Bath & Body Works, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE - August 16, 2017

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Exhibit 99.1
lbrandsa02aa09.jpg

L BRANDS REPORTS SECOND QUARTER EARNINGS

- UPDATES EARNINGS GUIDANCE -

Columbus, Ohio (Aug. 16, 2017) - L Brands, Inc. (NYSE: LB) today reported second quarter earnings results.

Earnings per share for the second quarter ended July 29, 2017, were $0.48 compared to $0.87 for the quarter ended July 30, 2016. Second quarter operating income was $300.9 million compared to $408.2 million last year, and net income was $138.9 million compared to $252.4 million last year.

The reported results above include certain significant items as detailed below:

•
In 2016:
◦
A pre-tax gain of $108.3 million ($0.24 per share) related to a cash distribution from Easton Town Center; and
◦
A pre-tax charge of $35.8 million ($0.08 per share) related to the early extinguishment of the company’s July 2017 notes

Excluding the significant items above, adjusted second quarter earnings per share decreased 31 percent to $0.48 compared to $0.70 last year, and adjusted net income was $138.9 million compared to $204.7 million last year.

The company reported net sales of $2.755 billion for the second quarter ended July 29, 2017, compared to sales of $2.890 billion for the second quarter ended July 30, 2016. The company reported a comparable sales decrease of 8 percent for the second quarter ended July 29, 2017. For the second quarter ended July 29, 2017, the exit of the swim and apparel categories had a negative impact of about 6 percentage points and 9 percentage points to total company and Victoria’s Secret comparable sales, respectively.

At the conclusion of this press release is a reconciliation of reported to adjusted results, including a description of the significant items.

The second quarter comparable sales decline of 8 percent was below the company’s expectations. Accordingly, the company’s guidance for the remainder of the year reflects a more conservative sales forecast than its previous guidance. The company updated its guidance for 2017 full-year earnings per share to $3.00 to $3.20 from $3.10 to $3.40 previously, and issued guidance for third quarter earnings per share between $0.25 and $0.30.






VICTORIA'S SECRET / BATH & BODY WORKS / PINK / LA SENZA / HENRI BENDEL
Three Limited Parkway Columbus, OH 43230 www.LB.com



Earnings Call and Additional Information
L Brands will conduct its second quarter earnings call at 9:00 a.m. Eastern on Aug. 17.  To listen, call 1-866-363-4673; conference ID 21214013 (international dial-in number: 1-973-200-3978; conference ID 21214013).  For an audio replay, call 1-855-859-2056; conference ID 21214013 (international replay number: 1-404-537-3406; conference ID 21214013) or log onto www.LB.com.  Additional second quarter financial information is also available at www.LB.com.

ABOUT L BRANDS:
L Brands, through Victoria’s Secret, PINK, Bath & Body Works, La Senza and Henri Bendel, is an international company. The company operates 3,077 company-owned specialty stores in the United States, Canada, the United Kingdom and Greater China, and its brands are sold in more than 750 additional franchised locations worldwide. The company’s products are also available online at www.VictoriasSecret.com, www.BathandBodyWorks.com, www.HenriBendel.com and www.LaSenza.com.

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 press release or the second quarter earnings call 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 press release or the second quarter earnings call 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;
•
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;

VICTORIA'S SECRET / BATH & BODY WORKS / PINK / LA SENZA / HENRI BENDEL
Three Limited Parkway Columbus, OH 43230 www.LB.com



•
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 associates 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 press release or second quarter earnings call to reflect circumstances existing after the date of this press release 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.

For further information, please contact:    
L Brands:
Investor Relations
 
Media Relations
Amie Preston
 
Tammy Roberts Myers
(614) 415-6704
 
(614) 415-7072
apreston@lb.com
 
communications@lb.com


VICTORIA'S SECRET / BATH & BODY WORKS / PINK / LA SENZA / HENRI BENDEL
Three Limited Parkway Columbus, OH 43230 www.LB.com



L BRANDS
SECOND QUARTER 2017

Comparable Sales Increase (Decrease) (Stores and Direct):
 
Second Quarter
 
Second Quarter
 
Year-
to-
Date
 
Year-
to-
Date
 
2017
 
2016
 
2017
 
2016
Victoria's Secret1
(14%)
 
2%
 
(14%)
 
2%
Bath & Body Works1
6%
 
5%
 
4%
 
6%
L Brands2
(8%)
 
3%
 
(9%)
 
3%

1 - Results include company-owned stores in the U.S. and Canada and direct sales.
2 - Results include company-owned stores in the U.S., Canada, the U.K. and Greater China and direct sales.

Comparable Sales Increase (Decrease) (Stores Only):
 
Second Quarter
 
Second Quarter
 
Year-
to-
Date
 
Year-
to-
Date
 
2017
 
2016
 
2017
 
2016
Victoria's Secret1
(11%)
 
1%
 
(11%)
 
1%
Bath & Body Works1
4%
 
3%
 
2%
 
4%
L Brands2
(6%)
 
1%
 
(7%)
 
2%

1 - Results include company-owned stores in the U.S. and Canada.
2 - Results include company-owned stores in the U.S., Canada, the U.K. and Greater China.

Total Sales (Millions):
 
Second Quarter
 
Second Quarter
 
Year-
to-
Date
 
Year-
to-
Date
 
2017
 
2016
 
2017
 
2016
Victoria's Secret1
$
1,351.0

 
$
1,469.1

 
$
2,597.5

 
$
2,850.3

Victoria's Secret Direct
295.3

 
398.3

 
581.8

 
757.9

  Total Victoria's Secret
$
1,646.3

 
$
1,867.4

 
$
3,179.3

 
$
3,608.2

 
 
 
 
 
 
 
 
Bath & Body Works1
$
753.0

 
$
709.1

 
$
1,341.5

 
$
1,295.7

Bath & Body Works Direct
107.3

 
92.3

 
196.9

 
165.9

  Total Bath & Body Works
$
860.3

 
$
801.4

 
$
1,538.4

 
$
1,461.6

 
 
 
 
 
 
 
 
VS & BBW International2
$
113.9

 
$
99.7

 
$
217.2

 
$
195.0

Other
$
134.5

 
$
121.2

 
$
256.6

 
$
238.8

L Brands
$
2,755.0

 
$
2,889.7

 
$
5,191.5

 
$
5,503.6


1 - Results include company-owned stores in the U.S. and Canada.
2 - Results include retail sales from company-owned stores outside of the U.S. and Canada, royalties associated with franchised stores and wholesale sales.






VICTORIA'S SECRET / BATH & BODY WORKS / PINK / LA SENZA / HENRI BENDEL
Three Limited Parkway Columbus, OH 43230 www.LB.com



Total Company-Owned Stores:
 
Stores
 
Stores
 
Operating
Operating
 
at 1/28/17
Opened
Closed
at 7/29/17
Victoria's Secret U.S.
998

2

(6
)
994

PINK U.S.
133

2

(1
)
134

Victoria's Secret Canada
37

2

—

39

PINK Canada
9

—

(2
)
7

   Total Victoria's Secret
1,177

6

(9
)
1,174

 
 
 
 
 
Bath & Body Works U.S.
1,591

17

(12
)
1,596

Bath & Body Works Canada
102

—

—

102

   Total Bath & Body Works
1,693

17

(12
)
1,698

 
 
 
 
 
Victoria's Secret U.K.
15

1

—

16

PINK U.K.
3

—

—

3

Victoria's Secret Beauty and Accessories
31

—

(1
)
30

Victoria's Secret China
—

2

—

2

   Total VS & BBW International
49

3

(1
)
51

 
 
 
 
 
Henri Bendel
29

—

—

29

La Senza U.S.
4

—

—

4

La Senza Canada
122

1

(2
)
121

Total L Brands Stores
3,074

27

(24
)
3,077


Total Noncompany-Owned Stores:
 
Stores
 
 
Stores
 
Operating
 
 
Operating
 
at 1/28/17
Opened
Closed
at 7/29/17
Victoria's Secret Beauty & Accessories - Travel Retail
152

11

(8
)
155

Bath & Body Works - Travel Retail
8

2

—

10

Victoria's Secret Beauty & Accessories
239

7

(10
)
236

Victoria's Secret
23

4

—

27

PINK
5

—

—

5

Bath & Body Works
151

13

(1
)
163

La Senza
203

4

(9
)
198

Total
781

41

(28
)
794



VICTORIA'S SECRET / BATH & BODY WORKS / PINK / LA SENZA / HENRI BENDEL
Three Limited Parkway Columbus, OH 43230 www.LB.com



L BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THIRTEEN WEEKS ENDED JULY 29, 2017 AND JULY 30, 2016
(Unaudited)
(In thousands except per share amounts)
 
2017
 
2016
Net Sales
$
2,755,020

 
$
2,889,744

Costs of Goods Sold, Buying and Occupancy
(1,727,129
)
 
(1,776,840
)
Gross Profit
1,027,891

 
1,112,904

General, Administrative and Store Operating Expenses
(726,996
)
 
(704,688
)
Operating Income
300,895

 
408,216

Interest Expense
(100,428
)
 
(101,172
)
Other Income
16,617

 
73,014

Income Before Income Taxes
217,084

 
380,058

Provision for Income Taxes
78,210

 
127,636

Net Income
$
138,874

 
$
252,422

 
 
 
 
Net Income Per Diluted Share
$
0.48

 
$
0.87

 
 
 
 
Weighted Average Shares Outstanding
288,936

 
290,986


L BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
TWENTY-SIX WEEKS ENDED JULY 29, 2017 AND JULY 30, 2016
(Unaudited)
(In thousands except per share amounts)
 
2017
 
2016
Net Sales
$
5,191,543

 
$
5,503,560

Costs of Goods Sold, Buying and Occupancy
(3,260,802
)
 
(3,347,701
)
Gross Profit
1,930,741

 
2,155,859

General, Administrative and Store Operating Expenses
(1,420,655
)
 
(1,424,255
)
Operating Income
510,086

 
731,604

Interest Expense
(201,035
)
 
(198,501
)
Other Income
26,479

 
79,934

Income Before Income Taxes
335,530

 
613,037

Provision for Income Taxes
102,602

 
208,309

Net Income
$
232,928

 
$
404,728

 
 
 
 
Net Income Per Diluted Share
$
0.81

 
$
1.39

 
 
 
 
Weighted Average Shares Outstanding
289,132

 
291,882









VICTORIA'S SECRET / BATH & BODY WORKS / PINK / LA SENZA / HENRI BENDEL
Three Limited Parkway Columbus, OH 43230 www.LB.com



L BRANDS, INC. AND SUBSIDIARIES
ADJUSTED FINANCIAL INFORMATION
 (Unaudited)
(In thousands except per share amounts)
 
 
 
 
 
 
 
 
 
Second Quarter
 
Year-to-Date
 
2017
 
2016
 
2017
 
2016
Details of Special Items - Income (Expense)
 
 
 
 
 
 
 
Victoria's Secret Restructuring
$
—

 
$
—

 
$
—

 
$
(34,545
)
Special Items included in Operating Income
—

 
—

 
—

 
(34,545
)
 
 
 
 
 
 
 
 
Gain on Distribution from Easton Town Center, LLC
—

 
108,310

 
—

 
108,310

Loss on Extinguishment of Debt
—

 
(35,827
)
 
—

 
(35,827
)
Special Items included in Other Income
—

 
72,483

 
—

 
72,483

 
 
 
 
 
 
 
 
Tax Effect of Special Items
—

 
(24,724
)
 
—

 
(11,549
)
Special Items included in Net Income
$
—

 
$
47,759

 
$
—

 
$
26,389

Special Items included in Earnings Per Diluted Share
$
—

 
$
0.16

 
$
—

 
$
0.09

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Reported Operating Income to Adjusted
     Operating Income
 
 
 
 
 
 
 
Reported Operating Income
$
300,895

 
$
408,216

 
$
510,086

 
$
731,604

Special Items included in Operating Income
—

 
—

 
—

 
34,545

Adjusted Operating Income
$
300,895

 
$
408,216

 
$
510,086

 
$
766,149

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Reported Net Income to Adjusted Net Income
 
 
 
 
 
 
 
Reported Net Income
$
138,874

 
$
252,422

 
$
232,928

 
$
404,728

Special Items included in Net Income
—

 
(47,759
)
 
—

 
(26,389
)
Adjusted Net Income
$
138,874

 
$
204,663

 
$
232,928

 
$
378,339

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Reported Earnings Per Diluted Share to
     Adjusted Earnings Per Diluted Share
 
 
 
 
 
 
 
Reported Earnings Per Diluted Share
$
0.48

 
$
0.87

 
$
0.81

 
$
1.39

Special Items included in Earnings Per Diluted Share
—

 
(0.16
)
 
—

 
(0.09
)
Adjusted Earnings Per Diluted Share
$
0.48

 
$
0.70

 
$
0.81

 
$
1.30


See Notes to Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures.



VICTORIA'S SECRET / BATH & BODY WORKS / PINK / LA SENZA / HENRI BENDEL
Three Limited Parkway Columbus, OH 43230 www.LB.com



L BRANDS, INC. AND SUBSIDIARIES
NOTES TO RECONCILIATION OF GAAP FINANCIAL MEASURES
TO NON-GAAP FINANCIAL MEASURES
(Unaudited)

The “Adjusted Financial Information” provided in the attached reflects the following non-GAAP financial measures:

Fiscal 2017

In the first and second quarters of 2017, there were no adjustments to results.

Fiscal 2016

In the second quarter of 2016, adjusted results exclude the following:

•
A $108.3 million pre-tax gain ($70.2 million net of tax of $38.1 million), included in other income, related to a $124.4 million cash distribution from Easton Town Center.

•
A $35.8 million pre-tax loss ($22.4 million net of tax of $13.4 million), included in other income, associated with the early extinguishment of our July 2017 notes.

In the first quarter of 2016, adjusted results exclude the following:

•
Pre-tax charges of $34.5 million ($21.4 million net of tax of $13.1 million) related to actions at Victoria’s Secret, including severance charges, fabric cancellations and the write-off of catalogue paper.

The Adjusted Financial Information should not be construed as an alternative to the reported results determined in accordance with generally accepted accounting principles. Further, the Company’s definition of adjusted income information may differ from similarly titled measures used by other companies. Management believes that the presentation of adjusted financial information provides additional information to investors to facilitate the comparison of past and present operations. While it is not possible to predict future results, management believes the adjusted information is useful for the assessment of the ongoing operations of the Company because the adjusted items are not indicative of our ongoing operations due to their size and nature. Additionally, management uses adjusted financial information as key performance measures of results of operations for the purpose of evaluating performance internally. The Adjusted Financial Information should be read in conjunction with the Company’s historical financial statements and notes thereto contained in the Company’s quarterly reports on Form 10-Q and annual report on Form 10-K.



VICTORIA'S SECRET / BATH & BODY WORKS / PINK / LA SENZA / HENRI BENDEL
Three Limited Parkway Columbus, OH 43230 www.LB.com

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