Amie Preston - Stuart B. Burgdoerfer - Chief Financial Officer, Principal Accounting Officer and Executive Vice President Sharen Jester Turney - Chief Executive Officer of Victoria's Secret Megabrand & Intimate Apparel and President of Victoria's Secret Megabrand & Intimate Apparel Nicholas Coe - Chief Executive Officer Martyn R. Redgrave - Chief Administrative Officer and Executive Vice President

Jennifer M. Davis - Lazard Capital Markets LLC, Research Division Omar Saad - ISI Group Inc., Research Division Stacy W. Pak - Barclays Capital, Research Division Kimberly C. Greenberger - Morgan Stanley, Research Division Jeffrey S. Stein - Northcoast Research John D. Kernan - Cowen and Company, LLC, Research Division Jennifer Black Roxanne Meyer - UBS Investment Bank, Research Division Janet Kloppenburg Paul Lejuez - Nomura Securities Co. Ltd., Research Division Jeff Black - Citigroup Inc, Research Division Barbara Wyckoff - Credit Agricole Securities (USA) Inc., Research Division Michelle Tan - Goldman Sachs Group Inc., Research Division Ike Boruchow Dana Lauren Telsey - Telsey Advisory Group LLC

Good morning. My name is Jennifer, and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter year-end 2011 earnings call. [Operator Instructions] At this time, I will turn the call over to Ms. Preston, Chief Investor Relations Officer. Please go ahead.

Thank you. Good morning, everyone. 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 and related financial information, including any non-GAAP or adjusted financial reconciliation tables, are available on our website, limitedbrands.com. Also available on our website is an investor presentation, which we will be referring to during this call. The call is being taped and can be replayed by dialing 1 (866) NEWS-LTD. You can also listen to an audio replay from our website. Stuart Burgdoerfer, EVP and CFO; Sharen Turney, CEO, Victoria's Secret; Nick Coe, CEO, Bath & Body Works; Andrew Meslow, Chief Administrative Officer, Bath & Body Works; and Martyn Redgrave, EVP and Chief Administrative Officer are all joining us today. After our prepared comments, we will be available to take your questions for as long as time permits. [Operator Instructions] Thanks, and now I'll turn the call over to Stuart.

Thanks, Amie, and good morning, everyone. Fourth quarter adjusted earnings per share increased 19% to $1.50 per share versus $1.26 last year and were at record levels. Our reported result was $1.17 per share versus $1.36 last year. The sale of the third-party apparel sourcing business negatively impacted this year's fourth quarter by about $0.03. Both this and last year's reported results include significant items as detailed in our press release. This year's reported fourth quarter results include the following: a pretax gain of $110.8 million or $0.32 per share related to the sale of our third-party apparel sourcing business; a pretax, principally noncash charge of $256.1 million or $0.74 per share related to intangible asset impairment and restructuring charges, including store closures at La Senza. The intangible asset impairment charge is to reduce the value of La Senza goodwill and other intangible assets in accordance with applicable accounting principles. Martyn Redgrave will talk about the store closures and restructuring charges later. And the last 2011 significant item is a tax benefit of $28.4 million or $0.09 per share related to certain discrete tax matters. I won't repeat the 2010 significant items, which are detailed in our press release. All results discussed on this call exclude these significant items. You may have also noticed from the materials that we had reclassified La Senza's results from the Victoria's Secret segment to the Other segment. This presentation groups La Senza with our other international businesses. So now to take you through the fourth quarter results as detailed on Page 4 of the presentation. Net sales were $3.515 billion versus $3.456 billion last year and comps increased 7%. Total sales were negatively impacted by the sale of the third-party apparel sourcing business by about $225 million. The gross margin rate increased 210 basis…

Thank you, Stuart, and good morning, everyone. Victoria's Secret earned record fourth quarter and full year profit in fiscal 2011. In the fourth quarter, total Victoria's Secret segment sales increased 10% to $2.091 billion and operating income increased 12% to $446.8 million, 21.4% of sales. For the year, total segment sales increased 11% to $6.121 billion and operating income increased 22% to $1.081 billion, 17.7% of sales. We are very pleased with this result and are confident that the keys to our success are the priorities that we have been focused on all year. These priorities are first and foremost our focus on our core category, bras and panties, coupled with a much higher emphasis on getting faster and more agile. Second, we are approaching the business with optimism and we will manage inventory and expenses in a balanced way. And third is bringing all our work together in a well-told brand story across channels and telling that story through innovative products, steady newness with the right fashion and outstanding in-store execution. I'll begin my remarks this morning with a review of fourth quarter performance at both Victoria's Secret channels, followed by a brief recap of the full year and will then turn to a discussion of how we're thinking about the business as we head into the first quarter of 2012. Our fourth quarter results are detailed on Page 15 of the presentation. In the Victoria's Secret stores channel, fourth quarter comps were up 12%, with total sales increasing to 13% to $1.57 billion. This is on top of our 15% comp performance last year. This result was driven by strength across the assortment as customers continued to respond favorably to our new, fresh and fashion-right offerings. We remained agile on inventory, chasing into winners, replacing strategic set in…

Thank you, Sharen, and good morning, everyone. At Bath & Body Works, we delivered sales and operating income growth versus last year's strong performance in the fourth quarter. We continue to deliver improved results by maintaining focus on 3 key categories: our Signature Collection product line, the antibac soap and sanitizer business and our home fragrance assortment. The customer also responded well to increased presence of seasonally relevant fragrances and forms. Performance improved versus last year in our Signature Collection driven by our holiday collections, the launch of our new Signature Collection fragrance, Be Enchanted, as well as the continued success of Paris Amour that we launched earlier in the year. The anti-bac business delivered growth in our soaps and PocketBac collections and holiday fragrances and forms. Our home fragrance performance continued to be driven by candles in new and seasonal fragrances, as well as growth in new forms and novelty in our diffuser and some portable categories. The strong performance of our key categories was partially offset by the gift set business that was down to last year. We will continue to review the gift set business as we look to redefine our gifting strategy next year. January comps were down to last year driven by performance of semiannual sale. Semiannual sale performance was driven by lower inventories and the decision not to buy into inventory in discontinued fragrances. In the fourth quarter, transactions were up versus last year driven by traffic and continued improvement in our conversion rate. So with that said, let me take you through the financial results for the quarter, as detailed on Page 17 of the presentation. Bath & Body Works fourth quarter comps were up 3%. Total sales for the quarter were $1.1 billion, up 4% or $47 million versus last year. For…

Thanks, Nick, and good morning, everyone. My comments this morning will focus on an update on our international businesses. We said many times before, we believe our opportunity for our international growth is significant given the leadership position and awareness of our brands and the success we've seen from our early efforts. We continue to approach our international expansion with a methodical rollout and a test-and-learn philosophy. We want to ensure that we have the infrastructure in place to deliver an excellent brand experience to customers around the world. This effort is being led by a totally separate management team in order to minimize distractions for the leaders of our domestic businesses. As we noted in our update meeting, we don't anticipate that our international business will be a significant driver of profit growth in the near term, as we continue to invest in talent and infrastructure to support our future growth. As shown on Page 14 of the presentation, we opened 90 net new stores in 2011, and plan to open a net of around 115 new stores in 2012. Now taking a look at each of the businesses, let's start with Victoria's Secret. In 2011, we opened 7 Victoria's Secret full assortment stores and 1 PINK store in Canada, bringing the total in Canada to 11 Victoria's Secret stores and 8 PINK stores. These stores continue to do very well and we plan to open another 7 locations in 2012. We also continue to be on track to open our Bond Street store and a second mall-based store in London this summer. As Stuart mentioned, the costs associated with these store openings will pressure our first half product earnings. We also plan to open 3 mall-based full assortment stores in the Middle East under our partnership with Alshaya…

Thanks, Martyn. That concludes our prepared comments and at this time, we'd be happy to take your questions. [Operator Instructions] And I'll turn it back over to the operator.

[Operator Instructions] Your first question is from Jennifer Davis with Lazard Capital Market.

I had one clarification and one question, if I may. The clarification, I thought you are going to open 2 mall-based full assortment VS stores in the U.K., so I was just wondering what happened to that other mall-based store? And then in the packet, it looks like you have 2 stores and selling square feet of 31,000. So just wondering the size of the flagship and the size of the mall-based store, that seems a little large. And then my question is, could you talk a little bit about Beauty part, what your -- the benefits you're getting from that, what you're seeing from that and if any of that can be transferred to Lingerie and Victoria's Secret?

Okay. Jennifer, we're going to start with Martyn about the U.K. stores.

Yes, Jennifer, as I mentioned, I think what we had previously said was 2 to 3 stores in the U.K. And at this point, we're not announcing any additional openings in the U.K. and we're really totally focused on the 5 stores that I did describe, the 2 in the U.K. and the 3 in the Middle East, which are all full assortment stores that we want to deliver in a very successful fashion in 2012.

And then in terms of the size, Jennifer, I'm pretty sure the mall location is between 10,000 and 12,000 square feet and the remainder would be the flagship on Bond Street.

The full assortment stores are -- with the more traditional A mall-type stores in the United States, 10,000 to 15,000 square feet.

And then for the Beauty part, I think, we can maybe go to both to Nick and Sharen for that.

On the Beauty part, we actually, we're able to utilize the Beauty part, as we were taking into our gift sets, which we did have very good selling in gift sets in Beauty. So we believe that there's a big opportunity as we continue to be able to maximize that. I think your second question is, does that have benefit for the Lingerie business as well? One of the things that we have, as we have built our sourcing strategy and our feed model is that we actually had been able to treat our vendors in the Far East like they were in our backyard. And so where we have been able to then read and react to the business and within 15 days, have product in the store. So that is our strategy. I think there is such a big opportunity as we look in the future to continue to find ways in all of our product categories to get faster.

Jennifer, it's Nick. So the Beauty part really comes online this spring for us, so we'll see benefit later in the year. And it's really, fundamentally about being closer to the vendor, which really helps us.

The next question is from Omar Saad with ISI Group.

I guess my one question would be, looking at the promotional environment, which is kind of something that's been out there in a lot of areas of the retail sector in the last several months. I'm trying to understand, especially given the unique positioning of the Victoria's Secret brand, the BBW, not a lot of competition. What's really driving the promotionality in the business? Is it coming from the department store competitors? Is it related to the inventory situation? Help us understand if there's certain parts of the business that are more promotional than others. And given how uniquely positioned your 2 big businesses are, how that's coming about?

It's Sharen from Victoria's Secret. The Victoria's Secret store business and the Direct channel from an intimate apparel perspective, absolutely was not promotional. Now how do you want to define promotion? Do we do surprise and delights with our gift with purchase, which we feel like are great branding items, whether it's our bag giveaway or umbrella giveaways. So we have not had to be promotional. And in fact, we carry no red lines on the floor in our Lingerie categories at all. We only have 2 sales a year in the Lingerie category. In the Direct channel, we still do have an apparel business, which has been a little bit more promotional because of the competitive nature of that, and as we continue our strategy of making our Direct channel more aligned to the Victoria's Secret product, I think over time, you will see that diminish.

It's Nick. I think we will continue to focus on building highly emotional products with our brands, which should help us to continue to offset the promotional activity in the marketplace. We're seeing that now in February with a good start with Pink Chiffon and fine fragrance mist as we mentioned earlier, where she's really wanting to partner with us on full price. So the more we can continue to build the emotional connection with her, the better we'll be.

The next question is from Stacy Pak with Barclays.

One quick clarification and then a question. Stuart, on the -- just wondering what the driver is as you see it of the merchandise margin gain for the year x the sourcing. And then my question is on international, when you look out further, what are you thinking in terms of the number of Victoria's Secret international stores when you look to like, '13 and '14, and how are you thinking about Web versus physical store expansion internationally?

Thanks, Stacy. So we'll go to Stuart first.

So with respect to the merchandise margin rate, assume the forecast improvement for the full year, there's 2 things that are -- or maybe 3 things they're having. One is, in the back half of the year, we would expect year-on-year favorability related to the cost pressure that we, to some extent and others to a greater extent, have seen in the industry, so it would be that effect. And then separately, we continue to work on and we're focused on getting better at lead times, fashion, getting the merchandise right, really maximizing full price selling and we're optimistic that we can make further improvements in those areas as well to drive merchandise margin rate improvement, and that's where we spend most of our mind times making it on the sales side, if you will. And we would expect to have further improvement in those areas as well.

Thanks, Stuart. Martyn, for VS internationally.

Yes. In terms of VS expansion. I think as you've seen from us consistently, we've been a company about taking it one step at a time. So we test and we learn brand by brand, country by country. We're staying very consistent with that discipline and that's one of the specific reasons why we're not talking about very specific things beyond the 5 stores that we will specifically open in 2012. Obviously, we're optimistic about the Victoria's Secret brand and its appeal worldwide. But we're going to take it one step at a time. In terms of the Web versus stores, we are a store-based retailing company and I think philosophically, we want to prove ourselves in store-based retailing internationally. Of course, the Web is a big opportunity as well and we're very curious about how that will play into our international expansion. That said, our Victoria's Secret Direct business does a substantial volume of business outside of the United States today and is continuing to grow profitably.

Your next question is from Kimberly Greenberger with Morgan Stanley.

I wanted to follow up on the e-commerce question. I know that in the fourth quarter, it was the first time you allowed consumers who purchased online to return in the Victoria's Secret stores. And I'm wondering if you could update us on your plans to more seamlessly integrate the web experience and the stores experience at the Victoria's Secret. What are the investments that are required in order to get from here to there? And what's the time frame that you have in mind to improve the overall experience and customer satisfaction?

Kim, it's Sharen. We're so excited about really a seamless purchasing opportunity for Victoria's Secret, regardless of what channel that she actually shops in. We did turn on buy online, return in store this year. It is a manual process. We're learning a lot. We should have full technology in, knock on wood, by September to be able to have this driven by technology and not be a manual process. At the same time, we are turning on the capability that if we're store out of stock and buy online through our new POS system as well. That goes into pilot in the fall season and should be able to be fully rolled early in the spring season. We're very excited about this venture. We believe that this is a big opportunity for us to actually create more customers for life by giving them ability to shop at Victoria's Secret, how and when she wants to be able to do that.

Your next question is from Jeff Stein with Northcoast Research.

Two quick ones for Stuart. First, Stuart, this sounds like it might be a year where you could actually grow expenses a little bit faster than sales and this seems to be contrary to your longer-term model, and I want to make sure that I understand if that might be the case. And secondly, the math on the buyback would seem to suggest a lower share count than you're assuming for the full year. You're assuming 298 million shares and yet, you're planning to buy back $650 million worth of stock. So I'm wondering if you could address those 2 issues.

Sure, Jeff. On expenses, our commitment as a management team is very clear-cut and that is to grow expenses slower than sales. We believe that the operating income rate potential for the business given the quality of the brands is in the high teens and some of that is going to come through expense leverage over the next several years, so that commitment is unwavering. Obviously, the views that we put out last night, this morning, reflect reasonably conservative sales assumptions, we believe, appropriate at this point and we'll work hard to chase. But we are going to ensure that we grow expenses slower than sales. With respect to the share count, we're assuming $650 million of shares repurchased, there is dilution from option and other equity awards in that as well. And obviously, there are timing assumptions assumed as well. We're assuming that the $650 million happens at a relatively quick pace in 2012.

Your next question is from John Kernan with Cowen.

Wanted to follow back up on the merch margin questions. Don't mean to beat a dead horse. But for Bath & Body Works, obviously, that merch margin was down in Q4. How do you see that evolving? Obviously, that's not a concept that's really going to benefit from the cost pullback. But how should we think about merch margin within that Bath & Body Works concept in 2012? And then one quick follow-up.

Okay. John, we'll start with Nick.

Yes, John, it's a good question. Our focus will be -- our business model is set up really to drive full-priced selling, so as we see costs increase in terms of resin, fuel, et cetera, that will be offset as we continue to drive our percentage of business in full price. That's where the Beauty part comes into play for us, being closer to our vendors and continuing to drive as much business as we can into fashion, where she's reacting well with the brands, that she's really reacting well to, being the 3 that we talked about earlier on. So it's really about pushing full price selling to offset that.

Okay, great. And then, Stuart, just a maintenance question. Now that you've got an extra $1 billion in debt or will have an extra $1 billion in your balance sheet, is there a cash cushion -- is there a higher cushion that we should think about in terms of a safety net?

I appreciate the question. Our thinking on that hasn't changed much over the last 12 to 24 months and what we talked about previously and remains our view is that we, all things equal, we should start the year with about $600 million in cash to fund our working capital needs as we go into the holiday season in October and November and that would assume that we don't draw on the revolver. So we ended the year with $900 million, just over $900 million in cash, borrowed $1 billion after that and we'll use our judgment as we go through the year and in consultation with the board about how to best deploy excess cash and whether we want to fully approach that $600 million or not, or even contemplate using the revolver to some degree; it's there and we paid for it. So we think about that within our possibilities as well. But it's a judgment and it's based on a lot of factors as you would imagine, including what's going on in the world and the performance of our business and so on. But back to your original question, our view has not changed about the minimum cash we should have to fund the working capital needs of the business. And again, that's about $600 million to start the year.

Our next question is from Jennifer Black with Jennifer Black & Associates.

I wondered if you, Nick, could talk about the price increases that you've taken on the signature line and also the lower dollar amount to get free product I wondered if the customers noticed and what the response has been? And then, Sharen, I wondered if you could talk about your plans for Shapewear and VSX.

Thanks, Jennifer. So it's really about wherever we've introduced fashion or whether we've upgraded the product, whether we've improved it, we've tested and played with different prices. So we've actually seen a positive reaction. It's not been an issue, we've actually seen a positive reaction to that. And then I'm sorry, I missed the second part of your question. The first part was around price increases, what was your second part?

The lower coupon amount, the lower amount that you get in free product. I know it's a small amount but it does eliminate some of the signature lines.

Yes. We haven't seen an issue associated with that on either end.

Okay, great.

Jennifer, it's Sharen. On the Shapewear question, Shapewear is now in all stores. It is a kind of a replenishment fashion business. I think that it is just a steady business that we have today. When I think about VSX, the Victoria's Secret Sport, very excited about this concept. And as you know, within some of our tight real estate, as we continue to invest in our real estate and expanding and optimizing the Victoria's Secret space, as well as in keeping PINK in the freestanding space, this will give us an opportunity to continue to expand this category. We do have 2 freestanding stores and have piloted Victoria's Secret Sport in about 45 stores and very, very positive about this concept.

Will you expand the number of doors this year?

As fast as we can get the real estate to do so.

The next question is from Roxanne Meyer with UBS.

My questions are around PINK. I'm just curious, if you could remind us, what percentage of total Victoria's Secret sales are PINK right now? How big do you think it can actually get as a proportion of Victoria's Secret over the next few years? And then as you look to put PINK into more and more of your stores, noting that it is only in its full entirety, in 10% of the chain, how do you think about the ultimate opportunity as you continue to remodel or relocate Victoria's Secret stores?

Okay. Today, depending on the real estate, the demand in the store, it can be anywhere penetrated from 10% of the store to 20% of the store. We believe PINK, as you know, hit over $1 billion last year. We think that there's an opportunity to more than double the PINK business with the right real estate plays. And when you think about what percent of the business it compete, the total Victoria's Secret, we think there's such an opportunity for Victoria's Secret to grow as well. As we started playing around with the PINK concept, we took space away from Victoria's Secret. So we don't even -- we're not really optimizing Victoria's Secret today, and we're not optimizing PINK today. Therefore, the big investment in terms of our real estate strategy as we go forward into 2012 and into 2013. So we're very excited about both the businesses having the opportunity. It's very important to our long-range strategy for PINK, as well as for Victoria's Secret. So I think this year, we've proven a lot by -- our real desire is to have enough to continue with square feet across the mall to have PINK and Victoria's Secret right next to each other. So if we can work that, that's perfect. If not, we will have separated stores.

Your next question is from Janet Kloppenburg with JJK Research.

For Sharen, staying on PINK, I was wondering if you could talk a little bit about the timeline for deeper penetration of the full PINK line in the Victoria's Secret domestic store base. And I was also wondering if you could talk about your launch schedule and your price points both versus last year. And for Nick, I was wondering if you could talk about the gift set performance during the holiday season and your thoughts on that product category as we move into holiday '12.

The first question is that we will have most of the freestanding PINK stores opened up by this summer, which will give us, allow us to actually within those key malls have the full breadth of assortment in PINK freestanding store, as well as optimize on the Victoria's Secret side of the business. I'm very excited about the launch lineup that we have for this spring season. One of the things that's coming out next week is actually relaunching our #1 bra, which is Very Sexy. It is new and improved, it is absolutely fabulous, the fashion is great. As with also launching Very Sexy, we're actually coming out with a Very Sexy touch fragrance line to complement that launch. As we go and march through the spring season, there's a lot of newness in our launches, a lot of new fashion in our launches. Therefore, we're continuing to keep all of our franchises very relevant as we go through the spring season.

Is the launch schedule comparable to last year, Sharen?

Yes, it is comparable. We actually are adding one launch in the summer time frame.

And on the price points?

The price points on the bras are anywhere from $42 to $50, depending on the level of fashion in the Very Sexy franchise. And then as we get into the Angel franchise, they really go from anywhere from $39 to probably $48. So it's still mostly in our better price points.

Are you skewing towards the better price points?

I would say between the fashion and the complexity of the bras and really working on our fit, they will be over the $40 price point this spring season. Now I just want to say one other thing though. I think that it's important that those launches are over $40 but we do have in our business, a good, better, best strategy and we are not walking away from our good strategy, nor our better strategy. We just have more emphasis this year in the Victoria's Secret side around the best, as well as on the PINK side, we have a lot of strength in the good price point. So I just want to make sure that we don't leave the impression that we're not going to have a balanced strategy of good, better, best.

Thanks, Sharen. Gift sets?

Janet, so we're still very much hindsighting the performance of gift sets to understand the ins and outs and the opportunities associated with that. My point of view is we probably need to and will take a more holistic point of view towards what role does gifting play in the store for her during that time period because clearly, it's a high-traffic time period. Clearly, she still comes to us for gifting. She still sees us as important in that. I think what's also interesting for us is when we look at and break down our business during that time frame, we also saw our 3 brands actually over index and perform particularly well. So how do we take some of the existing stuff that we've got that's working well and how does that work and play within the whole gifting arena.

The next question is from Paul Lejuez with Nomura Securities.

Stuart, back in '07, I think it was '07, you guys had a store program where you were increasing the size of the Victoria's Secret stores. Can you just review for us the detail of that program? Just including the resulting returns on capital of those projects. What happened to store productivity? And I guess, how does that differ from what you guys are doing today with expansions?

Paul, I'm going to start and Sharen may want to add. With respect to the expansion of stores in '07 time frame, certainly as we would have -- any of us would've evaluated it externally or internally in '08 or '09, it wouldn't evaluate very well because we had under performance in the business, some due to our own issues and some due to the economy. As the business has improved substantially over the last 3 years as we've looked at those locations, they're doing extraordinarily well. So the productivity, the profit per door, et cetera, those investments have proven to be very good investments. And then what's different about and again, Sharen may want to elaborate on it. What's different about the investments that we're making now and the initiative as we think about it today is that we are concentrating more in key geographic markets to ensure that we really have the -- we get the best operating results in addition to the changes in real estate and the optimization of the space, as Sharen mentioned earlier for PINK, Lingerie and Beauty. So '07 program, certainly, as we look at it today, very good. First year or 2 out of the box, wouldn't look so good. And as we play it forward here, we think we learned some things about how to do it even better, frankly, and we're applying those things to the investments we're making now. Sharen, I don't know if you want to add?

Yes. I think the one thing that I would add, I just think we're in such a different place today than we were in 2007. I think that we probably put the real estate in before we had fully baked the entire assortments and concept. And now, we are absolutely confident that where we need the additional space, what concepts are going to go into the additional space, how we're going to utilize it, market it. I just think we're just in a totally different place than we were back in 2007. So I'm thrilled with the results that we're getting in the early stages at the stores we've been able to go in and expand our space and rightsize both Victoria's Secret and PINK.

Your next question is from Jeff Black with Citigroup.

Just a clarification really. On the expenses, Stuart, on the buying and occupancy in SG&A both, how do we look at the comp levels needed to achieve similar levels of leverage that you did this year? I mean, don't those hurdle rates go a little higher or are there offsets that you want to talk about, so we can understand that better?

Yes. I would -- the most summary level answer to that question and do appreciate that it's -- actually as you work the details, it gets more complicated, is that it takes a low-single to mid-single digit comp, absent actions to leverage our expenses. So if we think about the general growth rate in our occupancy expenses, the general growth rate in selling costs and overhead costs, there in that low-single digit, 3% or 4% kind of range. There are certainly unique things we mentioned in the first quarter, for example, investments related to the La Senza transition and the international business that in a shorter period of time might skew that general point of view a bit. But certainly on a full year basis, it is that low to -- 3% to 4% kind of growth rate. With that said, and hopefully as you've sensed from us previously, and as I reiterated in an earlier comment, we've got a lot of leverage to pull and we use a lot of judgment to pull them. We want to approach the business in a balanced way, but if we had a prolonged period of less sales growth, we would re-examine a lot of things and again our commitment is to grow expenses slower than sales.

The next question is from Barbara Wyckoff from CLSA. Barbara Wyckoff - Credit Agricole Securities (USA) Inc., Research Division: I guess for Martyn and Stuart, how should we be looking at CapEx going forward beyond this year into 2013, 2014? And then for this year, could you give us an idea of where the spending is going to be for new stores, remodels, systems, et cetera?

Sure. So it's -- I'll respond to that, Barbara. The CapEx level kind of prospectively is in the $500 million to $600 million range. As mentioned earlier in this call and when we had our meeting together in October, the key driver of increase in CapEx between 2011 and 2012 is that investment in the United States related to the remodeling and expansion of Victoria's Secret stores along with some increase for additional PINK freestanding locations, where we can't get the adjacent space that Sharen mentioned earlier. About -- as a general point of view and it's been true for us for a long period of time, between 60% and 70% of our capital investment goes into stores, relates to stores, real estate-related activity. New stores, remodeling stores, the technology associated with new stores, et cetera. Then the next biggest category is technology and then we do have some spending on distribution, logistics as well to add capacity where needed and update things where needed. So that's the general overview for CapEx. Again, on a multiyear-forward basis, I think the appropriate range right now to use is between $500 million and $600 million. And again, as we demonstrated in 2009, if things happen in the world or in our business, where we need to adjust, a big part of how we run this business is we try to make judgments based on what's going on in the business. The $500 million or $600 million assumes continued positive growth and profitability of the business, which we expect by the way. But my point is, if things happen in the world, we can adjust that. As you'll remember, we pulled it back to just over $200 million, and some of the increase this year is also a bit of catch-up frankly from that period of time as well.

Your next question is from Michelle Tan with Goldman Sachs.

Sorry if I missed this in the earlier part of the call. But I was wondering if Sharen or Stuart, you could give us a little more perspective on what kind of the average unit cost increases you've seen in the Victoria's Secret business in the back part of this year, and how much you're actually seeing as you look forward to fall of '12?

So, Michelle, I'll take a crack at it and again, Sharen may want to add something. But as a general point, we have seen increases, they were concentrated in fall of 2011, with some carryover into the spring of 2012 as you would expect and I think is intuitive those cost -- the effect of those cost increases and the nature of those is moderating and we would expect to have some favorability with respect to that in fall of 2012. We haven't, Michelle, gotten specific about the percentage and so on. It varies so much, I mean. By way of a reminder, 40% of what we sell is personal care and beauty. So that's got different characteristics to it. There are differences between the PINK business where we have seen the greatest proportion of cost increases and other parts of our business. But the most important thing as we see it is that effect will moderate as we go through the year and we would expect some favorability in the fall.

Stuart, if we were trying to ballpark it, is it -- are we probably getting in the range, if we think about the kind of cost increases, decreases that an apparel brand would see that's reasonably cotton-based and just putting the ratio of your business that's within PINK onto that percentage, as kind of a guesstimate and assume that the rest of the movement in Victoria's Secret and BBW is pretty minimal or is that too simplistic?

Well, it's probably at the end of the day is a little too simplistic. Because as you know, even within the PINK business, they have a loungewear business, which would track generally with other apparel categories. But they have important and significant parts of their business that are bras and panties as well, along with other categories. So I suppose there's a way to model and make assumptions about anything. We've tried to give you kind of our overall sense of it. And again, the most important thing as it relates to merchandise margins is our opportunity to continue to improve full priced selling through great fashion, chase shorter lead times, great marketing, great display. That's what our business is about.

Your next question is from Ike Boruchow with JPMorgan.

I'm calling for Brian this morning. Stuart, just a quick question. When I take a step back and look at Victoria's Secret, and the ongoing opportunity in the U.S. Can you remind us when was the peak or all-time high productivity for Victoria's Secret in the U.S? And at that time, how much PINK was in the store relative to how much PINK is in the store today?

The peak sales per foot or real estate productivity, Ike, was in 2006. And at that time PINK was a pretty small portion of the business, obviously.

Okay. And today, I mean, can you – we're just trying to get a sense how much opportunity is there in the core Victoria's Secret?

The sales per square foot this year, Ike, will be the best ever for Victoria's Secret and Bath & Body Works is approaching its best ever as well, which coincidentally was also in 2006. And as you understand, real estate productivity is a math function. It's a numerator and a denominator, right? And we believe that there's not a natural -- there are certainly at some level natural limits but the productivity, for example, in the Beauty category, is very, very high. And we believe that we certainly can exceed prior levels on productivity. With that said, the reason that our capital spending is up is we're starting to reinvest more aggressively in remodeling and expanding stores to drive the balance there. But I wouldn't want people to think simplistically that, oh, Victoria's Secret has gotten its peak productivity, so that means that there's some natural limit on sales growth in the business. We really don't see it that way.

And your final question is from Dana Telsey with Telsey Advisory Group.

On sub-brands driving sales, that was a big topic this past year for Victoria's Secret. How do you think of it for next year? Are there any new sub-brands that we should be watching? And then for both businesses, on the online opportunity, how do you see it for the U.S. opportunity and could that be a margin driver going forward?

In terms of the PINK, Beauty, Lingerie business is that, for this year, is we see growth opportunity in all 3 of those businesses. And I think we've been discussing a lot today that, number one, is there's just a lot more productivity we can get out some of our existing stores and we also know that we have a real estate expansion program that benefits both the PINK, the Beauty and the Victoria's Secret Lingerie business. We have a very robust Direct business. We have an opportunity, as we talked a little bit about earlier, is how do we -- the 2 channels have totally been separated for many, many years. The opportunity of making them one view of the customer, how we can take care of the customers across channels is going to be a big win and a big unlock for Victoria's Secret. And when you combine those 2 together in terms of how we market to the customer and how we leverage to the customer, in my view, it will be transformational. Probably more of a liability for the Direct channel in the beginning but in the long run, I think Victoria's Secret as a brand will benefit.

Nick, comments on your Direct business.

Yes. I think it's still -- obviously, is to continue to be an opportunity for us this year. And I think not only from a business but equally important for our opportunity to tell the brand story in another channel other than bricks and mortar, and connect with her where she wants to connect, whether she wants to connect with us online or whether she wants to connect with us physically in the store. So an opportunity on both levels.

Great. Thanks, Nick. Thanks, Dana. That concludes our call this morning and we thank you again for your interest in our business.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may now disconnect your lines.