Tom Katzenmeyer – IR Martyn Redgrave - EVP, CAO, CFO Sharen Turney - CEO, Victoria's Secret Neil Fiske - CEO, Bath & Body Works Jay Margolis - President, Apparel Mark Weikel – President & COO, Victoria's Secret

Paul Lejuez - Credit Suisse Jeff Stein - KeyBanc Capital Markets Stacy Pak - Prudential Jennifer Black - Jennifer Black and Associates Tom Filandro - Susquehanna Financial Dana Cohen - Banc of America Lorraine Maikis - Merrill Lynch Kimberly Greenberger - Citigroup John Morris - Wachovia Marni Shapiro - The Retail Tracker

Welcome to Limited Brands Inc. fourth quarter and year end 2006 earnings release conference call. (Operator Instructions) Now I'll turn the call over to Mr. Tom Katzenmeyer, Senior Vice President of Investor, Media and Community Relations. Sir, you may begin. Tom Katzenmeyer: Thank you and good morning, everyone. Again, this is our fourth quarter and year end conference call for the period ending Saturday, February 3, 2007. Just as a reminder everything that we say today is subject to our Safe Harbor statement that's in our SEC filings. Everything you need for the call and for this report is out on our website. We did that after the close yesterday, so you can access that. If you can't by those means, you can call our office and we'll fax those materials to you. We have a lot of ground to cover today. This is who is with me: Martyn Redgrave, EVP, CAO, and CFO; Sharen Turney, CEO of Victoria's Secret and Mark Weikel from Victoria's Secret is also with us today; Neil Fiske, CEO of Bath & Body Works; and Jay Margolis, President of our Apparel Group. Jay's in New York, but we'll go out to him also for comments and questions. Stewart Bergdorffer, our EVP of Finance, and of course the ever charming Amy Preston is here with us this morning, our VP of Investor Relations. We are going to go right to Martyn and the other CEOs will cover some territory here, then I will be back in a few minutes for the Q&A session. With that I will turn it over to Martyn.

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IR firm sponsors transcript of micro-cap company: Consulting company sponsors company's transcript in sector of interest: Your company's name and promotion could have been on this transcript! Learn more, or email Zack Miller for details. Martyn Redgrave: Thanks, Tom and good morning, everyone. First of all I want to explain that all the results that we will be discussing on this call will exclude the 2005 fourth quarter one-time items which totaled $0.29 per share and are detailed in our press release. Also, as a reminder, the 2006 fourth quarter consists of a 14-week time period versus 13 weeks in 2005. So we're very pleased with our 2006 full year results. Total sales increased by 10% and our operating income increased by 23%. Earnings per share for the full year were $1.68 versus $1.33 last year. Excluding the impact of the 2006 incremental stock option expense of $0.05 per share, this represents earnings per share growth of 30%. We drove this profit growth with significant increases in operating income across all three of our segments, while at the same time making incremental investments in marketing initiatives and technology that will spur future growth. Taking a minute to look at this future growth and specifically 2007, we remain focused on the six key strategic imperatives that we presented at our Investor Relations update meeting in November. So before I get into the detail of our fourth quarter results I'd like to take a few minutes to discuss these imperatives as a frame for our 2007 plans. The first imperative is organic growth through comp store sales and sales productivity in our current brands and our current footprint. Over the past ten years we have increased overall sales productivity by 5.2% per year compounded. In 2006, sales per square foot increased by 8.4%. We remain confident in our ability to continue to deliver increased sales productivity, and we're planning mid single-digit comps in 2007. We also will continue to close unproductive apparel stores and convert Express stores to the dual-gender format, which is a strategy that has resulted in significant gains in sales productivity. Apparel square footage, for instance, is projected to decline by about 12% in 2007. Our second imperative is expanding our brand footprint and entering into new channels and geographies. As we announced in November, based on the favorable returns from the tests of our larger Victoria's Secret store formats, in 2007 we will begin a plan to increase the square footage of our average Victoria's Secret store by about 50% per store. Specifically, in 2007 we plan to open 35 new stores and remodel another 105 stores to the new larger store size. That will drive a total square footage increase for the brand of between 8% and 10% in 2007 versus a 2.5% increase in 2006. Now, it's important to understand that we are not anticipating a positive impact on profitability in 2007 from these initiatives. As we ramp up the real estate and store reconstruction activity and have to recognize the related accelerated depreciation, write-offs and, of course, the impact of store closings during a remodel period, we expect that those costs will offset the incremental profitability that will be generated from the new stores and reconstructed stores. We do expect that this activity will begin contributing to profitability in 2008. At Bath & Body Works we plan to open roughly 55 new stores in 2007 primarily in specialty center locations, resulting in square footage increase of about 3% compared to 1% in 2006. In addition, our acquisition of La Senza expands our presence into Canada and the international space. We plan to open 32 new stores in 2007 for a total square footage growth of 12%. Importantly, this acquisition also provides us with an operations platform in Canada and a franchising network in 34 other countries as we begin to think about international expansion for our brands. Given the contraction in apparel square footage, all of our real estate activity in 2007 nets to flat square footage year over year versus a 3.6% decline in 2006, and this excludes the impact of the La Senza acquisition. Our third growth imperative is the incubation and growth of new concepts like PINK, Intimissimi, White Barn Candle Co., C.O. Bigelow's, and accessories concepts at Henri Bendel and Diva London. These concepts are in various stages of growth from an aggressive expansion of PINK that you all know about to the new tests and evaluation phases that we're in for the Diva London concept. Our fourth growth imperative relates to our investment in infrastructure to support our future growth. We are very focused here on two primary initiatives. First is the enterprise-wide multiyear project to standardize and upgrade our technology in three areas: shared services, customer relationship marketing, and supply chain. This project which began in late 2004 will continue into 2009. EBW was the first brand to implement the new supply chain systems in July of last year, and Mast, our production and sourcing business for apparel and intimate apparel, will implement their systems this summer. Second is our initiative to support the growth of our direct businesses through the construction of a new distribution center and the development of new front-end technology. This activity, which began late last year, will continue into 2010. Our fifth growth imperative is talent. We believe we have some of the best merchants in the business and have great confidence in our brand leadership. We will continue to invest in growing and retaining this talent. Finally, our last growth imperative relates to our capital structure. As you are aware we are making incremental investments back into our business to support all of the growth imperatives that I have mentioned. We will continue to return excess free cash flow to shareholders through dividends and share repurchases. With this overview in mind, I will now turn to the review of results for the fourth quarter. Earnings per share were $1.08 in the quarter versus $0.98 per share last year. Excluding the impact in 2006 of some stock option expense of approximately $0.02 per share, this represents earnings per share growth of 12%. Comps increased 8% in the quarter, and total sales increased 15%, $4.025 billion. The extra week in the quarter accounted for approximately $171 million, or 4% of our incremental sales. Gross margin decreased 20 basis points to 40.1%. This was driven by a decline in merchandise margin that was partially offset by buying and occupancy expense leverage. Total SG&A dollar spending increased by 18% which de-leveraged by 60 basis points. This incremental spending was driven primarily by the following factors: about a quarter of the increase relates to our increase in store selling costs, which were flat as a percentage of sales. Another quarter of the increase can be attributed to identifiable incremental payroll costs associated with that extra week in this year's quarter. Another 15% of the increase relates to incremental investments in the two major technology initiatives that I had mentioned earlier. Another 15% represents the increase related to higher incentive comp expense this year which is both tied to our improved performance as well as the recognition of the incremental stock option expense related to our adoption of FAS 123R. The remainder of the increase relates to miscellaneous items that are not individually significant, including the incremental cost of recording La Senza's SG&A. So in total, fourth quarter operating income increased by $63.6 million. By segment, the results were: Victoria's Secret operating income increased by $14.7 million, Bath & Body Works increased by $33.2 million, apparel increased by $33.4 million, and the other segment, net expense, also increased by $17.7 million. Retail inventories ended the quarter up 47% per square foot at cost as we deliberately invested at both Victoria's Secret and Bath & Body Works. Now, I know that this has been a source of many questions, Amy has been telling me repeatedly since our January sales release, so I'd like to spend some time discussing and dissecting this increase for you. Let me start by saying that the inventory increase is a result of deliberate strategic actions on our part as we have been describing in our last two quarterly calls, but we remain comfortable with our overall investment level. Breaking it down by segment in dollars, the 47% increase per square foot is driven 60% by Victoria's Secret, 30% by BBW, and the remaining 10% at our apparel businesses. For the portion that relates to Victoria's Secret, about 40% is in core lingerie, another 40% relates to beauty, and the remainder is in PINK. Continuing to peel the onion here, in core lingerie the majority of the increase is in the bra category. The growth in bras is related to our initiatives to improve our in-stock position in seasonless basics, as well as we increased the number of bra launches last year from nine to 14. In fact, our overall growth in the bra category was the largest contributor to Victoria's Secret stores fall season sales increase. The remainder of the increase in core lingerie is in the panty category and reflects our strategy of multiples pricing on panties as well as the use of panties as a promotional item in our increased level of customer relationship marketing. The increase in beauty is to support proven winners like our Garden and Dream Angels and Heavenly lines, new sub brands like Beauty Rush color and Bare Bronze, and new fall '06 and spring '07 product launches, the new Very Sexy makeup, Desire, Exotics, et cetera. The increase in PINK which is about 20% of the total Victoria's Secret increase, relates to our expanded assortment this year, particularly in the loungewear category. PINK continues to perform very strongly, with 2006 sales of approximately $650 million, a 36% increase over last year. Turning to BBW, approximately 30% of our retail inventory increase relates to BBW. At Bath & Body Works, in the middle of the spring season, as we have discussed on prior calls, we consciously invested in safety stock, in seasonless basics in anticipation of the new supply chain systems implementation and conversion which occurred in July. We are still very much in the post-implementation phase of this conversion, and therefore we are continuing to carry this increased investment at the end of 2006. That accounts for about 40% of BBW's total increase. Another 30% of BBW's inventory increase is in seasonless basics to support our initiative to improve our in-stock positions, particularly as we enter holiday, and in categories such as the Signature collection and other transaction-driving categories. Each of these categories also achieved double-digit sales growth in the fall season, so we believe that has been a good investment. New brands such as Patricia Wexler, Savannah B, Aquafonica, Isle De Tahiti, and Liplicious represent most of the remaining increase. Finally apparel inventories ended the quarter up 27% per square foot at cost. This increase in apparel is driving less than 10% of our total retail inventory dollar increase, which is a small amount. As you know, we have been pursuing a strategy to close large unproductive apparel stores and convert Express stores to dual-gender format, as I mentioned earlier, and that is, in fact, driving increases in sales productivity. However, as we close or consolidate stores that had a large box size and low inventory density per foot, it drives a mathematical result that increases our inventory per square foot overall, and, in fact, one-half of the total 27% increase is attributable simply to that math and how it affects per square foot calculations. In addition, as you know, over the last several years we have aggressively managed and decreased our apparel inventory. As a result, compared to our competitors our current inventory turns are higher and our inventory per square foot is lower. We have therefore made a strategic decision to increase our inventory density in core seasonless basic categories primarily wear-to-work pants, like the Editor pant at Express. This is driving the dollar increase and a part of the per square footage increase in the apparel inventory category. With that, let's turn back to the other fourth quarter results. During the quarter we repurchased approximately 244,000 shares for $6.9 million. We have about $59 million remaining under our current $100 million share repurchase authorization. 2006 CapEx were $548 million, versus our previous estimate of $620 million. The decrease versus our previous estimate was primarily attributable to the timing of our infrastructure investments. So let's turn now to our outlook for 2007. Unfortunately, the quarter has gotten off to a slower start than we had initially forecasted, due in part to weather conditions that negatively impacted Valentine's Day sales at Victoria's Secret and to a lesser extent Bath & Body Works. While we had initially forecasted a high single-digit comp for February, we are now estimating a comp in the low to mid single-digit range. In the first quarter, we're projecting earnings per share of $0.25 to $0.28 per share versus $0.25 per share last year. Of course this 2007 estimate includes an estimated dilutive impact for the La Senza acquisition of $0.01 per share. This estimate is predicated on mid single-digit comps, a decline in the gross margin rate and an increase in the SG&A rate. The increase in the SG&A rate is being driven principally by increased marketing expense primarily at Victoria's Secret, as we expect to leverage other SG&A costs. We expect a total increase in SG&A on a dollar basis including the impact of La Senza to approximate the percentage growth in the last couple of quarters. From an inventory perspective, we expect that the percentage growth in retail inventory per square foot will moderate somewhat during the first quarter as compared to the fourth quarter. For the full year 2007, we're projecting earnings per share in a range of $1.75 to $1.90 per share compared to $1.68 in 2006. This 2007 estimate includes an estimated accretive impact for the La Senza acquisition of about $0.02 per share. This projection represents 4% to 13% earnings per share growth over 2006. However, if you exclude the impact of the 53rd week in 2006, this projection represents a 7% to 16% earnings per share growth range for 2007. Of course, 2006 was a year in which we increased earnings per share by 30%. So I want to reassure everybody that we remain fully committed to our 12% compounded EPS growth goal that we articulated at our update meeting last November. The full year estimate is predicated on mid single-digit comps, modest decrease in the gross margin rate, and roughly flat SG&A rate. We do estimate the 2007 capital expenditures will be between $790 million and $815 million versus 2006 actual of $548 million. Over 60% of our total capital expenditures relates to investments in remodeling and expanding existing stores as well as opening new stores. This investment is driving three-quarters of the incremental capital spending versus last year and relates primarily to the real-estate growth at Victoria's Secret and BBW that I discussed earlier as well as capital spending is on La Senza which is now included in our numbers for 2007. About 20% of our CapEx budget relates to investments in the two technology initiatives that I have mentioned as well as the expansion of our direct distribution center. This investment level is roughly flat year over year. The remainder of our CapEx budget relates to home office and other investments most of which is dedicated to consolidating the majority of our New York offices into one location in 2007. So that's the financials. Before I turn it over to Sharen, I'd like to make a few comments about La Senza's performance in 2006 and how the acquisition will impact our 2007 results. We're thrilled that we've been able to complete this acquisition in mid-January, and we are very excited about the future opportunities. La Senza's management team led the business to very strong results in 2006, with full year sales growth of 18%, comp store sales growth of 8%, and a significant operating income growth. This growth was primarily driven by the bra category. In fact, in La Senza's holiday season, which they define as November and December, was also very successful. Comps increased 11%, and again it was driven by sales of bras, panties, and pajamas in that season. 2007, the La Senza management team will continue to grow the business with initial plans to increase square footage by 12% through the addition of 32 new stores. The La Senza acquisition, including purchase price adjustments and foregone interest income will be about $0.02 accretive to our results in 2007. For your benefit I will break that down by quarter. So we expect the first quarter to be dilutive by about $0.01, the second quarter to be neutral, third quarter to be accretive by about $0.01, and the fourth quarter continue accretive by about $0.02. The impact, of course, of purchase price accounting adjustments is greater in the first quarter due to the fact that we write up inventory in our purchase price accounting, and that amortizes through our P&L in the first quarter. La Senza's results will be reported with our Victoria's Secret segment. We expect 2007 sales to be in the $450 million to $500 million range. We've now owned La Senza for just seven weeks, and we're very much in the process of exploring opportunities for us to work effectively with the La Senza management team. As you may recall, the entire current management team of La Senza will continue to run their business and will operate as a separate operating business. In addition to that, though, we are also beginning to work on finding the right ways to take advantage of the value that they can create for us and the value that we can create for them. So with that, thank you very much, and I appreciate your patience. Now I will turn it over to Sharen to talk about Victoria's Secret. Sharen Turney: Thank you, Martyn and good morning, all. I'm pleased to report that Victoria's Secret mega brand surpassed the $5 billion mark in sales in 2006. For the fourth quarter Victoria's Secret's total segment sales increased 18% to $1.8 billion and comps increased 10%. Operating income increased by $14.7 million to $404 million. At Victoria's Secret stores, fourth quarter sales comps were 10%, missing our aggressive expectations. However, we are pleased that all segments of the business performed well versus last year, including core lingerie, PINK, and beauty. We generated great momentum throughout the month of November including a successful Black Friday -- what we now are referring to as PINK Friday. We began losing the momentum in December, continuing into January as the trend began to soften. Operating income dollars increased, but the operating income rate declined versus last year driven by a decline in gross margin rate. Roughly half the gross margin rate decline was driven by increased markdowns due to clearing select merchandise that missed sales expectations and increased levels of direct mail activity to drive trial, loyalty, and increase market share. The balance of the gross margin rate decline is principally attributable to a shift in the mix of business and the expansion of our multiple pricing offers for panties. During the fourth quarter, we focused on winning at holiday through our best at bra category, highly giftable sleepwear assortments, continued growth in PINK, and innovation in the beauty business. In the bra category we executed the launch of the Angels Invisible Lace bra which features our Secret Embrace technology. We supported the bra launch with national media and incremental direct mail campaigns. Our technology advancements in the bra business such as Secret Embrace and Infinity Edge continued to invigorate this category, contributing to year-over-year growth and increased market share. Our young, colorful, and fun sleepwear assortment resonated with the customers, delivering very positive results for last year. Our PINK business had another strong quarter as we realized favorable performance in loungewear, pink panties and pink accessories versus last year. We supported the PINK business with both in-store gift with purchase and purchase with purchase as well as redemptive print offers all building brand affinity and strengthening overall brand awareness. Our Beauty business delivered sales growth supported by national media, redemptive print and in-store GWPs as well as purchase with purchase events. Our Beauty Rush color line and the continued momentum of Dream Angels Desire, the fourth fragrance in the Dream Angels family, exceeded expectations. We now have the number one and number three selling fragrances in America. Dream Angels Desire at number three and Dream Angels Heavenly at number one. The Intimissimi line of fashion-forward intimate apparel continues to expand in additional in-store locations. Intimissimi is in now roughly 150 stores with plans to expand to 230 stores by the end of this year. I hope you had the opportunity to view our fashion show that aired on CBS in December. In addition to a successful event, the fashion show continues to generate a tremendous amount of media coverage both pre and post the actual show and is a great example of our brand equity building activities during this quarter. Victoria's Secret is a unique brand in its ability to create great emotional connection with the customer. This gives us great competitive advantage and great reason to be optimistic about the future. Looking ahead to the first quarter, we plan to focus on the following: We will continue to launch successful bra innovations, including creating equity in technologies such as the revolutionary new Secret Embrace, Infinity Edge, and IPEX. We are currently celebrating our Secret Embrace technology in store which crosses three of our powerful sub brands: Body by Victoria, Angels, and Very Sexy. We also plan to launch the Very Sexy Infinitive Edge extreme bra next month. We look forward to the continued success of PINK and future innovations in the beauty business. We are excited that real estate will continue to be a critical strategy for Victoria's Secret. By the end of 2007, we will expand square footage by 8% to 10% while targeting 130 to 140 Victoria's Secret store projects. These projects are distorted towards the back half of the year and will expand average square footage by roughly 50% in these stores. Finally, we will continue to support our business through increased investments in media, direct mail campaign, and in-store events. In the direct channel, Victoria's Secret achieved fourth quarter sales growth of 18%. The catalog and Internet channels are an important part of the 360-degree access we provide our customers, and we maintain momentum throughout the fourth quarter in the direct channel. Direct sales growth was well balanced with double-digit growth in intimate apparel and clothing. This sales growth was supported by a healthy increase in a buyer file boding well for our future. So I'm very optimistic about the long-term growth opportunities for the Victoria's Secret mega brand and believe that both the real estate expansion initiative and the investment in direct infrastructure leave us well positioned for the future. So thank you, and now I will turn it over to Neil. Neil Fiske: Thank you, Sharen and good morning, everyone. Bath & Body Works comps increased 9% in the fourth quarter against a 1% increase last year. Sales for the quarter were above our expectations. For the year, we surpassed annual sales of $2.5 billion and generated a record profit. Operating income for the quarter excluding last year's one-time gift card breakage of $15.8 million improved by $33.2 million, or 11% to a profit of $336.6 million, in line with our expectations. Our gross margin rate was down to last year, driven by a decrease in merchandise margin rate, partially offset by leverage in buying and occupancy. The decrease in merchandise margin rate to last year was driven by a mix of promotional transaction-driving activities, including the big Black Friday TV promotion and a better than expected performance of the semiannual sale. We continued our proactive steps to manage discretionary expenses. These actions contributed to modest SG&A expense leverage over last year. The quarter began with the strong performance of our Happy Fallidays themes, carrying over to our more overt Perfect Christmas theme. Strong sales in November were driven by Signature collection, gifting items, anti bacterial soaps, and seasonal items. Thanksgiving weekend featured our first-ever TV promotion which centered on the Signature collection Eau De Toilette. The TV event met our expectations. Overall holiday performance met our expectations. We successfully executed against four learnings from last year: First, a better transition from fall to holiday. Second, improved staging of newness. Third, a focus on irresistible gifting items, our seasonal toiletry and home fragrance collections, and value-conscious items. Fourth, improved focus on our integrated marketing strategy across stores, web, and catalog on generating traffic and transaction. We were, however, disappointed with the final days leading up to holiday and are pursuing additional strategies next year to strengthen our position in the final days of the holiday rush. Our semi-annual sale performed above our expectations. Once again, we learned from last year's performance by focusing our promotional activity and in-store presentation resulting in a strong traffic pattern throughout the semi annual sale period. Another highlight of the fourth quarter was the performance of our direct channel. Our Bath & Body Works catalog reached over 7 million homes this season. We view the catalog as both an effective revenue generator and a valuable marketing vehicle to build both our master brand and our key destination sub brands. The direct channel is building momentum, affirming our optimism and the power of being a multichannel retailer. Our direct business, though still a small part of our total, generated a profit for the year. Looking ahead to 2007, in February we launched two key new lines, Isle De Tahiti and Liplicious as well as a new signature collection fragrance, Midnight Pomegranate. We were pleased with the results of all of these items. We are currently in our cure for the common mood theme featuring new fragrances, tranquil mint and mandarin lime in our aromatherapy line, along with a focus on our Signature collection body butters. Next week we kick off our Honeysuckle spring theme launch which will focus on the introduction of an array of spring fragrances with special emphasis on the signature collection, Honeysuckle Fragrance. In April we continue to focus on new fragrances with our exciting Spring Fling theme that features fun spring fragrances with fun. With that I'll turn the discussion over to Jay. Jay Margolis: Thank you, Neil, and good morning, everyone. For the fourth quarter total apparel segment comps were up 1% and sales increased 2% to $744.3 million. Total segment operating income excluding last year's one-time Express gift card breakage of $14.6 million increased by $33.4 million to $42.9 million, or a 450-basis-point improvement. The operating income rate improvement was driven by an increase in merchandising margin. Express comps increased 3% in the fourth quarter and operating income was up significantly, driven by an improvement in merchandising margin. We began the quarter with a strong start to holiday in November driven by strong CRM program, redeeming throughout the month, and a very successful Thanksgiving weekend. However, the traffic declined in December and therefore sales did not meet our expectations for the month. We had good success with our key item strategy and focus on sweaters and woven tops for self purchase. However we did not have enough focus on the giftability items in our assortment as well as in the-store visual clues and marketing messages that help direct customers to giftable items. Key item packaging or additional holiday elements will be used in the future to better define must-have key items for holiday and generate additional interest in gift cards, improving the gifting of Express during holidays is in the works. Traffic rebounded in January with a strong clearance event and an encouraging response to early spring merchandise. Our spring assortment looks strong and consumers are responding. Looking ahead to spring, we continue our focus on driving customer loyalty and repeat purchases. You began to see this focus in our stores in February with the launch of our new wide-leg pant which is already off to a really great start. Other items that are trending well include our woven tops assortments, premium denim and new models in pants, new designs in pants. Sweaters also continued to trend well, in part due to the cooler weather but also due to the wearability into the spring and they look trend-right. In regard to our sales metrics, we continue our maniacal focus on improving traffic trends through focused segmented and integrated messaging to the customer. This combined with a promotional strategy that communicates strong volume driver opportunities would allow us to continue to grow our customer file, increase retention and improve campaign performance. At Limited Stores fourth quarter comps were down 4% and operating results declined to a slight loss versus last year's several million dollar profit, driven by soft December sales. Limited Stores fourth quarter results were below expectations with top line misses in cut and sewn and sweaters more than offsetting sales increases in jackets, skirts, woven shirts, and dresses. Thanks and now I'll turn the discussion back over to Tom. Tom Katzenmeyer: Jay, thank you. We're now ready for the Q&A portion of the call. I realize our opening comments have gone on longer than normal, but we do want to try to get to as many questions as possible so please limit yourself to one question, and operator we'll start with the first one.

Our first question is from Paul Lejuez – Credit Suisse. Paul Lejuez - Credit Suisse: Thinking ahead a bit, because you guys are such a fourth quarter story, this fourth quarter you invested big in inventory and marketing, especially on the Victoria's Secret side and we saw the results. I'm just wondering, what do you do in '07 for an encore to drive the fourth quarter comp? I would think more inventory and marketing is not the answer. Tom Katzenmeyer: Paul, do you want us to keep that to a comment about Victoria's Secret? Paul Lejuez - Credit Suisse: If each could comment that would be great, but Victoria's Secret was the main focus. Tom Katzenmeyer: We'll start with Sharen then. Thank you. Sharen Turney: Although we talked about 10% increases, which we are very excited about, I think there's still plenty of room in the fourth quarter for next year, especially in the first three weeks prior to December. When you think about the inventory investment we do not have to reinvest that. In fact, we are being able to identify where we can actually smooth that investment out. We also think there are categories that we still have not gotten to the market share that we would like to in terms of, for an example, sleepwear that we think is a big opportunity for us as we are thinking about that time frame. So in terms of looking at that time fourth quarter where we see the biggest growth opportunity lies right smack in the middle of the biggest traffic time which is the first three weeks before Christmas. Tom Katzenmeyer: Neil, comment about Bath & Body Works. Neil Fiske: Similar theme for us. Really the way that we look at the opportunity for growth next year is in the time staging and the segmentation of holiday time periods. So last year we set out to improve our holiday 1 theme with our Happy Fallidays theme and have a better transition which was very successful. Holiday 2 was strong for us, and holiday 3 was relatively weak. So we see that there is clear opportunity for us to grow our holiday 3 sales by strategizing that time period differently and distinctly as we did in 2006 with holiday 1 and holiday 2. We have got some surprises in store for next year's holiday 3. Tom Katzenmeyer: Thanks, Neil. Jay, if we can go out to you for similar comment about apparel. Jay Margolis: I think Neil hit it right on the head. Segmenting to consumers purchasing habits, key items for them, gifts for friends or significant others, or the parties. Really how you look at that in terms of when people do purchase things has changed and the timing of it in terms of how we bring newness to the floor and all those categories I think is a huge opportunity for next year. Tom Katzenmeyer: Thanks, Jay. We're ready for the next question.

Our next question is from Jeff Stein - KeyBanc Capital Markets. Jeff Stein - KeyBanc Capital Markets: Sharen, I'm wondering if you can comment if you have seen the J.C. Penney launch of their Ambrielle line and what you think of it? In the context of that, what appears to be an increased level of competition in intimate apparel, talk about your ad spending plans for the current year, how much you would expect to increase your ad spending in dollars? Sharen Turney: First of all, we're very aware of J.C. Penney's strategy, and, in fact, we know that they had worked with Inner brand and know that they have actually patterned Victoria's Secret and segmented their business right at Victoria's Secret. So we always appreciate competition, and it's something that we will continue to watch. I think if you look at Victoria's Secret and part of our strategic initiative within marketing over this past year, the investments that we have put into it is to gain market share. And we are taking a very aggressive approach on that to continue to gain market share even though new competition is coming in. If you look forward into spring we're probably looking at our marketing dollars being flat to last year in the spring season. Jeff Stein - KeyBanc Capital Markets: And how about the back half? Sharen Turney: The back half probably flat to down a bit. Jeff Stein - KeyBanc Capital Markets: Okay. So you think that your current level of spending obviously you believe is sufficient to continue to sustain market share growth, or at least hold your share? Sharen Turney: We actually have an aggressive approach to gain market share, but I think that when you look at the amount of investment that we layered in in '06, and as we talked to everyone previously, it was a learning year. So we know that we made some missteps, we know that we kind of duplicated, we overdid some things. So what we have learned about that, by spending the same amount of dollars we are going to be much more efficient and get a better sales growth, hopefully to that. I don't think you will see as much of that in the first quarter, and hopefully you will start seeing a tip of that in that the second quarter. Jeff Stein - KeyBanc Capital Markets: Thank you. Tom Katzenmeyer: Thanks, Sharen. Next question, please.

Your next question comes from Stacy Pak - Prudential. Stacy Pak - Prudential: Just on the February comp can you clarify VS versus BBW? Because I do understand weather hitting VS for Valentine's Day, but not so much BBW. Then my question is, I think you said that you're planning a mid single-digit comp for '07 which sounds kind of high to me for a plan. Then I think you also said, at least if I heard you right, 18% SG&A dollar growth in '07? Is that correct? If so, can you account for that? Because that sounds very high, and I'm kind of wondering what comp you are going to need to leverage that kind of dollar. Martyn Redgrave: Well, I think what we can say, as we said, is we're coming out of the box slower. We think that the Valentine's Day week was disappointing for I assume most retailers, but particularly for a business like Victoria's Secret. In terms of geography, it's pretty clear that our Southern and Western markets are doing better than our Midwest and Northeastern markets, as you might expect. Our mid single-digit fallout for the first quarter is really driven by what we're seeing in February. But we still expect the March April timeframe to be strong. I'm not sure we can go into much more detail than that by brand. Obviously our sales call is next week, so you will see February in detail next week. Sharen Turney: Stacy, your second question was about the '07 comp guidance? Stacy Pak - Prudential: '07 comp guidance, a mid single-digit, and then SG&A dollar growth. Did you say 18%? That's a big number. Can you account for that? Martyn Redgrave: What I said was that the SG&A rate for the first quarter would be consistent with the fourth quarter, but you could imply that, Stacy. Sharen Turney: But that was the first quarter, Stacy. Martyn Redgrave: That's just the first quarter. Stacy Pak - Prudential: So what's the number for the year? Is the '07 comp mid single-digit for the year? What's the SG&A dollar growth number for the year? Martyn Redgrave: Single-digit for the year. Sharen Turney: And a flat SG&A rate for the year. We didn't comment on dollar growth for the full year in SG&A. Stacy Pak - Prudential: Can you tell us what say comp you need to leverage SG&A for the year? Martyn Redgrave: Well, anything above the mid single-digits would theoretically or mathematically leverage the SG&A. So by definition, if I'm saying mid single-digits, that is the projection of SG&A increase for the balance of the year, for the full year, I should say. Mathematically, right? Stacy Pak - Prudential: Yes, I'm just trying to understand what you're saying. So you are saying you need a mid single-digit comp for the year, and you need over that? Martyn Redgrave: Mid single-digit comp to have SG&A remain flat on a percentage of sales basis year over year. Tom Katzenmeyer: Thanks, Stacy. Next question please.

Your next question comes from Jennifer Black. Jennifer Black - Jennifer Black and Associates: My question is for Sharen. I wondered how your test is going with your Very Sexy sports bra, and we have a big test going on in my region, and I wondered how you feel about athletic as a category for Victoria's Secret. Sharen Turney: Right now we're in the stage of just testing our Sexy Sport. As you know, we have that in about nine stores, and it is something that we do feel bullish about but we're going slow to go fast in terms of really learning about that to make sure that we can differentiate ourselves and keep it on the sexy side as well as giving it the functional benefit. So we are being kind of quiet about what we're doing because we really don't want to share that with all of our competition but it's something that we do believe in. Jennifer Black - Jennifer Black and Associates: Thank you very much. Tom Katzenmeyer: Thanks, Jennifer.

Your next question comes from Tom Filandro - Susquehanna Financial. Tom Filandro - Susquehanna Financial: I think this question is for Sharen first, and then Neil as well. Sharen you touched upon this a little bit, but the CRM dollar off and give-away deals as well as like these GW and PWPs, it's starting to feel like maybe customers are becoming conditioned to spend only when they have a deal in hand. So can you give us more color on what your view is for those type of events in '07? And then I'd also like to ask that question of Neil. Sharen Turney: Sure. That is not our intent to become a promotional house. We worked over the last, really, when we turned to brand, really worked outside of that promotional build. But what our intent is, is really when you think about trial, when you think about giving away a free panty, if it's a great panty, they try it, they want to come back to it. We also look at it as an opportunity to introduce them to new categories whether it be PINK in terms of accessories. It's also a great leverage when you think about the beauty business. As many people do a lot of sampling into fragrances, or sampling into other new lines, so it it's really about sampling, it's really about getting into the products that maybe they don't think about from an adjacency that Victoria's Secret would be in, as well as a trial program. It's something that we really turn ourselves inside out about. Did we go a step too far maybe in '06? I would say probably yes, and it's something that we're looking at to making sure that anything we do really follows the guidelines of trial, introduction into new products, introduction to new customers that we're not going back to a promotional strategy. Tom Katzenmeyer: Thanks. Same question to Neil. Neil Fiske: Tom, I think a similar answer from our perspective, which is that the CRM that we do is very carefully designed and orchestrated to build share of spending of the customers that we have got, to get them into categories that they may not be in or to brands that they may not have tried. We also know that it's a great loyalty builder and actually builds our brand equity to know that we speak with her on a regular basis. We carefully rotate our offers through our 25 million name customer database so that we don't get overplay or saturation, and target those offers very carefully. I think as we look forward, we see the opportunity, having said all that, to leverage new devices, if you will, in our marketing mix, particularly the catalog and the web, to build awareness, to keep the conversation current to market our destination sub brands, and I think you'll see more of an emphasis on the direct channel as one of our key marketing initiatives versus traditional CRM. Tom Katzenmeyer: Tom, I think we're going to have Mark Weikel add a thought to this also. Mark Weikel: Just a reminder too, Tom, is that we have over time increased our customer file, so some of the increase in customer relationship marketing is due to that. We also continue to learn more and more about how to mine segments of that customer file, so there's expansion in there as well. One of the things that we look at very closely is the frequency of contact across time for an individual customer. So that's another piece of the strategy as well.

Your next question comes from Dana Cohen - Banc of America. Dana Cohen - Banc of America: First, did PINK misplan in the fourth quarter? Given the merchandising erosion at Victoria's Secret in the fourth quarter why are you so confident about the inventory levels? A second question is, when I hear you guys talk, it's very top line focused, gaining market share, particularly at Victoria's Secret, and yet the merchandising margins are eroding, and you guys have delevered SG&A for two years. Where I'm struggling is, why isn't there a more optimal way to run this P&L, perhaps not giving up gross margin and perhaps regaining some gross margin? Tom Katzenmeyer: Why don't we start with PINK, with Sharen, or Mark with Sharen, and then we'll go to Martyn. Mark Weikel: PINK exceeded sales expectation within the fourth quarter. We had very aggressive expectations. So, not sure if we were unclear on that previously or not. On our operating income, Dana, our financial architecture going forward is really based on mid single-digit base and core business growth, and then we will have faster growth in emerging categories, like PINK and other businesses like that. Then we'll have growth from real estate as well. What we're intending to do from that is deliver high single-digit or low double-digit operating income growth. The other piece that Sharen mentioned that I'm not sure if it came across on the call, was we do continue to learn more about what's going on with the marketing spend within the store, and we're learning more and more from what our customers' response is to these different efforts and believe that we will begin to see some efficiency in the second quarter of '07. Dana Cohen - Banc of America: So you think there is an opportunity at the gross margin level? Mark Weikel: Yes, in gross margin, we are really focused on dollar growth, not rate growth. Dana Cohen - Banc of America: Despite the margin erosion this year? Mark Weikel: Yes. Sharen Turney: Dana, I think the other part of your question was why the inventory level at VS, and whether there's margin risk to that? Martyn, I think, can address that. Martyn Redgrave: Well, I think it might be helpful to just back up to the total portfolio of businesses and the financial architecture that we're targeting. So what you are hearing in the guidance is we are architecting the businesses now to be more at a mid single-digit comp level. Modest increase in gross margin is across the businesses, driven by a strategic focus on gaining market share and remaining very competitive against emerging competitors. The SG&A rate, I want to back up and clarify, because I incorrectly answered the question or implied an answer that's incorrect, the total sales growth for 2007 is obviously going to be higher than our comp store sales growth because of all the new stores that we'll be opening. So when I say SG&A rate flat for 2007, it's against the total sales growth that we're projecting, not just the comp store sales. With that said, the increased SG&A spending in 2007 is entirely driven by the technology investments. The year-over-year increase in SG&A is entirely driven by that, as well as of course the standard increase in store expenses to support the sales growth. But if you're looking at G&A, as opposed to selling expenses, it's driven by that. Mathematically, it's also driven by the impact of La Senza being added into our numbers, which adds all of their SG&A into the numbers mathematically, and that is driving a dollar and percentage increase year over year. Dana Cohen - Banc of America: And is '07 the last of the big spending on technology? Martyn Redgrave: It's the peak. Is the best I can say. As I have mentioned the projects extend out into '09 for our core projects, and '10 for our direct projects. Tom Katzenmeyer: Thanks, Martyn. Thanks, Dana. I realize it's 10:00 and we have been on the call for an hour but I think we'd like to take a couple more quick questions if we can. Operator, if we can go back out to you, please.

Your next question comes from Lorraine Maikis - Merrill Lynch. Lorraine Maikis - Merrill Lynch: Could you just talk about free cash flow goals for the year and how you plan to use that cash? Tom Katzenmeyer: Thanks, Lorraine. We'll go to Martyn for that. Martyn Redgrave: Well, in terms of goals for the year obviously we're looking to generate more operating cash flow from the operating results of the business. We do not anticipate investing quite as much in inventory in 2007, but I'm not going to go into more detail than that. We have given you the number for CapEx. So on that basis, you should be able to get a pretty good feel for how we're thinking about free cash flow, and, of course, we are maintaining our dividend and plan to continue to think of that in terms of the high yield position that we have, 2% plus kind of dividend rate or yield. To the extent that we have leftover free cash flow that is, in fact, excess, we will return it to shareholders through share repurchases. We also have a financing transaction that needs to take place in 2007 related to the La Senza deal that we have previously signaled which we're watching the market on and getting ready to place. Tom Katzenmeyer: Thanks. Let's take three more questions and then we will wrap up.

Your next question comes from Kimberly Greenberger - Citigroup. Kimberly Greenberger - Citigroup: I had an inventory question specifically with regard to Victoria's Secret. Sharen, I think you indicated that the sales plan in fourth quarter at Victoria's Secret you missed a bit, so if you could talk about what portion of the inventory increase was a result of the missed sales plan and how you expect to get back on track relative to the optimal inventory levels? At Bath & Body Works, we're sort of seven or eight months beyond the supply chain initiative. When do you expect that safety stock to be unnecessary and what is the strategy for working through that inventory? Thanks. Tom Katzenmeyer: Kimberly, we'll go to Martyn for that question. Martyn Redgrave: I think coming out of the season at Victoria's Secret as I have said, I have given you quite a bit of detail and breakdown on what's in that inventory, much more than we ever have before and I have tried to give you a sense of how we think about it category by category. Any time you miss sales you have some excess inventory that you're potentially carrying over to the next season. Victoria's Secret above all and beyond any of our businesses has a business model by which it clears and sells through excess inventory more efficiently and with less financial detriment than any other of our businesses. BBW is a different situation because of the systems conversions and the incremental inventory we have invested in supporting their investment through those conversion timeframes. We hope to be able to work that inventory back down to what I call the standard inventory per square foot type of investment level as we go through 2007, but the one that we don't want to do is starve that business and have it be out of stock. So as I said I think BBW's performance, profitability, sales, otherwise, certainly indicates that that investment has been a reasonable one, but I do expect, and we are planning to reduce that investment level as we go through 2007. Tom Katzenmeyer: Thanks. We'll take two more questions.

Your next question comes from John Morris - Wachovia. John Morris - Wachovia: A question for Martyn, and a quick one for Neil. On the SG&A spending you mapped out pretty clearly the guidance for the full year, and I guess that would imply, given the continued buildup just here in the first quarter, a pretty nice, commendable improvement in the SG&A ratio in the back half. Is that simply because you're lapping the marketing spend at VS from last year, or are there other cost control initiatives that are helping you to get that implied down ratio? Neil, it's been some time since the supply chain initiative went in at BBW. What are the specific benefits that you are seeing from that at this point that can be applied to some of the other businesses and divisions? Thanks. Martyn Redgrave: I'll just comment quickly on SG&A again. Yes, because we did substantially increase our investment in marketing in 2006 we are expecting that to leverage a little bit more positively in 2007. I think Sharen gave a very articulate answer as to how and why we think that would take place. The technology investment is the other major year-over-year increment, and the balance we are looking for leverage in and plan to start to leverage it. Tom Katzenmeyer: Thanks. We'll go to Neil for the second part of the question. Neil Fiske: John, the way I would think about the supply chain initiative at Bath & Body Works is that it's really a multi-year kind of a program. And if you think about just the scope of what we have changed out virtually every information system and every information platform in the business, along with that, redesigning and implementing a whole new set of processes to take advantage of that technology. The people side of that equation is enormously important, training people to use the processes; it just takes time, frankly. So I think the short answer to your question is very little short-term benefit so far in what we have done with Insight. The payoff is really more in the medium to longer term timeframe, and I think very clearly what we can see is that when we build a system around the customer pull at a store level and work that all the way back through the demand chain, we're going to get a much more efficient inventory model for the business that replenishes more quickly with actually less inventory in the total system delivering a higher level of sales. But it really is a multi-year commitment to realize those benefits just because you have technology, you have process, you have people, all of which need to change and come together in order to realize those benefits. Tom Katzenmeyer: Thanks, Neil. We'll take one last question.

Your final question comes from Marni Shapiro - The Retail Tracker. Marni Shapiro - The Retail Tracker: I have a question on apparel. If you could talk about it across the brand, it seems Express has got its feet together here on the wear-to-work, and Victoria's Secret on Direct, and PINK is expanding its lounge. I guess where are the holes in each of those divisions on apparel to improve the other portion of it? As you expand more into the lounge wear and apparel segment at PINK, what should the right mix be, apparel to intimate at PINK over the next 12 to 18 months? Tom Katzenmeyer: Why don't we go to Sharen first, then we'll go out to Jay in New York. Sharen Turney: Well, first of all, in PINK we're really not looking to get in too deep into the apparel business. Basically it's a loungewear strategy, it's really different in terms of a fit methodology, and when you think about it in terms of looking at the segments that we think are continuing to be opportunities at our top to bottom ratio, we actually distort very well to the bottoms and think that there's a lot of opportunity within the T-shirt category and some other top categories to go along with that strong bottom performance. Moving into the direct apparel business, as you know, we did have strong double-digit growth. We are always looking at opportunities in terms of segmentation of that business. We actually have had a good run at a balance between our lifestyle, which is how do we actually go after the career business versus the casual business and to keeping that balance to that. Also within that apparel business is also a strong swim business which really is an opportunity for us to leverage our core equities from the bra technologies into our swimwear technologies, so it is something that we continue to focus on as we go forward. Tom Katzenmeyer: We'll go out to Jay for a final comment. Jay Margolis: Thank you for an apparel question. I appreciate it, Marni. Again, looking at our consumer and understanding we are best at legs, and look at that category, but our tops are turning very fast, there's a casual opportunity, there's obviously a young wear to work opportunity. So we're looking at all the various parts of our business and so far the balance in what we're doing in the store is working well. We have a best T-shirt category which continues to work really well for us into the spring season, and we're pleased with the way the store looks right now. Hopefully you are as well. Tom Katzenmeyer: Thanks again, everyone. Thanks for listening in. We appreciate your continuing interest in Limited Brands.

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