Tom Katzenmeyer, Senior Vice President of Investor, Media, and Community Relations Len Schlesinger, Vice Chairman and COO Martyn Redgrave, EVP and CAO Grace Nichols, CEO, Victoria’s Secret Stores Mark Wyckle, COO, Victoria’s Secret Stores Neil Fiske, CEO, Bath and Body Works Tom Fitzgerald, COO, Bath and Body Works Ken Stevens, CEO, Express Paul Rapp, President of Express Jay Margolis, Group President of Apparel Amy Preston, Vice President of Investor Relations

Barbara Wykoff, Buckingham Research Lauren Levitan, Cowan & Co. Richard Jaffe, Stifel Nicolaus Dana Cohen, Bank of America Mark Montagna, CL King Brian Tunick, JP Morgan Neely Tamminga, Piper Jaffray Jeff Black, Lehman Brothers Margaret Major, Goldman Sachs Stacy Pack, Prudential Dana Telsy, TAG Todd Slater, Lazard

Good morning and welcome to the Limited Brands First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. During the Q&A session, please press *1 on your touchtone phone. Today’s conference is being recorded, if you have any objections, you may disconnect at this time. Now we will turn the meeting over to Mr. Tom Katzenmeyer, Senior Vice President of Investor, Media, and Community Relations. Sir, you may begin.

Tom Katzenmeyer, Senior Vice President of Investor, Media, and Community Relations: Thank you and good morning everyone. Welcome to the Limited Brands First Quarter Earnings Conference Call for the period ending Saturday, April 29, 2006. As always, as a matter of formality, I need to remind you that any forward-looking statements that we may make today are subject to our Safe Harbour Statement found in our SEC filing. Our first quarter earnings release and related financial information are available on our website, www.limitedbrands.com. We’ve had positive feedback on releasing our results the afternoon before the call, after the close, and it’s a practice we plan to continue. So, hopefully you all found that helpful last night. This call is being taped and can be replayed by dialing 1-800-337-6551 followed by the passcode 583. You can also listen to an audio replay from website. There are many folks who have joined me today, so I just want to tell you who’s on the call. Len Schlesinger, Vice Chairman and Chief Operating Officer, Martyn Redgrave, VP and CAO, Grace Nichols, CEO of Victoria’s Secret Stores, Mark Wyckle, COO of Victoria’s Secret Stores, Neil Fiske, CEO of Bath and Body Works, Tom Fitzgerald, COO of Bath and Body Works, Ken Stevens, CEO of Express, Paul Raff, President of Express, Jay Margolis, Group President of Apparel, and Amy Preston, Vice President of Investor Relations. They are all with me this morning. So, after our prepared comments, we will be available to take your questions until about 10:00 a.m..So that we can speak with as many callers as possible, it is important that you limit yourself to one question, I will remind you about that again later. And now, we’ll turn the call over to Martyn Redgrave. Martyn Redgrave, EVP and CAO: Thanks Tom, and good morning everyone. Well, obviously we’re very pleased with our first quarter results. Earnings per share increased 56% to $0.25 per share, $0.09 above our initial expectations. The upside in the quarter was primarily driven by strong results in Victoria’s Secret and Apparel. Additionally, spending on various initiatives that we had initially budgeted for the first quarter were pushed back into the second quarter and the remainder of the year, and I’ll discuss that a little bit further later in my remarks. Comps increased by 5%, and total sales also increased 5% to $2.077 billion dollars. Gross margin also increased by 330 basis points to 38% and that was primarily driven by an improvement in merchandise margin at Express, but we also leveraged our buying and occupancy costs. Total SG&A dollar spending increased by 6%, de-leveraging by 30 basis points. That incremental spending was primarily driven by the following. First, an increase in incentive compensation expense driven by the improved performance. Second, an increase in store payroll costs which were leveraged as a percentage of sales. Third, we made incremental investments in technology and infrastructure. Fourth, we had an increase in marketing expenses, primarily at Victoria’s Secret to support the new product launches. And finally, we recognized incremental stock option expense related to our adoption of FAS123-R. First quarter operating income increased by $67.4 million dollars. By segment, the results were Victoria’s Secret operating income increased by $38.4 million, Bath and Body Works decreased by $1.6 million, apparel results increased by $46.1 million, and the other segment net expense increased by $15.4 million. Inventories end of the quarter up 3% per square foot at cost and apparel inventories at the end of the quarter were down 15% per square foot at cost. During the quarter, we repurchased approximately 3.5 million shares at a cost of 84 million dollars. This included the completion of our 200 million dollar program that began in November of 2005, and the repurchases under our current 100 million dollar program that began in February of this year. We have approximately 58 million dollars under the current program. Now, turning to outlook for the second quarter. In the second quarter we’re projecting earnings per share of $0.22 to $0.24 versus $0.20 per share last year. This estimate is predicated on low to mid single digit comp, an increase in the gross margin rate, and an increase in the SG&A rate. It also includes an estimated cost of one penny per share for stock option expense. As I mentioned earlier, we’re planning on incremental spending for key initiatives in the remaining quarters of the year. In the second quarter specifically, we expect total SG&A dollar growth of 7 and 9% versus last year. This increase will be driven principally by investment spending on new systems and process management capabilities to support all of our businesses, and new distribution center capacity to support the substantial growth at Victoria Secret Direct. We expect inventories in the second quarter, on a cost of goods available for sale basis, will be up mid single digits versus last year. Now for the full year of 2006, we are projecting earnings per share of between $1.50 and $1.60 per share. Excluding the estimated 2006 stock option expense of $0.04 per share and the 2005 significant items of $0.29 per share, which are detailed in our press release, this projection represents at 16%-23% earnings growth over 2005. This estimate is predicated on low to mid single digit comps, an increase in the gross margin rate, and an increase in the SG&A rate. It also includes an estimated cost of $0.04 per share for stock option expense. We continue to estimate that 2006 capital expenditures will be about $600 and $650 million versus 2005 expenditures of $480 million. A roughly $100 million of that increase relates to investments to support the growth of our direct business, including new technology capabilities and a new distribution center. So, with that I’ll now turn the call over to Grace. Grace Nichols, CEO, Victoria’s Secret Stores: Thanks Martin, and good morning everyone. Victoria’s Secret Stores first quarter results including Beauty, exceeding expectations. Comps increased 8% and operating income increased as well. Sales growth in the quarter was achieved in all categories, including bras, panties, sleepwear and beauty. In our core lingerie business, growth in bras was driven by three successful launches including the Angels Secret Embrace, the Body by Victoria Ipex Wireless, and the Very Sexy Infinity Edge Push-up. All of our bra launches have been supported by national media and strong customer relationship marketing campaigns that drove incremental traffic to the total store. PINK had a very strong quarter driven by a strong response to the sleepwear assortment and strength in the panty category. Plus, we rolled an expanded PINK assortment to an additional 50 stores for a total of 93 at the end of the quarter. In addition, we’re pleased with our results in intimacy during the quarter. The customer has responded favorably to the weekly flow of fashion and to the assortment breadth. Now for the balance of the spring season, we will remained focused on our best-at bra strategy with continue new style introductions. On Tuesday of this week, we launched our newest category, Sexy Sport supported by print media and a sampling campaign. The Sexy Sport category focuses on a range of sport bras and other related items. The Semi-Annual sale event will run in the second quarter, and it will be the same length and timing as last year, and will be supported by national media. Thanks, and now I’ll turn things over to Len for some comments on Victoria’s Secret Beauty and Direct. Len Schlesinger, Vice Chairman and COO: Thanks Grace. Victoria’s Secret Beauty results also exceeded expectations during the quarter mainly driven by the successful launch of three new sub brands. Beauty Rush Lipgloss and Eyeshadow, Bare Bronze Color and Body Care, and Pure Paradise, a seasonal bodycare line. We also successfully launched Very Sexy Now, a seasonal scent that is an extension of our successful Very Sexy sub brand and continue to see growth in our Garden Bodycare line. Mother’s Day featured the restage of our top-selling Dream Angels fragrance sub brand with romantic new packaging, and this week we launched the new Body by Victoria daily bodycare line supported with substantial in store sampling. Victoria’s Secret Direct had another tremendous performance. Sales increased 10%, and operating income increased significantly. Performance was above our expectations, driven by strength and intimate apparel and sleepwear. Beauty also achieved an especially sales growth over last year as we continue to invest and grow this category. Thanks so much, and now I’ll turn it over to Neal. Neil Fiske, CEO, Bath and Body Works: Thank you Len and good morning everyone. Bath and Body works comps increased 4% in the first quarter and operating income declined by $1.6 million or 90 basis points. The operating income decline was primarily driven by a decline in merchandise margin, which was substantially, but not completely offset by leverage in buying and occupancy, and SG&A costs. A decline in the merchandise margin rate was driven by increased promotional activity, increased freight costs, and merchandise mix. We were able to tightly manage expenses in the quarter, partially offsetting the impact of the decline in the merchandise margin rate. We are taking additional steps to improve our sales trends by making clear statements at the front of the store with stronger calls to action and stronger emphasis on the newness and the assortment. Additionally, we have begun to test reduced assortments to make the store easier to navigate and shop for our customer. Shifting to the assortment, results for the quarter reflect our customer’s affinity for our traditional product lines, as well as strong interest in our new sub brands. The Signature Collection has stabilized as a percentage of the business due to increased frequency of fragrance introduction, and more sophisticated fragrances and packaging like our very successful Japanese Cherry Blossom line. These activities will continue going forward. The Dr. Wexler line has been a strong performer within the brand, beating its initial plan both in stores and in the direct channels like QVC and the infomercial test. We are planning additional line extensions to round out the assortment and leverage the strong customer affinity to this sub brand. We also saw continued strength of the C.O. Bigelow product line while expanding the product assortment; we have seen solid performance in the daily use products indicating strong growth potential for this sub brand. Also in the quarter was the launch of the first Bath and Body Works catalog. We view the catalog as a valuable marketing and education vehicle to familiarize our customer with our brands, and their benefits. Initial response has affirmed our optimism about the power and growth potential of becoming a true multi-channel retailer. We are taking the learnings from this first foray into the catalog channel and applying it to our second catalog in the fall. Currently, stores are focused on our Beach Beauty theme featuring the relaunch of our True Blue Spa line and the introduction of Temptations, a new collection of tropical skin care pampering treatments. Beginning the first week of June, we launch our semi-annual sale, which like last year is planned to run for five weeks. Wrapping up the season is our post semi-annual sale theme featuring the launch of our Signature Collection Haircare line as well as new fragrances in both the Signature Collection and Breathe. With that I’ll turn the discussion over to Ken. Ken Stevens, CEO of Express: Thanks Neil, good morning everyone. Express’s first quarter results exceeded our expectations. Comps were up 4%, and operating income increased significantly to last year, primarily as a result of improvement in merchandise margin. Both the women’s and mens businesses achieved positive comps in the quarter. This was driven by transaction increases of over 20%, more than offsetting our average unit retial decline. Growth was realized in several categories, including women’s knit tops and bottoms, shorts, jackets, and dresses, while the growth in mens was realized in knit tops, jackets and outerwear. A number of factors contributed to our improved margin performance. First and foremost, we are seeing positive reaction to our assortment changes, resulting in better sell through at regular prices. Second, better product sourcing is driving lower average unit costs, and lastly from a marketing perspective we planed and executed a much quieter quarter clearance sale. We discounted viewer items, and our markdowns were not as deep as in previous clearance events. Therefore, although our event sales were lower, we were able to generate a higher margin for the period. Operationally, we continue to focus on a disciplined inventory management philosophy, which has allowed us to stay more nimble, turning our inventory faster, and align our decision-making much closer to the time the merchandise will be in the store. In May, we began our focus on summer; with women’s merchandise shifting from white, sexy suiting and party knit tops to crops, shorts, sleeveless shirts and graphic tees. In mens, the summer assortments include track jackets, graphic tees, and polo shirts together with cargo shorts. We’re moving to our Best-of-Summer sale in a view weeks, and then we’ll transition to our Semi-Annual Volcanic sale event toward the end of the season. Thanks, and now I’ll turn our discussion back over to Tom. Tom Katzenmeyer, Senior Vice President of Investor, Media, and Community Relations: Thanks Ken. Before we move to Q&A, a comment on Limited Stores. Limited Stores first quarter performance was disappointing. Comps decreased 7% and bottom line performance declined versus last year. Aver Meyer, our new GMM joined us at the beginning of the month, who as you know was previously the co-founder and GMM of Club Monaco. That concludes our prepared comments. At this time, we’d be happy to begin to take questions that you might have. Again, in the interest of time and consideration to others, I want to remind you that we’d like to limit you to one question each. Operator, we’re ready for the first question.

Thank you. Our first question comes from Barbara Wykoff. You may ask your question, and please state your company name. Barbara Wykoff.: Hi everyone, Buckingham Research Group. A question for Neil. I presume the Signature is a Daily Beauty Rituals, right?

Yes, that’s correct.

Okay, and then could you talk about the focus on driving transactions with purchases kinds of activity, do you expect that to trail off, or is than an integral part of your strategy?

I think there are three primary traffic drivers that we utilize in the business. One is purchase with purchase program where we typically run every theme, and that has been very successful for us and improving over time. The second is our increased success with our CRM program. We now have a database of 25 million customers, and have found it very economical and profitable to reach more deeply into the file to drive those customers to stores. Third, and finally, we’re moving to a strategy of having one or two sharp promotions, every theme, not 10 or 13 spread throughout the store, but 1 or 2 sharply focused promotions to drive traffic.

Thanks Barbara, next question.

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

Thanks, good morning, Cowan & Co. My question is also for Neil. Neil, you commented that your testing reduced assortments, I’m wondering if you could elaborate on how that works across the different store formats? Is this a sku count reduction, or across third party versus private brands? Could we get some sense of timing for it, and also how will that affect your pacing of new product intros, which I know in the past you said you felt needed and adjustment.

Thanks Lauren. So, first just a little bit of context. Going back over a two or three year time period, as we began the turnaround and transformation of Bath and Body Works, as you’ll recall, we had a quite an empty pipeline of new product development. Really, what we’ve done over the last two years is bring a lot of new products to market, and in that process have learned a lot about what’s working, what’s not working and we believe that we’re now at a stage to really focus in on that learning, concentrate on making bigger statements with the brands that really have power and growth potential, and just become a little more focused. So, I think to some extent, narrowing the assortment, and getting focuses is really a natural evolution of the transformation process that we have undergone. Specifically, with regard to that principle by format, I think you will see in going forward in both flagship stores and core stores, more dominant statements of what we call the blue-chip brand, and calling of both underperforming sku’s and underperforming brands. Lastly, we are in the process of developing a new in store navigation system, which will make it much easier for our customer to shop and navigate by category, fragrance, facecare, haircare, apothecary, home fragrance, etc.

Thanks Neil, next question.

Thank you, Richard Jaffe, you may ask your question, and please state your company name.

Thank you very much. I’m from Stifel Nicolaus. A question on inventory by division going forward. I’d be curious to know what you think the levels will be at each division, and your willingness to invest, obviously the apparel brand, but at Bath and Body Works, the shift in investment from third party brands to private label, and then at Victoria’s Secret. Thank you.

Richard, we’ll go to Martyn Redgrave for that. Martyn Redgrave.: Well, I think the first thing to understand about inventory investment for this year is the change that is taking place in our apparel businesses because of the re-architecting of the business model that we’ve discussed, which is resulting in lower inventory levels. That will continue through the balance of the year, despite obviously our expectations for substantial growth and profitability of those businesses. In terms of the other businesses, we are looking at making more inventory investment in the balance of the year in both Victoria’s Secret and Victoria’s Secret Direct to support their substantial growth. As Neil discussed, they are also in the process of re-architecting their assortment, so their investment inventory will be more consistent with the kinds of investments that we’ve made in the past couple of years in terms of year over year growth rates.

Operator, next question.

Dana Cohen, you may ask your question and please state your company name.

Hi, guys. First of all, Jay congratulations, great to see. Two questions. One is on the apparel side, in particularly Express, can you talk about…..it seems like to some extent you’re trading some of the comp upside for margin. How do you see that playing out going forward? And then second, for Martyn or Len, on the corporate side, I was thinking about this a lot last night. Corporate is up 100% in the last five years, despite the fact that you’ve gotten rid of $2 billion in sales in terms of disposition. It just seems like that line just continues to grow exponentially every year, and point-to-point is costing the company a bad quarter. So, point-to-point, and how long is that going to continue to grow?

Dana, we’ll divide that question in half. First we’ll go out to Ken Stevens for the question about Express, and then we’ll come back to Martyn.

Hi, Dana this is Paul Raff at Express and your question regarding trading margin; of course last year margin performance was so incredibly low, that really what we’re trying to do is simply stabilize our sales trend, and our margin trend to a normalized rate, really focusing on the strategy that we discussed with you guys on several of these calls, which his product that our customer wants, at price points that are really realistic. Our unit costs are down significantly in the last year. Our selling price, our averaging retails are down as we gain the sweet spot pricing, particularly in our tops businesses. Really, it’s a margin picture for us right now that’s really driving the momentum.

Paul, thanks. Now, we’ll go to Martyn for the balance of the question.

I’m going to try to take this on from a couple of points of view, because I know it’s both a historical and current year question if I heard Dana correctly. The history part of this I think is connected to two things. One, clearly, I’m going to say, I’ve only been here 13 months now, but 3 or 4 years ago, a conscience decision was made to shift the emphasis in terms of support function between the brands and the center. So, we did bring more focus to supporting all of our business from the center up to the brand, and that did result in some increased investment in support functions at the center that has continued. The second, kind of historical shift, has been our investment spending, which began more substantially last year and is continuing this year, and will continue into next year in connection with remarks made earlier in re-architecting our technology capabilities across the firm, as well as investing in new capabilities and capacities for a couple of our businesses specifically, and the largest part of that is for our Victoria’s Secret Direct business, distribution center, and the new technology that we’re building for them. So, I think that kind of explains the shift historically. In terms of this year, as I mentioned in my remarks if you look at the first quarter SG&A spend year over year, about 60% of the increase year over year is directly related to operating performance elements; things like selling expense, marketing expense, and incentive comp that is directly tied as you know from an approval perspective, new operating performance. Another 15% of the year over year increase is related to this investment spending that I just described on technology. The balance is both the stock expense, and some other what I call ‘cats and dogs’. But, that does in fact explain most of the variants year over year. Looking forward to the full year, we see those same factors affecting the full year, and that’s why we’ve commented on the fact that the SG&A spend rate will be up 79% in the second quarter, and that will be more consistent through the full year.

Thanks for thoughtful answer, our next question operator.

Mark Montagna, you may ask your question and please state your company name

CL King. Just a question about the Express store count. I noticed back on February 22, you had projected year-end count for Express women of 257, now you’re projecting 193. I’m trying to understand what happened there in terms of the projection.

Ken or Paul could we go out to you guys for that?

Yes you can Tom, this is Ken. Here’s our current position. We have slightly over 700 hundred stores today in total. Approximately 320 of them are dual gender, so they will have mens and women’s in there. In addition, we have about 300 freestanding women’s stores, and we have just about 100 freestanding mens stores. This count will change slightly, but not materially throughout the rest of 2006.

Okay, but was there some changes in the leases? Like maybe you bought out leases, changes in terms that enabled you to suddenly go in just a three-month period to changes so drastically just for the Express women’s?

I’m sorry I’m not sure where you’re numbers are coming, and if it’s something we put out, maybe Tom we can get back offline and figure it out. I didn’t recognize your numbers to tell you the truth.

Mark, are you talking about dual gender conversion?

No, I’m talking just about Express women. With the package that you guys sent out last night, it says 193 for the end of the year count, whereas the packet that was sent out February 22 was projected at 257.

I think that may have been an error, and let us check that and get back to you.

Well, actually Ken, I think there was a change in the first quarter in terms of dual gender conversions actually adding mens assortment into a women’s store?

We did that in 15 stores.

Well, I think that’s a projection for the whole year this year.

We’ve probably shifted all of those stores into dual gender now.

We’ll follow up. From a lease standpoint just to be clear though, there have been no substantial changes and we haven’t been doing lease buyouts or anything like that.

Yeah. We’re reflecting a change in classification from women’s to dual gender, Mark, because we’re actually in a significant number of stores going to be adding the mens assortment into the women’s store without any sort of a remodel or a change in the lease.

Okay.

Hopefully that clarifies it, and we’ll follow-up with you after the call. Operator, next question.

Okay, thanks.

Brian Tunick, you may ask your question and please state your company name.

Yes, JP Morgan. A question for Grace. On the fantastic results in the quarter, we were wondering if you attributed to the number of bra launches or did you hit upon the right product, and then along with that, what kind of marketing dollar increase did you have in the quarter? Thank you very much Grace.

Hey Grace, we’ll divide that in half. We’ll give Mark the marketing part of it if you could answer the first part about the bra launch.

Yeah I’m in New York, so I’m disconnected from the group. I would say that in the middle of last year we recognized that what we needed to do to sustain growth at an escalated rate was really to open the pipeline. So, we really have done a lot of work in the fall season of last year, reworking our processes, putting more time and attention on innovation and multiple pathways to market. So, that really gave us a lot more things to play with. You know, more ideas, and I would also say better ideas. The result in the quarter was really the result of some of the groundwork that we relayed last year, and we actually had one additional strong product offering that we put into the calendar in February. March, we were pretty comparable to last year, and April we were pretty comparable to last year, and we just had better products and a stronger marketing plan. Mark, you could answer the exact numbers question there?

Yes, I think so. The marketing increase in think strategically is trying to have brand right traffic building, and from a media support specifically behind launches, the one addition that we had was the one that Grace mentioned. That was really the Angels Secret Embrace, which is the best push-up bra in the world. We make those choices, Brian on a situational nature, or selective nature, and based on having the product availability, basing us to run the media. The second piece of this is really our customer relationship marketing strategy, similar to what Neil mentioned. It’s really a highly strategic customer contact strategy, which engages our clients across all of our sub brands, or re-engages our clients to really create more loyal clients on ongoing basis. For the first quarter, our marketing as a percent of sales de-leveraged slightly, and the marketing investments we’ve made in the first quarter have met our expectations. Just a quick glimpse of the second quarter, we would continue to expect to do the same type of brand right traffic building activity, and would make those choices on a selective and situations basis, and would expect them to deliver marketing in the second quarter.

And are the number of launches supposed to be up versus LY in the second quarter?

Our second quarter activity really is, right now, we’re in a Sexy Sport launch, which is primarily bras driven. We will have a bra launch in the first half of June. Then, we will follow that with a Semi-Annual sale, which will be the same length of time as last year, and then last July will be a PINK focus, similar to last year.

Thanks very much for the insight.

Thanks Brian. Next question.

Thank you. Neely Tamminga, you may ask your question, and please state your company name.

Great, good morning. It’s Piper Jaffray. Congratulations on a great performance. I had a question for Paul or for Ken over at Express. Clearly, if you look at the evolution of the brands in the Limited organization, you see that they go from single branded to multi-branded, and I’m wondering how you’re looking for Express to participate in that same evolution, thinking longer term at this point.

Good morning, this is Paul again. You know, Jay and I, Ken, Len, we’ve all been talking about how that does hold some interest for us. Initially for foray into that arena is primarily in the form of using outside resources to develop house brands for us, particularly in the denim lab area. Our concept is really to both have our own X2 Jeans brand, which we are re-launching for the Coming-Back-to-School, and to also engage some superior outside product innovation to provide for us a third party brand that will appear to the customer to be premium in nature. So, that is initially on how we’re focussing on it. We’re also, as a result of the tremendous success of our Editor pant looking to extend and lateralize that into becoming in fact a sub brand within the box. So, certainly taking some of the best practices that we’ve seen in sister divisions, and applying it as appropriate to the Express brand.

Thanks Paul. Next question.

Jeff Black, you may ask your question and please state your company name.

Lehman Brothers. I had a question on the impact on Q2 margins given the accounting changes, and I guess we want a better understanding if you could give us one, on how much clearance inventory we have going into the second quarter, and on the Victoria’s Secret, and really in particular the BBW side of things. What did you learn from the recent semi-annual sales in terms of changes we might see implemented in the June sales this year? Thanks

Jeff we’ll go to Martyn for that question.

In terms of what we’re projecting in the second quarter, I won’t characterize as there being any significant shift in either our going into the quarter philosophy about seasonal sales, with the exception of Express. Because, clearly in the first quarter they did not have as much inventory, therefore not as much on sale in the first quarter. In the second quarter they are still planning the same kind of sale cadence, but obviously its very early in the quarter to make the call on how many units they’ll have going into sale in June or July timeframes.

Jeff, does that answer your question?

Yes. In terms of clearance though, would you say we are more of less similar at Victoria’s Secret and BBW?

No, I ‘d say similar.

Okay that does answer it, thank you very much.

You're welcome. Next question please Operator: Margaret Major you may ask your question and please state your company name.

Goldman Sachs. My question is about your gross margin outlooks and how well you did with Victoria’s Secret in the most recent quarter. Do you think that kind of improvement can, if possible, as you look out over the course of this year in that business in particular? And I just want to follow-up on the last question about the launches. Is that in fact what you think kind of made Victoria’s Secret turn the corner, because it seemed to be wobbling a little bit last year, it never really became problematic; and now its come back super strong. I’m just wondering what really invigorated it in the first quarter and moved the margins up, and can that continue over the next three quarters? Thanks

Margaret we’ll divide that question up. We’ll go to Mark Wyckle for the margin part and then we’ll go out to Grace.

Margaret, our primary focus is really around operating income dollar growth. We’re satisfied with our rate of operating income and gross margin rate, and are not really focused on increasing the rate as much as the dollar growth. In the first quarter, our gross margin rate improved slightly.

And Margaret, I’ll just add to that. In terms of when you’re looking at the segment results, we did have a substantial improvement at Direct as well, which drove the overall segment improvement.

Okay, and what was the main reason for Direct improving substantially? Len Schlesinger.: This is Len. It was largely a function of being able to be right on the front end and selling more full priced goods.

And is that a story that continues throughout the year?

Oh it is certainly is the economic logic of the Direct business, and based on the quality of our merchandising strategies, and C&R strategies, we would hope to continue to see that. But, it’s always a number that’s pressured. I think the biggest issue goes back to Marks earlier comment, which is we don’t anticipate, expect or organize the business to generate substantial improvements in gross margin across the segment.

And Margaret you had a question on launches, do you want to repeat that quickly for Grace?

I just wanted to make sure that I understand that there was a previous person asking the question about the launches, and is that what really drove the business in the first quarter, and how do you see that playing out over the course of the year? Will there be increased launches? What really stimulated Victoria’s Secret versus a little bit patchier performance last year?

What I would say is that the performance last year was in part, and no excuse, but based on the fact that we had a very strong prior year. The learning that we took out of it was that we didn’t spend enough time focusing on how big the next new ideas had to be and how many ideas we had to have for consideration in order to continue to climb the ladder of growth. So, I’d say there was just a major process and attitude change about playing a stronger game of offense. Based on the fact that we have more ideas and more arrows to shoot out, we are escalating our communication and launch strategy, and we’re getting acceptable returns. But we also have had good improvements in our panty business. Remember, we talked all last year about how it was a little lackluster. So, as we’ve been putting out these new bras, we also have strong panty performance, and we re-introduced our casual sleepwear assortment back to all stores and are getting a strong response there. Also, our customer contact strategy is driving more people into the total store, which his benefiting all the categories in the store, whether it’s lingerie, whether it’s PINK or whether it’s Beauty. So, we’re actively engaged in innovation, as well as actively engaged in bringing people to the party, and fortunately this season they really liked the assortment in all categories.

Well, you’re an amazing franchise Grace, good luck, see ya.

Margaret, one thing I would add or continue to expand on what Grace said is that PINK continues to exceed our expectations it the quarter, so that brand is doing well, primarily driven by sleepwear and the panty assortment. We’ve also continued to do more business in the intimacy franchise, and I think Beauty has done a good job in engaging the customers through really aggressive launch strategy, which the customers have responded to.

Great thank you.

Lets take the next question.

Stacy Pack, you may state your question and please give us your company name.

Thanks, it’s Prudential. Could each of the divisions talk briefly about how they are going to approach the fall season differently from last year, whether it’s execution, set timing launches, pricing, fashion marketing, or whatever they think is going to be the key to beating last year’s numbers for the fall season?

Stacy we probably won’t give too much guidance on the fall at this point in time, but why don’t get some introductory comments, and we’ll start with Neil.

Obviously for us, the big question is how we’re organized for holiday. We have taken a very different approach this year given our performance in 2005. It is really a yearlong cross-functional landing effort for us. We took the learnings that we talked about in the prior call, and have really gone after those in a very aggressive way. So, you’ll see our timing being more Fall-i-day in October, rather than overtly holiday, number one. Number two, you will see the launch of the Bath and Body Works Christmas Book, which we’re very enthusiastic about, and believe that can really elevate and market the brand at that time of year in a big way. We expect the web and Direct channel to be a powerful channel, not just of the Direct channel, but drive the store. And lastly, we’re focused on making fewer bigger better statements, and an easier shopping experience, and hope that when we add all that up we’ll have a pretty different result this year than we had last year.

Why don’t we go to Mark Wyckle for a comment about Victoria’s, and then we’ll go out to the folks at Express

Thanks Tom. For fall and holiday, we’re frankly going to focus on the fundamentals. Part of that is really about planning and executing mostly our bra launches. Another pieced we will continue, something that Grace referred to, and that’s really driving brand right traffic building. We will continue that as long as that makes sense for us. We still have a huge opportunity of further leveraging the , and as Neil indicated, this is really a yearlong effort that all of us work together to really maximize, and we think that we will really be a big play for us this year. The plan is also to continue to expand PINK assortment architecture as much as we can, and Beauty launches that are connecting and engaging with our clients will be another piece of our fall strategy.

Now let’s go out to Express.

At Express, our women’s fall continues our relentless efforts to define and cater to the Express Girl with every selection of merchandise appealing to this young, sexy, fashionable female, while continuing to focus on fundamentals and engage our speed model. We will provide a constant flow in newness in our merchandise, initially focusing on knits on denim, and as the season progresses, shift our strategy towards more seasonal products with a studio party focus. In mens, our strategy for fall is to evolve the lifestyle mix that connects with the 28 -year-old male, and casual going out, and wear to work. This would include category dominance in our shirt, graphic tee, and denim and jacket businesses.

Thanks Paul. Stacy that’s a great question and we’ll talk more about it on the August call, and hope you will all join us on November 7th and 8th for the update meeting here in Columbus. Let’s try to get a couple more quick questions in here.

Thank you, Dana Telsey you make ask your question and please state your company name.

TAG. Good morning everyone. Could you talk a little about, in terms of financial management how you’re making the new systems you’re implementing for inventory levels by division, how will it slice and dice inventory levels betters, what benefits do you expect to see? On the real estate side, with the focus on the Top 160 Malls Program, what about the malls beneath that, B’s and C’s? What are doing to rationalize or enhance that real estate and how are you looking at it? Thank you.

Dana, good morning. We’ll go to Len first for the real estate question.

Hi Dana. As you know there are 1,026 malls in the U.S., and we have chosen obviously to concentrate a fair amount of distorted energy on the Top 160 for the very simple reason that the economic performance of those malls, and the customer basis in those malls wildly exceed both the quality and spending power in the rest of the U.S. that being said, we will still have an amazingly powerful business in the A-, B, and B+ malls, and we are devoting more and more energy to the repositioning of our brands in that space. So, the overwhelming majority of the work that is going on in the Top 160 is very much merchandising oriented, and we are making sure that that work is not denigrating the involvement in and the focus on where we are making an enormous amount of money, which is in the rest of the mall population.

And Martyn.

I think in terms of the investment that we’re making in the new systems, you’re correct to say that a substantial proportion of that investment is going into what we refer to as the ‘demand chain’, what you may refer to as the ‘supply chain’. A clear objective of that investment is to accomplish one of our critical strategic comparatives, which we refer to as ‘speed and scale’. So, we think of the payback mainly in terms of being a lot faster at everything that we do, be shorter cycle times to bring the product to market, shorter cycle times to read, chase, and replenish, being more right about the assortment at a segment and store level, being able to assort differentially to different stores. All of those kinds of capabilities that we’re building we think will just make us a lot more responsive to the customer, and clearly more efficient from a costs logistics and manufacturing perspective. The other comment I’d make, in terms of the benefit stream, I know that’s one of the things you’re always curious about. We are investing and building and implementing these systems as we speak. Bath and Body Works is going to implement a major systems throughout the balance of the year. The rest of our brands next year. So, we hope to see the benefits from those investments flowing beyond that.

Thank you.

Next question please.

Todd Slater, you may ask your question and please state your company name.

Thank you. Lazard. My question just revolves around the expense issue. I hate to beat a dead horse, but that’s really the big change in our second quarter model. So, I understand the DC expansion, some of the other things you talked about; maybe you could just get a little specific about some of the systems upgrades, is it catch-up, what’s new in the system, is it expected to drive sales or have a return in investment? Then, as an ancillary, could you just help us understand the incremental dollar spend for the second quarter end year so we can calculate the real trend line, lets say in the core expense growth, because it’s likely not 9%, but I’m just curious? Thank you.

Todd, we’ll go to Martyn for that.

Again, a couple components. I think the easiest way to look at our first quarter results is the way I described earlier in terms of the percentage breakdown of the dollars, year over year; a lot of that dollar increase year over year is going against supporting the improved operating performance, 15%-20% against these new investments. As you know, from an accounting perspective, part of that is the current expense of the teams building those system, and part of it is depreciation on systems that have already been built and implemented. As I look forward to the balance of the year, and its consistent in the second quarter as well as the balance of the year, that same kind of increase in spending will flow through the balance of the year. Another way to look at that, which may be helpful, is in terms of the 30 basis point change in SG&A that took place in the first quarter. If I look forward to the balance of the year, I would look for a consistent kind of change in the balance of the year.

Lets take one more question to wrap up the hour. Operator.: Thank you. Our final question comes from Paul Lusway, you make ask your question and please state your company name.

Hi, Credit Suisse. I was just wondering if you can share with us how much PINK added to the Victoria’s Secret comp. Also, how did the 93 stores do that had the expanded assortment of PINK? How did they do relative to the chain? And what are the plans going forward as far as additional rollouts and things?

Thanks Paul, we’ll go to Mark Wyckle for that.

Two pieces of that. PINK continues to meet our lofty expectations on its budgeted amount and is currently adding probably about 3%-5% to the total store likes. The second piece of that is the question around the additional stores that had the expanded PINK assortment, and the additional group of stores; they’ve only been in for literally 30 days to 45 days. They are performing in a similar manner to the first group of 43 stores we talked about last fall. So, they are also meeting our expectations.

Is that above the rest of the chain?

It is.

And the plans going forward for additional roll out?

Our plans going forward are wherever we can expand the assortment and the space we have available. We will continue to explore that.

That concludes our first quarter earnings conference call. I want to thank everyone for tuning in this morning, and I hope you have a good rest of the day.