Limited Brands Earnings Call Insights: Margin Boost Drivers and PINK
Margin Boost Drivers
Kimberly Greenberger – Morgan Stanley: Congratulations on a really great start to the year. My question is for the division heads; Sharen, Nick and Martin. I am wondering if you can look out here over the next two to three years and talk about where you see the opportunity, if you do see any, to raise your divisional margins over time, and Martin, specifically, just at La Senza division, not necessarily international.
Amie Preston – IR: We’ll go to Sharen first.
Sharen Jester Turney – President and CEO, Victoria’s Secret: As I look out over two to three years, obviously we want to continue to have via big growth business and we do believe that we will continue to see margin improvement, so I am very optimistic about the opportunities that Victoria’s Secret has to be able to deliver on that.
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Amie Preston – IR: Nick?
Nicholas Coe – CEO, Bath & Body Works: I think a couple of things. One is just based on us being nimble and agile, we’ll continue to get faster and therefore we’re going to have less clearance on the floor which will push us back towards full (indiscernible) selling, and then obviously stay focused on leveraging our expense management as we move forward.
Amie Preston – IR: Thanks Nick. Martin.
Martin Waters – President, Limited Brands International: Well, you recall that La Senza is really our turnaround business, and we’ve changed just about everything in La Senza from the customer proposition, to the marketing, to the product. We even relocated the team from Canada into the U.S.; so, an enormous amount of change in that business. And our focus is really on the fundamentals on getting that positioning right and executing solidly. So, it’s difficult to predict what the next few years will bring, but we are feeling very optimistic about the La Senza brand in total.
Stuart Burgdoerfer – EVP and CFO: Kimberly, it’s Stuart. I know you’re trying to test something (indiscernible), but on an overall basis, the Company does, just to reiterate, see the opportunity for a high-teens operating margin rate as we look over the next several years.
Paul Lejuez – Nomura Securities: Can you maybe talk about the sales productivity of the PINK square footage compared to the rest of the store, and as you do the expansions to allow for the full PINK assortment, what are you seeing in terms of the lift relative to your expectations?
Sharen Jester Turney – President and CEO, Victoria’s Secret: Hi, Paul, it’s Sharen. We see the PINK sales productivity are higher than the rest of the store, but primarily because they are squeezed for space. And it’s not dramatically different. The other thing I want to note too is that although PINK is only in 10% of the stores, the true Victoria’s Secret – full line of Victoria’s Secret is even in less than 10% of the stores; the true opportunity. As we expand and move PINK out to freestanding stores, we are still being able to have high productivity within those stores.
Paul Lejuez – Nomura Securities: How is it tracking relative to expectations; if you could share that, as you do the expansion?
Sharen Jester Turney – President and CEO, Victoria’s Secret: They are exceeding our expectation as we do the expansions. So what happens is, as we pull out PINK, PINK is better, we are able to expand the assortments for Victoria’s Secret (and total) Victoria’s Secret Box gets better, so it’s really a win-win as we go into these malls, and then as you think about it too, it’s mall-by-mall basis as well, but we are very pleased because what we see is PINK getting more productive and being able to service the customer with whole assortment and Victoria’s Secret gets more productive because we’re able to expand those assortments into our adjacent categories.