax gain related to the Express dividend payment ($4M net of tax).

A $25 million pre-tax loss ($16M net of tax) associated with the early retirement of portions of our 2012 and 2014maturity bonds;A $20 million pre-tax gain and a related net tax benefit of $22 million associated with the sale of our remaining25% interest in Limited Stores; and

Reconcil iati on of Reported Results to Adjusted Results

2010(in millions except per share amounts)

A $52 million pre-tax gain ($32M net of tax) related to the initial public offering of Express including the sale of aportion of the company’s shares;A $49 million pre-tax gain ($30M net of tax) related to a $57 million cash distribution from Express;A $45 million pre-tax gain related to the sale of Express stock ($28M net of tax);

APPENDIX


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APPENDIX


Net Sales 8,632$ -$ 8,632$


General, Administrative and Store Operating Expenses 2,169 - 2,169

Operating Income 868 (9) 859




˙̇˙

Reconci li ation of Reported Results to Adjusted Results

A pre-tax gain of $9 million and a related net tax benefit of $5 million related to the disposal of a non-core joint venture$23 million of favorable income tax benefits primarily related to the reorganization of certain foreign subsidiaries; and$9 million of favorable income tax benefits primarily due to the resolution of certain tax matters.

2009(in millions)

APPENDIX


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APPENDIX


Net Sales 9,043$ -$ 9,043$



Operating Income 589 129 718

Earnings Per Share 0.65 0.40 1.05



˙̇˙̇

˙˙

$15 million of favorable income tax benefits primarily related to certain discrete foreign and state income taxitems.

Reconcil iati on of Reported Resul ts to Adju sted Results

A pre-tax gain of $13 mill ion ($8M net of tax) related to a cash distribution from Express; and

A pre-tax charge of $19 million ($20M net of tax) related to the impairment of the investment carrying value ofanother non-core joint venture;

A pre-tax gain of $128 million ($81M net of tax) related to the sale of a non-core joint venture;

A pre-tax non-cash impairment charge of $215 million ($204M net of tax) to reduce the carrying value of La Senzagoodwill and other intangible assets;

2008(in millions)

A pre-tax charge of $23 million ($14M net of tax) for severance related to the reduction of roughly 10% of homeoffice headcount, or approximately 400 associates ;

lb 2015 investor presentation

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