GlobeNewswire Inc | Aug 19, 2020 04:15PM EDT

August 19, 2020

COLUMBUS, Ohio, Aug. 19, 2020 (GLOBE NEWSWIRE) -- L Brands, Inc. (NYSE: LB) today reported second quarter earnings results.

Consistent with expectations disclosed in the companys July 28, 2020 business update, net sales were $2.319 billion for the quarter ended Aug. 1, 2020, a decrease of 20 percent compared to sales of $2.902 billion for the quarter ended Aug. 3, 2019. The companys stores were closed during periods of time throughout the second quarter due to the COVID-19 pandemic. As of the end of the second quarter, most Bath & Body Works and Victorias Secret stores in North America have reopened.

Total Bath & Body Works second quarter sales in the United States and Canada were $1.197 billion, an increase of 13 percent compared to $1.061 billion last year. Sales at the Bath & Body Works direct business, which remained open throughout the quarter, increased by 191 percent to $518.6 million compared to $178.4 million last year. Bath & Body Works second quarter store comparable sales increased 87 percent during the period in which stores were open.

Total Victorias Secret second quarter sales in the United States and Canada were $977.5 million, a decrease of 39 percent compared to $1.606 billion last year. Sales at the Victorias Secret direct business, which remained open throughout the quarter, increased by 65 percent to $613.9 million compared to $373.1 million last year. Victorias Secret second quarter store comparable sales decreased 10 percent during the period in which stores were open.

Reported loss per share for the second quarter ended Aug. 1, 2020, was $0.18 compared to earnings per share of $0.14 for the quarter ended Aug. 3, 2019. Second quarter operating income was $44.0 million compared to $174.6 million last year, and net loss was $49.6 million compared to net income of $37.6 million last year.

The second quarter reported results include the following special items:

In 2020, net charges of $0.42 per share, as follows:

-- A pre-tax non-cash charge of $117.1million ($0.35 per share) related to the impairment of certain Victorias Secret lease and store assets; -- A pre-tax charge of $80.8million ($0.23per share), principally severance, related to previously announced restructuring actions; -- A pre-tax net gain, primarily non-cash, of $36.3 million ($0.09 per share) related to the closure and termination of our lease and the related liability for the Victorias Secret Hong Kong flagship store; and, -- An income tax benefit of $20.5 million ($0.07 per share) related to recent changes in tax legislation included in the CARES act.

In 2019:

-- A pre-tax charge of $39.6 million ($0.11 per share) related to the early extinguishment of debt.

Excluding these special items, adjusted earnings per share for the second quarter ended Aug. 1, 2020 were $0.25 per share compared to $0.24 for the quarter ended Aug. 3, 2019. Adjusted second quarter operating income was $205.7 million compared to $174.6 million last year, and adjusted net income was $69.0 million compared to $67.6 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.

Given the continuing high level of uncertainty in the current environment, the company is not providing third quarter or full-year 2020 earnings guidance.

Earnings Call and Additional InformationAdditional second quarter financial information, including management commentary, is currently available atwww.LB.com. L Brandswill conduct its second quarter earnings call at9:00 a.m.Eastern on August 20. To listen, call 1-888-946-7609 (international dial-in number: 1-517-308-9411); conference ID 6362067. For an audio replay, call 1-888-566-0478 (international replay number: 1-203-369-3051); conference ID 6362067 or log ontowww.LB.com.

ABOUT L BRANDS:L Brands, through Bath & Body Works, Victorias Secret and PINK, is an international company. The company operates 2,709 company-owned specialty stores in the United States, Canada, the United Kingdom 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.comand www.VictoriasSecret.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 BRANDSSECOND QUARTER 2020

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

Year- Year- Second Second to- to- Quarter Quarter Date Date 2020 2019 2020 2019 Bath & Body Works^1 123% 8% 84% 10%Victoria?s Secret^1 28% (6%) 6% (6%)L Brands^2 63% (1%) 32% (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-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):

Year Year Second Second -to- -to- Quarter Quarter Date Date 2020 2019 2020 2019 Bath & Body Works^1 87% 4% 54% 6%Victoria?s Secret^1 (10%) (9%) (13%) (8%)L Brands^2 33% (4%) 12% (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-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):

Year- Year- Second Second % to- to- % Quarter Quarter Inc/ Date Date Inc/ 2020 2019 (Dec) 2020 2019 (Dec) Bath & Body Works^1 $678.1 $882.5 (23%) $1,101.8 $1,596.8 (31%)Bath & Body Works 518.6 178.4 191% 807.5 334.8 141%DirectTotal Bath & Body $1,196.7 $1,060.9 13% $1,909.3 $1,931.6 (1%)WorksVictoria?s Secret^1 $363.6 $1,232.5 (70%) $877.6 $2,381.3 (63%)Victoria?s Secret 613.9 373.1 65% 921.5 735.2 25%DirectTotal Victoria?s $977.5 $1,605.6 (39%) $1,799.1 $3,116.5 (42%)SecretVS & BBW $80.0 $154.5 (48%) $145.4 $289.5 (50%)International^2Other $65.3 $80.5 (19%) $119.9 $192.7 (38%)L Brands $ $ (20%) $ $ (28%) 2,319.5 2,901.5 3,973.7 5,530.3

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, direct sales in China, royalties associated with franchised stores and wholesale sales.

Total Company-Owned Stores:

Stores Stores at 2/1/20 Opened Closed at 8/1/20 Victoria's Secret U.S. 909 2 (198 ) 713PINK U.S. 144 1 - 145Victoria's Secret Canada 33 - (9 ) 24PINK Canada 5 - (3 ) 2Total Victoria?s Secret 1,091 3 (210 ) 884 Bath & Body Works U.S. 1,637 10 (14 ) 1,633Bath & Body Works Canada 102 - - 102Total Bath & Body Works 1,739 10 (14 ) 1,735 Victoria?s Secret U.K./Ireland 21 - - 21PINK U.K. 5 - - 5Victoria?s Secret Beauty and Accessories 41 1 (3 ) 39Victoria?s Secret Greater China 23 3 (1 ) 25Total International 90 4 (4 ) 90 Total L Brands Stores 2,920 17 (228 ) 2,709

Total Noncompany-Owned Stores:

Stores Stores at 2/1/ Opened Closed at 8/1/ 20 20 Victoria?s Secret Beauty & Accessories ? 153 1 (5 ) 149Travel RetailBath & Body Works ? Travel Retail 16 1 - 17Victoria?s Secret Beauty & Accessories 207 1 (8 ) 200Victoria?s Secret 72 3 - 75PINK 12 1 - 13Bath & Body Works 262 6 (1 ) 267Total 722 13 (14 ) 721

L BRANDS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME (LOSS)THIRTEEN WEEKS ENDED AUGUST 1, 2020 AND AUGUST 3, 2019(Unaudited)(In thousands except per share amounts) 2020 2019 Net Sales $ 2,319,466 $ 2,901,538 Costs of Goods Sold, Buying and (1,607,986 ) (1,919,300 )OccupancyGross Profit 711,480 982,238 General, Administrative and (667,440 ) (807,637 )Store Operating ExpensesOperating Income 44,040 174,601 Interest Expense (104,245 ) (95,110 )Other Loss (56 ) (37,651 ) Income (Loss) Before Income (60,261 ) 41,840 TaxesProvision (Benefit) for Income (10,664 ) 4,244 Taxes Net Income (Loss) $ (49,597 ) $ 37,596 Net Income (Loss) Per Diluted $ (0.18 ) $ 0.14 Share Weighted Average Shares 277,795 278,487 Outstanding^1 ^1 - Reported Weighted Average Shares Outstanding in the second quarter of2020 reflects basic shares due to the Net Loss.

L BRANDS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME (LOSS)TWENTY-SIX WEEKS ENDED AUGUST 1, 2020 AND AUGUST 3, 2019(Unaudited)(In thousands except per share amounts) 2020 2019 Net Sales $ 3,973,675 $ 5,530,347 Costs of Goods Sold, Buying and (2,973,586 ) (3,614,095 )OccupancyGross Profit 1,000,089 1,916,252 General, Administrative and Store (1,273,748 ) (1,588,306 )Operating ExpensesOperating Income (Loss) (273,659 ) 327,946 Interest Expense (201,044 ) (194,007 )Other Income (Loss) 2,193 (31,499 ) Income (Loss) Before Income Taxes (472,510 ) 102,440 Provision (Benefit) for Income (126,046 ) 24,589 Taxes Net Income (Loss) $ (346,464 ) $ 77,851 Net Income (Loss) Per Diluted $ (1.25 ) $ 0.28 Share Weighted Average Shares 277,391 278,326 Outstanding^1 ^1 - Reported Weighted Average Shares Outstanding in 2020 reflects basicshares due to the Net Loss.

L BRANDS, INC. AND SUBSIDIARIES ADJUSTED FINANCIAL INFORMATION (Unaudited) (In thousands except per share amounts) Second Quarter Year-to-Date 2020 2019 2020 2019 Details of Special Items - Income (Expense) Victoria's Secret Lease and Store $ (117,109 ) $ - $ (213,953 ) $ - Asset Impairment Restructuring (80,807 ) - (80,807 ) - Charges Hong Kong Store Closure 36,287 - 36,287 - and Lease Termination Special Items included in (161,629 ) - (258,473 ) - Operating Income (Loss) Loss on Extinguishment - (39,564 ) - (39,564 ) of Debt Special Items included in - (39,564 ) - (39,564 ) Other Income (Loss) Tax Benefit from the Resolution of Certain Tax 20,544 - 70,904 - Matters and Changes in Tax Legislation Tax Effect of Special Items included in Operating 22,456 9,532 47,296 9,532 Income (Loss) and Other Income (Loss) Special Items included in $ (118,629 ) $ (30,032 ) $ (140,273 ) $ (30,032 ) Net Income (Loss) Special Items included in Earnings $ (0.42 ) $ (0.11 ) $ (0.50 ) $ (0.11 ) (Loss) Per Diluted Share Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income (Loss) Reported Operating $ 44,040 $ 174,601 $ (273,659 ) $ 327,946 Income (Loss) Special Items included in 161,629 - 258,473 - Operating Income (Loss) Adjusted Operating $ 205,669 $ 174,601 $ (15,186 ) $ 327,946 Income (Loss) Reconciliation of Reported Net Income (Loss) to Adjusted Net Income (Loss) Reported Net $ (49,597 ) $ 37,596 $ (346,464 ) $ 77,851 Income (Loss) Special Items included in 118,629 30,032 140,273 30,032 Net Income (Loss) Adjusted Net $ 69,032 $ 67,628 $ (206,191 ) $ 107,883 Income (Loss) Reconciliation of Reported Earnings (Loss) Per Diluted Share to Adjusted Earnings (Loss) Per Diluted Share Reported Earnings $ (0.18 ) $ 0.14 $ (1.25 ) $ 0.28 (Loss) Per Diluted Share Special Items included in Earnings 0.42 0.11 0.50 0.11 (Loss) Per Diluted Share Adjusted Earnings $ 0.25 $ 0.24 $ (0.74 ) $ 0.39 (Loss) Per Diluted Share See Notes to Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures.

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 2020

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.

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.

Fiscal 2019

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

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.

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.