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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended October 30, 2004

OR

For the transition period from              to             

Commission file number 1-8344

LIMITED BRANDS, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (614) 415-7000

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x    No  ¨

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  x    No  ¨

        Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

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LIMITED BRANDS, INC.

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SAFE HARBOR STATEMENT UNDER THE PRIVATE

SECURITIES LITIGATION ACT OF 1995

The Company cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Quarterly Report on Form 10-Q (“Report”) or otherwise made by the Company or management of the Company involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond the Company’s control. Accordingly, the Company’s 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 similar expressions may identify forward-looking statements. The following factors, among others, in some cases have affected and in the future could affect the Company’s financial performance and actual results and could cause actual results for 2004 and beyond to differ materially from those expressed or implied in any forward-looking statements included in this Report or otherwise made by the Company or management: changes in consumer spending patterns, consumer preferences and overall economic conditions; the potential impact of national and international security concerns on the retail environment, including any possible military action, terrorist attacks or other hostilities; our ability to service our debt, any debt we draw down under our credit facilities, and any other debt we incur, and the restrictions the agreements related to such debt impose upon us; the impact of competition and pricing; changes in weather patterns; political stability; postal rate increases and charges; paper and printing costs; risks associated with the seasonality of the retail industry; risks related to consumer acceptance of the Company’s products and the ability to develop new merchandise; the ability to retain, hire and train key personnel; risks associated with the possible inability of the Company’s manufacturers to deliver products in a timely manner; risks associated with relying on foreign sources of production, including risks related to the disruption of imports by labor disputes; and risks associated with the possible lack of availability of suitable store locations on appropriate terms. Investors should read Exhibit 99.1 to the Company’s Annual Report on Form 10-K, as well as the Company’s other filings with the Securities and Exchange Commission, for a more complete discussion of these and other factors that might affect the Company’s performance and financial results. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

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PART I— FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

LIMITED BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Thousands except per share amounts)

(Unaudited)

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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LIMITED BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Thousands)

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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LIMITED BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands)

(Unaudited)

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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LIMITED BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

Limited Brands, Inc. (the “Company” or “Limited Brands”) sells women’s intimate apparel, personal care products and women’s and men’s apparel, under various trade names through its specialty retail stores and direct response (catalogue and e-commerce) businesses.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Investments in unconsolidated entities over which the Company exercises significant influence but does not have control are accounted for using the equity method. The Company’s share of the net income or loss of unconsolidated entities is included in other income (loss).

The consolidated financial statements as of and for the thirteen week and thirty-nine week periods ended October 30, 2004 and November 1, 2003 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s 2003 Annual Report on Form 10-K. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (which are of a normal recurring nature) necessary for a fair statement of the results for the interim periods.

Due to seasonal variations in the retail industry, the results of operations for any interim period are not necessarily indicative of the results expected for the full fiscal year.

Certain prior year amounts have been reclassified to conform to the current year presentation.

2. Shareholders’ Equity and Earnings Per Share

At October 30, 2004, one billion shares of $0.50 par value common stock were authorized, 523.9 million were issued and 472.9 million were outstanding. At January 31, 2004, 523.9 million shares were issued and 518.1 million were outstanding. At November 1, 2003, 523.9 million shares were issued and 516.2 million were outstanding. In addition, ten million shares of $1.00 par value preferred stock were authorized, none of which were issued.

In April 2004, the Company completed a modified “Dutch Auction” tender offer under which the Company repurchased approximately 50.6 million shares of its outstanding common stock for $1 billion, or $19.75 per share.

In May 2004, the Board of Directors of the Company authorized the repurchase of $100 million of the Company’s common stock. The Company completed this $100 million repurchase in August 2004, repurchasing approximately 5.1 million shares of its common stock at an average price per share of approximately $19.42.

In August 2004, the Board of Directors of the Company authorized the repurchase of an additional $250 million of the Company’s common stock. Before this repurchase was superseded by the $2 billion tender offer announced in October 2004 (see Note 14), the Company had repurchased approximately 0.7 million shares of its common stock under this authorization for $14.6 million at an average price per share of approximately $21.04.

In January 2003, the Board of Directors of the Company authorized the repurchase of $150 million of the Company’s common stock. During the thirty-nine weeks ended November 1, 2003, the Company completed the $150 million repurchase by acquiring approximately 9.9 million shares of its common stock at an average price per share of approximately $15.

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Earnings per basic share is computed based on the weighted average number of outstanding common shares. Earnings per diluted share includes the weighted average effect of dilutive options and restricted stock on the weighted average shares outstanding.

Weighted average common shares outstanding (thousands):

The quarterly computations of earnings per diluted share exclude options to purchase 0.9 million and 14.9 million shares of common stock for the thirteen weeks ended October 30, 2004 and November 1, 2003 and the year-to-date computation of earnings per diluted share excludes options to purchase 1.6 million and 20.2 million shares for 2004 and 2003, because the options’ exercise prices were greater than the average market price of the common shares during those periods.

3. Stock-based Compensation

The Company recognizes compensation expense associated with stock-based awards under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and related interpretations. Under APB No. 25, because the exercise price of the Company’s employee stock options is generally equal to the market price of the underlying stock on the date of grant, no compensation expense is recognized. Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” establishes an alternative method of expense recognition for stock-based compensation awards based on fair values.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123:

4. Other Income (Loss)

Other income (loss) primarily includes the non-operating gains described below.

In March 2004, the Company recognized a $44.9 million gain resulting from (i) the early repayment of New York & Company’s (formerly Lerner) $75.0 million subordinated note held by the Company plus accrued interest of approximately $10 million (scheduled maturity was November 26, 2009) and (ii) New York & Company’s $20.0 million purchase of warrants representing approximately 13% of New York & Company’s common equity. The note and warrants were part of the consideration received by the Company for the sale of New York & Company in November 2002, and had a carrying value, including accrued interest, of $60.1 million.

In connection with the agreement to prepay the note and to purchase the warrants, as amended on August 5, 2004, New York & Company agreed to make an additional payment to Limited Brands if (i) New York & Company completed an initial public offering pursuant to a registration statement filed on or before December 31, 2004 or was sold pursuant to an agreement entered into on or before December 31, 2004 and (ii) the implied equity value of New York & Company based upon one of the above transactions exceeded $156.8 million. On May 24, 2004, New York & Company filed an initial registration statement with the SEC in connection with an initial public offering. This initial public offering was completed on October 7, 2004 and the agreed upon payment of $45.7 million was received by the Company on October 13, 2004, at which time the Company recognized a $45.7 million pretax, non-operating gain.

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5. Gains on Investees’ Stock

In July 2004, the Company sold its remaining ownership interest in Galyan’s Trading Company, Inc. (“Galyan’s”) for $65.3 million resulting in a pretax gain of $17.6 million. Prior to the sale of Galyan’s shares, the Company accounted for its investment using the equity method.

During the first quarter of 2003, the Company sold approximately one-half of its ownership in Alliance Data Systems Corporation (“ADS”) for $130.7 million resulting in a pretax gain of $79.7 million. During the third quarter of 2003, the Company sold its remaining interest in ADS for $192.9 million resulting in a pretax gain of $128.4 million. Prior to the sale of ADS shares, the Company accounted for its investment using the equity method.

6. Inventories

The fiscal year of the Company and its subsidiaries is comprised of two principal selling seasons: spring (the first and second quarters) and fall (the third and fourth quarters). Inventories are principally valued at the lower of average cost or market, on a weighted average cost basis, using the retail method. Inventory valuation at the end of the first and third quarters reflects adjustments for estimated inventory markdowns for the total selling season.

7. Property and Equipment, Net

Property and equipment, net consisted of (thousands):

8. Trade Names and Other Intangible Assets, Net

Intangible assets, not subject to amortization, represent trade names of $411.0 million as of October 30, 2004, January 31, 2004 and November 1, 2003.

Intellectual property assets and other intangibles, subject to amortization, were as follows (thousands):

The estimated annual amortization expense for these intangible assets is approximately $8 million each year through 2006 and approximately $5 million in 2007, at which time these intangible assets will be fully amortized.

9. Income Taxes

The provision for income taxes is based on the annual effective tax rate and also reflects a $16 million tax benefit primarily related to the favorable resolution of certain state tax matters during the third quarter of 2004. Income taxes paid during the thirty-nine weeks ended October 30, 2004 and November 1, 2003 approximated $353.4 million and $322.1 million, respectively. Income taxes payable included net current deferred tax liabilities of $49.5 million at October 30, 2004, $69.7 million at January 31, 2004 and $51.7 million at November 1, 2003.

The Company’s effective tax rate has historically reflected and continues to reflect a provision related to the undistributed earnings of foreign affiliates. Since 1995, the Internal Revenue Service (“IRS”) has assessed the Company for additional taxes and interest for the years 1992 to 2000 relating to the undistributed earnings of foreign affiliates. In September 1999, the United States Tax Court sustained the position of the IRS with respect to the 1992 year and, in connection with an appeal of that Tax Court judgment and related IRS assessments for subsequent years, the Company paid $122 million in taxes and interest for the years 1992 to 2000 that reduced deferred tax liabilities.

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In March 2002, the U.S. Court of Appeals for the Sixth Circuit ruled in favor of the Company, reversing the previous Tax Court judgment relating to the 1992 year. This ruling also applied to years 1993 and 1994. In the third quarter of 2003, the Company reached an agreement with the IRS regarding the computation of interest and recognized interest income of $30 million related to the Company’s appeal of the 1992 through 1994 years, of which $28 million was collected in the fourth quarter of 2003; the remaining balance reduced deferred tax liabilities. While the outcome cannot yet be determined, the Company is pursuing additional actions to obtain a refund of tax of up to $85 million plus interest related to the 1995 through 2000 years.

On October 22, 2004, the American Jobs Creation Act (the “Act”) was passed. The Act provides for a special one-time deduction of 85% of certain foreign earnings that are repatriated to the U.S. provided certain criteria are met. The Company has historically provided U.S. tax on all of its foreign earnings at the applicable tax rate. The Company is currently evaluating the impact of the Act which is contingent upon the resolution of the actions noted above related to the 1995 through 2000 years and upon meeting the provisions of the Act.

10. Long-term Debt

Unsecured long-term debt, net of unamortized discount, consisted of (thousands):

On October 26, 2004, the Company issued $500 million of 5.25% notes utilizing a shelf registration statement, under which up to $500 million of debt securities, common and preferred stock, and other securities could be issued.

In the first quarter of 2003, the Company issued $350 million of 6.95% debentures due March 1, 2033 under a 144A private placement. The Company exchanged the privately held securities for securities registered with the SEC with identical terms through a non-taxable exchange offer. $0.5 million of securities were not exchanged and remain privately held.

Also in the first quarter of 2003, the Company redeemed its 7 ¹/2% debentures due 2023 at a redemption price equal to 103.16% of the principal amount, plus accrued interest through the call date. The early redemption of these securities resulted in a pretax charge of $13.4 million, comprised of the call premium and the write-off of unamortized deferred financing fees and discounts. This charge was included in interest expense in the Consolidated Statements of Income.

As of October 30, 2004, the Company had a 5-year $750 million unsecured revolving credit facility (the “Facility”), under which borrowings outstanding, if any, would be due July 13, 2006.

The Facility had several borrowing and interest rate options. Fees payable under the Facility were based on the Company’s long-term credit ratings, and were 0.125% of the committed amount per year.

The Facility required the Company to maintain certain specified fixed charge and debt to capital ratios. The Company was in compliance with these requirements at October 30, 2004.

The Facility was available to support the Company’s commercial paper and letter of credit programs, which are used from time to time to fund working capital and other general corporate requirements. The Company did not issue commercial paper or draw on the Facility during the thirty-nine weeks ended October 30, 2004. In addition, no commercial paper or amounts under the Facility were outstanding at October 30, 2004. The Facility was replaced with a $1 billion unsecured revolving credit facility effective November 22, 2004 (see Note 14).

Cash paid for interest during the thirty-nine weeks ended October 30, 2004 and November 1, 2003 was $37.3 million and $43.1 million, respectively.

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11. Commitments and Contingencies

In connection with the disposition of certain subsidiaries, the Company has remaining guarantees of approximately $403 million related to lease obligations of Abercrombie & Fitch, Too Inc., Galyan’s, Lane Bryant and New York & Company under the current terms of noncancelable leases expiring at various dates through 2015, unless extended or renewed. These guarantees include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate only to leases that commenced prior to the disposition of the subsidiaries. In certain instances, the Company’s guarantee may remain in effect if the term of a lease is extended. The Company believes the likelihood of material liability being triggered under these guarantees is remote.

Also, in connection with the Company’s investment in Easton Town Center, LLC (“ETC”), the Company has guaranteed $25 million of ETC’s $210 million secured bank loan.

Additionally, in June 1999, the Company issued a $31 million standby letter of credit, on which the City of Columbus, Ohio (the “City”) could draw solely to pay principal and interest on public bonds issued by the City for infrastructure development at Easton. In November 2004, the City determined that this letter of credit was no longer required and terminated the letter of credit agreement.

The Company is subject to various claims and contingencies related to lawsuits, income taxes, insurance, regulatory and other matters arising out of the normal course of business. Management believes that the ultimate liability arising from such claims or contingencies, if any, is not likely to have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

12. Shareholder Litigation

During 1999, shareholders of the Company filed a lawsuit against the Board of Directors and the Company, as nominal defendant, related to the Company’s June 1999 Tender Offer and the rescission of the Contingent Stock Redemption Agreement previously entered into by the Company with Leslie H. Wexner and The Wexner Children’s Trust. This matter has now been settled and the plaintiffs’ counsel has been awarded fees and expenses of $7 million. Mr. Wexner has agreed to contribute, through the forfeiture of stock options, the payment of cash or other consideration, an amount sufficient to limit the Company’s contribution to $3 million. The Company’s estimated cash contribution has not been paid and was included in accrued liabilities as of October 30, 2004 and January 31, 2004.

13. Segment Information

The Victoria’s Secret segment derives its revenues from sales of women’s intimate and other apparel, personal and beauty care products and accessories marketed primarily under the Victoria’s Secret brand name. Victoria’s Secret merchandise is sold through its stores and direct response (catalogue and e-commerce) businesses. The Bath & Body Works segment derives its revenues from the sale of personal care products and accessories and home fragrance products marketed primarily under the Bath & Body Works and White Barn Candle Company brand names. The Apparel segment derives its revenues from sales of women’s and men’s apparel through Express and Limited Stores.

Segment information for the thirteen and thirty-nine weeks ended October 30, 2004 and November 1, 2003 follows (thousands):

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14. Subsequent Events

On October 6, 2004, the Company announced that the Board of Directors of the Company had authorized the repurchase of $2 billion of the Company’s outstanding common stock through a modified “Dutch Auction” tender offer, which expired on November 22, 2004. Under this tender offer, the Company repurchased 69.0 million shares of common stock at a purchase price of $29 per share.

Upon the expiration of this tender offer on November 22, 2004, the Board of Directors announced a $500 million special dividend, or approximately $1.23 per share, payable to shareholders of record on December 22, 2004.

Also upon expiration of this tender offer, the Company replaced its existing $750 million unsecured revolving credit facility, with a new $1 billion unsecured revolving credit facility (the “Facility”). The Facility is available to support the Company’s commercial paper and letter of credit programs, which may be used from time to time to fund working capital and other general corporate requirements. Borrowings outstanding under the Facility, if any, are due in November 2009. Fees payable under the Facility are based on the Company’s long-term credit ratings, and are currently 0.15% of the committed amount per year.

In connection with this tender offer, the Company also borrowed $500 million under a term loan agreement that became effective in November 2004 (the “Term Loan”). The amount outstanding under the Term Loan agreement is due in quarterly installments of $25 million from March 2007 to December 2008 and $75 million from March 2009 to December 2009.

The Facility and the Term Loan have several interest rate options, which are based in part on the Company’s long-term credit ratings, and require the Company to maintain certain specified fixed charge and debt to earnings ratios.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

of Limited Brands, Inc:

We have reviewed the consolidated balance sheets of Limited Brands, Inc. and its subsidiaries (the “Company”) as of October 30, 2004 and November 1, 2003, the related consolidated statements of income for the thirteen and thirty-nine week periods ended October 30, 2004 and November 1, 2003, and the consolidated statements of cash flows for the thirty-nine week periods ended October 30, 2004 and November 1, 2003. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Limited Brands, Inc. and subsidiaries as of January 31, 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for the year then ended not presented herein, and in our report dated February 26, 2004 (except for Note 16 as to which the date is March 16, 2004), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of January 31, 2004, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Columbus, Ohio

November 18, 2004

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Executive Overview

Limited Brands, Inc. (the “Company”) operates in the highly competitive specialty retail business. The Company sells women’s intimate apparel, personal care and beauty products and women’s and men’s apparel through its retail stores (primarily mall-based) and direct response (catalogue and e-commerce) businesses.

Strategy

In 2004, the Company has continued its focus on core intimate apparel, personal care and beauty product brands, while decreasing its reliance on the apparel businesses. The Company’s focus, similar to the consumer packaged goods industry, is on its core, prestige brands and on product innovation to support a strategy for continued growth.

The Company’s strategic agenda is to continue to focus on brands, talent and capability.

Brands

In the third quarter of 2004, the Company continued to see positive results from product extensions, including the launch of the Satin Angels “Uplift” bra, the rollout of the Pink product line and the continued growth of the beauty products business at Victoria’s Secret and the rollout of the Henri Bendel Home Fragrance product line at Bath & Body Works.

In addition, during the quarter the Company began testing two new stand-alone store concepts: C.O. Bigelow, focusing on upscale body care, face care, beauty and cosmetics products; and Henri Bendel, another entrant in the personal care, beauty and lingerie business.

The Company continues to concentrate on brand building activities by investing in store design and by implementing a more focused promotional strategy. Accordingly, during 2004, the Company has eliminated most of the promotional activity that discounts the entire store and has shifted its focus to more targeted product promotions combined with quarterly sale events. We believe these brand building activities have supported our brand repositioning strategy at all of our brands.

Talent

One of the Company’s key imperatives is to develop, retain and attract talent on a continuing basis. This talent pool is critical to enable the Company to develop and implement a wide range of ideas that are essential to its continued growth. Accordingly, the talent initiative continues to be a major focus of the Company and involves identifying and building the capabilities required to manage the business today and just as importantly, to manage the business the Company anticipates in the future.

Capability

The Company is focused on a number of initiatives to develop and improve operational capabilities, including: a Center-based creative team focused on new products and product extensions; the implementation of a new human resources system throughout the business in 2004; an enterprise-wide focus on the procurement of non-merchandise goods and services; and store operating initiatives which are intended to drive sales and labor productivity. The Company is also standardizing and upgrading our technology and processes in order to support the future growth of the business.

The Company’s strong financial position enabled it to deliver enhanced shareholder value by returning capital to its investors through three recent actions. In May 2004, the Company announced that its Board of Directors had authorized a $100 million share repurchase program. This share repurchase program was completed in August 2004. Also in August 2004, the Company announced that its Board of Directors had authorized an additional $250 million share repurchase program, under which $14.6 million in shares were repurchased. This repurchase program was superseded on October 6, 2004 when the Company announced that the Board of Directors of the Company had authorized a $2.5 billion recapitalization. In accordance with the plan, the Company repurchased $2 billion of the Company’s outstanding common stock through a modified “Dutch Auction” tender offer. Under this tender offer, which expired on November 22, 2004, the Company repurchased approximately 69 million shares of common stock at a purchase price of $29 per share. Upon expiration of this tender offer, the Company announced that the Board of Directors had approved a $500 million special dividend, or approximately $1.23 per share, payable to shareholders of record on December 22, 2004.

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Third Quarter 2004 Results

In the third quarter of 2004, key economic indicators, including GDP growth, the unemployment rate and initial jobless claims continued to show signs of improvement over last year, while higher energy prices and a stagnant stock market contributed to declines in consumer sentiment. The Company’s third quarter operating results may have been impacted by the mixed external economic environment during the third quarter.

In the third quarter of 2004, net sales increased approximately 2% or $44 million, comparable store sales increased 1%, and operating income increased approximately 26% to $53 million compared to the third quarter of 2003.

For the thirty-nine week period ended October 30, 2004, net sales increased approximately 7% or $377 million, comparable store sales increased 6%, and operating income increased approximately 24% to $399 million compared to 2003.

The following summarized financial and statistical data compares reported results for the thirteen week and thirty-nine week periods ended October 30, 2004 and November 1, 2003:

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