L Brands, Inc. (NYSE:LB) Q4 2017 Earnings Conference Call - Final Transcript

Mar 01, 2018 • 09:00 am ET


L Brands, Inc. (NYSE:LB) Q4 2017 Earnings Conference Call - Final Transcript


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Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the L Brands Fourth Quarter 2017 Earnings Conference Call. I will now turn the call over to Ms. Amie Preston, Chief Investor Relations Officer for L Brands. Please go ahead.

Thanks, Regina. Good morning, everyone, and welcome to L Brands' fourth quarter earnings conference call for the period ending Saturday, February 3rd, 2018. 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 statement found in our SEC filings. Our fourth quarter earnings release, additional commentary, and earnings presentation are all available on our website, lb.com.

Joining us today are Stuart Burgdoerfer, EVP and CFO; Denise Landman, CEO of PINK; Jan Singer, CEO of Victoria's Secret Lingerie; Greg Unis, CEO of Victoria's Secret Beauty; and Martin Waters, CEO of International. Andrew Meslow, COO of Bath & Body Works, is filling in for Nick Coe, who is under the weather today. All of the results that we've discussed today are on an adjusted basis and exclude the special items detailed in our press release.

Thanks, and now I'll turn the call over to Stuart.

Stuart Burgdoerfer

Thanks, Amie, and good morning, everyone. Although our fourth quarter adjusted earnings per share of $2.11 were above our initial guidance of $1.95 to $2.10, the upside was related to a favorable tax rate. Absent the impact of the lower-than-forecasted tax rate, we delivered an earnings per share result toward the lower end of our range. On a 13-to-13-week basis, operating income declined by 5%. And although this result is an improvement versus the third quarter, we had expected to do better.

Our performance was mixed. Growth in operating income at Bath & Body Works versus last year and our forecast was more than offset by a decline at Victoria's Secret. Turning to 2018, we're very focused on improving performance in the Victoria's Secret business, staying close to our customer, improving the customer experience in stores and online, and improving our assortments in compelling new product launches. We will continue to be disciplined in the management of inventory, expenses and capital. Following an extensive evaluation of our wage rates by market, we are making investments in our workforce by increasing wage rates and benefits, principally for hourly associates.

These investments will help us continue to attract and retain high-quality talent and be an employer of choice. The impact of these investments is approximately $100 million in 2018 and is included in our guidance.

Excluding the impact of these wage investments, our operating income forecast is for low single-digit growth at the high end of our range. We, as a management team, would not be satisfied with that result and are working hard to do better.

With that, I'll turn the discussion over to Denise.

Denise Landman

Thanks, Stuart, and good morning, everyone. I plan to share a brief overview of PINK's Q4