Tom Katzenmeyer – SVP, Investor, Media and Community Relations Martyn Redgrave - EVP, CAO, CFO Grace Nichols - CEO, Victoria’s Secret Stores Neil Fiske - CEO, Bath and Body Works Jay Margolis - President, Apparel Amy Preston - VP, IR

Lorraine Maikis – Merrill Lynch Kimberly Greenberger - Citigroup Brian Tunick – JP Morgan Stacy Pack – Prudential Paul Lejuez – Credit Suisse Tom Filandro - Susquehanna Financial Group Lauren Levitan – Cowan & Co. Margaret Mager – Goldman Sachs Richard Jaffe – Stifel Nicolaus Dana Cohen – Banc of America Neely Tamminga – Piper Jaffray

Welcome to the Limited Brands, Inc. second quarter earnings release conference call. (Operator Instructions) Now we’ll turn the meeting over to Mr. Tom Katzenmeyer, Senior Vice President, Investor, Media and Community Relations. Sir, you may begin.

Thank you and good morning, everyone. Welcome to the Limited Brands second quarter earnings conference call for the period ending Saturday, July 29, 2006. As a matter of formality I need to remind you that any forward-looking statements that we may make today are subject to our safe harbor statement found in our SEC filings. Our second quarter earnings release and related financial information are available on our website, limitedbrands.com. This call is being taped and can be replayed by dialling 1-800-337-6551 followed by the pass code 583. You can also listen to an audio replay from our web site. Martyn Redgrave, EVP, CAO and CFO, Grace Nichols, CEO, Victoria’s Secret Stores, Neil Fiske, CEO, Bath and Body Works and Jay Margolis, President of Apparel are all joining me today. Amy Preston, VP of Investor Relations is also with us. As always, after our prepared comments we will be available to take your questions for as long as time permits. We expect the call to run until about 10:00 a.m. So that we can speak with as many callers as possible, it is important that yourself to one question. With that, I’ll turn the call over to Martyn.

Thanks Tom, and good morning, everyone. We’re very pleased with our second quarter results. As you know, earnings per share increased 40% to $0.28 per share. Our comps increased by 5% and our total sales also increased 7% to $2.454 billion. Gross margin increased by 230 basis points to 34.8%, primarily driven by an improvement in merchandise margin at Express. In addition, we also leveraged our buying and occupancy costs. Our total SG&A dollar spending increased by 11%, which was slight de leverage by 90 basis points. Our incremental spending was driven primarily by the following: First, about half of the SG&A increase was driven by an increase in marketing expenses, primarily at Victoria’s Secret to support new product launches and Grace will talk more about that. Second, an increase in our incentive compensation expense year-over-year which was driven by improved performance. Third, an increase in total payroll costs, which were leveraged as a percentage of sales but were necessary to support our increased sales levels. Fourth, we made incremental investments in technology and infrastructure as we’ve discussed in prior calls. Finally, we recognized incremental stock option expense related to our adoption of FAS 123(R). Our second quarter operating income increased by $43.4 million and by segment the results were Victoria’s Secret operating income increased by $5.8 million, Bath and Body Works increased by $18.8 million, Apparel results improved by $27.6 million and our other segment net expense increased by $8.7 million. Our inventories ended the quarter up 19% per square foot at cost. This was primarily driven by a planned increase at Bath and Body Works. We were deliberately building up our safety stock inventory at BBW in advance of the start of our conversion to new supply chain systems which we cut over to on the July 4th weekend. Victoria’s Secret is also up from last year, which is driven by increased inventory to support all of the new product launches in the second quarter. Apparel inventories ended the quarter down 5% per square foot at cost. During the quarter we also repurchased approximately 1.9 million shares for $49.9 million. Our current program is nearly complete. We will continue to repurchase shares in the third quarter and beyond under our new $100 million program which was recently approved by our Board in June. Now, turning to our outlook for the third quarter. In the third quarter we’ll project the earnings per share to be roughly flat compared to last year’s breakeven result. This estimate was predicated on high single-digit comps, an increase in the gross margin rate and a significant increase in the SG&A rate. It also includes an estimated cost of approximately $0.02 per share for stock option expense. Our third quarter forecast reflects the following factors: First, the third quarter does not include a major holiday or semi annual sale, as you all know, and therefore it’s historically our lowest volume quarter for Victoria’s Secret and BBW. We also incur expenses related to preparing for the holiday in the third quarter, which are more difficult to leverage against our lower sales volumes. Second, our forecast includes significant increase in marketing expense, which is primarily a reflection of our brand expansion strategy at Victoria’s Secret stores and again, Grace will explain further in her remarks. Third, as I mentioned on our first quarter call, we are investing in new systems and process management capabilities. This multi-year project is impacting our finance, supply chain and customer relationship management systems across all of our brands and as I mentioned earlier, BBW converted to the new supply chain systems just this past month in July. The remainder of our brands will be implementing these new systems over the next two years. Lastly, we are investing in a new distribution center and new distribution center capabilities and front-end technology capabilities to support the substantial growth at Victoria’s Secret Direct. We expect inventories in the third quarter on cost of goods sold, cost of good available for sale basis will be up in the low 20s versus last year. This increase reflects the safety stock buildup at Bath and Body Works that I just referred to and the increases at Victoria’s Secret to support the fall product launches that I mentioned earlier. For the full year 2006 we are projecting earnings per share of $1.55 to $1.65, which represents a fall forecast which is consistent with our previous projections. Excluding estimated stock option expense of $0.05 per share this year and the 2005 significant items of $0.29 per share which are detailed in our press release, this projection represents a 20% to 28% earnings growth over 2005. This estimate is predicated on mid to high single-digit comps, an increase in our gross margin rate and an increase in our SG&A rate. It also includes an estimated cost of $0.05 per share for stock option expense. We estimate capital expenditures will be approximately $650 million for the full year versus 2005 expenditures of $480 million. Roughly $100 million of that increase relates to our investments to support the growth of our Direct business, including the technology and new distribution center that I referred to. Now, before I turn the discussion over to Grace, I’d like to make some comments about Victoria’s Secret Beauty and Direct. Victoria’s Secret Beauty results exceeded expectations during the quarter, driven by the continued success of our new Beauty Rush sub-brand of lip glosses and eye shadows, the restage of our top-selling Dream Angels fragrance sub-brand and the launch of several new lines in the body care category. Looking ahead to the third quarter, we’ll be launching a new, Very Sexy Makeup line in September in over 600 stores, which will be supported with national media. Earlier this month, we successfully launched the line in 22 stores in Los Angeles in advance of the September rollout. Additionally, in October we’ll be launching the fourth scent in the Dream Angels fragrance sub-brand. At Victoria’s Secret Direct, we had another exceptional performance in the quarter. Sales increased 14% and operating income increases commensurately. Internet sales continued to experience strong growth. This performance was above our expectations and was driven by the strength in both intimate apparel and sleepwear. Beauty also achieved strong sales growth at Victoria’s Secret Direct over last year as we continue to invest and grow this category. So now, I’ll turn it over to Grace to talk more specifically about Victoria’s Secret stores.

Thanks Martyn, and good morning, everyone. Victoria’s Secret Stores’ second quarter sales comps were up 11% and we’re pleased with the top line momentum in the business, especially because all segments of the business are performing. Operating income was flat to last year in dollars, and down as a percent of sales. First, I’m going to talk about the sales portion and then I will discuss the operating income rate. Sales growth during the quarter was achieved in all categories: bras, panties, sleepwear, PINK and beauty. In our core lingerie business, growth in bras was driven by our Angels sub-brand, with successful launches in both May and July and with the continued strong response to our Secret Embrace technology. Our panty business exceeded our modest expectations as we rolled out a new cotton panty assortment in June and introduced a new line of Sexy Little Things panties. PINK had a very strong quarter, driven by positive customer response to the loungewear assortment and strength in the panty category. In Intimissimi, we added the product line to seven stores during the quarter for a total of 66 stores and are pleased with the results. And as Martyn said, Beauty also achieved especially strong sales growth over last year as we continued to invest in and grow this important category. We enjoyed strong sales in the top line across all our business categories however, as I mentioned, our operating income rate was flat to – income rate was down to last year, and flat in dollars. The majority of the operating income rate decline was due to an unplanned decline in the merchandise margin rate driven by the following: First, core lingerie and PINK clearance merchandise entering the semi-annual sale did not perform as expected, necessitating additional markdowns. Second, in Beauty we exited our current makeup line during the semi-annual sale to make way for our exciting launch of the new, Very Sexy Makeup in September. The remainder of the operating income rate decline was attributable to an increase in marketing expenses. While the majority of these campaigns successfully drove traffic to the store and drove profitable transactions in line with our strategy, we did not receive the anticipated response from the Sexy Sport direct mail and redemptive print campaigns, or the strapless bra media in early June, and a portion of the PINK’s media. For the fall season, we will remain focused on our best at bra strategy with continued new style introductions through major bra launches. PINK’s will highlight a strong fashion offering supported by marketing and redemptive print. Stores are currently featuring the new Body by Victoria “The Body” which features our Secret Embrace technology and as Martyn mentioned, we will continue to place a deliberate focus on expanding the brand through aggressive marketing and traffic-driving strategies. This will include introductory offers that are designed to grow our customer base in areas where we want to expand market share and increase loyalty. We are also introducing new and existing customers to our products and sub-brands through sampling. We have been steadily increasing our database and we’re going to continue to contact these new clients. We are also adding events to our calendar in order to continue the momentum of the business. Thanks, and now I’ll turn things over to Neil.

Thank you Grace, and good morning, everyone. Bath and Body Works’ comps increased 11% in the second quarter against a 9% increase last year. Operating income for the quarter increased by $18.8 million, or 25%, which represents a 170 basis point improvement as a percentage of sales versus last year. Overall, sales and operating income for the quarter were above our expectations. Our gross margin rate improved as leverage on buying and occupancy expense more than offset a slight decline in merchandise margin rates. As mentioned on the last call, we continue our proactive steps to manage discretionary expenses very tightly. These actions contributed to modest SG&A expense leverage over last year. The quarter began with our best Mother’s Day performance ever, a theme which focused on gifts for Mom and Signature Collection fragrances launched in April. The re-launch of the True Blue style line during the summer theme was very successful, demonstrating our ability to create renewed customer interest in an existing sub-brand. Also during the summer theme we introduced Temptations, a collection of tropical skincare pampering treats. This fun collection was very well received by our customers and performed above expectations. We saw a very strong start and a strong finish to the semi-annual sale through more effectively managed promotional activity. Throughout the quarter we continue to emphasis the Signature Collection formerly known as Daily Beauty Rituals. Most significantly in July we launched the Signature Collection hair care line, reflecting our strategy to grow the Bath and Body Works brand and build new incremental product categories. As we enter the critical fall season, we will continue to focus on themes with fewer bigger statements and balancing newness with the strength of our Signature Collection. Currently stores are focused on the back to beauty theme which, consistent with our second quarter strategy, features three big in store statements of our annual hand soap event, a fragrance extension within the Signature Collection and new items within the American Girl sub-brand. Early fall themes offer incremental fragrance extensions in Signature Collection and the re-introduction of our popular, Perfect Autumn Collection comprised of seasonal fragrances. Lastly, we continue to be very pleased with the performance of our Direct business. We view the catalog and web channels as primary marketing vehicles that we will continue to exploit in the fall season. With that, I’ll turn the discussion over to Jay.

Thanks Neil, and good morning, everyone. Express comps declined 11% in the second quarter, which was disappointing. A large driver in this decline was the anniversarying of significant promotional and clearance activity last year. Despite the lower sales, we were able to achieve significant bottom line improvement as a result of better acceptance of our new assortment, continued focus on inventory management and cost improvements. Therefore, we were able to reduce last year’s loss by more than half. Transactions declined in the quarter and versus the first quarter trend, as we believe we did not deliver enough newness in the quarter to attract and convert customers. Additionally, as I said earlier, we were up against significant promotional activity last year. Fall will reflect the constant flow of newness and wear-now merchandise. Our back-to-school denim launch, which includes fits, washes and back logos has been on our plan. We believe our denim lab umbrella for all X2 Denim, Wicked West, Denim Lab and third-party denim brands is gaining traction. Denim, along with sexy basic synthetic party tops and early reads on sweaters have been very positive. We are set for September launches in sexy suiting, playing off our continued success in Wear-To-Work and Editor iterations. Editor continues to be a base business that captured our consumer. From basic Editor to city shorts to crops we have built this category, which builds loyal consumers. Launches in new fits, fabrics and styles have tested very well and September is a very big Wear To Work month. We’re supporting all launches with direct mail campaigns and in-store events. Our speed to market initiatives have paid off nicely. We are learning how fast we can beat the hit trends. Skinny, skinny jeans, leggings, short shorts, city shorts and synthetic knits are all examples of being ahead of the market. For example, our jacket business in spring was the biggest in Express history. Recognizing this trend and shaping it really paid off. Limited’s store set and floor results were disappointing as well. Comps decreased 4% and the operating loss increased versus last year. The third quarter will focus on a wear to work theme with the perfect travel suit, a washable wool suit debuting this month. Fall and holiday look great. Audrey Meyers, our new CMM, working with our design, merchandising, manufacturing, planning and visual teams, has really made a significant difference. I’m confident that we can get this division moving towards profitability. There’s a void for great going out, partying and wear-to-work clothes for a very young, working professional woman. Thank you. Tom?

Okay, thanks. That concludes our prepared remarks. For the next 40 minutes, we’d like to take your questions. I want to remind everyone, please one question per person so we can get to as many callers as possible. So operator, we are ready for the first question.

Thank you. (Operator Instructions) Our first question comes from Lorraine Maikis. You may ask your question and please state your company name. Lorraine Maikis – Merrill Lynch: Thank you. Merrill Lynch. Good morning. It sounded like the Sexy Sport ad campaign slightly underperformed your expectation. Could you just talk about the acceptance of this new product line and how you plan on marketing it going forward?

Right. This is Grace. The Sexy Sport campaign was something that we really – we had not tested the marketing elements of that campaign and that was kind of a break with our tradition. So we took a calculated risk against some other broad category models and that didn’t play out in this niche category. However, an additional factor was that our inventories were actually broken on the key style that we featured in the campaign so that affected our conversion rates as well. In terms of Sexy Sport, we’re actually taking a go slow to go fast view of the category and Les has assembled a creative team which is really looking at the re positioning of the sport category in the way that the work was done on PINK about three years ago. I hope that answers your question. Lorraine Maikis – Merrill Lynch: Thank you.

Next question, please.

Your next question comes from Kimberly Greenberger. You may ask your question and please state your company name. Kimberly Greenberger - Citigroup: Great. Thank you. Citigroup. A question for Neil. In terms of the resurgence of your signature collection during the second quarter, could you just talk about the trend there? I think has been a category you haven’t focused on for awhile so just wanting to understand how you’re thinking about it in the future and then with Jay, just a real quick question for you on the lack of newness in the second quarter. It would seem that that would be a bit contrary to your strategic direction in terms of trying to get back to your fast fashion route. I’m just wondering if you could talk about what happened there? Thanks.

Thanks, Kimberly. We’ll go on to Neil first for the first part of your question about the signature collection.

Okay, so, a couple parts to the answer on this, Kimberly. First, in general, our strategy with the signature collection has really been to elevate the quality and the sophistication of the line in every aspect, the most important of which is the quality and sophistication and trend-appropriateness of the fragrances themselves, and this really started early in the year, as you may recall, with the launch of Japanese Cherry Blossom, which is sort of an exotic, sensual scent. Very fashion forward. Very trend right, and the success of that really validated to us that our customer has an appetite for more sophisticated fragrances and that we can invest – economically, we can invest more in the quality of the fragrances and get paid back for that with the customer. We’ve also begun Part 2 of the evolution, which is sort of a gradual upgrading of the packaging, which you’ll continue to play out, really over the next couple of years, and the response to changes in packaging that we’ve done have been favorably received. Obviously, to the extent that we can re-invent this core product line, it builds the base of the business and allows us to add performance categories on top of it. So we see our growth very much hand-in-hand with the growth of the signature collection, believe that we’ve figured out a model to do that and I think that you should expect to see continued acceleration of new scents, the pace of innovation and the upgrading of the line in the coming months.

Thanks, Neil. We’ll go back to Jay Margolis for the second part of Kimberly’s question.

Kimberly, good question. Coming off of a really nice turnaround, January, February, March, first quarter, and the consumer really coming in, enjoying what the stores look like and us chasing into bestsellers, we felt that going into the May/June time period, we had enough ammunition to really keep this consumer excited. The truth is, we didn’t bring enough newness in because we kind of shortened the flow of newness knowing that we had a summer sale – we moved that up a little earlier. We moved the fall floorset and early fall transition earlier, and in both cases, because of that we didn’t want to buy inventory that we felt had a short shelf life at that time. It was a mistake because the truth is, the consumer liked the newness we were bringing month by month by month, we now recognize you can’t stop that. You have to keep flowing new ideas in percentage to understanding that there’s weeks of supply, you know, inventory concerns as you go forward. It’s a terrific learning. It did, I think, just – while margins improved, it cut the newness back to the consumer and I think we could have grown our business a lot more. It’s a big question, but one - we will not make that mistake again. Kimberly Greenberger - Citigroup: Great. Thanks.

Thanks, Jay. Next question please.

Brian Tunick, you may ask your question and please state your company name. Brian Tunick – JP Morgan: Yes, JP Morgan. Thanks. I guess a question for Neil. On the merchandise margin side, have you reduced third-party shelf space or was it your private label products going out at better margins? Maybe you can give us the mix of third-party this year versus last year and sort of what you’re planning going forward in the back half?

Sure. So year-over-year, the mix of third-party brands, particularly in our flagship business, has grown modestly but we believe that we are at a percentage mix of the business that’s sort of a good equilibrium state for us. We think that third-party brands in our flagship stores should be around 20% of the volume, and that’s the level that we’re at. So we don’t expect that penetration to go up further, and this is really a factor that only affects the flagship part of our brand which, you know, is 10% to 15% of the volume. So the overall impact on margin, one way or the other, from third-party brands is relatively modest. Did that answer your question? Brian Tunick – JP Morgan: Sort of. So your private label business, obviously went out at better margins?

I think, you know, some things are up and some things are not up as much. As we talked to you all before, over the course of the last two or three years we’ve brought a lot of new brands to market and in the early stages of bringing those brands to market you have to invest a lot in trial and promotional activities to build the brand. As those brands mature we have to do less of that and so that has a beneficial effect, and then there are factors that just play out some what differently, season on season. Like how big is the sale and is that above expectations or below expectations. This particular season our sales volume exceeded our expectation. That actually had some negative pressure on the margin rate, but positive on total margin generated. So unfortunately it’s a little bit of a complex answer. Some things plus, some things minus. But I do believe that our merchandise margin rate is beginning to stabilize. Brian Tunick – JP Morgan: Thanks, Neil.

I think we’re ready for the fourth question.

Stacy Pack, you may ask your question and please state your company name. Stacy Pack – Prudential: Thanks. It’s Prudential. Grace, I was wondering if you could give us a little more detail. First of all, just kind of gross margin versus SG&A and then coming back to what you talked about, lingerie and PINK markdowns, the makeup and the marketing, you know, can you sort of give us an idea of how much each one was and I’m assuming the marketing impact continues, so what we should be expecting there in terms of Q3 and Q4’s impact? Thanks.

Well that’s a great question, or series of questions. Pretty complex, so let me see if I can hit them all, Stacy, and if I don’t you can come back and I’ll give you a chance to come back and re-clarify. I would say that in terms of the weighting of the issues that I talked about, the impact on markdowns was a little bit higher than the impact on marketing. But let me talk about the marketing first. As I said before, the categories that we were advertising in that time period were niche categories. Sport is a pretty small market share category and strapless bras are also a pretty low market share category so this is a very – a departure from the kinds of things that we’ve been focused on in the past, which are big, market share, broad appeal categories. So I think that we overplayed in our marketing spend the buyability of niche products in terms of its ability to optimally impact the box. We’re really re-looking at how we would re-strategize the second quarter next year and re-mixing our product offerings so that we’re focusing on categories that have broader everyday and fashion appeal. So I don’t really see the marketing thing as a continuing thing. However, we are aggressive – going to be aggressive about bringing traffic in because when we bring traffic in, we find out that customers really do like our assortment and we’re getting decent sell-throughs. The other thing is that, in our marketing strategy, because a big piece of it is sampling basics, when we can get somebody to come in and buy once one of our basic products that we’re sampling in, we know that we’re building traffic for the future and we’re building loyalty into those categories and that those customers like those products and their levels of loyalty begin to really escalate. The question is balancing that so that we can make it work quarter by quarter. But we’re really trying to find the sweet spot. In terms of the issues about margin, particularly markups and markdowns, I think that’s - the lion’s share of this was driven by the fact that we ought to really study the best practices in terms of Bath and Body Works and their approach to their semi-annual sale. We’ve been running the same kind of semi-annual sale for basically the last eight years without any kind of change in the formula and we thought that we could get 11% to 12% growth off of our semi-annual sale clearance products based on the momentum that we were seeing on our regular-priced products, pre-semi-annual sale. What really happened in the semi-annual sale was - kind of good news – is our regular-priced goods continued to get strong growth and we really need to figure out some new ways to have a higher level of energy on the sale products. So a big opportunity for us to continue to grow our business. I really think that that was the essence of it. So hopefully that – oh, I think you asked a question about SG&A and that that was also – that was actually leveraged as a result of our top line sales. Stacy Pack – Prudential: Just one follow up, Grace. How do you know, or what’s your gut say, that, you know, the marketing was just on these niche things that you didn’t get the payback on? I mean, how do you know that it’s not just sort of getting saturated and there’s too many catalogs out there and that you’re going to get the right payback on those things in Q3 and Q4? What’s your gut say on why the lingerie in PINK didn’t sell on sale?

In terms of the detail on the lingerie in PINK on sale was, we were pretty aggressive in terms of the amount of basics that we set up to liquidate in the semi-annual sale but two issues for us, we might be more careful about that or we might apply some of the best practices that Bath and Body Works applied in their very successful semi-annual sale. So I think we can re-energize the marketing of our sale goods during the semi-annual sale to pay more attention to that. In terms of your answer on the marketing, we’re not really that aggressive in terms of our customer contact strategy. There’s 52 weeks in a year and our current point of contact really is, we only hit our clients six times out of the 52 week a year period so I’m not really that concerned about saturation at this point and there is a percentage of customers that are – shared customers between stores in the direct channel and we are careful about looking at that contact strategy, but there’s a very high percentage of customers that are stores only customers. So we don’t equate it out. Stacy Pack – Prudential: Thanks, Grace.

Let’s move onto another question. Paul Lejuez, you may ask your question and please state your company name. Paul Lejuez – Credit Suisse: Thanks. Credit Suisse. This one’s for Neil. It seems like over the past few years you’ve really been targeting top line, sometimes at the expense of margin. Not this quarter, but sometimes. Wondering if you see a point in the future where you shift that focus more toward driving operating margins higher or is this always going to be a top line driven business, and then also, just wondering what the supply system changes allow you to do that you could not do before? Thanks.

Okay. So two parts to that. First, taking kind of the P&L architecture question, if you will. I think at the end of the day what we’re focused on is delivering is an objective, consistent bottom line growth and I think that we’ve tinkered with the formula over the past couple of years and sometimes we’ve driven that with expense leverage and top line growth, with some change in margin that has been negative to merchandise margin rate but positive to the bottom line. So I think the short answer is, we’ll continue to kind of tweak that formula but in a way that really delivers consistent, bottom line operating income growth. Last year I think was a bit of a unique year for us inasmuch as we invested an enormous amount in brand building activities and had, I think, some one-time costs that hit us adversely last year. So the outlook I would think would be continued efforts to stabilize the merchandise margin rate. I don’t think it’s completely stable yet but I think that we are comfortable with the formula that we’ve got. We might experience some slight erosion here and there depending on what events we’re running in store, what mix we’re pushing in any given month so, for example, this month we’re running our annual hand soap event, which obviously focuses primarily on our anti-bacterial and aromatherapy soaps which have a different margin mix than the signature collection. So depending on what we’re pushing in the theme, you might see some fluctuations month to month. But I again would reiterate that we see the long-term outlook as stabilizing margins with top line growth and expense leverage leading to a formula of consistent double-digit operating income growth. With respect to the second question on the supply chain systems, it’s a very complex undertaking. It really takes our total set of systems from product conceptualization through replenishment and links them in one, integrated demand chain and my expectation is it will take us a couple more months before we kind of work out all the kinks of that. It’s a pretty massive system cutover, as you can imagine, and we’ll clearly experience some hiccups along the way as is natural with any project of this scope. The upside to us is enormous. It will allow us to do things that we haven’t been able to do in the past, for example, segment our stores. You know our base of 1,600 stores varies widely in footprint and volume. With the systems that we’ve got, we’ve been really forced and constrained to get every store, with the exception of our flagship stores, pretty much the same inventory and we haven’t been able to reduce our assortments in the lower volume stores, expand them in the higher volume stores and store segmentation really is a powerful capability for us that the new systems will unlock. The second big one that we’re excited about is really being about to move to consumer demand driven total system, where all of our demand chain is driven from the store back and what is pulled off the shelf by the consumers which should give us, over time as we get through this transition, better inventory turns, faster response to in store selling patterns and overall higher customer satisfaction and product velocity. There are a lot more that we really don’t have time to go into right now, but just two examples that I think are very powerful capabilities that will come as a result of this new system platform. Paul Lejuez – Credit Suisse: Thank you.

Thank you. Evelyn Greenroth, you may ask your question and please state your company name. Tom Filandro - Susquehanna Financial Group: It’s actually Tom Filandro. Nice quarter and Martyn, happy to see your responsibilities are expanding.

Thank you, tom. Tom Filandro - Susquehanna Financial Group: I have two questions. One question’s for Martyn. You guys outlined a conservative third quarter view, but following outperformance in both the first and second quarter, does that view at all reflect in any way a more challenging trend in early fall business? My second question is for Jay. The biggest hurdle rate, for the brand, Jay, is to show a meaningful turn in traffic so can you just sort of speak to your efforts to drive traffic, direct mail, GWPs and any cross-marketing opportunities? Thank you.

Thanks, Tom. We’ll go to Martyn first.

Good morning, Tom, and thanks for your congratulations, I guess. Let me try to address third quarter because I think that is an obvious question in terms of our guidance. First of all, it’s important to understand that from our perspective our outlook for the fall season has not really changed at all. We have increased our full year projection to kind of reflect our second quarter upside. Of course, this is the first time we’ve really talked about third quarter guidance and that is potentially a concern from your point of view. Our third quarter guidance, though, does not reflect any disappointment with our early sales results in August. In fact, you know, we remain very comfortable with our August comp store sales projections in the mid to high single-digit comp range. I think you all know that our third quarter has been a challenging one from a kind of a sales, volume and profitability perspective and it’s particularly challenging because of the investments that we’re making, particularly in the systems and strategic initiatives that we’ve described in the last couple of calls. It’s also challenging because we do make significant investments in the third quarter that prepare for holiday and we expect the flow-through and benefit to show up in the fourth quarter. But things like sales training, floorset expenses, marketing expenses, all incremental to prepare for the holiday and then, as I said, investment spending that is flowing through this year’s numbers in terms of systems, distribution center capacity and net investment in additional marketing expenses is really the driver of that flat earnings projection. Of course, we also have the stock option expense that’s about $0.02 per share, $0.02 for the quarter, that effects us year-over-year and all these investments are really driving our projection for the significant increase in SG&A rate in the third quarter. But we are looking for continued profit improvement year-over-year from each of our brands across the board in the third quarter and obviously into the fourth quarter. Tom Filandro - Susquehanna Financial Group: Thank you, Martyn.

Now we’ll go to Jay for the traffic driver question.

Hi, Tom. Our marketing plans for Q3 include selective offers that focus on increasing visits of our best customers and include these kinds of things: various bounceback and direct marketing opportunities, best customer events to preview and be the first to buy new merchandise offerings, retentive print to continue growth and build the customer base back, and selective transaction drivers to capitalize on high traffic opportunities such as denim offerings during back-to-school. Doing – for instance, we’re doing a big event, an integrated event, with InStyle Magazine. We actually doing a gift with purchase and tie-in visuals, tying our windows with the InStyle event. We’re very excited about that. We think it’s going to get a great response from our consumer. From a number of event and activity point of view, there’ll be 72 different events this year versus 43 last year. Number of circulation difference is up 64% and we believe the sales impact is going to be great. We, again, this has to tie back to, you know, Kimberly’s question of newness, the newness factor, hitting trends, chasing into the business but we think the combination is going to set us up for a good fall holiday season. Tom Filandro - Susquehanna Financial Group: Thank you. Best of luck.

Thanks, Tom.

Thank you. Lauren Levitan, you may ask your question and please state your company name. Lauren Levitan – Cowan & Co.: Thanks. Cowan & Co. Good morning. My question is for Grace. I wanted to follow up and get a little better understanding of the marketing plans for the back half. Last year I recall that some of the timing in terms of when you were investing those dollars was shifted. Curious how that will, or will not, be anniversaried this year. Then if you could also just drill down a little bit further in terms of CRM initiatives for Victoria’s Secret. I know you commented earlier about the significant number of stores-only customers. Does this limit your use of email as a driver to store traffic? We’ve seen BBW using that quite effectively and we’re just curious if we should be expecting that fairly inexpensive tool as a driver going forward? One clarification for Martyn. You just said that you look for profitability improvements in all brands in the back half. Is that both in terms of dollars and rate, or just dollars? Thanks very much.

We’ll go to Grace first, and then to Martyn.

Okay. Thanks. If I don’t get all of these, we’ll come back for some clarification. Our approach to the third quarter, this year versus last year, is we’re planning to have six major floorsets versus four last year and they’re a combination of anniversarying the typing of last year’s major bra launch events. You know, I’d remind you that last year our launches were not that strong so we are up against off-comp sales during that time period. But we are adding two new events to the calendar so principally by shortening some four-week events to three-week events, we were able to get in more pace and excitement. All of these have been tested in the spring and summer seasons so we understand what the customer demand is for these products and obviously as a result of that, we’ve increased our media support behind those, both in terms of a television investment as well as expanded customer reach. The customer reach is really driven by the fact that we’ve been very aggressive in getting telephone captures which expands our database. We’re not changing our rules of engagement necessarily on a client to client basis, but we are reaching to a broader database. We are piloting one email event in the season. We haven’t really – we have to work out a capture, both phone numbers as well as email numbers and from them, back through the direct channel that we’re just really managing the email for us. So I think it’ll be a very exciting learning for us.

We’ll go back to Martyn for the clarification about profitability by segment.

So Lauren, in terms of our expectations for the balance of the year, we are expecting dollar improvement in terms of operating income in each of our brands and of course, at Express, substantial increase in the percentage of operating income as well. Lauren Levitan – Cowan & Co.: Thank you.

Thanks, Lauren. Operator, there’s about 10 minutes left in our hour-long call so maybe we could try to get about three more questions in, if we can?

Thank you. Margaret Mager, you may ask your question and please state your company name. Margaret Mager – Goldman Sachs: Hi. Goldman Sachs. I would like to know, in terms of the 53rd week, how much of an impact is that in EPS terms, if you can quantify it like that, as well as impact on revenue? Then, on Victoria’s Secret, it’s hard to say that your marketing didn’t do well in terms of driving the top line but to have your profitability erode like that, you know, definitely disappointing. How much was your marketing spend up in the quarter and was the elimination of the cosmetics line unplanned? That seemed like a little strange. Then looking into the third quarter, can you talk about what you’re doing in the color cosmetics and how is the margin structure of that business? Will it be promoted aggressively in the third quarter and could it also have a dampening effect on profitability in the third quarter? Thanks.

Margaret, first we’ll go to Martyn for the impact of the 53rd week.

Yes, specifically on the 53rd week, we’re estimating that the 53rd week will be about a $0.02 to $0.04 per share income item for us. It will obviously affect sales, probably $125 to $150 million.

Margaret, just to – I’ll take part of Grace’s question. This is Amy. Martyn, I think, said in our prepared remarks that of our total SG&A increase in the quarter, about half of that was due to an increase in marketing expenses and that was principally at Victoria’s Secret so that helped to mention that for you a little bit.

In terms of the question about Victoria’s Secret, I want to reiterate in the quarter I would share your concerns. We’re happy about the top line and happy that customers are responding and we’re disappointed in what happened on the bottom line. The weighting was something like 60% of this was markdown related, not marketing related, to help dimensionalize that for you. Margaret Mager – Goldman Sachs: Okay, and then the color cosmetics – what’s the story with that? And by the way, Grace, congrats on your retirement decision.

Thank you. Color cosmetics are being tested right now out in the Los Angeles area. We’re seeing some pretty exciting results. Actually, there’s – Christine was out in the Los Angeles area and they’re currently going back and refining some of the watch strategies based on some of the things that they’ve seen favorable in terms of the campaign. Margaret Mager – Goldman Sachs: Margin impact?

Nothing significant in terms of the weighting of the – Margaret Mager – Goldman Sachs: Okay. Well, you’ll be missed, Grace.

Thank you. But my husband will be glad to see me. Margaret Mager – Goldman Sachs: Still have him?

Yeah, after 35 years.

Thanks Grace. Say, let’s try to get a couple more questions in real quick before we have to finish up here.

Your next question comes from Richard Jaffe. You may ask your question and please state your company name. Richard Jaffe – Stifel Nicolaus: Thanks very much, guys. Just a thought about the inventory and inventory plan for the third and fourth quarter, particularly regarding the Apparel division. With incremental improvement and some visibility, do you see an opportunity to invest in inventory to help drive top line in the third and fourth quarter and then, similarly, comments on VS and BBW.

We’ll go to Martyn.

Yeah, I mean – I don’t know if Jay wants to comment, but the inventory levels overall, the principal increases that we’re planning for, as I mentioned in my comments, at VSS, Victoria’s Secret Stores, and Bath and Body Works and Victoria’s Secret Stores is to support the launches, hopefully a focus that they are driving on ever out-of-stock positions in basics. So that kind of has a different architecture versus our past investments. Obviously, our investment in basics is a riskless investment over time. BBW it’s quite a different story because, you know, as I mentioned, we did find that low, a lot of inventory in advance of this systems cutover which carried through the end of the quarter. We expect that to stabilize a little bit as we go through the balance of the year but we’re going to be carrying more inventories there just to make sure that, if our systems are not completely stabilized, that we will continue to be in-stock at the store. Secondly, they also are really looking at their basics, making a larger investment into the fall and making sure that we are in-stock in our basics. The Apparel business, our investment for the fall will increase but it is still more in line with the types of year-over-year investments that we’ve had in the last couple of years. Do you have a comment about that?

Well Q2, in May, June, July, we were pretty conservative. We had, you know, deep double-digit declines in both dollars and units and I think we recognize we’re flat, really flat in inventory levels going into the fall season. But we really are studying our unit density by classification and making sure that we’re not distorting one place and taking out of another and making sure that our stores are stocked to do business. So I think we’re comfortable with the inventory levels, we’re comfortable with how we’ve spent our money and feel better about it. As I said, I think in the second quarter I think we may have been short some opportunity.

Thank you. I think we can get in two more questions.

Thank you. Dana Cohen, you may ask your question and please state your company name. Dana Cohen – Banc of America: Great. Questions on expenses and I guess, Martyn, I’m not sure if it’s condolences or congratulations here, but just looking forward to working with you. Just in terms of the question on SG&A, the half that is marketing is that dollars? So something like $30 million is marketing?

Are you talking about Q2? Dana Cohen – Banc of America: Correct. You said half of the increase was marketing. I just want to make sure you were talking dollars not rate.

Yes, we are. In fact, I can give you a little bit more on that because I know this is kind of a theme-based question but in terms of Q2, as Amy said, about half of the increase is driven by our increase in marketing investment in principally VSS in connection with the brand strategies that Grace has described. About 20% of the increase year-over-year is driven by increased incentive comp. You know, we had a disappointing spring last year, did not pay out very much incentive comp. The remaining 30% is driven by increases in selling expenses, really to support the incremental sales. So that’s leverage, actually, on a percentage of sales basis. The dollars are up. Stock option expense is a year-over-year thing that I think everybody understands. Then finally, this year-over-year increase in investment for the technology initiatives that I’ve commented on. Dana Cohen – Banc of America: And what inside costing for the year?

It’s over $100 million of capital expense and approximately the same in terms of, you know, expense. Dana Cohen – Banc of America: And incremental? Is that incremental to last year? Because you were spending on it last year, too.

Hold on just a minute. That’s the total amount hitting our P&L this year in terms of explaining the overall SG&A. I’m not exactly sure what the incremental one is. Incremental effect is. I don’t see that in my notes here. We can get back to you on that, though. Dana Cohen – Banc of America: Great. Thank you very much.

Thanks, Dana. Let’s try to get one more question. We’ll finish on that.

Thank you. Neely Tamminga, you may ask your question and please state your company name. Neely Tamminga – Piper Jaffray: Piper Jaffray. Saved the best for last. All right. Here’s the question I have for Neil and that is, first and foremost, on the hair care launch, albeit very small, but could you characterize for us what’s different about the organization today than what you tried to do three years ago, or four years ago, when you guys launched Bio. What are some of the – like, if we were to really say the top three things that are different about how the organization today is approaching a hair care launch which, of course, is not something you guys would necessarily be known for, how is that different today than where you would have been, let’s say, three or four years ago with the Bio launch?

Sure. So the first issue I think is understanding where we have authority and where we don’t have authority with our customer. Historically, we have not had authority in hair care and so for us to launch Bio which was really a performance position line, while we got some good sales out of it, it was pretty minor in the scheme of things and I don’t think she ever really believed in our authority and expertise to deliver a top of the line performance hair care product. The launch of Signature Collection comes from a different positioning and therefore a different authority and the authority is really around fragrance, and it specifically targeted to that segment of our customers, which is quite large, that will be driven primarily by the luxurious experience and the scent of the product. Give us credit for having a good formula, but it’s not positioned as sort-of a salon hair care line competitor. So I think the first thing that’s different is just understanding what segment we’re hitting, what’s the basis of our authority and credibility and what’s the reason to buy, and the reason to buy with this hair line is very much about the fragrance experience. The second thing though that is different is that may be the reason to buy, but she doesn’t want to trade off product quality to get it and, compared to past product lines that we’ve developed, we feel very good about the quality of this product. We have a partnership with Proctor and Gamble and they’ve helped us develop the base formulas that take this great fragrance experience and obviously they are a world leader in hair care, and so we feel good on the technical platform and then what we bring to it is our experience in fragrance. So I think that’s the primary difference and obviously, as we try to grow the business, we’re going to be continuing to look for areas where we can take our primarily confidence, which is things that are fragrance pampering experiential, and identify new categories to apply those against, whether it’s home fragrance or hair care or hand care and so this is, I think, very much part of our roadmap for finding incremental categories and exploiting what we do best in those categories. Neely Tamminga – Piper Jaffray: That has been very helpful, Neil. Thank you, and good luck.

Thanks, Neely. Thank you. We appreciate all the time that everyone has spent with us this morning. I hope you have a great rest of the week.

Thank you. This concludes today’s conference call. Thank you for your participation. You may disconnect at this time.