GlobeNewswire Inc | Nov 18, 2020 04:30PM EST

November 18, 2020

COLUMBUS, Ohio, Nov. 18, 2020 (GLOBE NEWSWIRE) -- L Brands, Inc. (NYSE: LB) today reported 2020 third quarter results.

Third Quarter ResultsThe company reported earnings per share of $1.17 for the third quarter ended Oct. 31, 2020, compared to a loss per share of $0.91 for the quarter ended Nov. 2, 2019. Third quarter operating income was $580.6 million compared to an operating loss of $151.2 million last year, and net income was $330.6 million compared to a net loss of $252.0 million last year.

Reported results above include the following significant items:

In 2020, a net gain totaling $0.04 per share resulting from the following:

-- A $52.7 million pre-tax loss ($0.14 per share) on early extinguishment of debt; -- A $29.9 million pre-tax gain ($0.10 per share) related to the establishment of a joint venture for the Victorias Secret U.K. business with Next PLC; and -- A $23.1 million net tax benefit ($0.08 per share) related to tax matters associated with foreign investments and recent changes in tax legislation.

In 2019, charges of $0.93 per share resulting from the following:

-- A $247.5 million non-cash pre-tax impairment charge ($0.83 per share) related to certain Victorias Secret store and other assets; and -- A $37.2 million pre-tax charge ($0.10 per share) to increase reserves related to ongoing guarantees for the La Senza business which was sold in the fourth quarter of 2018.

Excluding the above items, adjusted third quarter earnings per share were $1.13 compared to $0.02 last year, adjusted operating income was $550.7 million compared to $96.3 million last year, and adjusted net income was $320.3 million compared to $5.7 million last year.

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

The company reported net sales of $3.055 billion for the 13 weeks ended Oct. 31, 2020, compared to net sales of $2.677 billion for the quarter ended Nov. 2, 2019. Comparable sales increased 28 percent for the quarter ended Oct. 31, 2020.

Andrew Meslow, Chief Executive Officer of L Brands, stated L Brands reported a record third quarter, driven by exceptional results and continued strength at Bath & Body Works, and a significant improvement in performance at Victorias Secret. On behalf of the Board of Directors and the management team, Id like to express our sincere appreciation to our associates, whose hard work and dedication during these unprecedented times made these results possible. As we head into the holidays, our inventories are well-positioned, and we are encouraged by customers early response to our merchandise assortments. However, we are cautious about our ability to exceed last years fourth quarter sales and earnings results, given anticipated constraints on store traffic, online fulfillment and shipping capacity, as well as other uncertainties related to the COVID pandemic. We are confident in the strength of our brands and remain focused on execution and delivering the best possible outcome for the fourth quarter.

Earnings Call and Additional Information

Additional third quarter financial information, including management commentary, is currently available atwww.LB.com. L Brandswill conduct its third quarter earnings call at9:00 a.m.Eastern on November 19. To listen, call 1-888-946-7609 (international dial-in number: 1-517-308-9411); conference ID 6362067. For an audio replay, call 1-888-676-2681 (international replay number: 1-402-220-6447); conference ID 6362067 or log ontowww.LB.com.

ABOUT L BRANDS:L Brands, through Victorias Secret, PINK and Bath & Body Works, is an international company. The company operates 2,681 company-operated specialty stores in the United States, Canada and Greater China, and its brands are also sold in more than 700 franchised locations worldwide. The companys products are also available online at www.BathandBodyWorks.com, www.VictoriasSecret.com and www.PINK.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 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 otherwise made by our company or our management:

-- General economic conditions, consumer confidence, consumer spending patterns and market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises or other major events, or the prospect of these events; -- divestitures or other dispositions, including any divestiture of Victorias Secret and related operations, could negatively impact our business, and contingent liabilities from businesses that we have sold could adversely affect our financial statements; -- the seasonality of our business; -- difficulties arising from turnover in company leadership or other key positions; -- our ability to attract, develop and retain qualified associates and manage labor-related costs; -- liabilities arising from divested businesses; -- 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, environmental hazards or natural disasters;significant health hazards or pandemics, which could result in closed factories, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in infected areas;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; andchanging expectations regarding product safety due to new legislation; -- our geographic concentration of vendor and distribution facilities in centralOhio; -- 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; -- shareholder activism matters; -- the ability of our vendors 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, third-party or company information; -- our ability to comply with laws and regulations or other obligations related to data privacy and security; -- 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 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.

For further information, please contact:

L Brands:Investor Relations Media RelationsAmie Preston Brooke Wilson(614) 415-6704 (614) 415-6042apreston@lb.com communications@lb.com

L BRANDSTHIRD QUARTER 2020

Comparable Sales Increase (Decrease) (Stores and Direct):

Year- Year- Third Third to- to- Quarter Quarter Date Date 2020 2019 2020 2019 Bath & Body Works^1 56 % 9 % 70 % 10 %Victoria?s Secret^2 4 % (8 %) 3 % (6 %)L Brands^2 28 % (2 %) 30 % (1 %)

NOTE: Stores are excluded from the comparable sales calculation when they have been closed for four consecutive days or more. Therefore, comparable sales results for 2020 exclude periods of time that stores were closed for four consecutive days or more as a result of the COVID-19 pandemic. Refer to our SEC filings for further discussion regarding our comparable sales calculation.1 Results include company-operated stores in the U.S. and Canada and direct sales.2 Results include company-operated stores in the U.S., Canada, the U.K. (pre-joint venture) and Greater China and direct sales.

Comparable Sales Increase (Decrease) (Stores Only):

Year- Year- Third Third to- to- Quarter Quarter Date Date 2020 2019 2020 2019 Bath & Body Works^1 38 % 5 % 45 % 5 %Victoria?s Secret^2 (10 %) (9 %) (13 %) (8 %)L Brands^2 13 % (3 %) 13 % (3 %)

NOTE: Stores are excluded from the comparable sales calculation when they have been closed for four consecutive days or more. Therefore, comparable sales results for 2020 exclude periods of time that stores were closed for four consecutive days or more as a result of the COVID-19 pandemic. Refer to our SEC filings for further discussion regarding our comparable sales calculation.1 Results include company-operated stores in the U.S. and Canada.2 Results include company-operated stores in the U.S., Canada, the U.K. (pre-joint venture) and Greater China.

Total Sales (Millions):

% Year- Year- % Third Third Inc/ to- to- Inc/ Quarter Quarter (Dec) Date Date (Dec) 2020 2019 2020 2019 Bath & BodyWorks Stores ? U.S. and $ 1,201.8 $ 871.7 37.9 % $ 2,303.6 $ 2,468.4 (6.7 %)CanadaBath & Body 446.5 192.4 132.1 % 1,254.0 527.3 137.8 %Works DirectBath & BodyWorks 53.9 34.8 54.9 % 158.3 128.9 22.8 %International^1Total Bath & $ 1,702.2 $ 1,098.9 54.9 % $ 3,715.9 $ 3,124.6 18.9 %Body WorksVictoria?sSecret Stores? $ 755.2 $ 1,080.9 (30.1 %) $ 1,632.8 $ 3,462.2 (52.8 %)U.S. andCanadaVictoria?s 470.0 331.3 41.9 % 1,391.5 1,066.5 30.5 %Secret DirectVictoria?sSecret International^ 127.9 165.3 (22.6 %) 288.7 503.9 (42.7 %)2TotalVictoria?s $ 1,353.1 $ 1,577.5 (14.2 %) $ 3,313.0 $ 5,032.6 (34.2 %)SecretOther - 0.3 - - 49.9 - L Brands $ 3,055.3 $ 2,676.7 14.1 % $ 7,028.9 $ 8,207.1 (14.4 %)

1 Results include royalties associated with franchised stores and wholesale sales. 2 Results include company-operated stores in the U.K. (pre-joint venture) and Greater China, royalties associated with franchised stores and wholesale sales.

Total Company-Operated Stores:

Stores Transferred Stores at to at 2/1/20 Opened Closed joint venture 10/31/20 Bath & Body Works 1,637 24 (18 ) - 1,643Bath & Body Works Canada 102 1 - - 103Total Bath and Body Works 1,739 25 (18 ) - 1,746 Victoria's Secret 909 18 (223 ) - 704PINK 144 2 (3 ) - 143Victoria's Secret Canada 33 - (10 ) - 23PINK Canada 5 - (3 ) - 2Victoria?s Secret U.K./Ireland 21 - - (21 ) -PINK U.K. 5 - - (5 ) -Victoria?s Secret Beauty and 41 1 (4 ) - 38AccessoriesVictoria?s Secret Greater China 23 3 (1 ) - 25Total Victoria's Secret 1,181 24 (244 ) (26 ) 935 Total L Brands 2,920 49 (262 ) (26 ) 2,681

Total Partner-Operated Stores:

Stores Transferred Stores at to at 2/1/20 Opened Closed joint 10/31/ venture 20 Bath & Body Works 262 10 (3 ) - 269Bath & Body Works ? Travel Retail 16 1 - - 17Victoria?s Secret 72 9 (1 ) 21 101PINK 12 1 (1 ) 5 17Victoria?s Secret Beauty & 207 2 (14 ) - 195AccessoriesVictoria?s Secret Beauty & 153 2 (11 ) - 144Accessories ? Travel RetailTotal L Brands 722 25 (30 ) 26 743

L BRANDS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME (LOSS)THIRTEEN WEEKS ENDED OCTOBER 31, 2020 AND NOVEMBER 2, 2019(Unaudited)(In thousands except per share amounts) 2020 2019 Net Sales $ 3,055,276 $ 2,676,747 Costs of Goods Sold, Buying and (1,695,787 ) (1,936,244 )OccupancyGross Profit 1,359,489 740,503 General, Administrative and (778,878 ) (891,717 )Store Operating ExpensesOperating Income (Loss) 580,611 (151,214 )Interest Expense (120,729 ) (92,098 )Other Loss (50,418 ) (34,051 ) Income (Loss) Before Income 409,464 (277,363 )TaxesProvision (Benefit) for Income 78,882 (25,371 )Taxes Net Income (Loss) $ 330,582 $ (251,992 ) Net Income (Loss) Per Diluted $ 1.17 $ (0.91 )Share Weighted Average Shares 283,001 276,398 Outstanding^1 ^1 - Reported Weighted Average Shares Outstanding in the third quarter of 2019 reflects basic shares due to the Net Loss.

L BRANDS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME (LOSS)THIRTY-NINE WEEKS ENDED OCTOBER 31, 2020 AND NOVEMBER 2, 2019(Unaudited)(In thousands except per share amounts) 2020 2019 Net Sales $ 7,028,951 $ 8,207,095 Costs of Goods Sold, Buying (4,669,373 ) (5,550,340 )and OccupancyGross Profit 2,359,578 2,656,755 General, Administrative and (2,052,625 ) (2,480,024 )Store Operating ExpensesOperating Income 306,953 176,731 Interest Expense (321,772 ) (286,105 )Other Loss (48,228 ) (65,550 ) Loss Before Income Taxes (63,047 ) (174,924 )Benefit for Income Taxes (47,165 ) (783 ) Net Loss $ (15,882 ) $ (174,141 ) Net Loss Per Basic Share $ (0.06 ) $ (0.63 ) Weighted Average Shares 277,804 276,059 Outstanding^1 ^1 - Reported Weighted Average Shares Outstanding in 2020 and 2019 reflects basic shares due to the Net Loss.

L BRANDS, INC. AND SUBSIDIARIESADJUSTED FINANCIAL INFORMATION(Unaudited)(In thousands except per share amounts) Third Quarter Year-to-Date 2020 2019 2020 2019 Details ofSpecial Items - Income(Expense)Victoria'sSecret Asset $ - $ (247,532 ) $ (213,953 ) $ (247,532 )ImpairmentRestructuring - - (80,807 ) - ChargesHong KongStore Closure - - 36,287 - and LeaseTerminationEstablishmentof Victoria'sSecret UK and 29,918 - 29,918 - Ireland JointVenture withNext PLCSpecial Itemsincluded in 29,918 (247,532 ) (228,555 ) (247,532 )OperatingIncome (Loss)La Senza - (37,217 ) - (37,217 )GuaranteesLoss onExtinguishment (52,668 ) - (52,668 ) (39,564 )of DebtSpecial Itemsincluded in (52,668 ) (37,217 ) (52,668 ) (76,781 )Other Income(Loss)Net TaxBenefit fromthe Resolutionof Certain Tax 23,085 - 93,989 - Matters andChanges in TaxLegislationTax Effect ofSpecial Itemsincluded inOperating 9,920 27,015 57,216 36,547 Income (Loss)and OtherIncome (Loss)Special Itemsincluded in $ 10,255 $ (257,734 ) $ (130,018 ) $ (287,766 )Net Income(Loss)Special Itemsincluded inEarnings $ 0.04 $ (0.93 ) $ (0.46 ) $ (1.04 )(Loss) PerDiluted Share Reconciliationof ReportedOperatingIncome (Loss) to AdjustedOperatingIncomeReportedOperating $ 580,611 $ (151,214 ) $ 306,953 $ 176,731 Income (Loss)Special Itemsincluded in (29,918 ) 247,532 228,555 247,532 OperatingIncome (Loss)AdjustedOperating $ 550,693 $ 96,318 $ 535,508 $ 424,263 Income Reconciliationof ReportedNet Income (Loss) toAdjusted NetIncomeReported Net $ 330,582 $ (251,992 ) $ (15,882 ) $ (174,141 )Income (Loss)Special Itemsincluded in (10,255 ) 257,734 130,018 287,766 Net Income(Loss)Adjusted Net $ 320,327 $ 5,742 $ 114,136 $ 113,625 Income Reconciliation ofReported Earnings(Loss) Per Diluted Share toAdjusted EarningsPer Diluted ShareReportedEarnings $ 1.17 $ (0.91 ) $ (0.06 ) $ (0.63 )(Loss) PerDiluted ShareSpecial Itemsincluded inEarnings (0.04 ) 0.93 0.46 1.04 (Loss) PerDiluted ShareAdjustedEarnings Per $ 1.13 $ 0.02 $ 0.41 $ 0.41 Diluted Share See Notes to Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures.

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

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

Fiscal 2020

In the third quarter of 2020, adjusted results exclude the following:

-- A $52.7 million pre-tax loss ($40.0 million net of tax of $12.7 million), included in other income (loss), associated with the early extinguishment of outstanding notes. -- A $29.9 million pre-tax gain ($27.2 million net of tax of $2.7 million), included in general, administrative and store operating expenses, related to the establishment of a joint venture for the Victorias Secret U.K. and Ireland business with Next PLC. -- A $23.1 million net income tax benefit related to tax matters associated with foreign investments and recent changes in tax legislation.

In the second quarter of 2020, adjusted results exclude the following:

-- A $117.1 million charge ($98.7 million net of tax of $18.5 million), included in buying and occupancy expenses, related to the impairment of certain Victorias Secret lease and store assets. -- An $80.8 million charge ($65.2 million net of tax of $15.6 million), included in general, administrative and store operating expenses, related to previously announced restructuring actions. -- A $36.3 million gain ($24.7 million net of tax of $11.6 million), principally included in buying and occupancy expenses, related to the closure and termination of our lease and the related liability for the Victorias Secret Hong Kong flagship store. -- A $20.5 million income tax benefit related to recent changes in tax legislation included in the CARES Act.

In the first quarter of 2020, adjusted results exclude the following:

-- A $96.8 million charge ($72.0 million net of tax of $24.8 million), included in buying and occupancy expenses, related to the impairment of certain Victorias Secret store assets. -- A $50.4 million tax benefit related to the resolution of certain tax matters.

Fiscal 2019

In the third quarter of 2019, adjusted results exclude the following:

-- A $247.5 million charge ($230.0 million net of tax of $17.5 million), $217.1 million included in buying and occupancy expenses and $30.5 million included in general, administrative and store operating expenses, related to the impairment of certain Victorias Secret store and other assets. -- A $37.2 million charge ($27.7 million net of tax of $9.5 million), included in other income (loss), to increase reserves related to ongoing guarantees for the La Senza business which was sold in the fourth quarter of 2018.

In the second quarter of 2019, adjusted results exclude the following:

-- A $39.6 million pre-tax loss ($30.0 million net of tax of $9.5 million), included in other income (loss), associated with the early extinguishment of $764 million in outstanding notes maturing between 2020 and 2022 through the issuance of $500 million of new notes maturing in 2029 and the use of $315 million in cash, lowering total debt by $264 million.

In the first quarter of 2019, there were no adjustments to results.

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 Companys 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 Companys historical financial statements and notes thereto contained in the Companys quarterly reports on Form 10-Q and annual report on Form 10-K.