Bath & Body Works Inc (BBWI) 2002 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to Limited Brands third quarter earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer only session and instructions will follow at that time. As a reminder, this conference is being recorded. Ladies and Gentlemen, thank you for standing by. I would like to now turn the call over to Mr. Tom Katzenmeyer, Vice President of Investor Relations. Mr. Katzenmeyer, you may begin.

Thank you very much.

Good morning, everyone. Welcome to the Limited Brands third quarter earnings conference call for the period ending Saturday, November 2, 2002. Before I begin and 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 filing. This morning as always, we faxed to your offices, the third quarter earnings release and related financial information. This information is also available on our website, Limited Brands.com. If you have not received the fax, please call our offices at 614-415-7076 and we'll send it out to you immediately. This call is being taped and can be replayed by dialing 1-800-337-6551, followed by the passcode, LTD, which is 583. You can also listen to an audio replay from our website, Limited Brands.com.

Ann Hailey, EVP and Chief Financial Officer is here in Columbus with me today. And joining us from New York are Grace Nichols, President and CEO of Victoria's Secret stores and Wendy Burton, EVP of Operations and Administration of Victoria's Secret stores. Ann and Grace will be making comments after I finish. Tracy Travis Senior VP of Finance and Stewart Bergdorfer, Senior VP and Controller are also with us this morning, along with Amy Preston. We will all be able to answer your questions at the end of the call.

I will start with a brief overview of the third quarter results, first overall and then by brand. Then Grace will discuss Victoria's Secret's third quarter performance, and the outlook for the fourth quarter. Ann will close our prepared remarks with a look at the third quarter in more detail and an outlook for the third quarter overall and by brand.

Again, all the results that we will discuss on this call are adjusted results, which reflect the following items which were outlined in our press release. First, adjustments for the impact of the divestiture of Lane Bryant, including exclusion of a pretax nonoperating gain of 6.1 million or a penny per share, recorded in the third quarter of this year as a result of the sale of the Charming Shoppes stock we received as part of the sale of Lane Bryant, Charming Shoppes.

Exclusion of the 2001 operating results from Lane Bryant, which was sold to Charming Shoppes in August of 2001 and also the adjustments to eliminate minority interest expense and increase weighted average shares outstanding to reflect the recombination of Intimate Brands Inc. as if it had occurred at the beginning of 2001.

Total third quarter sales were 1.983 billion, compared to adjusted sales of 1.789 billion last year. Costs for the quarter were up 3%. Adjusted third quarter earnings were two cents per share this year compared to a loss of three cents per share last year. Gross margin increased 160 basis points in the quarter to 31.2%. And the overall SG&A rate improved by 40 basis points. Inventories at the end of the quarter were up 2% per square foot at cost. And up 3% per square foot at the apparel brand.

Now for the brand and segment results. As usual, you should have the following headings across your page. The name of the brand, sales, cost, external gross margins rates, operating income rate and operating income dollars. I'll begin with the Victoria's Secret segment.

At Victoria's Secret stores, which includes beauty, sales in the third quarter were 5.15 million, comps up 8% and external gross margin operating income rate and operating income dollars were all up significantly. At Victoria's Secret direct, sales were up. Sales chain was plus 10% and also external gross margin rate, operating income rate and operating dollars were all up significantly.

DS direct results were driven by good performance in the fall books. The clothing category is benefiting from the price point offering and broader casual assortment. Knit tops, dresses, and denim were strong categories. So for the Victoria's Secret in total, sales were 677.5 million. That's again, 605.5 million last year. Again, comps were 8%. External gross margin rate was up significantly. The operating income rate of this segment was 8.5%, against 2.6% last year and operating income dollars at the Victoria's segment in the quarter was 57.3 million, that's again against 16 million last year.

For the Bath & Body Works segment, sales were 309.3 million, that's against 300.6 million last year. Comps were down 1%. External margin rate was about flat. Operating income rate of the segment was .7%. That's against negative .3% last year. Operating income dollars were 2.2 million, against a loss of .8 million last year.

Bath & Body Works improved operating income slightly on a minus 1% comp. As they were able to hold SG&A costs basically flat to last year due to savings in direct mail costs and labor efficiencies.

Aromatherapy was the focus in September, it had strong sales results driven by massage and bathing products. True Blue Spa which relaunched in October with new packaging and products and performed above plan.

Now for the total apparel segment. Sales in the apparel were 890 .4 million. That's against 880 last year. Cost were plus 2%. External gross margin rate was about flat. Operating income rate was .2%, versus .8% last year. Operating income dollars in apparel were 1.4 million, versus 7.1 million last year.

Both sales and margins for the apparel plans were below plan in the third quarter. Incentive was higher than last year for every apparel brand as we responded to softening trends to clear through inventory. Sweater sales were down to last year in every brand, although sales began to pick up at the end of October with the arrival of colder weather.

Now for the individual apparel brand results beginning with Express. Express's sales in the third quarter were 517.6 million. Comps were plus 1%. And external gross margin income rate, operating income rate, and operating dollars were all about flat. Express began the quarter with focus on denim for back to school and transition to wear to work in September. Fall sale ran from September week 3 through October week 3 and the first holiday floor sales was October 27th.

In women's, knit and woven tops, knit pants and dresses achieved strong growth in the quarter while sweaters and woven bottoms were disappointing.

In men's, strong growth was seen in woven shirts, denim, accessories, and suiting elements. Knit tops and sweaters were disappointing.

At York and Company sales in the third quarter were 215.1 million. The comps were flat. External gross margin rate, operating income rate and operating income dollars were all up. Active wear and woven tops, and accessories were successful categories during the quarter. Sweaters and denim were disappointing.

At The Limited sales in the third quarter were 157.8 million. The comps were up 10%. External gross margin rate was down significantly. Operating income rate was down significantly. And the operating income dollars were down.

Hold on just a second here. I'm sorry. I lost my place there.

While Limited achieved good top line growth ask 10% comps in the quarter, this did not translate to the bottom line, as sales were driven by sales promotional activity. For the other segment, which includes [INAUDIBLE] Henri Bendel and total corporate overhead. Again, this is for [INAUDIBLE] and Henri Bendel, third quarter were 1.05 million. That's against 93.5 last year. The comps, this is for Henri Bendel only, were plus 17% and operating income dollars were negative 39.4 million, versus negative 39.1 million last year.

That concludes my prepared comments. I would now like to turn it over to Grace Nichols in New York.

Thank you, Tom. And good morning, everyone.

I'm pleased with our third quarter performance, as Tom said, our comp was 8%. And the Victoria's Secret segment in total, including beauty and direct more than tripled last year's operating income. Key to the success of the third quarter was our continued focus on bras.

Our sub brands drove the results with the relaunch of the Body by Victoria online full coverage bra, the launch of Angels and the introduction of a new, lightly-lined demi style to the very sexy assortment, all helped drive the bra category. Customer relationship marketing campaigns were also important in the quarter. And represented a higher percentage of sales than last year. Panty sampling, mailing a post card for a free panty is one of our most important and proven campaigns, targeted to both our best customers who have never tried a Body by Victoria, as well as those who have never shopped at Victoria's Secret. In other words, we're not promoting to our own clients.

We mailed an incremental Body by Victoria panty sampling in September and added a $5 off for Body by Victoria bra overlay to Octobers' panty sampling event versus the prior year. These events drove traffic into our stores and increased transactions incrementally.

The panty category had double-digit comps in the quarter and sleepwear comps were also strong.

Victoria's Secret Beauty also had a terrific third quarter. Comps were in the double digits. Secrets, our first fragrance collection, at what we call the bridge or intermediate price point collection was successfully launched. And Very Sexy for Him and Garden Collections achieved strong growth from last year.

Looking ahead to holiday, our focus has been on developing a winning assortment and topping last year's strong results. We have done extensive testing on our holiday bra, the Very Sexy lace oval plunge bra, which launched on November 12th, as well as extensive testing on our sleepwear assortment. The bra launch is support the by advertising, and we are repeating our successful holiday gift with purchase program, offering 1.75 million of our best customers a free Victoria's Secret handbag with a $75 purchase.

We have also added another Body by Victoria panty sampling event, which will be effective from December 3rd through December 24th.

Again, this offer is targeted to a new group of customers who have never bought Body by Victoria before. Robin Burns and her team at Beauty launched Body by Victoria for Her at the end of October and have put together a very unique and exciting collection of gift sets at attractive price points. Our merchandise assortment is supported by several big brand events. And I hope you caught the fashion show which aired last night on CBS. And if you are in New York, please visit our newest Flagship store in the Herald Square area, where we just had our grand opening.

And of course, we will cap off the holiday season with our popular bra sale, which begins the day after Christmas and our January semi annual clearance sale event. Both are proven traffic builders, designed to extend in-store excitement, following the holiday rush, and to clear fall inventory in preparation for spring.

And with that, I'll turn the discussion over to know Ann. Ann?

Thank you, grace. Good morning, everyone.

Looking at the third quarter performance by segment, I'll echo Grace's comments and say that we're very pleased with the third quarter result of Victoria's Secret. Although the results at Bath & Body Works are better versus previous trends, there is still room for improvement in that business. And we were disappointed with the apparel group performance.

Turning to the third quarter result for the enterprise, our adjusted third quarter earnings per share was two cents, versus a loss of three cents last year. Operating margins improved by 200 basis points. The result of a gross margin rate improvement of 160 basis points and an SG&A improvement of 40 basis points. The 160-point improvement in gross margin was the result of both improved merchandise margin and buying an occupancy expense leverage.

The SG&A rate improved by 40 basis points. Store selling expenses, which are our largest expense category were flat as a percent of sales. Marketing spending was up 30 basis points as we invested in additional advertising at Victoria's Secret and Express. All other expense categories combined improved by 70 basis points.

Turning to holiday, Grace discussed the plans at Victoria's Secret, and I'd like to provide you with a few highlights on Bath & Body Works and Express. Many of you had a chance to preview the Bath & Body Works holiday assortment at our update meeting in Columbus on October 16th. For those of you who may have missed it, the full assortment was set in the stores on October 31st, so you can go see it any time and hopefully buy some things.

This year, Bath & Body Works expanded the gift set assortment and developed four distinct collections. Here Comes Santa, Winter Wonderland, Home for the Holidays, and Natural Botanicals. We have improved the value and have an increased the percentage at compelling price points. For example, this year, about 20% of the Daily Beauty Ritual gift sets will be under $15 as opposed to just 1% last year.

And Daily Beauty Rituals is the majority. It's about 80% of the total gift set collection. So you can see the price competitiveness of that category. We plan to sell 9 million gift sets this year, compared to 7.5 million last year.

Turning to Express, at women's, one of the keys to winning at holiday is always sweaters. While Express has not had a strong sweater performance to date, we have aggressively reassorted this important holiday category, based on our third quarter learnings, and selling has improved. In addition, we will continue to capitalize on the romantic top trend and denim has also been reasorted to a higher proportion of novelty styles to capitalize on our customer's desire for fashion newness.

In men's, we're continuing to build on the popularity of the 1-MX shirt, a core item in the assortment. We should sell about 1 million units of this shirt this year. In addition, ties and sweaters are doing well, resulting in a strong core assortment for gift giving.

And now I'd like to turn to our fourth quarter expectations. The current environment remains uncertain with the continuing challenges that we've talked about around consumer sentiment mall traffic, and political instability.

At this point, we continue to support the current first call consensus estimate for the fourth quarter of 73 cents versus our record 71 cents last year. In order to achieve this result, we would need to deliver low to mid-single digit positive comps for the fourth quarter. We forecasted a decline to last year's strong gross margin result and slight leverage in SG&A costs.

For November, we're projecting a low single digit comp, including the impact of the later Thanksgiving, which we estimate to be between one and three points. We are only 2 1/2 weeks into the month and we want to remind you that the post-Christmastime period has become increasingly important to our fourth quarter performance. Our brands are positioned to capitalize on the traffic during this time period, including the semi annual sale at Victoria's that Grace mentioned and the annual denim sale at Express.

Looking at inventories, we ended the third quarter up 2% at cost per square foot and up 3% at the apparel group. The end of the month levels are slightly higher than planned, reflecting the impact of the west coast dock workers dispute, which resulted in a disruption of the planned flow of inventory, and higher costs due to the impact of air freight versus ocean. We estimate the impact at the higher freight costs to be about a penny on 40 quarter earnings. With respect to the sales and earnings impact disruption caused by the strike, we believe that's minimal. All brands set their holiday floor sets on schedule, except Lerner, and they were only about five days late. In terms of COGASF, cost of goods available per square foot, the apparel group for the 40 quarter is planned to be roughly flat to last year. For capital spending, we estimate a number this year that will be about 325 million, or less. That's below our previous projection of 375 million. This decrease reflects our continued discipline around capital spending, also reflects the release of a reserve that we were holding, which it does not appear that we're going to need.

With that, I'll turn it back over to Tom, and we'd be happy to take your questions.

Thank you, Ann.

That concludes our prepare comments. At this time we'd be happy to take any questions you might have. As always, in the interest of time and consideration of others, please limit yourself to one question. And Operator, since we're in two cities this morning, I'll act as a moderator to help direct the questions. We're ready to take the first question now.

At this time, we're ready to begin the formal question-and-answer session. If you would like to ask a question, please press star 1. You will be announced prior to asking your question. To withdraw your question, please press star 2. Once again, to ask a question, please press star 1. One moment, please.

Our first question comes from Mark Freedman of Merrill Lynch. You may ask your question.

Thanks. Good morning, everybody.

Ann and Grace, I was wondering if, Ann, you could comment on Lerner and on Limited. You mentioned some of the changes made off of Express off the third quarter. If you make, what any kind of changes you made given the tough business, especially at Lerner in the third quarter. And Grace, as far as what you learned during the 30 quarter and anything you were able to take advantage of off of strength for the fourth quarter, if you could give us an update on that.

Mark, thanks. Why don't we go out to Grace and Wendy in New York to answer the Victoria's Secret part of the question first.

Hi, Mark. The question for the third quarter, what did we learn?

Basically, I'd attribute it to the testing, the learning a lot, the testing that was done in the late July, early August period, which allowed us to chase reorders on our best-selling holiday giftables, our Chelsea sleep shirt, and our flannel pajamas. So we could get the correct demand by color and pattern. Which is something we weren't able to do last year.

In addition, we saw the upswing on the retrosport trend and we were able to place some very strong reorders on the velure jog suits, which our version is unique because it is all in pastels. Very feminine. And diamond-studded.

Great. Ann.

What I'd say about Lerner and Limited, is Lerner as Tom talked about did have an improved result in the third quarter. And they have a strong program planned for the fourth quarter. They're focused on Christmastime in the city. On the holiday, they have their version of velour. They have track suit, city stretch. They have quite a number of wow for the third quarter.

Limited stores did a lot of resorting in the third quarter and selling up in their assortment to get a stronger sweater assortment. And that, as is the case with Express has started selling better with the reassortment and I think also with some cooler weather.

Thank you, Operator, we're ready for the next question.

Dana Kelsey of Bear Stearns, you may ask your question.

Good morning, everyone. Ann, can you comment on the gross margin, are we still seeing initial market improvement and what do you expect going forward?

Also, any updates on the capital review planning process?

And Grace, congratulations on the terrific operating margin at Victoria's Secret, can you comment on further potential of what you see for the Victoria's Secret operating margin and an update on the Beauty segment. Thank you.

Dana, how many questions was that?

Just a couple.

Just a couple, yeah.

Let's go to Ann first with the gross margin question.

In the third quarter, we saw IMU improvement in all the segments. We saw [mmu] improvement in all the segments. So we did, to your question, continue to see improvement on that.

We had a very strong fourth quarter last year. So we are not planning to lap that. And as I said in my opening remarks, have planned that down for the fourth quarter.

On capital, this is Steward Bergdorfer, the perspective we gave you in October about real estate is still directionally correct. We continue to work on our '03 budget and we'll have more detail on that on our February call.

And Grace?

I'll take the question on operating profit. And although our '03 view would be to budget operating margin flat, where we see opportunities is the improved testing that we have should -- should lead to reduced markdowns. Our speed initiatives should lead to reduced cancellation writeoff of unwanted manufactured goods and raw materials. And we have a major initiative to continue to advance and improve our inventory shrinkage.

Operator, next question.

Thomas Valander of Goldman Sachs. You may ask your question.

Hi. First, Grace, can you give us a little more color on the December 3rd through 24th mailer, whether that compared to the one last year?

Are you going to have the $5 added on to that as well and how many are going to be sent out?

And then a question for Ann on gross margin and marketing, the question on gross margin, just on Dana's question, can you just be more specific on the split for the quarter between merchandise margins and leverage?

And just curious on the marketing side, whether we're thinking about going back into marketing television for Express next year?

Why don't we go to Grace first on the mailer question.

Mailer is a new event to last year. It's going to a circulation of two million of our credit card file. But I want to reinforce that these are customers who have never bought a Body by Victoria product. So really what the intent is to build trial and loyalty around products that are our best sellers. And our history has been that these panty samplings not only give us the initial transaction, people respond very highly to the offer, but they also come back and repeat purchase the product again, simply because the products are very good.

Ann?

On the gross margin, Tom, for the third quarter, the split was roughly two thirds driven by [mmu] and roughly one third driven by buying in occupancy leverage.

With respect to marketing for Express, our plans for 2003 are not yet finalized. We will have marketing for Express. The mix between TV and print is still something that we're debating.

Operator, next question.

Richard Baum of Credit Suisse First Boston. You may ask your question.

Good morning. Three-part question for Ann. I'll be up front about it.

Thank you, Richard.

Do I get to choose which one to answer?

One is, can you provide additional comments on the $39 million loss in the other category?

Second, can you provide any color on the relative profitability of the apparel brands?

And third, on the Bath & Body gift sets, because your price points are going to be so much lower, I know your unit volume is up 1.5 million, but when you do the dollars, are you looking for gift set dollar sales to be up or down?

We'll go to Ann for the first two parts of that and Tracy Travis for the last piece there.

The other is Mast, Henri Bendel, and corporate overhead. So the big piece of that -- well, actually, most of the piece of the number is negative overhead. Because Bendel is a very slight loss.

The relative profitability of the apparel brands for the third quarter, total Express was profitable with women's making money and men's losing money, although at a lesser rate and combined, they were about flat versus prior year. Lerner made a little bit of money. And Limited clearly lost money more than last year.

So the profitably in the segment comes from Express, a little bit from Lerner, offset by the loss at Limited.

As far as Bath & Body Works goes, as Ann mentioned in her comments, we are expecting more significant more gift set sales this year versus last year, yes at lower price point, but we do expect to have more profitability on our overall gift set sales, additionally driving positive transactions in the store and selling other categories, particularly our newer categories like Aromatherapy and Spa.

Thank you, Tracy. Next question?

Lauren Levenhahn of S.G. Cowen, you may ask your question.

Thank you. Good morning.

You spoke, Grace spoke regarding initiatives at Victoria's Secret. I was wonder figure you could comment on other initiatives planned for Q4 in the other brands, and maybe give us sense as to whether or not that represents a shift in the mix relative to prior year, with respect to total advertising budget. Thanks.

Lauren, we'll go to Tracy Travis for that answer.

Okay. As far as the other brands go, I'm starting with Bath & Body Works, they also have two direct mail programs this year, similar to last year. The circulation is slightly down versus last year. One of the differences as well this year is, they are offering a free 2-ounce Aromatherapy sample with the Holiday One circulation of direct mail. Which provides important sampling on, again, one of our initiative categories, the Aromatherapy category. But year-over-year, the number -- the mailing programs are the same. The circulation is down slightly.

With the Express, the direct mail plans are essentially flat to last year. Consistent with last year, there will be fast cast and bounce-back events planned during each month to drive higher traffic and [adf]. And as Ann mentioned as well, the denim sales will be run in the post-Christmastime period.

Thank you, next question?

Jeff Klinefelter of U.S. Bancorp, you may ask your question.

Yes, Ann, in terms of the comps you are looking for in Q4, the low single digit to mid-single digit, can you share with us what sort of traffic expectations you have?

I know that's something you watch pretty closely. What sort of traffic you need in terms of year-over-year changes and specifically with Bath & Body Works?

Consider that's a traffic dependent category, or concept. What are your expectations there for comps?

Thank you.

We don't actually forecast a specific traffic number. But we have, you know, we're planning in terms of our expectations for traffic to be down, which I think that the kind of the circumstances that I talked about earlier would suggest and certainly that's been the case for over a year now in terms of trends.

With respect to the specific comps by business, there's not much differentiation by segment, so we're planning kind of the low to mid-single digit comps in all of our segments.

Thanks, Jeff. Next question?

Harry Aginson with First Albany. You may ask your first question.

Thank you. Good morning.

Could you give us details on changes in the other expense line, year to year?

Thank you.

The primary items that are in the other interest income line, net interest income, which were up slightly on larger cash balances offset by lower interest rates, which everyone is familiar with. We did also repay $150 million of long-term debt in May of '02. Those were 7% notes, so that brought down interest expense.

And then in other income, we have some equity investments, a few joint ventures, et cetera. And that number changed boy about a million dollars.

Thanks, Ann. Next question?

Barbara Wicoff of Buckingham Research. You may ask your question.

Hi, good morning. Question is for Grace.

Can you talk about the percentage of sleepwear between comfort and sexy this year versus last?

How, you know, given that you had a very strong performance last year, do you expect to beat those numbers?

What's difference in the mix outside of velour and if you could comment on the panty issue.

The relationship in the fourth quarter is about 75% of our business's relaxed classics and 25% is the glamour category. That's basically the same as last year. The thing that -- the main things that are forecasted to drive comp growth in these two categories are the successful increased sell-through of our reorders because we're better positioned on our most wanted selections per item. As well as the strength of the whole retrosport category. And in addition, on the glamour side of the business, there's just a lot of interest in what we call playful provocative things of -- things that are gift items in our sexy category that are flirty and young and very European looking. So we've had some very strong response to our baby dolls. And short sexy slips.

Next question.

Pat Slater of Lavard, you may ask your question.

Good morning. Thanks.

You give a pretty wide fourth quarter comp range of low to mid-singles, 1 to 5% on the sensitivity and I'm just wondering if you can hit the 73 cents, if you hit the low end of that range, assuming, as you believe, our gross margins will be down?

We would have difficulty at the low end of the range, hitting the comp number. I mean, I'm sorry. At the low end of comp range, we'd have difficult hitting the ETS number.

Next question.

Richard Jaffy of UBS Warburg you may ask your question.

Thanks very much.

Just going back to Bath & Body Works for a minute, and trying to better understand the shift, it seems the core rituals are being presented much more forcefully. Is there a change in the balance of inventory this year versus last, in terms of Spa and Aromatherapy?

And is the investment in gift sets obviously more units, how is the investment in dollars year-over-year?

Richard, we'll go to Tracy Travis for that.

The investment in units is obviously up. Investment in dollars is up as well.

As far as the mix goes, the gift sets are predominantly DBR. The gift sets of Aromatherapy and Spa are up slightly to last year as well. But predominantly, the collections that Bath & Body Works have the DBR products in them.

Thank you. Operator, I think we have time for two more questions.

Dorothy Lagner of CIBC World Markets, you may ask your question.

Yes. Thanks. Good morning, everyone.

First of all, just a point of clarification on sweaters at Express. Did I understand correctly?

I know in the third quarter, performance was disappointing both for women's and for men's sweaters. So the reassortment occurs when the holiday assortment came in clear at the end of the quarter, and that's when the improvement began.

And secondly, what the ad spend is in the third quarter versus a year ago.

This is Ann. I'll take the Express order question. The improved selling came for a couple of reasons. One was the improved assortment. And two was we kind of always go through this in the third quarter. We worry that sweaters aren't going to sell and the weather is warm. And it starts getting closer to Christmas and it gets cooler and sweaters start selling. So I would have to say at Express, it was a combination of both factors, the reassortment and getting closer to the sweater season.

As far as the total marketing spend in the fourth quarter, it's relatively flat to last year.

Thanks, Tracy. Operator, your last question.

Emmy Koslav of Sanford Bernstein, you may ask your question.

Hi there.

I'm looking at the weak operating margin performance of Bath & Body Works, you know, the division was barely profitable. What specific cost cutting efforts or process re-engineering plans do you have going on to improve the profitability of the division?

Thanks.

We're looking at a number of things to improve the Bath & Body Works business. The first is obviously the transition of the categories to what we believe is next, and those would be Aromatherapy and Spa which are both doing very well at roughly 7% to 8% of the total store on an unpromoted basis. Bath & Body Works is looking for opportunities as are all of our businesses for improving the efficiency and effectiveness, as you know, the total enterprise has a head count cap so that all heads have to be approved by both Len Schlesinger, the CFO, and myself. So Bath & Body Works is very focused on improving its profit performance.

Thanks, Emmy. That concludes our call this morning. I also want to thank Grace Nichols and Wendy Byrd for joining us from New York. And we thank you for your continued interest in Limited Brands.