Tom Katzenmeyer - SVP ofInvestor, Media, and Community Relations Martyn Redgrave - EVP and CAO Stuart Burgdoerfer - EVP and CFO Sharen Turney - CEO of Victoria's Secret Diane Neal - CEO of Bath &Body Works

Jeff Black - Lehman Brothers Michelle Clark - Morgan Stanley Brian Tunick - JP Morgan Kimberly Greenberger - Citigroup Jeff Stein - Keybanc CapitalMarkets Eric Miller - Lehman Brothers Lorraine Maikis - Merrill Lynch Lauren Levitan - Cowen andCompany Sarah Lewis - Credit Suisse Marni Shapiro - The RetailTracker Richard Jaffe - Stifel Nicolaus Dana Cohen - Banc of AmericaSecurities Frank Henson - Bear Stearns John Morris - Wachovia Howard Tubin - RBC CapitalMarkets Dana Telsey - Telsey AdvisoryGroup

Welcome to the Limited Brands'Third Quarter Earnings Call. All participants will be in a listen-only modeuntil the question-and-answer portion. (Operator Instructions). Today'sconference is being recorded. If you have any objections, you may disconnect atthis time. I will now turn the meeting overto Mr. Tom Katzenmeyer, Senior Vice President, Investor, Media, and CommunityRelations. You may begin.

Thank you and good afternoon,everyone and welcome to Limited Brands' third quarter earnings conference callfor the period that ended Saturday, November 3, 2007. As always, as a matter offormality, I need you to remind you that any forward-looking statements we maymake today are subject to the Safe Harbor statements foundin our SEC filings. Our third quarter earningsrelease and related financial information are available on our website,limitedbrands.com. The call is being taped and can be replayed by dialing1-800-337-6551 followed by the pass code 583. You can also listen to an audioreplay from our website. Martyn Redgrave, EVP and CAO,Stuart Burgdoerfer, EVP and Chief Financial Officer; Sharen Turney, CEO,Victoria's Secret, Diane Neal, CEO, Bath & Body Works, and Amie Preston,Vice President of Investor Relations are all joining us today. After our prepared comments, wewill be available to take your questions for as long as time permits. Andagain, so we can speak with as many callers as possible, it's important thatyou limit yourself to one question and I will remind you about that later. And now I'd like to turn the callover to Martyn.

Thanks, Tom and good afternoon,everyone. Since we just held our investor update meeting about a month ago, Iam not going to spend a lot of time this afternoon discussing our strategicinitiatives. However, I do want to reiterate that we remain very focused on ouropportunities for growth, including the following things: Expanding the averageVictoria's Secret store size by roughly 50%, resulting in 8% to 10% squarefootage growth per year for the brand over the next five years; opening new BBWstores primarily in non-mall locations, which will result in BBW square footagegrowing at about 6% per year over the next five years; our continued expansionof La Senza in Canada, which will result in square footagegrowth this year and total company owned stores of roughly 15%. The continuedtesting and expansion of our new concepts including the VSX, our new sportinitiative for Victoria's Secret, Intimissimi, our accessories and BBWdirect and finally, the further development of our plans to expandinternationally including the opening of five to ten new BBW stores in Canadanext year. Now, if we review it in somedetail of the investor update meeting, all of these initiatives are on trackand meeting our expectations in terms of timing and performance. As you know, we have also beeninvesting in our operational capabilities to support the growth of our brands.Over the past three years, we have successfully implemented new systems andcapabilities in a number of areas, including our PeopleSoft implementation forpayroll and HR capabilities, our SAP core financial systems implementation, our[entire] data, customer data warehouse and customer relationship marketingsystems, and the creation of our finance, HR and procurement servicesorganization. In addition, last year, weimplemented new supply chain systems at Bath & Body Works. And we spent thepast year stabilizing those systems and training our associates in how to fullyutilize the new capabilities delivered by these systems. We believe we willbegin to see the benefits from these new capabilities in the fourth quarter andmore completely next year. We are also investing in our newdistribution center and new front-end technology to support the growth of our Victoria's Secret Directbusiness. As you know, we opened the new distribution center for Victoria's Secret Directin early August. As we described in our October sales call, it has taken uslonger than we had anticipated to ramp up this new DC to full capacity. Thishas had a negative impact on our third quarter results and we now expect thatit will have an even more negative impact on our fourth quarter results. Stuart and Sharen will discussthe financial impacts more specifically, but I thought it would be helpful toprovide you with an overview of this situation. The former direct distributioncenter was built back in 1992, when the business was doing less than $400million in volume. The business is now at $1.4 billion and we have beenexperiencing capacity issues in the last two holiday seasons. As a result, werecognized that we could not support the growth of this direct business withexisting DC. When we planned the new DC thatwould support the growth of our direct business for the next decade, weinvested in a new physical facility, systems, material handling equipment andprocesses that represent the best practices that are being used in directdistribution. While many of the systems andprocesses we are using in the new DC have been employed before in other centers.The way in which these systems are integrated, there's a unique combination, dueto the high unit velocity and the range of skewed diversity in our directbusiness. The fact of it is that the hard change over of the new integratedprocesses, mechanical equipment, and IP systems is taking us longer thanexpected to stabilize. We appear to have hit a limit in how much we can processthrough the new center and we need to be able to substantially increase our throughputto serve the volumes that we expect for holiday in January semi-annual sale. Direct demand at Victoria's Secret remainsvery strong and we want to ensure that we don't disappoint our customers.Therefore, we have taken actions to constrain the volume of orders we'll takeincluding reducing catalogue circulation, which will significantly reducefourth quarter direct demand and sales. Again the direct DC up to fullcapacity is, without question, the more significant operational priority thatwe have. We have our best internal people as well as outside vendor experts andindependent experts evaluating this situation and we are looking at a range ofoptions to make changes. As we have previously discussed,we also have two other significant technology projects underway. As a result ofthe challenges that we've experienced with both the implementation of thesupply chain systems at Bath & Body Works, and the new direct distributioncenter, we are reevaluating the approach and timing of the supply chain systemsrollout to Victoria's Secret and Mast, and thedevelopment of the new front-end technology systems at Victoria's Secret Direct. Our number one business priorityis to remain very focused on executing the best possible fourth quarter inholiday. Although, we anticipate that the external environment will remainchallenging and we will be negatively impacted by the issues at the Victoria's Secret Directdistribution center, we do believe that our brands are very strong and that weare very well positioned with respect to our assortment, our inventory levelsand expense discipline. Thanks. And I'll now turn it overto Stuart to do the financial update.

Thanks, Martyn, and goodafternoon, everyone. Turning to our third quarter performance, we reportedearnings of $0.03 per share, $0.04 of which represented gains from the sale ofcorporate aircraft in connection with the disposition of the apparel businessesand our review of corporate overhead. Our earnings mix versus ouroriginal expectations was driven by Victoria'sSecret Direct and the issues that Martyn discussed related to the distributioncenter. Sharen will discuss this in moredetail. Although, we did experience softness in the stores channels of brandsas reflected in the negative 3% comp for the quarter versus our expectation fora flat comp, we were able to offset the earnings impact of this sales mixthrough greater than anticipated expense savings. The negative 3% comp for thequarter was driven by negative traffic levels and we believe it is more theresult of a tough environment versus specific assortment issues. It is alsoworth noting that our comp was up 13% in the third quarter when viewed on a twoyear basis. Gross margin decreased 400 basis points to 31.9%. As we discussedon the second quarter call over half of the basis point decline is the resultof the net impact of the recognition of Mast sales to Express and LimitedStores partially offset by the elimination of the lower margin apparelbusiness. The remaining decline is theresult of a significant decline in the gross margin rate at Victoria'sSecret Direct and to a lesser extent deleveraging, buying and occupancy at the Victoria's Secretstores. Importantly the merchandise margin rate at Victoria's Secret stores was roughly flatand BBW's merchandise margin rate improved versus 2006. The SG&A rate improved by 410basis points again consistent with our guidance. Key drivers of the rateimprovement include, first, the net impact of the recognition of Mast sales toExpress and Limited Stores partially offset by the elimination of the apparelbusinesses which drove over half the rate improvement. Second the benefit ofthe Aircraft gains. Third the benefit of home, office, marketing and otherexpense reductions, and fourth, an offset due to the impact of lower salesvolumes and incremental expenses at Victoria'sSecret Direct. Total operating income declined $5 million to $61.1 million. By segment the Victoria's Secret segment declined by $52.3million to $77.7 million. The Bath & Body Works segment declined by $2million to a loss of $1.1 million and the other segment improved by $47.7million to a loss of $15.2 million. Our capital restructuring activitiesincluding the impact of the additional debt in the share repurchases were about$0.02 diluted in the third quarter. Retail inventories ended thequarter down 14% per square foot at costs in line with our targets. We continueto target retail inventory per square foot to be down roughly 20% to 25% to2006 levels by year end. On a two year basis retail inventory growth per footin the fall will be below our sales growth per foot. We repurchased 14.6million shares of stock in the third quarter for $335.6 million. At the end ofthe third quarter we had $96.4 million remaining in our current $250 millionprogram. Additionally our Board has authorized an additional $250 millionrepurchase program. Now, turning to our earningsoutlook for the fourth quarter. We expect fourth quarter earnings per sharebetween $0.90 and $1.05 versus our previous estimate of $1.18 and $1.08 lastyear. Last year's earnings per share include about $0.04 attributable to the53rd week. The decline versus our previous estimate is primarily attributableto a reduction in our projections for Victoria'sSecret Direct. As Martyn mentioned, we havetaken steps to reduce demand and sales in the fourth quarter in order toprotect the customer experience. We believe that these measures could reduce Victoria's Secret Directsales in the fourth quarter by roughly $150 million versus last year. We arealso incurring additional expenses related to the distribution center. Ourrevised estimate also reflects a decline at Victoria's Secret stores and Bath& Body Works versus our prior estimates in recognition of the difficultenvironment and negative traffic trend. Our revised comp estimate forNovember is the negative mid-single digit count and for the fourth quarter isthe negative low single digit count versus flat guidance for both periodspreviously. This would represent a two year comp result for the fourth quarterin the high single digits. Versus last year, our operating income dollars willbe most impacted by a significant decline at Victoria's Secret Direct. A decline at Mastdriven by lower sales to Victoria'sSecret and Abercrombie partially offset by a reduction in corporate overheadrelated to our headcount reductions. We estimate that total sales inthe fourth quarter will decline by roughly 15% to 20% driven by the sale of theapparel businesses and the decline at the Victoria's Secret Direct partially offset byan increase in Mast sales of roughly $70 million. We estimate that the fourthquarter gross margin rate will be roughly flat. And we expect that the fourthquarter SG&A rate will increase versus last year, driven by the samefactors that drove the third quarter rate improvement. It is important to note that thenet impact of the incremental Mast sales, and the elimination of the apparelbusinesses, will not be as significant on a rate basis as it was in the thirdquarter due to the higher sales volume in the fourth quarter. We expect theinterest expense will be about $50 million in the fourth quarter, and that thetotal of interest income, other income and minority interest will be around $50million. We continue to estimate that 2007capital expenditures will be between $765 million and $790 million. As we'vediscussed previously, over 60% of our capital expenditures relate to theinvestments in remodeling and expanding existing stores as well as opening newstores. This investment relates to the real estate growth for Victoria's Secret and Bath & Body Works,as well as the capital spending of La Senza which isincremental for 2007. About 20% ofour CapEx budget relates to investments in technology initiatives and theexpansion of our direct distribution center, and this investment level isroughly flat year-over-year. The remainder of our CapEx budget relates to home,office and other investments, including the consolidation of the majority ofour New Yorkoffices to one location. Before I turnit over to Sharon,I'd like to make some comments on La Senza's thirdquarter performance. Third quarter sales at La Senzawere $117.3 million and comps were down 2%, which was below expectation. Althoughoperating income dollars were slightly lower than expectation due to the [salesmix] the operating income rate was inline with our plans. Victoria's Secret Beauty products wererolled to all the center stores in October and we are encouraged by theresponse to-date. Thanks and now I will turn the discussion over to Sharen.

Thank you, Stuart and goodevening. The total Victoria'sSecret segment sales including La Senza increased 9% in thethird quarter to $1.077 billion. Comp store sales decreased 4% but were up 13%on a two year basis. Total segment operating income declined $52 million to$77.7 million, a decline of 40%. And total segment operating income declinedwith a primary driven by a decline at Direct. A decline in operating income of Victoria's Secret storeswas largely offset by the La Senza's operating profitduring the quarter. Turning to theindividual business performance, Victoria'sSecret store comp declined by 4% and total sales declined 1% to $735 million.Operating income dollars declined and the operating rate declined by just over200 basis points driven by buying and occupancy deleverage. The merchandisemargin rate was roughly flat and SG&A leveraged as a percent of sales dueto decline in marketing stand. Comp store sales for the quarter were belowexpectations as our performance was hampered by the continued overall economicenvironment and consequential softness in mall traffic. During thethird quarter our core bra, panty and sleepwear business was down to last yearwhile our PINK and Beauty business posted year-over-year growth. For the fourth quarter, we arefocused on executing the best holiday possible, continuing to introduce andlaunch new and innovative product and executing our real estate strategy. Asour customer insight work tells us, at the beginning of a holiday season ourcustomers' primarily focus on self purchase. Therefore, we began the holidayseason with this focus in mind, featuring the launch of a new Very Sexy Wavewith lace bra, fresh PINK assortment and a new Supermodel fragrance launch inBeauty. In order to deliver our holidayplan, we are focused on executing our planned strategy, executing cost toaction marketing to drive additional traffic to our stores and increaseconversion, and we continue to proactively manage inventory levels whileproviding customers with required levels of newness. We are also continuing to developkey drivers of growth for the holiday. Some of our plans include a shift fromself purchase to gift things during key holiday timeframe, including lingerie,PINK and Beauty gifting. We expanded our giftable and impulse purchaseassortment to include fun items such as [penny pop, penny candy, gift cardholders] that also serve as luggage tagged along with other highly giftableitems that we think will sell this holiday. We planned a celebration of thefirst ever supermodel PJ party featuring a fun, fabulous colorful collection ofsleepwear that is perfect for self purchase or gifting. We are continuing tobuild the Intimissimi line as intimate apparel, which represents a strongopening price point proposition and an escalated frequency of fashion.Intimissimi will be in roughly 240 stores by the end of this year. Testing VSX, our new line ofsports bras and apparels in about 30 stores, and finally, we continue to focuson and be excited about our overall real estate strategy. In the third quarter, we opened17 new stores and remodeled 52 stores with plans to open a remodel -- a totalof 145 stores by yearend. Make sure you watch the fashion show, which will airon December 4th at 10:00 pmon CBS. This year's show features the kickoff of the World Reunion Tour of theSpice Girls. Now turning our intention to thedirect channel. As Martyn and Stuart mentioned, our results at direct werenegatively impacted by the delays in shipping out of our new distributioncenter. Demand for the brand, as evidenced by our orders in the catalog and theInternet channel, remain very strong. But sales at direct declined 7% in thequarter due to the increase shipped time and operating income declinedsignificantly. The decline in operating income was a result of sales andrelated shipping and handling revenue decline, the loss of higher marginexpedited shipping option and incremental labor higher to staff a DC and workon fixing the issue. We were, obviously, disappointedthat we have had to take steps to reduce this demand in the fourth quarter.However, protecting the customer experience and their satisfaction with thebrand is of paramount importance. As Martyn said, this is our most significantoperational priority and we are working very hard to bring the DC up to fullcapacity and maintain customer satisfaction. Thank you. Now I will turn itover to Diane.

Thank you, Sharen, and goodevening. Bath & Body Works comp decreased 3% in the third quarter against a15% increase last year. Although sales for the quarter increased $16 millionover last year, sales were below our expectations. For the quarter, operating incomeversus last year declined $2 million to a loss of $1 million. The operatingincome result was driven by increases in sales in margin dollars, primarilydriven by real estate activity and a margin rate improvement. That was offsetby deleveraging a fixed buying and occupancy expenses and start-up costsassociated with new store real estate activity, and consistent with priorquarters, higher SG&A costs due to ongoing supply chain system supportcosts. Overall, third quarter sales andmargins were below expectations, driven in part by lower than expected customertraffic. Throughout the quarter, we experienced a downturn in customer traffic,which has been consistent with mall traffic decline. Both merchandise marginand growth margin rates were up to last year, driven primarily by mixed andimproved product costs, partially offset by increased promotional activity toclear seasonal fragrances in gift sets. During the quarter, performanceof our e-commerce business met expectations. We continue to view the directchannel as both a revenue generator and marketing vehicle for our brand andcollection of sub brands. In August, we ran our annual hand soap event, whichfocused on our antibac and aromatherapy hand soaps and featured the launch ofthree new hand soap fragrances; Midnight Pomegranate, Japanese Cherry Blossomand Sensual Amber from our Signature collection line. In early September, we launchedour fall fragrance theme featuring the new irresistible apple fragrance fromour Signature collection and our Perfect Autumn home fragrance collection. Inlate September, we moved to our home fragrance theme that continued to focus onour Perfect Autumn and Halloween home fragrance collections and new fragrancesfrom our Temptations body care line. In October we launched our fallhome fragrance theme featuring Perfect Autumn and Halloween home fragrancecollection, we then moved to our Happy Falliday theme, which was a moretransitional holiday set. Happy Falliday features the launch of new fragrancesVelvet Tuberose, Blackberry Amber from our Signature Collection line, as wellas our Perfect Autumn home fragrance collection. In November, we moved to the perfectChristmas theme which featured holiday gifts, home fragrance and toiletrycollections. This year's Black Friday promotions will be similar to last year,featuring an (inaudible) gifts with purchase, and [wildflower] promotion. December themes will continue tofocus on our holiday collection. New for this year, we'll seek to excitingactivities to drive traffic each day during the last 12 days leading up toChristmas. Holidayis off to softer [cycle] than we have planned, but we believe our assortmentsare fresher than last year and inventories are appropriately at balance intotal and occupy stores driven primarily by our systems implementationbenefits. We also have additional inventory support in our key volume driversthat we feel was a missed opportunity from last year. We are cautiouslyoptimistic that we will deliver a successful holiday in fall seasons. With that I will turn thediscussion back over to Martyn.

Thanks, Diane. Before we takeyour question, I'd just like to emphasis three main points. First, we are verystrong brands that lead the industry in their categories. Second, we arereevaluating the timing and approach to our ongoing technology initiatives inorder to minimize the disruptions to our business in 2008. And finally, we'revery focused on managing the key basic operational elements of our business,our assortments, inventory levels, expense controls and operating execution. Thanks. And I'll now turn it backover to Tom for questions.

Thanks, Martyn. That concludesour prepared comments. At this time, we'll be happy to take any questions youmight have. Again, I want to remind you we'd like to limit everyone to onequestion. So I'd like to turn it over to back to Josh for the first question. Operator?

Thank you. At this time, we areready to take question. (Operator Instructions). Our first question is from Mr.Jeff Black of Lehman Brothers. Jeff Black - Lehman Brothers: Thanks. Good afternoon, everybody.I guess, just a question on the magnitude and depth of the problem at the DC. Imean is this a full reengineering effort we have to undertake here, and whatare the chances that extends beyond 4Q and into spring, would be a? And then onVictoria'sSecret systems implementation, assuming you probably don't want to do that nextfall, is that going to slip into '09? Thank you very much

Thanks, Jeff. We're going to goto Martyn Redgrave with your question

Jeff, in terms of thedistribution at our operation, just to step back and give your a little bitmore perspective, because I'm sure this could be a source of a number ofquestion, the first thing I think you need to understand with opening a newcentre in August we had expected a slow ramp-up. We did, in fact, ramp up thedevelopment pace as were expecting to ramp-up that throughout the end ofSeptember and into October. We say no ways, if you will, in the operation ofthe center, but we didn't see an inability to breakthrough the volume levelsthat we need to breakthrough the service holiday. Over the last four weeks, as wehave evaluated the performance of the center, we've concluded that that aresome issues there that are going to cause us to have one of the capacity incenter that will limit the capacity in center as we're entering a holiday. The center itself, obviously is anew operation for us, for instance, it utilizes a number of new capabilitiesthat we've not had in our other distribution centers before the things like theHigh Bay reserve storage capabilities thatare not in our other centers. So, we're using as a dynamic location pickingsystem, which is very different then the static location for consistence thatour traditional centers have used. We are using new high-speedmultiple stage conveyor systems, new handheld and laser reading scanningtechnologies, all of this is kind of new to us, not necessary new to the worldin terms of the way it's been utilized in other large scale distributioncenters, but it is just taking us longer than we had expected to, kind of, burnin these new processes, these new systems and make sure that our associates inour distribution center fully understand how to utilize the new processes andsystems. Another point that I'd give youas perspective is that the center right now is operating in about 70% to 75% ofour targeted capacity. In other words, the capacity we would need to be atbefore these service holidays, so that gives you a sense of the gap. And the last thing I would say,and I would be happy to answer more questions about this, is that we'reobviously focused on stabilizing the systems, the processes and ensuring thatour people are properly trained to operate these new systems and processes. We're working on all aspects ofthat on a very real time basis with internal and outside experts. And at thisstage it's premature to say how long it's going to take to fully stabilize thecenter, and whether or not it's going to have an impact on the spring. We doexpect it will have some impact though. Jeff Black - Lehman Brothers: And Martyn, he had a follow-onquestion about the systems at Victoria's.

Well, as I mentioned in thescripted remarks, we're evaluating the timing of the implementation of thesupply chain systems for Victoria'sSecrets stores. It's important to distinguish that, on one hand we're talkingabout the Victoria'sSecret Direct business that's the distribution center. On the other hand, whichis a completely separate organization and operation is our stores operations,which is scheduled to implement the supply chain systems next year. As I indicated, we're evaluatingthe timing of that implementation, particularly, as we look at the otherpriorities that we have to deliver against, and it is probable that we willchange that timing in order to not disrupt the Victoria's Secrets stores business in 2008. Jeff Black - Lehman Brothers: But without belaboring thesystem, does it stands now and with the 70% capacity it can handle springvolume or no?

It handles spring volume but notsemi-annual sales peak volumes. Jeff Black - Lehman Brothers: Okay. I'll turn it over to therest of the callers. Thanks.

Thanks, Jeff.

Next question please.

Our next question is from Ms.Michelle Clark of Morgan Stanley. Michelle Clark - Morgan Stanley: Thanks guys and good eveningeveryone. Can you breakout for us what the year-over-year change in operatingmargin rate would have been at Victoria'sSecret pacts the impact of the Direct business? And then, secondly, if youcould discuss square footage growth plans at VS, I mean any plans to Scale Backthere given continued struggle in the business overall, what's getting you toScale Back square footage growth at VS? Thank you.

Thanks Michelle. We're going togo to Stuart Burgdoerfer for those questions.

So on the question aboutexcluding the effect of directs from the Victoria'sSecret result, operating margin rate would have been down or was down in thethird quarter driven by P&L leverage. As I mentioned in my remarks,merchandise margins was basically flat, but there is deleverage in buying andoccupancy costs related to our real estate initiative. As we've talked about over thelast several quarters the effect of real estate in the first three quartersdoes not drive earnings growth. It will drive earnings growth in the fourthquarter. So the real driver of operating margins declined at Victoria's Secret's stores in the thirdquarter is the effect of the incremental real estate costs. But, again, thatwill become additive to earnings in the fourth quarter and in 2008. On real estate specifically, weare monitoring real estate closely. As we shared with the investment communitya few weeks ago, we are very encouraged by the results that we've seen but weare monitoring it very closely and we will evaluate it once we have the holidaysales results and in terms of seeing what the results look like post holiday. Michelle Clark - Morgan Stanley: Thanks.

Thanks, Stuart. Next questionplease.

Our next question is from Mr.Brian Tunick of JP Morgan. Brian Tunick - JP Morgan: Thanks. Good afternoon. Myquestion is, I guess, from a big picture, it sounds like marketing spend isdown, inventories were down, promotions are down, so, I guess, the question is:how do you think about comping better than mall traffic and holding marketshare between the two brands with all those things that are down versus lastyear?

Thanks, Brian. I think we'llstart with Stuart on that question.

And Diane and Sharen can add tothis. But, Brian, we've looked at things on a two-year basis, so, as you wouldimagine, we look at our sales trend in lot of different ways. As you are awareand certainly we're aware, our comparisons ease up quite a bit in the fourthquarter. So we have assessed our salesexpectations. We've certainly worked to factoring what we know at this pointand we are comfortable with the guidance we're providing obviously and that'skind of how we settle out. And maybe Sharen or/and Diane could comment furtheras it relates to BBW, VS.

Yeah. Hi. This is Sharen. Brian Tunick - JP Morgan: Hi, Sharen.

On the marketing dollars, yes,our marketing dollars for the third quarter were significantly down since lastyear. Our marketing spend as we're looking at going into the fourth quarter areboth in terms of looking at what we're doing and our lineup around holiday areprimarily flat to last year. We were investing those marketingdollars are truly around gifting products, as I said earlier, around are onsupermodel PJ party that we're looking at, our launch of holiday fragrance,which is very gifting, and looking at our gift card strategy. So, all themarketing dollars this year are primarily focused on true gifting opportunitiesfor this holiday season, which I do believe gives us the opportunity tocontinue to drive our market share as well as to drive the holiday.

And at Bath & Body Workssides. This is Diane, Bryan.At Bath & Body Works, we launched Velvet Tuberose as a fragrance inOctober. So we did not launch our fragrance last year, so we have that toanniversary in December. Also, last December, I hadmentioned before that our in-stocks and our top key fragrances within ourSignature Collection were about 50%. We are at unbelievable fate now. Not tomention our balance of inventory by store is much better than it has ever been.We're actually in a much better position by starting to hold inventory at BBW,I think than we have done in years. So, I'm pretty excited about our balance. And then the other piece of itreally is those last 12 days moving up to Christmas, that was a big miss for uslast year. And we've got a lot of great different activities happeningeveryday, I think will add additional volume for us. Brian Tunick - JP Morgan: Okay. Terrific. Very helpful.Good luck

Thanks, Bryan. We'll go to our next question please.

Our next question is fromKimberly Greenberger of Citigroup. Kimberly Greenberger - Citigroup: Hi. Thank you. I was hoping thatthe brand President could just talk about the margin direction at each Victoria's Secret andBath & Body Works. We've seen degradation throughout the year and based onthe fourth quarter guidance, perhaps we'd assume it would down margins again ineach of those divisions in the fourth quarter. Is the '08 outlook for somerecovery there or if you could just give us any sort of directional help withthat, that would be great. Thanks.

Hey Kimberly, why don't we startwith Stuart there again?

Kimberly, for both BBW and VS,our expectation is basically for a roughly flat margin result in the fourthquarter. So that's our expectations. We're working on our views for 2008. We'verealized what we're lapping in terms of the spring of '07, but we're stilldeveloping those views. But with respect to the fourth quarter, our expectationis a roughly flat result. Kimberly Greenberger - Citigroup: And Stuart, could you justaddress the Victoria'sSecret Direct sales shortfall in the fourth quarter? And how you get throughthe access inventory that that sales shortfall creates?

Yes. So as you would imagine, we'revery focused on that. We have estimated the inventory impact and we'readjusting [receipt] flow appropriately to minimize the negative aspects ofthat, but it's a preclude, as dynamic situation as you can imagine, and itrelates to an assessment of where we are in the distribution center and how wemight want to manage through spring. But our fourth quarter guidance in termsof earnings does contemplate or estimate any margin affect from our inventoryposition at the end of the year. Kimberly Greenberger - Citigroup: Thanks.

Kimberly, did we get all yourquestions answered? Kimberly Greenberger - Citigroup: That's helpful. Thanks, Tom.

Next question please.

Our next question is from Mr.Jeff Stein of Keybanc Capital Markets. Jeff Stein - Keybanc Capital Markets: Hey, well, this question isprobably a little premature, but I am just kind of curious: how you go aboutramping a business, or ramping back up a business, like Victoria's Secret Direct after slowing itdown? In another words, do you envision a steep ramp or once you get thebusiness stabilized, really will be more inclined to try to produce a softrange?

Jeff, we are going to get youSharen Turney for that.

Basically, at this time and thisis when we really peak the business around the holiday and semi-annual sale. Aswe come out of semi-annual sale, the normal business subsides down to all the wayuntil we get back into semi-annual. We feel very confident in terms of theproduct. The product demand has been very strong at direct and we continue tosee that opportunity in the spring season. The one caution that you have is thefact that we won't be driving the fire and the growth of the fire as we have inthe past. We're being very strategic with the contact strategy. We are just notcontacting the customers as frequently as we had in the past and our [selling]plan is around the contact strategy and going back after those customers at amore frequent basis both by catalogue as well as an e-mail strategy. Jeff Stein - Keybanc Capital Markets: Well, it sounds like it's kind ofa soft ramp, would that be correct?

Well, the think about it is, youare not really having to ramp up because you are coming out of a peak timeframewhere normally the volume drops. So, because the volume drops, thatdistribution center will be able to handle that volume, can we get the laborcorrected within that from a profit flow perspective. Jeff Stein - Keybanc Capital Markets: Got it. Thank you

Thank you, Jeff. Next questionplease.

Ms. Lauren Levitan of Cowen andCompany, you may ask your question. Please check your mute button. We'll moveon to the next question. Our next question is from Eric Miller of LehmanBrothers. Eric Miller - Lehman Brothers: Yes, good evening. Thank you fortaking the question. My question relates throughout your balance sheet and yourshare repurchase program that you had in place for sometime. Could you justtalk a little bit about as your operating performance has deteriorated andobviously, we are seeing your stock at a multi-year row, can you talk a littlebit about your commitment to maintaining a strong balance sheet as we face atougher economic environment and where you stand in terms of your commitment toin investment grade debt rating? Because it looks like you are on the pathheading below investment grade. Your debt spreads have now doubled over thelast two months or so, and I was curious what the company's commitment is tomaintaining the financial flexibility as we enter 2008? Thank you.

Thanks for your question. This isStuart. So, we are committed to retaining financial flexibility as you put it.As we have talked about before, we try to be very thoughtful about ouroperating performance, the credit environment, our estimates of cash flow, etcetera, in making decisions about capital structure including share repurchase,so that we balance the interest between equity holders and debt holdersappropriately. We believe that based on ouroperating performance and our announced programs that we will retain thefinancial flexibility that you speak of, and we review that specifically. Withrespect to credit spreads, they are up really for almost all retailers. So, wedo look at that as well and we looked at them recently, but the credit spreadsof a number of other retailers and really the retail category segment is up aswell. So, the net of it is we are committed to flexibility. We are committed tobalancing the interest. And we are in appropriate context with the ratingagencies on those points. Eric Miller - Lehman Brothers: Can you just answer the questionin terms of whether or not investment grade ratings are something that you arecommitted to?

We are committed to those. Eric Miller - Lehman Brothers: And is there a specific debt toEBITDA metric that you are measuring your business by? I mean you areapproaching four times adjusted debt to EBITDA when you look at yourleast-adjusted leverage, which is significantly higher than it has been insometime: is there a specific number that we should look to that you are goingto manage the business by?

We are not focused on any onemethod. We are focused really on the goals that were implicit in your questionand in our view of it and as you know, it's a function of many differentvariables including operating performance strength as well. So, we don't focuson one particular method, but we are certainly familiar with the ratios theagencies use.

Thank you for your question. Nextquestion please

Next question is from Ms.Lorraine Maikis of Merrill Lynch. Lorraine Maikis - Merrill Lynch: Thank you. Good evening. You havementioned before that the SG&A rate would be up in the fourth quarter. Canyou just clarify and give us the reasons for that? And also do you think thatyou are putting the Victoria'sSecret stores business at risk by not updating the systems and can you stillmanage the inventory in the newly expanded stores without doing the upgradeimmediately?

So, then we will go to Stuart forthe first part of your question and to Martyn for the second part.

For the fourth quarter, we areestimating that the enterprise SG&A rate will be flat. In terms of thedrivers that change in the SG&A rates, the impact of the Victoria's SecretDirect sales loss has a pretty meaningful effect on the SG&A rate andthat's really the most significant thing that I will call out beyond theeffects of the apparel and Mast that we have talked about before.

And then to Martyn.

In terms of the systemsimplementation, we assessed Victoria'sSecret stores and Mast for production and sourcing business, we probably willbe proceeding with implementing part of those systems in 2008, particularly forthe production and sourcing end of it which is kind of a front end, of thoseimplementations when you think about the supply chain. The fact is thatrealizing benefits from those systems is a medium-term not long-term butmedium-term effort as evidenced by the implementation of the supply chaincapabilities of BBW the last year. It did take us longer to stabilize thosesystems in BBW than we had originally expected. We had expected around sixmonths. It took us for 12 months to stabilize the systems and [in trying to]utilizing the way they are intending to utilize now, as Diane has mentionedthat this team is beginning to see the benefits in fully utilizing thosesystems. So, we are consciously aware of the trade [hawks] but feel thatre-timing the system implementations will give Victoria's Secret or this team achance to really focus on execution in 2008, and not go through a disruption infront of holiday as we have done with our direct channel this year in our BBWbusiness last year, and re-timing it to a spring of '09 timing, which is whatwe are examining and it would probably optimize all of the above pros and cons.

Well, [I'm really going] back toStuart for a clarification of something we missed out.

Yeah, excuse me on the fourthquarter SG&A rate, it will be up somewhat for the reason described which isthe affect of the [VSP] sales loss is the main driver. So, excuse me for that,I had mentioned it in my script correctly and on the Q&A incorrectly.Thanks. Lorraine Maikis - Merrill Lynch: Okay, thank you.

Thanks.

Next question?

Our next question is from LaurenLevitan of Cowen and Company Lauren Levitan - Cowen and Company: Thanks good afternoon, when I goback to the Victoria's Secret Direct issue, I'm curious if you believe cuttingcirculation has any impact on Victoria's Secret sales and so much as thatmarketing device might be driving people to the stores and how you'll addressthat, potential impact on traffic. And I know you mentioned earlier in responseto a question Stuart, that you thought that inventory, you've got ways to workthrough it that it's our understating that significant portion of thatinventory or of those styles are not available in stores, if you could help usget a better understanding of how that's going to flow through and then we havemade it to that expense [control] obviously in the third quarter, looks likeyou found more ways to control expenses than the original side of expense cutsthat you had talked about. Can you tell us, give us somesense as how much more opportunity do you think there is to control expenses? Particularlyin light of this reduced outlook you're seeing not just for Victoria's Secret Direct, but also in thecore businesses relative to traffic. Thanks.

Lauren, we're going to take yourquestion and pass it around here a little bit, we go to Sharen first.

The first question is in the halfI believe was that while cutting the catalog circulation. What would that do toSecret stores? We do know that when you mail a catalog that you actually do, itdoes drive some traffic through stores. What we are doing is actually just --we're actually just going back one contact. So, what we've done is, we've takenthose names and [have slipped] in an e-mail strategy to over 40 million peopleon a weekly basis between now and the end of January, which is totallycontacting those customers with a drive-to-store initiative. So that we dobelieve that we will be able to offset the catalog circulations by actuallyputting in a drive-to-store, store only event with those customers who try tooffset a little of that demand when it comes nearly to able to [sell all ofthe] demand that the direct business will [move]. I think one of the questions if Ithink was about the inventory levels in direct about the non purchase thingsthat are not in the store. What we've done is we've actually re-sorted thecatalog as well as the e-mails and homepages to truly seasonal merchandisewhether it being our apparel categories or being our sleepwear categories. Sotherefore the categories that are more long life categories are not as,probably in the catalog or online, therefore, selling through those that have ashorter life. We also are taking some inventories from Direct to the stores ofwhich we needed to actually drive our key bra business as well as someopportunities within the sleepwear category. So I do believe that we have doneeverything that we can to mitigate the risk that we do have within theinventory. There are still some and as Stuart has said that we have addressedthose within the guidance.

And Lauren we are going to getback to Stuart for your question on observation about third quarter expense.

In terms of the favorability onexpenses versus in our previous [year], we are just continuing fundamentallythe scrutinized home office spending and particularly projects in IT relatedspending and so that's what really drove the favorability versus our initialview in the third quarter. As you can imagine, based on our operatingperformance, we are reevaluating just about everything in our operating P&Lto drive consistent profit growth. So with respect to forward expectations,we'll be specific about that in February, but we're reevaluating all expensecategories to drive efficiency. Lauren Levitan - Cowen and Company: That's helpful. Oneclarification: Did you say that you thought Victoria's Secret EBIT margins willbe flat in the quarter and was that excluding the impact of the Victoria'sSecret Direct's issues?

In terms of the fourth quarter? Lauren Levitan - Cowen and Company: Yes.

What I said is they would be downin the fourth quarter, down somewhat driven by -- driven solely by B&O'sdeleverage on a rate basis.

I think, Lauren, we were talkingabout merchandise.

Yeah. So merchandise margin willbe roughly flat. Operating margin will be down somewhat driven by B&Odeleverage. Lauren Levitan - Cowen and Company: Thank you very much.

Thanks, Lauren. Next question?

Our next question is from PaulLejuez of Credit Suisse. Sarah Lewis - CreditSuisse: Hi. It's Sarah Lewis standing infor Paul. Just wanted to follow up on the question about DC impact on the Victoria's Secret retailbusiness: Is there anyway you could quantify what type of impact it had to thebusiness thus far in the stores? And then, also, can you just clarify what thenumber of bra launches will be in fourth quarter of this versus last year?Thanks.

Sarah, we're going to go toSharen for both of those.

We didn't do anything with thecirculation strategy in the third quarter. So, we see no effect on the stores.I do believe, as I said earlier, I think that we have got a plan in place onthe circulation that we are pulling back. We actually have a strong plan todrive to stores. And the other question was we have flat launches this yearversus last year in the fourth quarter.

Thanks. Next question, please.

Our next question is from MarniShapiro of The Retail Tracker. Marni Shapiro - The Retail Tracker: Hi, guys. Good evening. If youcould talk a little bit, you said inventory was down about 14% per square foot,it sounds like that a little bit more heavily weighted towards Victoria's Secret. Ifyou could, just break that out a little bit more clearly between the twobrands?

Thanks, Marni. We'll go to Stuartfor that.

It's down pretty consistently inboth businesses, so there isn't a dramatic difference between the twobusinesses. Marni Shapiro - The Retail Tracker: Great. Okay. Thanks, guys

Thanks, Marni. Next question.

Our next question is from RichardJaffe of Stifel Nicolaus. Richard Jaffe - Stifel Nicolaus: Thanks very much, guys. Just acouple of sort of mundane questions about tax rate for the quarter and for theyear, and what we should anticipate for next year in the new form?

So, this is Stuart. On that, youshould expect about 39%. The phenomenon that occurs in the third quarter iswhat I call the law of small numbers. So you'll get a funny rate, becauseinherently in the business and also in [prior dated] performance, the pre-taxincome was low. Richard Jaffe - Stifel Nicolaus: Right.

So a forward modeling assumptionof 39% is right. As you know, there is more volatility today in a publiccompanies tax rate due to the effects of FIN 48. But 39% is a good number.There will be some volatility quarter-to-quarter based on the settlement ofparticular issues, but 39% is a good number Richard Jaffe - Stifel Nicolaus: That's great. Just a quickquestion, could you provide inventory by division in a little bit more detail?

What I would say is that we'refocused on having the right amount of inventory. Obviously, in all of ourbusinesses, our focus has been in all the major businesses, and the results interms of declines in 2007 and being in balance on a two-year basis applies toboth Bath & Body Works and Victoria'sSecret stores. Richard Jaffe - Stifel Nicolaus: Thank you.

Thanks, Stuart. Thanks, Richard.I know we've been on the call for an hour, but I think we'd like to take a fewmore questions. There are still some folks in the queue.

Our next question is from Ms.Dana Cohen of Banc of America Securities. Dana Cohen -Banc of AmericaSecurities: Hi, guys. Thanks for taking thequestion. Starting with the other number, which moved to about $47 million, canyou just give us the pieces of that sort of like what were the big chunks tohave such a big swing in the other number? My second question is on the Victoria's Secret numberyou just gave, operating profit to be down somewhat, that is just Victoria's Secret bookedfor the direct business? I just wanted to confirm that and also confirm thatoperating margins were down 200 basis points and that was just the Victoria'sSecret business, where was that though?

Okay. We will go to Stuart.

Okay. And I will repeat the sameanswer to questions as I stated on the first one. On that first question, Dana,in terms of the key drivers within the other segment in terms of favorabilitythat gain on sale of corporate aircraft was the biggest driver. Expense savingsthat I mentioned related to home office overhead and IT-related projectspending would be the next biggest driver of the favorability. Dana Cohen -Banc of AmericaSecurities: Okay. Obviously, the gain is inthere. Are there any other pieces to that that are not recurring?

No. There is nothing out that Iwould describe as significant and nonrecurring. Dana Cohen -Banc of AmericaSecurities: Okay. And then just theclarification?

And the clarification is onoperating margins for…

So Dana, when we were talkingabout for -- Stuart was only talking about Victoria's Secret stores not excluding direct.

And we're talking about thefourth quarter. Dana Cohen -Banc of AmericaSecurities: Both for Q4 guidance and foroperating margins having (inaudible) 200 in Q3.

That was also only stores. Dana Cohen -Banc of AmericaSecurities: Perfect. Thank so much.

Thank Dana. One more, quickquestion here.

Frank Henson of Bear Stearns. Youmay ask your question. Frank Henson - Bear Stearns: Yes. Thank you very much fortaking my question. Most of my question have been answered, but I am curious asI look at your recent announcement of an additional $250 million sharerepurchase authorization, have you had a conversation with the rating agenciesprior to announcing this additional increase in authorization?

An answer to your very specificquestion answer is yes. We make sure that we're not going to be surprised byanything and we have had the right conversations to ensure that we're makinginformed decision. Frank Henson - Bear Stearns: Okay. Thank you very much.

Thanks Frank. Operator, let's tryto take two more questions.

Our next question is from JohnMorris of Wachovia. John Morris - Wachovia: Thanks. Hi. Unless I missed it,did you quantify how much you plan on catalogue circulation to be down in thefourth quarter, if you could give us that number? And then, also, just checkwith you the inventory plan on a per square foot basis for Q4, if you can giveme those metrics? Thanks.

John, we'll go to Stuart for that

John, on the first one and youcan appreciate while we want to be somewhat general from a competitivestandpoint, but I would just say that's hard to helpful that the circulationwould be down roughly in line with the sales impact that we described to you. John Morris - Wachovia: Okay. Good.

And then, the second question, Iam sorry was? John Morris - Wachovia: Second question was: just give usthe inventory on a per square foot, per store basis that you are targeting forQ4? I think you said it, but I want to get it again.

At the end of the quarter, we'retargeting a reduction of 20% to 25%. John Morris - Wachovia: Okay. And I think you said evenlyacross both the BBW and Vicki's divisions, right?

Yes. Exactly the same, but it'sessentially the same. John Morris - Wachovia: Okay. Thanks.

Operator, we're actually going totake two more questions. If were left in the queue.

Okay. Howard Tubin of RBC CapitalMarkets. You may ask your question. Howard Tubin - RBC Capital Markets: Hi. Thanks. Could you guys talkabout the mass business and what it will look like from a revenue basis nextyear in terms of business that you maybe losing or business that you maybegaining?

In terms of '08 specificity,again, we would be more, we'll be more prepared to do that and be part of our,that will cover that in the right way when we give guidance in February. As youcan appreciate recognition on an external basis of the Express and limitedsales will drive year-on-year growth giving the timing of those transactionspart way through 2006. And we've had some other changes in our third-partybusiness, some plus some minus. But we'll try to give you more color on that inFebruary. Howard Tubin - RBC Capital Markets: Okay. Thanks.

Thanks. Operator, one lastquestion please.

Last question is from Dana Telseyof Telsey Advisory Group. Dana Telsey - Telsey Advisory Group: Good afternoon, everyone andthank you very much for getting me in. Just wanted from each of the bandPresidents, how do you look at the issues going in each of your businesses? Howmuch is external, how much is internal in terms of your product assortment orwhere do you think you are off the mark or on the mark? And when do you think,it gets back to where you wanted to be? Thank you.

Dana, thanks. That's a great wayto finish off today, why don't we start with Diane.

I think as I mentioned before, Ithink we're pretty put in place for December product business. Going forwardour focus I mentioned before is really around our propriety brands and how webuild those. So we are making genuine progress throughout the entire springseason, but I think for us to see complete impact of some of these changes willbe in fall of '08. Dana Telsey - Telsey Advisory Group: Okay.

I think as we look into thefourth quarter, that we're very well positioned to, just trying optimize theholiday. I think our bra launches just we looked forward into spring arestronger and more focused. Trying to do a few things well, and like Diane, Ithink you'll see the full results of that in fall of '08. Dana Telsey - Telsey Advisory Group: Thank you

Sharen, Diane and Dana, thankseveryone for listening and we wish you all a happy Thanksgiving.