Second Quarter Earnings Presentation August 16, 2017
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this presentation or made by our company or our management involve risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “planned,” “potential” and any similar expressions may identify forward-looking statements. Risks associated with the following factors, among others, in some cases have affected and in the future could affect our financial performance and actual results and could cause actual results to differ materially from those expressed or implied in any forward- looking statements included in this presentation or otherwise made by our company or our management: • general economic conditions, consumer confidence, consumer spending patterns and market disruptions including severe weather conditions, natural disasters, health hazards, terrorist activities, financial crises, political crises or other major events, or the prospect of these events; • the seasonality of our business; • the dependence on mall traffic and the availability of suitable store locations on appropriate terms; • our ability to grow through new store openings and existing store remodels and expansions; • our ability to successfully expand internationally and related risks; • our independent franchise, license and wholesale partners; • our direct channel businesses; • our ability to protect our reputation and our brand images; • our ability to attract customers with marketing, advertising and promotional programs; • our ability to protect our trade names, trademarks and patents; • the highly competitive nature of the retail industry and the segments in which we operate; • consumer acceptance of our products and our ability to manage the life cycle of our brands, keep up with fashion trends, develop new merchandise and launch new product lines successfully; • our ability to source, distribute and sell goods and materials on a global basis, including risks related to: • political instability, significant health hazards, environmental hazards or natural disasters; • duties, taxes and other charges; • legal and regulatory matters; • volatility in currency exchange rates; • local business practices and political issues; 2
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 Continued • potential delays or disruptions in shipping and transportation and related pricing impacts; • disruption due to labor disputes; and • changing expectations regarding product safety due to new legislation; • our geographic concentration of supplier and distribution facilities in central Ohio; • fluctuations in foreign currency exchange rates; • stock price volatility; • our ability to pay dividends and related effects; • our ability to maintain our credit rating; • our ability to service or refinance our debt; • our ability to retain key personnel; • our ability to attract, develop and retain qualified employees and manage labor-related costs; • the ability of our manufacturers to deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations; • fluctuations in product input costs; • our ability to adequately protect our assets from loss and theft; • fluctuations in energy costs; • increases in the costs of mailing, paper and printing; • claims arising from our self-insurance; • our ability to implement and maintain information technology systems and to protect associated data; • our ability to maintain the security of customer, associate, supplier or company information; • our ability to comply with regulatory requirements; • legal and compliance matters; and • tax, trade and other regulatory matters. We are not under any obligation and do not intend to make publicly available any update or other revisions to any of the forward- looking statements contained in this presentation to reflect circumstances existing after the date of this presentation or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Additional information regarding these and other factors can be found in Item 1A. Risk Factors in our 2016 Annual Report on Form 10-K. 3
L BRANDS, INC. AND SUBSIDIARIES ADJUSTED CONSOLIDATED STATEMENTS OF INCOME THIRTEEN WEEKS ENDED JULY 29, 2017 AND JULY 30, 2016 (Unaudited) (In millions except per share amounts) % Increase Increase 2017 2016 (Decrease) (Decrease) Net Sales $ 2,755.0 $ 2,889.7 $ (134.7) -5% Comparable Store Sales -6% 1% Comparable Sales -8% 3% Gross Profit 1,027.9 1,112.9 (85.0) -8% % of Sales 37.3% 38.5% (120 bp's) General, Administrative and Store Operating Expenses 727.0 704.7 22.3 3% % of Sales 26.4% 24.4% 200 bp's Operating Income 300.9 408.2 (107.3) -26% % of Sales 10.9% 14.1% (320 bp's) Interest Expense and Other 83.8 100.6 (16.8) -17% Income Before Income Taxes 217.1 307.6 (90.5) -29% Provision for Income Taxes 78.2 102.9 (24.7) -24% % of Pre-Tax Income 36.0% 33.5% Net Income $ 138.9 $ 204.7 $ (65.8) -32% % of Sales 5.0% 7.1% (200 bp's) Net Income Per Diluted Share $ 0.48 $ 0.70 $ (0.22) -31% Weighted Average Shares Outstanding 288.9 291.0 4
L BRANDS, INC. AND SUBSIDIARIES ADJUSTED CONSOLIDATED STATEMENTS OF INCOME TWENTY-SIX WEEKS ENDED JULY 29, 2017 AND JULY 30, 2016 (Unaudited) (In millions except per share amounts) % Increase Increase 2017 2016 (Decrease) (Decrease) Net Sales $ 5,191.5 $ 5,503.6 $ (312.0) -6% Comparable Store Sales -7% 2% Comparable Sales -9% 3% Gross Profit 1,930.7 2,166.9 (236.2) -11% % of Sales 37.2% 39.4% (220 bp's) General, Administrative and Store Operating Expenses 1,420.6 1,400.8 19.8 1% % of Sales 27.4% 25.5% 190 bp's Operating Income 510.1 766.1 (256.0) -33% % of Sales 9.8% 13.9% (410 bp's) Interest Expense and Other 174.6 191.0 (16.5) -9% Income Before Income Taxes 335.5 575.1 (239.6) -42% Provision for Income Taxes 102.6 196.8 (94.2) -48% % of Pre-Tax Income 30.6% 34.2% Net Income $ 232.9 $ 378.3 $ (145.4) -38% % of Sales 4.5% 6.9% (240 bp's) Net Income Per Diluted Share $ 0.81 $ 1.30 $ (0.49) -38% Weighted Average Shares Outstanding 289.1 291.9 5
L BRANDS, INC. AND SUBSIDIARIES ADJUSTED OPERATING INCOME BY SEGMENT THIRTEEN WEEKS ENDED JULY 29, 2017 AND JULY 30, 2016 (Unaudited) (In millions) % Increase Increase 2017 2016 (Decrease) (Decrease) Victoria's Secret $ 183.1 $ 280.6 $ (97.5) -35% % of Sales 11.1% 15.0% (390 bp's) Bath & Body Works 156.3 148.3 8.0 5% % of Sales 18.2% 18.5% (30 bp's) Victoria's Secret and Bath & Body Works International 1.7 7.6 (5.9) -78% % of Sales 1.5% 7.6% (620 bp's) Other (40.2) (28.3) (11.9) -42% % of Sales (29.9%) (23.4%) (650 bp's) Total L Brands $ 300.9 $ 408.2 $ (107.3) -26% % of Sales 10.9% 14.1% (320 bp's) 6
L BRANDS, INC. AND SUBSIDIARIES ADJUSTED OPERATING INCOME BY SEGMENT TWENTY-SIX WEEKS ENDED JULY 29, 2017 AND JULY 30, 2016 (Unaudited) (In millions) % Increase Increase 2017 2016 (Decrease) (Decrease) Victoria's Secret $ 341.8 $ 548.9 $ (207.1) -38% % of Sales 10.8% 15.2% (440 bp's) Bath & Body Works 258.2 260.0 (1.8) -1% % of Sales 16.8% 17.8% (100 bp's) Victoria's Secret and Bath & Body Works International 1.1 20.7 (19.6) -95% % of Sales 0.5% 10.6% (1010 bp's) Other (91.0) (63.5) (27.5) -43% % of Sales (35.5%) (26.6%) (890 bp's) Total L Brands $ 510.1 $ 766.1 $ (256.0) -33% % of Sales 9.8% 13.9% (410 bp's) 7
L BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In thousands) July 29, 2017 July 30, 2016 ASSETS Current Assets Cash and Cash Equivalents $ 1,360,253 $ 1,272,713 Accounts Receivable, Net 244,904 266,230 Inventories 1,118,215 1,204,291 Other 233,362 216,999 Total Current Assets 2,956,734 2,960,233 Property and Equipment, Net 2,840,757 2,586,211 Goodwill 1,348,287 1,348,287 Trade Names and Other Intangible Assets, Net 411,000 411,000 Deferred Income Taxes 24,995 30,017 Other Assets 181,075 205,548 TOTAL ASSETS $ 7,762,848 $ 7,541,296 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Liabilities Accounts Payable $ 758,551 $ 792,852 Accrued Expenses and Other 859,802 879,143 Current Portion of Long-term Debt 64,251 12,983 Income Taxes 76,086 134,069 Total Current Liabilities 1,758,690 1,819,047 Deferred Income Taxes 368,552 268,182 Long-Term Debt 5,703,648 5,705,781 Other Long-Term Liabilities 844,277 877,491 Shareholders' Equity (Deficit) (912,319) (1,129,205) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 7,762,848 $ 7,541,296 8
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