http://www.morningstar.com/earnings/52467692-l-brands-inc-lb-q1-2013.aspx

L Brands Inc LB
Q1 2013 Earnings Call Transcript

Transcript Call Date 05/23/2013

Operator: Good morning. My name is Lorale, and I will be your conference operator today. At this time, I would like to welcome everyone to the Limited Brands' First Quarter 2013 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

I will now turn the call over to Ms. Amie Preston, Chief Investor Relations Officer for Limited Brands. Please go ahead.

Amie Preston - IR: Thanks, Lorale. Good morning, everyone, and welcome to our first quarter earnings conference call for the period ending Saturday, May 4, 2013.

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 statements found in our SEC filings.

Our first quarter earnings release and related financial information are available on our website, limitedbrands.com. Also available on our website is an investor presentation, which we will be referring to during this call. The call is being taped and can be replayed by dialing 1-866-NEWS-LTD. You can also listen to an audio replay from our website.

Stuart Burgdoerfer, EVP and CFO; Sharen Turney, CEO, Victoria's Secret; Nick Coe, CEO, Bath & Body Works; and Martin Waters, President of International are all joining us today. After our prepared comments, we will be available to take your questions for as long as time permits, so that we can speak with as many of you as possible, please limit yourself to one question.

Thank and now I'll turn the call over to Stuart.

Stuart Burgdoerfer - EVP and CFO: Thanks, Amie and good morning, everyone. Our first quarter results were good in many respects. Earnings per share increased 17% to a record $0.48. Total sales increased 5% and comps increased 3% on top of a 7% increase last year, and inventories were well-managed.

Operating income improved significantly at Bath & Body Works and in the other segment, but declined in Victoria's Secret. Total operating income dollars increased 6%, a result we are not satisfied with.

First quarter traffic trends were challenging and we responded with incremental promotions to drive traffic. Our first quarter comp increase of 3% was in line with our guidance, but our merchandise margin rate was down in the quarter below plan. The merchandise margin rate decline was offset by SG&A leverage of 50 basis points. We took action in the first quarter to reduce home office overhead and incurred severance cost related to these reductions. While these actions did not benefit the first quarter, we will see SG&A expense reductions as a result (indiscernible).

We delivered earnings per share $0.03 above the high end of our guidance despite the negative impact of about $0.03 from severance cost and higher tax rate, which were not included in our guidance.

Turning to the balance sheet on Page 6, retail inventories per square foot at cost ended the quarter up 3% versus last year. We are very comfortable with our inventory position. They are clean and in good shape.

We repurchased 1.2 million shares of stock in the first quarter for $54.7 million. At quarter end, we had $184.2 million remaining under our current $250 million repurchase program.

Read our Earnings Call Transcript disclaimer.
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