Good morning. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the L Brands First Quarter 2017 Earnings Conference Call. I will now turn the call over to Ms. Amie Preston, Chief Investor Relations Officer for L Brands. Please go ahead.

Thank you. Good morning, everyone, and welcome to L Brands' first quarter earnings conference call for the period ending Saturday, April 29, 2017. As you know, we released detailed commentary last night, which is available on our website. As a matter of formality, I need to remind you that any forward-looking statements we may make today are subject to our safe harbor statement found in our SEC filings. Our earnings release, additional commentary and our earnings presentation are all available on our website, lb.com. Stuart Burgdoerfer, EVP and CFO; Nick Coe, CEO Bath & Body Works; and Martin Waters, President of International, are all joining us today. And now I'll turn the call over to Stuart.

Thanks, Amie, and good morning, everyone. Our first quarter earning results were slightly ahead of our beginning-of-quarter guidance. We reported earnings per share of $0.33 compared to our guidance of between $0.20 and $0.25. $0.06 of upside was driven by the lower-than-forecasted tax rate. After a particularly challenging February, which we believe was related in part to a delay in the timing of income tax refunds, we gained momentum through the remainder of the quarter. Looking forward to the remainder of the year, we have confidence in the growth opportunities for our business. Our brands are strong and lead their categories, and we have an experienced and aligned leadership team. We're continuing to invest in initiatives that will drive significant growth, including White Barn remodels at Bath & Body Works and investment in China. As you know, about a year ago, we made strategic changes at Victoria's Secret to streamline the business, focus on our core categories and accelerate growth. While these investments and strategic actions will continue to put pressure on results in 2017, we are confident that they are providing the platform for accelerated future growth. Beyond the short-term impacts to this year, we remain committed to our goals of growing annual operating income by 10% and an operating income rate in the high teens. We will continue to focus on the things that we can control and manage inventory, expenses and capital spending with financial discipline. With that, I'll turn the discussion over to Nick.

Thanks, Stuart. Good morning. Just a few comments. We started -- I'd like to really start by highlighting that we finished the quarter with results that were much better than we started the quarter. Once we got past the challenges of February, we were able to get back into positive territory during March and April time frame. The reason I mentioned that is because I think it really proves the agility that we have in the business when things aren't right to be able to get back on track. Our earnings were down 9% for the quarter, but I really want to point out that, that was pretty much driven by the expense deleverage associated with the increased occupancy cost as we continue to invest in our brand and make sure that the most important place for our brand is in the stores. And we've always want those to look good, and we've obviously demonstrated, we can get return on investment there. Moving on to the retail landscape. It remains highly dynamic, and certainly, traffic has not been kind to many during Q1. However, we did find ways to drive traffic, drive good traffic with our agility in the quarter resulting in AUR growth. The home fragrance business remained a key driver for us, but we also saw body care start to build momentum during the quarter. And I think that's a direct result of the investments that we've made into that business or made into that category. We continue to flex our muscles in speed and testing on a daily basis, and we've continued to learn an awful lot about the customer acceptance of both product and promotional ideas, which has given as good ideas and good momentum as we go into the second quarter. Q1 has been one of the most aggressive testing periods for us, really giving us insights into how do we think we ought to manage the business, how do we think we ought to manage the brand as we continue to move the brand forward. We're feeling good about the direction of our product assortments, but we will continue to leverage our read-and-react capabilities to meet customer expectations. And obviously, we'll continue to make sure we're leveraging our operational and our fiscal disciplines. With that, I'll turn it over to Martin.

Thanks, Nick. Good morning, everybody. In the international business, we experienced a continuation of some of the challenges from 2016 in the first quarter of the year, including softness in beauty; difficult market conditions in the Middle East and Turkey; some FX pressure; and, of course, our investment in China also continues to negatively impact us in the near term. I'd also note that profitability in the U.K. was down in the first quarter, driven primarily by the exit of swim and apparel and, of course, additional pressure from the preopening cost in Dublin and some FX impacts as well. On a brighter note, the Bath & Body Works business did very well in the quarter, with positive comps and growth in operating income. And we opened our first 2 full assortment stores, Victoria's Secret stores in Mainland China in the first quarter to good response. We continue to be bullish about growth opportunities in China and around the world. And 2017 will be an exciting year for us as we continue to build on our footprint globally. Amie?

Yes. Thanks, Martin. That concludes our prepared comments. And at this time, we'd be happy to take any questions you might have. [Operator Instructions] And I'll turn it back over to Lisa.

[Operator Instructions] Our first question comes from the line of Paul Lejuez from Citi.

Just curious, have there been any moves that were made on the Victoria's Secret side of the business that you're reconsidering in any way, either for the second half or F '18? And then I think you guys made a comment that you were looking to focus on the constructed bra business in the second half. Just curious if that meant in any way that you'd be pulling back from bralette and/or sport as a percent of mix.

Paul, it's Stuart. So in terms of the significant changes that we made at Victoria's Secret, are we considering reversing or stepping back from any of those changes? The short answer is no. We feel very good about the decisions that we made and that they are the right changes to drive focus and accelerated growth for the business. The second question was around constructed bras, sport bras, bralettes. It's not a de-emphasis, Paul, on bralettes or sport bras, but rather, I would just say, an increased flow of newness and compelling bra launches in the constructed bra space that we believe will improve the result in the constructed bra space, and get it back to the growth trajectory that we would expect. So it's not a, per se, de-emphasis on, again, bralettes and sport bras, but rather increased flow of compelling new ideas, particularly beginning in the July period that we expect will drive healthy growth in that part of the business. Thanks.

Our next question comes from the line of Kimberly Greenberger from Morgan Stanley.

Stuart, my question is on gross margin. It fell 330 basis points here in Q1. I'm wondering if you could break down the buying and occupancy deleverage piece of that from the merchandise margin. And then it sounds like gross margin is expected to be a bit better in the second quarter. How should we think about those 2 components within your guidance for Q2?

Yes. Thanks, Kimberly. In terms of the gross margin decline, the bigger driver was the buying and occupancy deleverage. There was some decline in the merchandise margin rate as well. As we move forward, we believe that, based on the quality of our inventory, that we'll see an improved result in the merchandise margin rate trend in the second quarter. Inventories are in great shape. We did a lot of liquidation last year in semiannual sale at Victoria's. And we believe that we'll have a better rate outcome at Victoria's, including through contributions in the beauty side of that business. Thanks.

Our next question comes from the line of Paul Trussell from Deutsche Bank.

Just big picture. Could you just talk about some of the learnings regarding the changes that you've made in your promotional strategy? What's working and what's not? And then more specifically, just could you speak to the expected go-forward category comps in lingerie? Obviously, down meaningfully here in the first quarter as you have a lower AUR offsetting what you all said was a mid-teens growth rate in total lingerie bra units. Help us understand how we should think about that as the year progresses as we lap and cycle some of the robust bralette growth in the second half last year.

So in terms of learnings in promotional strategy, starting with the biggest change that we made in terms of communication and some related promotion, we continue to feel that the elimination of the catalog at Victoria's Secret was fundamentally an appropriate move for the business in the day and age that we're in. So that would be the first major changes that we made, and again, feel that, that was a strong move. Obviously, communicating with customers comes in various forms. And doing that digitally, electronically, through e-mail, through social media, all of those forms are important, and we're active in each of those channels. And then lastly, and it may be, at the heart of your question, is we made important changes in our direct mail programs beginning about this time a year ago. And the learning there was that -- what we had been doing was highly promotional offers and a standard offer that didn't have much variation to it in terms of dollars off bra and getting a free panty. And as we've moved through 2016 and into '17, we are contacting customers more than we were a few months ago through direct mail, but doing so in a brand appropriate way and with a range of offers that we believe are more compelling and more interesting and not as brand damaging. So I would say that reflects the learning there. So that's kind of where we are. In terms of growth in the major lingerie categories, I mean, our expectation would be that we grow any significant category of our business on a comp basis, mid-single or better in terms of sales growth with healthy margin. That's our overall thinking as we run these businesses that we have. And we would hope to begin achieving that in the major lingerie categories this fall.

Our next question comes from the line of Oliver Chen from Cowen and Company.

We -- our question is regarding your framework and thinking around the store base. All your stores are 4-wall profitable or the majority are. But I'm just curious about what's your assumption for when accelerations of closures happen at other competitors that are out of your control, department stores as well as specialty? And as you think about the U.S. store bases for both VS and Bath & Body Works and online, continues to grow, what are you thinking for your guideline overall? And how might that change based on the variables that you monitor as you try to prioritize the right investment across higher- versus lower-productivity stores?

Sure. So that's a big question, big subject you're asking about. So our first guideline is to ensure that our store environments are interesting and exciting. And through a combination of the store design, the merchandise we sell and the experience that our sales associates provide that we create an environment that is compelling for consumers. So the most important guideline is that. And our belief is that when we do that well, we have a very strong bricks-and-mortar results, which we do. As you know, our productivity in both our major businesses is north of $800 a foot. And as you know, 99% -- plus percent of our stores generate positive cash flow. As you know, we open and close stores every year and have for years and years, so we're regularly maintaining the fleet. We have not seen a significant impact when department stores close their stores. That's not a new phenomena, by the way, and we've studied it over the last 5 to 10 years on a mall-specific basis. And we haven't seen any meaningful impact to our businesses in those specific situations. Maybe a couple more points. We have a lot of flexibility in our real estate, and that really comes in 2 forms. One is that we have strong protections in the majority of our -- or substantially all of our lease agreements, where if mall occupancy levels fall below a certain level or certain named tenants are no longer doing business in a mall that we have the right to leave that situation with no lease liability. So that provides flexibility. And then with respect to our capital spending, particularly in North America, it's pretty short cycle. And what I mean by that is that we can make adjustments based on macro factors, our own company-specific performance, on a pretty short cycle. And to put some -- maybe 2 points of evidence around that, when we were with you guys in October, we'd indicated that we're -- our CapEx would be as much as $1 billion in 2017, and we've made adjustments based on the performance of our business and now we're expecting CapEx at around $850 million. So a significant adjustment in our real estate activity, again, based on a judgment about risk and reward in the near term. So a lot of flexibility on that further in on a more extreme basis, in the Great Recession, as you'll remember, we pulled our CapEx back from at that time a level of around $500 million to just over $200 million based on the situation at that time. So a lot of flexibility. So again, headline level, the first thing that's most important and it's why we're investing in things like the remodels at Bath & Body Works is #1 guideline is make it interesting for consumers, and they will come. And there are many in retail or certainly a number in retail outside of our company that where they've gotten a strong brand, compelling assortments, a clear position, they're actually doing very well in retail. And again, I'm referring to companies outside of L Brands. Within our company, the PINK business, the Bath & Body Works business and, apart from the adjustments we've made at Victoria's Secret, the Victoria's business over a long period of time has done very, very well. And then again, the health of our real estate fleet, as I've outlined, is very strong and we've got a lot of flexibility. So that's how we think about it. Thank you.

Our next question comes from the line of Lindsay Drucker Mann from Goldman Sachs.

I wanted to ask about monthly sales. It's great that you guys still give us the color on a monthly basis. More recently, you've had some challenges, achieving guidance that you set out ahead of the month. So I just wanted to ask about sort of the thought process when you set your target for monthly sales. Is it a function of kind of run rate? Or is it more aspirational of what you hope to achieve? And then for May, we noticed you didn't take the opportunity to update your expectation for May in this earnings release. Does that suggest you're on track with what your performance objectives are for the month?

Thanks, Lindsay. It's Stuart. So with respect to the guidance that we provide at the beginning of a month, I would call it a 50-50 view, meaning an expectation as we start the month. It's not an aspirational number nor is it a sandbag number, so I'd describe it as a 50-50 view. And that's how we've thought about it consistently. And in -- if we go back over the last 5 to 7 years, when our business is performing very well, we meet or exceed those numbers. And when we've got some unanticipated challenges, some of them company specific, some of them, at times, macro, sometimes we miss the number. But more times than not, over a longer period of time, we've met or exceeded those numbers. So that's how we think about it, a 50-50 view. With respect to May, in terms of performance to date, it's in line with what we expected at the beginning of the month, which, reflecting the negative impact of the non-go-forward business, was to be down mid- to high single. On a go-forward basis, there'd be a slight increase in comps for the month. That was our beginning-of-month expectation and today we're running in line with them. Thanks.

Our next question comes from the line of Brian Tunick from Royal Bank of Canada.

This is Kate on for Brian. I guess, just on BBW. It seems like home fragrance has really been leading the comps, but it seems like there are some green shoots going on in the body care categories. Can you just expand on what you're seeing there, and what we should we be looking for as the year progresses in categories outside from home? And then just can you also remind us, what store comp do we need at BBW in order to leverage occupancy, just given the real estate projects happening?

Thanks. We'll go to Nick, obviously.

Sure. Well, I think what we're experiencing at the moment in our, let's call it, body care business, is that the customers got a much higher degree of curiosity as it relates to the product from a health, well-being, good-for-you, efficacious aspect. And we feel good about the early reads, the early signs that we've got as we've ventured into that category. She continues to really want to come to us for a full body care experience, be that fragrance, be that shower gel, or be that of a more efficacious nature. And as we continue to play in those areas, she continues to find or we're experiencing us being pretty receptive, that she's being pretty receptive to that. So that's a pretty big clue for us. As it relates to other categories that we'll go into around that, we're testing stuff. As I mentioned earlier on, it was probably one of our most aggressive quarters in terms of things that we've tested that have given us really good clues as it relates to what not to do as well as what to do. So I'm not going to share with you the categories that we're going to go into other than that we will continue to expand in that area and grow. The return on investment -- the comp that we need to see from a return on investment with those stores is in the high single-digits comp territory. And we continue to be pleased with the results that we've got from those remodels. And as Stuart articulated earlier on, the single most important thing that we have, the single most important asset that we have are our brands. And as we look at the retail landscape and think about the lack of investment that has gone into retail, we don't want to fall into that category. So you're going to see this ongoing pressure on our P&L as we continue to appropriately invest in the stores, make sure that we're investing in a manner that provides us with the right ROI and gets back to the point of is it a great experience for the customer when she comes into the store. And we like the results so far, and we'll obviously do that on a basis that says, "Are we continuing to get what we want?" And if we're not, we'll adjust; and if we are, we'll continue. And that's a good thing, I think, for the brand. I think it's a good thing for the business and, obviously, that's a good thing for the mall as well.

Our next question comes from the line of Anna Andreeva from Oppenheimer.

Great. We had a follow-up on the bra category. I guess, as you lap all of the deflationary pressure from bralettes this summer, should we expect to see some stabilization in price there? And then with the trial activity in lingerie and sport, it's been extensive for a few quarters now. How has that performed versus expectations? And do you expect to see some moderation of that in the back half?

Anna, it's Stuart. So do we expect to see stabilization in overall AURs as we move through 2017? The answer to that is absolutely yes. Given the growth that we drove in the back half of '16 and the first part of '17 in the bralette and sport bra businesses, that will stabilize. And as was commented on earlier, Jan and the team very focused on newness and innovation and compelling bra launches in the constructed space in the back half of the year. So absolutely expect prices to stabilize. With respect to driving unit growth and trial in bralettes and sport bras, I mean, we were extremely aggressive about that in the fall and into the spring. And we've been successful in driving a lot of unit growth in those 2 subsegments of the bra business. We would expect that growth to moderate in the back half of the year, still to be relevant and healthy and those are important segments. But the constructed bra business continues to be the substantial majority of the bra business for us, and it's a very good and a healthy business. And with the regular flow of newness and innovation, we expect that will continue to be a very important to our bra business.

Our next question comes from the line of Mark Altschwager from Robert W. Baird.

I just wanted to follow up on the growth margin discussion earlier. I guess, looking beyond Q2 guidance does incorporate a pretty sharp inflection in the back half of the year. Can you just update us on the drivers to that? Maybe give us a sense of the magnitude of the shift on the B&O line and what's embedded from a merchandise margin expectation perspective?

Yes. So we are expecting improvement in the merchandise margin rate in Q2 as we commented on earlier. And we would expect some improvement in merchandise margin rates in the fall season as well, the back half of the year. And the deleverage related to B&O should also moderate, given the year-on-year volume difference, meaning that we're feeling the pressure right now, the deleverage pressure related to the exits, particularly in BBWs. Deleverage pressure is greater in the first part of the year than it will be in the back half of the year, just given the seasonality of that business. So the B&O rate pressure will moderate as we move through the year.

Our next question comes from the line of Kevin Heenan from Guggenheim Securities.

This is Kevin Heenan on for Bob Drbul. I just wanted to focus on the PINK business. It's been a strong performer in recent years and represents the big piece of the total VS business. I just wanted to hear your thoughts on sort of the opportunities for that segment as well as maybe some of the challenges or risk factors you see maybe that are unique to that piece versus the Victoria's Secret and Bath & Body Works component.

Sure. So with respect to our PINK business, we believe that, that business has the potential to literally double in North America. And that's a pretty bullish statement. But based on how clear minded the business is about the target customer, the opportunity to grow through additional square footage. As you know, many of our stores today don't have sufficient square footage to offer the full assortment of PINK merchandise to our customers. Based on their capabilities in supply chain and other retail fundamentals, business does well north of $1,000 a foot. It's just a very, very well run business. The brand is well defined and very relevant. The real estate opportunity is significant. The online opportunity is significant, and growing very well today, and the sourcing and supply chain-related capabilities, lead times and read-and-react capability, very, very strong in the business. So we see the potential for a lot of growth in that business over the next several years.

Our next question comes from the line of Adrienne Yih from Wolfe Research. Adrienne Yih-Tennant: I don't know if this is for Stuart, I think it is. Can you talk about the bralette category penetration last year being about 10% of the bra category? Where do you think that could go? And it certainly looks like you're adding in kind of constructed bralettes or structured bralettes at a higher price point. And I'm wondering what you've seen since you've implemented those or since you started selling those in terms of the willingness for her to buy that category at the higher price point?

Sure. So in terms of last year, it depends on what part of last year you talk about in terms of penetration. In the first quarter of last year, the bralette business for Victoria's Secret lingerie was pretty small. And now it's running about 10% of the total. So that's where we are on that business in terms of growth and penetration. And as we commented on earlier, we wouldn't expect that, that will get significantly larger than it is today. With respect to bralettes that have some construction or support or technical benefits in them, thinking about whitespace between these broad categories is obviously an important thing for any retailer to do, and we think about that. And as you observed, we're exploring some of those opportunities and are optimistic about the growth potential in some of the whitespace between the major segments, if you will. Thanks.

Our next question comes from the line of Matthew Boss from JPMorgan.

As you assess top line performance at brick-and-mortar across the fleet, any noticeable differences that you found between your A versus your B and C stores? I guess, how do you feel about the size of the fleet today? And are you seeing any flexibility with rents?

So I gave a pretty long answer earlier about how we think about real estate, which really does encompass our thoughts about it, so I don't want to repeat that. But in terms of variability by mall type, the short answer is in the first quarter and, maybe more importantly, for periods of time beyond that, we don't see a lot. And I've got this sheet literally right in front of me. I'm looking at it, so it's not that my memory is bad or something. So we don't see a lot of variability by mall tier, some, but I wouldn't describe it as significant. And our real estate is in great shape, and that's a function of just the regular monitoring that we do. With respect to lease flexibility, I commented earlier about our lease terms, in terms of situations in the more challenged malls where we have literally month-to-month flexibility. And maybe last, in terms of the opportunity to get lower rents, of course, there's some opportunity for that. But one of the things that is pretty well understood about real estate is it's about location, location, location. And to some degree, you get what you pay for. So if a retailer's #1 strategy is to get lower rents, that may beg other questions. It's not at the top of our list. We certainly don't want to overpay. But what's more important to us, frankly, is investing in our stores, having great locations, having great productivity over $800 a foot. Those are our priorities, and we work closely with our developer partners to achieve those outcomes. Thanks.

Our next question comes from the line of Lorraine Hutchinson from Bank of America.

Could you give us an update on the VS beauty business, both on a sales and a margin basis? How's that trended in the first quarter? And then what's baked into your assumptions for the rest of the year?

Yes. On the beauty business, as you're familiar with, but I think it bears the quick reminder or repeating. The first thing is we've got a new leader in that business. Greg just celebrated his 1-year anniversary. Greg Unis, coming from Coach. He's doing a terrific job. Importantly, he rationalized the SKU count in that business in the fall by roundly 40%. So a very substantial rationalization of the assortment. And the importance of that, obviously, is to ensure that we're focused on and we can help the customer understand what our true key items are and to drive volume in key items. So he's done a nice job there. As we've also commented on, the flow of production into -- what we refer to as the beauty park, so that's the short lead time, Columbus area set of production facilities. The use of that -- of those suppliers and those reduced lead times is substantially greater than it had been historically. So 2 very important changes in the business. In terms of the results of the business, significant margin improvement in the business and we would expect that to continue and become even more significant in the second quarter. Nice growth in the business online. Some sales dollar pressure in the store channel, but improved sequentially in a pretty meaningful way through the quarter. So February was tough for beauty as it was for most of our businesses, but March was better and April was even better than that. And again, the margin dollar results substantially outperforming sales. So we feel like we've got momentum in the beauty business, very optimistic about Greg and his leadership and the team, rationalized assortment, beauty park, strong lineup for fall. We've seen it. It's qualitative, but we're very optimistic about it. So we think we've got a lot of opportunity in the beauty business. A good business today with a lot of growth ahead of it.

Our next question comes from the line of Dana Telsey from Telsey Advisory Group.

As you think about the China opportunity, any updates there? Any learnings relative to product assortment? How you're thinking about sales and the investment requirements?

Thanks, Dana. We'll go to Martin for that.

Dana, thanks for the question. We're feeling good about China. We're really making progress on 4 fronts, I would say. As you heard me say earlier, we opened our first full assortment stores, 2 stores opened in February, with good results, very strong customer reaction. We have 4 more stores in the pipe for the balance of this year and then building to 10 to 12 stores next year. So very good progress there. Our beauty business, which has been open for nearly 2 years now, doing very well in those VSBA stores, double-digit comps in the first quarter. Our third business would be the direct-to-consumer business in China, which started back in the fall and has been building month-on-month. And we're excited that we'll move to China next-day delivery for that business during the summer, so good update there. And then, finally, I would say the team, making real progress on hiring a very high-quality team, some really terrific people, getting them onboarded in the business and building capability. So feel really good about that. In terms of the patterns of demand and customer behavior that we see, I would say that it's more of the same in the sense that our replication model works in pretty much the same way everywhere. What we find is bestsellers here tend to be bestsellers there. The 2 substantial differences, you won't be surprised to hear, are around size distortions, that we have a smaller customer. We have to distort significantly to that. And the second is just a lead time difference in getting products into market and through the regulatory environment that there is in that market, means that there is a time delay or an offset to North America. But aside from that, we're feeling very good about the business, and thank you for the question.

Our next question comes from the line of Janet Kloppenburg from JJK Research.

Stuart, I was just wondering if you could talk -- you have a great deal of confidence in the constructed bra business rebounding in the back half. And I know that some of the data that indicates that may be sensitive competitively. But I'm wondering if you could talk about any underlying trends that give you that encouragement, perhaps there's trends in place -- excuse me, tests in place that are fortifying your outlook. And also, I was just wondering about the pricing outlook on the constructed bra business. Do you think you can maintain the historical ASP level in that category?

Yes. So Janet, as you recognize in your question and as we kind of commented on in the remarks that were circulated last night. We're not getting to get into the details of the bra launches for this fall. It's just too important. We're optimistic about those launches and the nature of those launches in the constructed bra business. And more newness will flow. Some will flow in the second quarter, particularly towards the end of the second quarter. And Jan and the team have a good lineup for fall, but not going to comment on it specifically on this call. With respect to the selling prices or average unit retails in the constructed bra business, as you understand, as we all understand, it's a function of the quality of the merchandise itself. It's about the product, stupid, as they say. And so as we deliver a regular flow of fashion, technical benefit, fundamentally emotional content, where the customers says I've got to have that, that's how we get paid. And we're optimistic between the design folks and the merchant team and the sourcing folks and our focus on reducing lead times and our ability to read, react and adjust that we have the potential to have a very good fall season, particularly in building momentum through the second quarter. So our inventories are in great shape. As we've commented on, inventory per foot is down 12%. We've commented on the fact that, when we start the fall season, more than 90% of our Q4 buy is open. Our agility is very good as a company, and so we're optimistic about the momentum we have in the business and our ability to have a strong fall. Thank you.

Our final question comes from the line of Susan Anderson from FBR Capital Markets.

I was just wondering -- and sorry, if I missed this. I hopped on late. If you could talk about, just in general, the competitive environment, say, over the past 10 years. I know there's been a lot of talk about some smaller players popping up. But clearly, it looks like you're gaining share in terms of units. But maybe just do you feel like the competition has gotten a bit stiffer, either because of more players now in your categories or anything else driving this?

Thanks, Susan, so we'll start with Nick and end with Stuart.

That's a pretty broad question when you put it in the context of over the last 10 years. I think a number of different things have happened that have led to, we can either call it a stiffer competition or we can refer to it as more aggressive and broader-based competition. So clearly, the marketplace is having some impact, good, better indifferent from what's going on, on the online channel. And I think we're incredibly appreciative of the business that we've had and the gains that we've made in that channel. And what's been impressive about that is we've been able to gain in the channel -- in the direct channel without having to lose any momentum within the store base. So I think this notion that you can have a healthy store base, which is critical because it's the most important expression of the brand, which is why we continue to invest in our stores and have a healthy online channel at the same time. I think the other thing that obviously comes into play is that, with the apparel business being less than exciting, that puts a certain pressure in the marketplace as it relates to price deflation. So customers' expectations around pricing, promotion and markdowns seems to get larger and larger. So what's important to us in there is how do we leverage our short cycles, our ability to get back into businesses that are of full-price selling and control our promotional strategy until we get to a sale period. I think what's going to be probably more interesting is just taking into consideration what is going on from a more macro trend and how does that play into that retail environment. So as customers continue to be more and more engaged in, let's call it, a healthy, good-for-you lifestyle, even if it's only on a superficial level in some cases versus a meaningful level in other cases, you can see the impact on that in malls, mall traffic and customer expectations. So I think the beauty of the BBW brand is that we have an opportunity to do a couple of things. One is we've been able to drive our own traffic gains during those periods of challenging retail. And that the brand has got tremendous elasticity, so our ability to play in trends, to play in fashion, while at the same time trying to take into consideration the foundation of our business, which is pretty strong.

I guess, Susan, 3 or 4 things I would just add. I mean, we're in great categories of retailing. So the intimate apparel space and personal care and beauty categories of retail have strong loyalty characteristics. The potential for high inherent profitability. And so the categories or segments of retail that we're in are very attractive ones, and the good news is we're leaders in those categories. Being in that leading position gives us a lot of advantage. The presence of competition isn't a new thing. There are many other retailers that have tried to get into these spaces, some successful, some not. And then just maybe lastly, one of the other things that I think makes our company unique is that we've been very disciplined about controlling our channels of distribution. So our brands, our products are only sold in our stores and online through our websites. And that control of brand and control of channel has been very important to us. And I think allows us to reinforce and protect the leadership position of these brands.

That concludes our call for today, and thank you for your interest in L Brands.

This concludes today's conference call. You may now disconnect.