Tom Katzenmeyer, Senior Vice President of Investor, Media, and Community Relations Len Slessinger, Vice Chairman and COO Ann Hailey, EVP and CFO Martin Redgrave, EVP and CAO Grace Nichols, CEO, Victoria’s Secret Stores Mark Wyckle, COO, Victoria’s Secret Stores Neil Fiske, CEO, Bath and Body Works Ken Stevens, CEO, Express Margaret Major, Goldman Sachs

Barbara Wykoff, Buckingham Research Lauren Levitan, Cowen and Company Brian Tunic, JPMorgan Chase Dana Cohen, Bank of America Tom Philandra, Susquehanna Stacy Pack, (company name not given) Kelly Tang, (company name not given) Richard Jaffey, Nicholas Paul Lusway, Credit Swiss Mark Friedman, Merrill Lynch Dana Telsy, Wesley Advisory Group Kimberly Greenberger, Citigroup Tom Katzenmeyer, Senior Vice President of Investor Media and Community Relations: Thank you, good morning everyone and welcome to the Limited Brands 4th Quarter Earnings Conference Call for the period ending Saturday, January 28, 2006. As a matter of formality I need to remind you that any forward looking statements we may make today are subject to our safe harbor statement found in our SCC File. Our 4th Quarter Earnings Release and related financial information are available on our website LimitedBrands.com. Also, this call is being taped and can be replayed by dialing by 1-800-337-6551 followed by the passcode 583. You can also listen to an audio replay from our website. This is who is with me this morning, Len Slessinger, our Vice Chairman and COO, Martin Redgrave, EVP and CAO, Ann Hailey, EVP and CFO, Grace Nicholas, CEO, and Mark Wyckle, COO at Victoria’s Secret Stores, Neil Fiske, CEO, and Tom Fitzgerald, COO at Bath and Body Works, and Ken Stevens, CEO of Express, are all here to answer any questions. After our prepared comments we will be available to take your questions for as long as time permits. Again, we plan to run the call for one-hour until 9 AM so that we can speak with as many callers that’s possibly it’s important that you limit yourself to one question, I’ll remind you about that again later. And now I’ll turn the call over to Ann Hailey. Ann Hailey, EVP and CFO: Thank you, Tom. Good morning everyone, overall we were pleased that we exceeded our initial earnings per share guidance to the dollar for the 4th Quarter by $.05¢. In additional to the $1.05, we delivered upside a total of $.23¢ per share, bringing our reported results to a $1.28 per share. First, we recorded a favorable, one-time tax benefit of $77 million or $.19¢ per share related to the repatriation of core earnings under the provisions of the American Job Creation Act. This repatriation was enabled by final approval of our negotiated agreement with the IRS. This matter has been previously disclosed in our SCC filings. Also, in conjunction with this settlement, we recorded interest income of $40 million dollars or $.06¢ per share. The second item during the 4th Quarter was that we recognized $30 million dollars of revenue and operating income for $.04¢ per share related to give card breakage at Bath and Body Works and Express. The gift card breakage amount recognized was based upon analysis of historical redemption patterns and represents the gift card balances which we believe are unlikely to be redeemed. This is the first period in which we recognized gift card breakage; therefore, the $30 million dollar breakage income related to gift cards, it relates to the cards since the inception of the gift card program at Bath and Body Works and Express. We will recognize breakage in our other divisions once we have adequate historical data. Finally, in connection with our conversion to new merchandise systems this year, we elected to change our inventory evaluation method from the retail method to weighted average cost method during the 4th Quarter of 2005. Under the retail method, we recorded a charge to cost of goods available for all inventory on hand, based upon actual and estimated permanent reductions in retail selling prices for the season. Under the cost method, we do not recognize any impact of reductions in retail selling price, until the merchandise is actually sold to the customer or until we expect to sell the merchandise below original cost. We believe that the cost method will improve the organizational focus on the actual margin realized on each merchandise sale. This is importantly as we have shifted our business focus to intimate, beauty, and personal care, we believe the cost method better requests the characteristics of these businesses and is consistent with the practices of our competitors. Our conversion to cost accounting has a number of impacts on our results. First, the cumulative affect of the change of $.04¢ per share will be recorded as all of the beginning of 2005. Second, while the change has only a penny per share impact to our Full-Year results, the timing differences in mark down recognitions shift earning between Quarters. This timing difference results in a decrease in 4th Quarter earnings per share of $.06¢. The details of the impact to the remaining Quarters are included with our press release and are available on our website. Finally, the change results in a $22 million dollar increase to inventory at the end of 2005. In order to improve your understanding of our results and to improve comparability of financial information from period-to-period, all historical results that I am getting ready to talk about on this call are under the retail method for inventory evaluation. They also exclude the three 2005 significant items that I just discussed as well as the 2004 4th Quarter adjustments the lease accounting charges $.09¢ per share. So the numbers I am about to give you are on a basis consistent with the 4th Quarter guidance that we provided to you on our 3rd Quarter earnings call. So those numbers are: 4th Quarter earnings per share were $1.05 compared to $.96¢ per share last year. Comps increased 3% and total sales increased 5% to $3.511 billion. Gross margin increased to 60 basis points to 41.5% primarily driven by buying in occupancy expense leverage. The merchandise margin rate was roughly flat. Total SG&A dollar spending increased by 11%, incremental spending was driven by marketing costs and store selling incentives; 4th Quarter operating income increased by $17.7 million. By segments the results were, Victoria’s Secret operating income increased by $20.9 million, Bath and Body Works decreased by $22.4 million, apparel results increased by $17.6 million and the other segment loss increased by $1.6 million; inventory end of the Quarter down 1% per square footage cost, apparel inventory end of the Quarter down 4% per square footage cost. During the Quarter we completed $158 million of our $200 million dollar share re-purchase program which brings the year-to-date total share re-purchases to $390.7 million and 17.4 million shares. We have since completed the balance of the $200 million program, and are pleased to announce that our Board of Directors has authorized an additional $100 million dollar share re-purchase program. That concludes my comments on the 4th Quarter and so I’ll turn it over to Martin to talk about 2006. Martin Redgrave, EVP and CAO: Thanks, Ann and good morning everyone. As you know, Ann will be transitioning to a new role, but only after she’s certifies our 2005 financial statements, so I’d like to just take a moment to express the company’s tremendous appreciation to her for all of her achievements as CFO over the last, almost nine years. I am also very happy that we will be able to continue our relationship with Ann as she moves into her new role and the Head of Corporate Development. Now turning to our outlook for 2006, first to avoid any confusion our basis of comparison, our 2006 guidance is 2005 results on the cost basis of accounting per inventories and excluding the tax and gift card items in the 4th Quarter. More specifically for 2005 numbers were compared for purposes the numbers are $.16¢ per share in the 1st Quarter, $.19¢ per share in the 2nd Quarter, $.01¢ per share in the 3rd Quarter, and $.98¢ per share in the 4th Quarter, and the total of $1.33 per share for the Full-Year. Now in the 1st Quarter we are projecting roughly flat earnings per share verses $.16¢ per share last year. This estimate is predicated on low to mid single digit comps, an increase in the gross margin rate and an increase in the SG&A rate. It also includes an estimated cost of $.01¢ per share for implementation of the new stock option expense accounting. For the Full-Year 2006, we are projecting earning per share of between $1.40 per share and $1.50 per share verses the $1.33 per share last year. Now excluding the estimated 2006 stock option expense of $.05¢ per share, this projection represents 9-17% earnings growth over 2005. This estimate is predicated on low to mid single digits comps, an increase in the gross margin rate and an increase in the SG&A rate and as I said it also includes an estimated cost of $.05¢ per share for stock option expense. We estimate that 2006 capital expenditures will be about $600-650 million dollars verses 2005 expenditures of $480 million dollars. A roughly $100 million dollars of the increase relates to investments to support the growth of our direct business including technology and investments and the building of a new distributions center for that business. We expect that inventories in the 1st Quarter on a cost of goods available for sales basis will be roughly flat verses last year. Now I’ll turn it over to our brand leaders to discuss to their results, beginning with Grace and Victoria’s Secret Stores. Grace Nichols, CEO: Thanks, Martin and good morning everyone. Victoria’s Secret Stores sales including beauty slightly exceeded 4th Quarter expectations, but were certainly disappointing. Comps increased to 3% and operating income was slightly below last year. Operating income missed expectations primarily due to a decrease in beauty merchandise margin. Our marketing campaign drove incremental traffic through direct marketing and gift with purchased programs. The increase in media, increased traffic and lifted brand awareness and total sales. We were pleased to reintroduce the Victoria’s Secret fashion show as a brand building aspect of our holiday season this year. Customers responded favorably to holiday gifting assortment particularly pink sleepwear. Pink continues to exceed our expectations and in its’ first full-year achieved almost $500 million dollars in sales. We were pleased with the 44-store test of the expanded assortment and will be growing the number of stores in the test between 90-95-stores in the spring season. Bra sales were also above last year driven by the Body By Victoria Event in December week 5 and the introduction of the Angels Secret Embrace Bra. Holiday sales in sleepwear, although below last year, met our expectations, as we work to rebuild the casual sleepwear category. We continue to introduce lounge inspired casual sleepwear and were encouraged by the early results. We continue to be disappointed with our dressy panty performance. We have addressed issues related to silhouette and we are currently testing fabric and price. Semi-annual sales results were in line with our expectation. Now going forward, in March we’re up against our most successful bra launch ever. Our March bra launch will focus on the Body By Victoria IPEX family and will be introducing a new bra to this family, the Body By Victoria wireless bra. This will be supported by direct marketing and media and our marketing position is similar to last year. We are pleased as well to announce that our IPEX technology was recently patent approved. Our spring plan is more heavily weighted to the end of the 1st Quarter with the launch of the new Very Sexy Infinity Edge bra in April. Thanks, and now I’ll turn things over to Len. Len Slessinger, Vice Chairman and COO: Thanks Grace. For today’s call, I’m going to be talking about Victoria’s Secret Beauty, Victoria’s Secret direct and limited stores. Victoria’s Secret Beauty’s comps increased slightly in the 4th Quarter. Our merchandise margin rates were below our expectations as a result of gift set promotions in December and aggressive mark downs on color during the semi-annual sale. We were pleased with the performance of our Dream Angels fragrance line, especially Heavenly, the number one fragrance in America. We distorted in store marketing to Heavenly and introduced a Heavenly fragrance commercial in December, which drove incremental sales in the month after its airing. Other winners this Quarter, were Garden, our successful daily body care line and our deluxe fragrance co fray. However, the strength in Dream Angels Garden in our co fray was offset by disappointing results in other fragrances, primarily because we did not anniversary last years Basic Instincts fragrance launch. This spring we are focused on distorting proven winners and introducing a great deal of newness; including Beauty Rough, a new cosmetics line, Bare Bronze Body Care, and Very Sexy Now, a new seasonal woman’s scent. Shifting to Victoria’s Secret Direct, they had a tremendous 4th Quarter. Sales increased 15% and operating increased significantly. Performance was above our expectations driven by strength in intimate apparel and sleepwear. Beauty also achieved especially strong sales growth over last year as we continue to invest and grow this category on a direct channel basis. For the 1st Quarter, Victoria’s Secret Direct is planning continued growth for the large part of the growth coming from our new offerings in Beauty and continued strength in intimate apparel particularly in sleepwear and bras. Limited Stores 4th Quarter comps decreased 1%; however, merchandise margins improved significantly over last year and as a result operating income more than doubled year-over-year. Looking to the 1st Quarter, shorter pant lengths will continue to be a dominant trend, and Limited Stores is positioned to take significant advantage of it. We’re also focused on shortening lead times for a more wear now focus in cut and sew tops. Thanks and let me turn over the discussion to Neil. Neil Fiske, CEO: Thank you, Len and good morning everyone. Bath and Body Works comps increased 1% in the 4th Quarter against a 12% increase last year. We were disappointed with our 4th Quarter performance. Excluding the gift card breakage adjustment from this year and the lease accounting charge from last year, our operating income decreased by 7% for $22.4 million, driven by a combination of lower merchandise margin rate and investment in the brand. We believe our miss in the holiday time period was driven primarily by four factors. First, we sent our holiday team too early with a look that was too Christmas; many of our customers told us that they were simply not ready to start thinking about or shopping for their holiday buying. Second, we put too much of our best merchandise out immediately and didn’t have enough newness over the course of a long holiday season. By November and December, our stores looked largely the same to the customer. We learned that we need to have more phases to our holiday assortment, get customers in more frequently and to have more of a sustained holiday build. Third, we tried a different direct mail strategy this year that focused less on generating transactions and more on generating dollars per transaction. We missed our plan significantly. Going forward, we will refocus our strategy on generating traffic in transactions letting our store associates build the sale. Finally, we looked too similar to last year in our major merchandising programs. In an effort to anniversary the big wins we had in 2004, we ended up with an assortment that lacked big newness or big enough evolution year-over-year. We were also disappointed in our overall performance during the semi-annual sale in January. We tried a new look to the store and a mix of merchandise that did not perform as favorably as we had hoped. We were also short of inventory on some key products and programs. As a result of this softness in holiday sale, our operating income was $22 million in the 4th Quarter; roughly half of the decline was driven by a lower merchandise margin rate which was a result of unplanned mark downs to stimulate traffic. The second big factor in our earnings declined was investments we made in the brand, including marketing, store visuals, store labor, and training. Given our recent performance, we have a cautious outlook on the spring season. We are reassessing our plans and adjusting our inventory levels. We begin spring with a focus on Valentine’s Day. The Love Is Theme featured new products from our Tutti Dolci and lines as well as a Lip Event featuring Lip Plumpers from Goldie and Patricia Wexler, MD. We also launched the trial kit for the Wexler line in all stores. We continue to be very encouraged by the response for the Pat Wexler, MD line. Full size versions of the products in trail kit were launched in all stores on February 16 and exceeded our expectations. The current store theme, Cure for the Winter Blues, features fragrances in our spa, Aromatherapy, and C. O. Bigelow lines as well as the launch of AquaTanica, a collection of marine spa treatments. Next month we will feature our Blossom theme with several new additions to our successful Cherry Blossom business; White Cherry Blossom, Pear Blossom, and Japanese Blossoms from the Daily Beauty Ritual lines, and Orange Blossom from the line. As a final point, the 4th Quarter was the first full Quarter of operations for BBW Direct. We are encouraged by our performance to date, that the site welcomed over 1 million visitors per week in the height of the holiday season. We will continue to build on our learning throughout the spring season and believe that multi-channel retailing is an important platform of our future growth. With that, I’ll turn the discussion over to Ken. Ken Stevens, CEO, Express: Thank Neil, good morning everyone. Express’ 4th Quarter results exceeded our expectations. Comps were up 6% and operating income increased significantly to last year. We focused on winning customers back with the casual, youthful, sexy sensibility and appropriate price points and self-purchase or wear now approach to the holiday. November began with an I Wish theme and focused on going out and party wear. Thanksgiving weekend was particularly strong driven by Black Friday and other pulse promotions. In December, focused promotional and selling efforts during key high volume days of the month, generated a substantial sales increase to last year. Higher than expected holiday sales resulted in much less clearance inventory being carried into January; therefore, we did not need to run our clearance sale as long as last year contributing to our higher margin performance this year. We cut the first spring floor set the last week of January. We are encouraged by our customer’s initial response. Increases in transactions are more than offsetting the lower average unit retail of this year’s assortment. Pants, knit tops, and sweaters in particular are performing well. In addition, we launched slimmer fits with the introduction of the Skinny Jean and the stylist Pant. Initial indications are very positive. In the 1st Quarter, we’ll continue our emphasis on casual lifestyles with particular focus on being the customer’s first choice for of her legs purchases and winning her over with out knit assortment. Operationally, we will continue to focus on quicker reaction time to trends to customer needs and optimizing merchandise flow, while maintaining prices that are aligned with our customer’s expectations. Thanks and now I’ll turn the discussion back over to Tom.

Thanks, Ken. Operator we are now ready for the question and answer portion of the call. Again, we intend to run the call until 9 AM. We would like to get to as many questions as possible; if you can tee them up I’ll help them by moderating.

Our first question comes from Barbara Wykoff, Buckingham Research

Hi everyone, this is a question for Grace regarding Pink. Can you talk about plans to expand Pink perhaps into it’s own stores based on the success of the additional classifications, do you have any stand alone at this point, what has been the performance, and are there any changes between those stores verses the in store shops?

Barbara, we are going to Mark Wyckle for that question. Mark Wyckle, COO, Victoria’s Secret Stores: Barbara, today we have been very pleased with the expanded assortment that we have provided to the 43 additional stores in fall of 2005 and we’ll expand that assortment to a total of about 90-95 stores in spring of 2006. Based on that learning, we hope to consider a free standing option in fall of 2006, begin the exploration then.

Lauren Levitan, you may ask your question and please state you company name, Cowen and Company

Thanks good morning, my question is for Neil. Neil, you commented that the plans for spring incorporate some changes in your inventory and marketing plan, I am wondering in if you could elaborate on those and maybe give us some sense as to what metrics we should be watching for as indications of improvement, and how long you think it might take to bring the kind of newness and marketing plans to restore operating profitability growth for BBW? Thank you.

Thanks Lauren. Just to be clear, our investments for the spring are not so much in inventory levels but marketing programs design to support or next brands. Overall, as we look forward to the spring season, we’re really doing two things simultaneously. First, building on our proven winners in lines like Daily Beauty Rituals and Aromatherapy and True Blue Spa, while secondly adding to and building upon the new lines that we believe will take our customer to a new place which include C.O. Bigelow, Pat Wexler as two primary marquee next brands and so as we look forward to the spring season, you’ll see more direct marketing focused on building those programs driving traffic into the store, let our sales associates build the sale. You’ll also see, hopefully, the first launch of the BBW catalog in late spring, which we believe will be a very important marketing vehicle for us, for the brand, not just the position master brand, but to tell the stories of all these great sub-brands we’re bringing to the market and really the first major step into becoming true multi-channel retailer. And we believe that multi-channel retailing through the web, through e-mail, through catalog is one our best marketing growth platforms.

Brian Tunic, you may ask your question and please state your company name, JPMorgan Chase

Hi, I guess for Neil again maybe some color on the results of the C. O. Bigelow store you opened last year verses the Flagship BBW stores that have been running for a little while and then maybe just as far as the core BBW stores, are you happy, are you still tweaking the mix between the private label and the third party brands? Thanks.

First on the question of the Bigelow stores, overall we are very happy with the performance of the Bigelow stores and are particularly encouraged by their performance in the best malls in the best locations where historically our performance has not been up to par. In the downtown urban centers like Plaza and Water Tower in Chicago, we are running well ahead of where a BBW store would have traditionally run including the BBW Flagship store. And so I think the results from the those Bigelow openings in those downtown urban locations are very encouraging suggest to us that Bigelow’s position as a modern urban apothecary is right on the mark and although we could improve the concept, but I think the initial indications are quite good. With respect to the core store and third party brands, we really have three classes of brands. One class is those that are identified as Bath and Body Works brands, like Daily Beauty Rituals or Aromatherapy, second class are brands that look to our consumer like third party brands but are really BBW controlled brands and those would include C. O. Bigelow, , and Pat Wexler, and then the third category is true third party brands that we don’t own and control and in the core stores you will see very little true third party brands. Most of what you’ll see are the brands that look to the consumer like third party brands, but are in fact are controlled destination brands that have more favorable margins for us.

Dana Cohen, you may ask your question and please state your company name, Bank of America

Two quickies, one Neil, I guess I don’t understand, if I look at those issues that hit the 4th Quarter, most of them are 4th Quarter issues, I guess I don’t quite understand what are the issues now into the 1st Quarter and when that gets resolved and then second on the SG&A, Ann or whoever, if someone could talk about why SG&A is going to go up as a percent to sales on a low to mid single comp, what is driving that?

I think the biggest question coming out of the 4th Quarter is a challenge for us, is really building traffic and walking our customer through this next phase as the BBW transformation and clearly one of the things that we learned last year is that we have to walk not run, then we have to migrate very carefully to the new product lines that we’re bringing in and so for spring our marketing programs are really designed to drive traffic first of all and then secondly to build trial in the programs but I think stimulating traffic is our number one objective at this point.

Hi, yes Dana, there are a couple of things to look into SG&A both for the 1st Quarter and the Full-Year. First of all, I think it is important to understand that we are very strongly holding the line on home office department spending as we did in the fall and I think Ann had talked about it in our fall calls, so that’s consistent into 2006. We are also though continuing to invest incrementally in marketing and new systems capabilities to enable and drive our growth. In particular for 2006 we will be continuing to invest in the new technology initiatives for our supply chain management systems and as I mentioned in my comments also for Victoria’s Secret Direct, which is a new investment. And finally, in terms of this year-over-year number, our 2006 projections include full incentive compensation, expenses which 2005 unfortunately did not include and also the incremental stock option expense, which as I said is about a $.01¢ per quarter and $.05¢ in total for the year.

Tom Philandra, you may ask your question and please state your company name, Susquehanna

Neil, could you provide a better understanding of the impact you are seeing from the introduction of eCommerce as well as sort of the selling experience there maybe store canalization, particular product selling by the web, and maybe even some new to file customer reach if you have any data on that, that would be great. Thank you.

Yes, I think the short answer would be so far we’ve seen limited impact one way or the other both in terms of leveraging the web as a marketing vehicle for the stores and for our best customers. Certainly, we have seen absolutely no evidence of any canalization from the web and stores. Looking forward, one of our big objectives will be to build our e-mail file which as of this date, is only about 2.5 million customers verses our direct marketing file which is over 25 million customers, so if we can have the same kind of success in collecting and building our e-mail database, we believe that this is incredibly an effective way to market the brand, the Limited e-mail campaign that we have done so far, with a limited number of names, have proven highly effective both in stimulating web traffic and in drive to the store. And, one of the things that we know from our sister division as well as our benchmark of other competitors, is that the multi-channel shopper is worth 2-3 times what a single channel shopper is worth and that’s why we are so optimistic about multi-channel retailing as really an engine of growth for us that is totally additive and totally incremental. Operator Stacy Pack, you may ask your question and please state your company name, company name not given

Thanks, I was hoping that you guys could tell us why you are looking for a flat 1st Quarter now, you know is it BBW’s operating income is supposed to be down again and the other not or just sort of us help us there and then also how are you going to measure whether Express is turn is a success, is there a particular operating margin or metric sales per square foot for a certain time frame, etc. that we should be looking for? Thanks.

Yes, Stacy, as you know we do not provide segment guidance, but in terms of what our outlook is for the 1st Quarter, we are expecting substantially improved performance in apparel especially at Express. We’re looking for continued persistent growth at Victoria’ Secret and as you’ve heard we have a very cautious of performance at BBW and my comments about SG&A would also affect Q1.

Stacy, relative to the Express question, I think our desired and gold metrics have been changed one bit for the since we articulated them a while ago, which is that we are looking for and we are running a business to generate returns in the mid-teens in terms of earnings as percentage of sales so that hasn’t’ changed at all and that is the target we shooting at.

Is there a date?

Obviously, when we talked about the brand a year ago, we talked about a process where we looking for directional progress in the brand and we weren’t going that directional progress quite honestly at the end of our financials we were looking for a return of the customer, we were looking for positive comps, we were looking for improvements in margins. The reality of it is we’ve experienced all of those things. The last thing in the world we would do at this point is call for a turn. What we see are a lot of positive indications, we see improvements, profitability, and we are quite positive about all of that. I think the issue becomes one of, we are goaling ourselves to have continuing progress in this business and without continuing progress in this business, we would be left unsatisfied, so is there a specific date for a specific turn, the answer is no.

Kelly Tang, you may ask your question and please state your company name, company name not given

Hi guys, this is actually Kelly Tang calling in for Jeff Black, another question on apparel. Margins were up significantly in 4Q, it looks like you guys recovered nearly ¾ of what you lost last year, I was kind of wondering if you could give this a little bit more clarity, how much of it was driven by better margins through a lower market down, better inventory management, and can we expect to see that sort of margin recovery rate that 75% through 2006 or what would prevent us from seeing that? Thanks.

In terms of the margin improvement in the 4th Quarter, it was a combination of fewer mark down, better management of pricing and frankly just better selling at regular price which to us is basically an indication that the customers were much more receptive to what we were putting in front of them. Our average unit retail in the Quarter was down significantly as was our average unit cost and so you combine that with the attractiveness of the products of the customer and you could see what happened. The other thing is, I think we were a lot smarter in terms of how we managed pricing in the brand during the 4th Quarter and didn’t hold onto to a lot goods and then try to blow them out at incredibly low prices in January, but rather as time went a lot in the 4th Quarter made appropriate pricing moves that resulted, as I mentioned in my prepared remarks, a lower inventory level in January that you would have to clear at low margins, so as a result January is always a loss and our January was significantly better because of that.

Richard Jaffey, you may ask your question and please state your company name, Nicholas

Thanks very much. Can you guys talk about advertising and marketing efforts particularly on the apparel side but also Bath and Body Works, both in terms of dollars and new initiatives we should look for this year?

Good morning, our main focus in terms of advertising dollars is in direct mail and directed to a specific customer communication and we have upped our circulation of those programs substantially and have a program that is basically tied to each new floor set and we’ve segmented our customer base so we have specific communications and in some cases offers to specific customer segments. We are building our customer database at the rate of a little over 200,000 people per month and so this is becoming a much more valuable tool for us as we’ve gone forward.

I think there are kind of two parts to our answer on this. The first is the series of investments that will make around what we call the destination brands the best example of which is Pat Wexler skin care and you’ll see for each of these destination brands, the customized market index that’s suitable to build that brand and suitable for what the product is. So for example with Pat Wexler, we are experimenting with infomercials with QVC, but forms of advertising that really have a revenue strength associated with them; and therefore, are much easier for us to up quickly. We have very positive results when we put Pat Wexler on QVC, she was schedule for an hour and she sold out in 50 minutes and far exceeded their expectations and ours. We believe there is something in that direct television channel or the Pat Wexler line is a helpful advertising vehicle. We’re also exploring print and other traditional advertising vehicles for Pat Wexler and for C. O. Bigelow but don’t have plans as of yet that we can comment on. And then in the second broad directions, is continue to maximize the power that we have as a direct marketer with 25 million names, we believe we are just scratching the surface in the way in which we can communicate directly with our customer and given the fragmentation of media and the rising costs of media exposures, we believe that direct marketing is a most powerful, highest return on our investment and that includes the multi-channel strategy that we’ve under taken.

Paul Lusway, you may ask your question and please state your company name, Credit Swiss

Just given the accounting change from retail to cost, can you talk about the level of mark downs coming out of the 4th Quarter by brand? And that’s verses last year of course. Ann Hailey For the 4th Quarter before we abandon the retail method of accounting and moving to costs, the overall INU for the brand which is comprised of course of the INU and then the mark downs was down about 20 basis points, so we were roughly flat. The mark down levels were the largest at the highest change at Victoria’s Secret followed by BBW and then there was a big improvement in mark down levels at the apparel brand. So we were about 100 basis points of deterioration and mark downs verses the 4th Quarter of last year.

Hi Paul this is Amy, is that what you were asking, does that answer your question?

Yes, it does. I am just trying to get a sense of the mark downs and make sure that I am understanding the mark downs that are in store at the end of the 4th Quarter would actually under the cost method have exposure to the 1st Quarter margins, is that right?

So you’re asking currently in stores at the end of the 4th Quarter, how much like of a percentage of the inventory was…

Right, like the depth and of mark downs this year at the end of the 4th Quarter verses last year at the end of the 4th Quarter.

It was very comparable, I mean essentially we moved into the 1st Quarter on a very clean inventory basis, I mean we sat our spring floor set at the end of January, so there really wasn’t any significant level of mark downs in the stores.

And what I'd add is that has been a consistent practice. We clean out our, we don’t box things up, we clean out our inventory at the end of every season, we mark them out of stock and in particular the Quarterly sales we’ve added that the apparel brands have in and the big sale of both at Victoria’s Secret and Bath and Body Works on a semi-annual basis. We have a pretty disciplined process of saying were not going into the next season with that inventory. Operator Mark Friedman, you may ask your question and please state your company name, Merrill Lynch

Good morning. Grace, I was wondering if you could talk about the performance for some of the 3rd party brands, Intimicimi, Chantal Thomas in the 4th Quarter, could you also give an update as to what you have planned for them in 2006 and any other new brands you are looking to add? Thanks.

Mark, just a quick update the Intimicimi agreement that we have is an exclusive licensing agreement in the United States covering all channel and Intimicimi is the leading retailer of lingerie in Italy so next year and 2007 we also intend to begin the distribution of Intimicimi Beauty Products so I wasn’t sure if we had mentioned that to you before. We have been very pleased with the result of 26 store-in-store test that we have Intimicimi that we plan on expanding that by the end of 2006 to about 160-165 store-in-stores. I’ve been very pleased with that and a couple of things from the customers perspective, they’ve really responded favorably to the weekly flow of fashion, and also to the of assortment and I think as you know, Mark, we opened last fall one Intimicimi free standing location here in the East end and had been pleased from what we learned from that and will continue to learn from that in the spring of 2006.

Yes, I am out here in New York so that’s why we are having a little trouble trying to coordinate with one another, but we are very, very excited about Intimicimi and do have the plans that Mark outlined going forward. As we looked at the balance, the primary balance of our 3rd party effort, it was primarily an upscale designer fashion assortment and the conclusions that we’ve drawn is that we had good response to those ventures in urban markets, not unlike the Bigelow story, very sophisticated market, so as a result going forward into 2006, we’re really going to consolidate our efforts in terms of trying to understand what the market potential in our most sophisticated urban markets. Chantal Thomas is certainly a part of that Roberto Cavali, Dolce and Gabbana, Betsy Johnson, we just went to salon to lingerie so we have a much better articulated plan as based on the learnings that we’ve have in 2005 going into 2006. And finally, the other really significant success story and 3rd party brand was the, will be in the 2nd Quarter the introduction of a new sport bra program that we’re co-branding with Shock Absorber. We tested that last year in March, April, May period in Los Angeles and based on the results of those tests it’s going to be an important part of our total spring season marketing plan.

Dana Telsy, you may ask your question and please state your company name, Wesley Advisory Group

Can you please talk a little bit about Express the mix of basic verses fashion, where are you in the evolution and where would you like to be? And then Victoria’s Secret, I think the marketing budget has been in the 4th Quarter with the TV commercial and all, what should be expect going forward? Thank you.

Good morning, Dana. We have, you can kind of think about our product assortment in sort of two key areas. One is what we are now calling legs which we used to call pants, but we’ve expanded some to include anything, any bottoms basically, that I think you could categorize that further into denim, wear to work and casual and in each of those categories there will be a layer that is primarily basic than with frequent in and out fashion and depending on the category, denim will have a relatively small layer of fashion and mostly basic, casual will be mostly fashion, and the wear to work, the Editor in particular, will obviously be mostly basic with shots actually on almost a monthly basis. On tops we would have a smaller layer of basics and a much higher proportion of fashion and so this combination what we’re finding is taking the critical pants which are really driving loyal customers to repeat purchases combined with fashion tops which are really what drives a lot of impulse buying and a lot of getting people to turn their heads and actually walk into the store gives us a pretty powerful combination.

So we’ll continue to focus our marketing effort on both brand building and traffic driving and activity. Specifically in the 1st Quarter, our major bra launches will be supported by a level of media consistent with major launches last year. Secondly, we’ll also continue to have an increased investment in customer relationship marketing, which is really about driving traffic to the stores.

Margaret Major, you may ask your question and please state your company name, Goldman Sachs

And first of all, Ann congratulations on your new job, we’ll miss you on the conference call and what is corporate development, what will you be working on? And, I do have a couple of financial questions. On the capital expenditures, can you go over besides the extra $100 million that you’ll be spending on Victoria’s Secret Direct, can you just talk about the major buckets of Cap X, what was spent in 2005 and what you’ll be spending in 2006 and how, as you look at the guidance of the 140-150, will the corporation operating margin be trending up, down, flat and how do you think about the stepped up Cap X in the context of return on capital, so if you can you address all of that that would be great as your last financial.

Let me try to try to address the multiple parts there and I’ll, in terms our overall Cap X spending for 2006, is reasonably consistent with 2005 in a couple of respects. Over half of our spending will continue to be dedicated to new real estate investments either for new stores or reconstruction of existing store or refixturing of existing stores it was a little bit higher percentage in 2005. as I mentioned in 2006, we have continued investment in new technology platforms that was around $100 million in 2005 it’s going to be around $120 million in 2006 and then the other major variable year-over-year is this new distribution center that we are building for our Victoria’s Secret Direct Business and that’s going to require about $80 million dollars of capital in 2006 which was not being spent in 2005. So I think that gives you a pretty good break down on year-over-year and the components of 2006. From a return on capital perspective, as we always have, I think the company has an excellent discipline around demanding the kinds of return on costs of capital that we have consistently delivered and we have, I think a very enviable track record in terms of return on capital on new store and reconstruction projects, which is where most of our capital is going. We obviously anticipate that the new technology platforms that we are building, will enable growth and enable speed and allow us to be even more efficient at scale; and therefore, should produce very strong return on capital as well.

Well I was going to say that my current priorities right now are the Year-End Earnings finishing up the financials, making sure we issue a quality and certify the financials . Once that’s done, I’ll move to new responsibilities and those will be in the area of what we would probably call offense. And we’ve talked a number of times about, a few years ago, we moved from clothing store, splitting, spinning, to try and to grow offensively and realize that we don’t have enough resource to devote to those kinds of projects, because just the running of the day-to-day business is very time consuming, so I will work on a variety of things that we would call new initiatives offense.

Kimberly Greenberger, you may ask your question and please state your company name, Citigroup

Great, thank you. My questions are for Neil, Neil it seems as though the Pat Wexler line is somewhat production constrained here in the near term, when do you think you can get the production ramped up on that and secondarily, with Bath and Body Works seeing a sales increase in 4th Quarter with gross margins flat, it would seem that the line share of the decline in operating profit would be due to higher SG&A and I know you talked about a couple of other factors, but if you could just comment on, be a little more specific about the pressures of SG&A and whether those are expected to continue into 2006, that would be helpful, thanks.

Kimberly, this is Amy. Just to clarify there is a difference between the information in the financial package and what we actually discussed on the script because of the lease accounting adjustment, so if you take out the lease accounting adjustment from last years results, Bath and Body Works gross margin were actually down in the Quarter and I think Neil talked about roughly half of the operating income decline is due to that decline in gross margin. I just want to clarify that before we went to Neil.

On the first part of the questions, Kimberly, the good news and the bad news of beating our expectations on the Pat Wexler line is that we are inventory constrained, we don’t expect it that it will take us more than 8-10-weeks to get back fully in stock but we are running at a level that’s more than twice our expectations of what we would be selling, so I think it’s a good news problem to have and it won’t take us that long to get back into stock in the scheme of things. I think we don’t know how high is high yet on this line, so we will continue to experiment how big we can make it. And very specifically, on the SG&A question, the other thing I would say on that besides Amy’s comment, is that a lot less of it is structural and more of it in the 4th Quarter was discretionary investments that we chose to make in trying to build the brand that we can or can’t, we have the discretion of making going forward depending on where we are in the brand evolution and our need to do so in the future.

That concludes our call, I want to thank everyone for limiting their questions, this is a good call for us, we were able to get to a lot questions and I hope we were as thorough as possible for you. And, I also hope it helps that we crossed financials last night so you can get a little bit of a head start on this today. So, thanks everyone for tuning in today.