10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-8344

LIMITED BRANDS, INC.

(Exact name of registrant as specified in its charter)

Delaware	31-1029810
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Three Limited Parkway, P.O. Box 16000, Columbus, Ohio	43216
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (614) 415-7000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.50 Par Value	Outstanding at August 27, 2010
	322,778,842 Shares

LIMITED BRANDS, INC.

TABLE OF CONTENTS

	Page No.
Part I. Financial Information
Item 1. Financial Statements *
Consolidated Statements of Income for the Thirteen Weeks and Twenty-Six Weeks Ended July  31, 2010 and August 1, 2009 (Unaudited)	3
Consolidated Balance Sheets as of July 31, 2010 (Unaudited), January 30, 2010 and August  1, 2009 (Unaudited)	4
Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended July 31, 2010 and August  1, 2009 (Unaudited)	5
Notes to Consolidated Financial Statements (Unaudited)	6
Report of Independent Registered Public Accounting Firm	28
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995	29
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3. Quantitative and Qualitative Disclosures About Market Risk	45
Item 4. Controls and Procedures	46
Part II. Other Information
Item 1. Legal Proceedings	47
Item 1A. Risk Factors	47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3. Defaults Upon Senior Securities	47
Item 4. Reserved	47
Item 5. Other Information	47
Item 6. Exhibits	48
Signatures	49

* The Company’s fiscal year ends on the Saturday nearest to January 31. As used herein, “second quarter of 2010” and “second quarter of 2009” refer to the thirteen week periods ending July 31, 2010 and August 1, 2009, respectively. “Year-to-date 2010” and “year-to-date 2009” refer to the twenty-six week periods ending July 31, 2010 and August 1, 2009, respectively.

2

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

LIMITED BRANDS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions except per share amounts)

(Unaudited)

	Second Quarter						Year-to-Date
	2010			2009			2010			2009
Net Sales	$	2,242		$	2,067		$	4,174		$	3,792
Costs of Goods Sold, Buying and Occupancy		(1,464	)		(1,399	)		(2,702	)		(2,576	)
Gross Profit		778			668			1,472			1,216
General, Administrative and Store Operating Expenses		(542	)		(519	)		(1,051	)		(1,002	)
Net Gain on Joint Venture		0			9			0			9
Operating Income		236			158			421			223
Interest Expense		(51	)		(58	)		(112	)		(120	)
Interest Income		0			1			1			2
Other Income (Loss)		59			(2	)		121			(3	)
Income Before Income Taxes		244			99			431			102
Provision for Income Taxes		66			25			140			25
Net Income	$	178		$	74		$	291		$	77
Net Income Per Basic Share	$	0.55		$	0.23		$	0.90		$	0.24
Net Income Per Diluted Share	$	0.54		$	0.23		$	0.87		$	0.24
Dividends Per Share	$	0.15		$	0.15		$	1.30		$	0.30

The accompanying Notes are an integral part of these Consolidated Financial Statements.

3

LIMITED BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(in millions except per share amounts)

	July 31, 2010			January 30, 2010			August 1, 2009
	(Unaudited)						(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	1,300		$	1,804		$	1,550
Accounts Receivable, Net		209			219			230
Inventories		1,083			1,037			1,091
Deferred Income Taxes		32			30			74
Other		181			160			188
Total Current Assets		2,805			3,250			3,133
Property and Equipment, Net		1,641			1,723			1,850
Goodwill		1,447			1,442			1,441
Trade Names and Other Intangible Assets, Net		596			594			599
Other Assets		233			164			162
Total Assets	$	6,722		$	7,173		$	7,185
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable	$	559		$	488		$	508
Accrued Expenses and Other		615			693			557
Income Taxes		6			141			33
Total Current Liabilities		1,180			1,322			1,098
Deferred Income Taxes		224			213			220
Long-term Debt		2,532			2,723			3,251
Other Long-term Liabilities		713			731			740
Shareholders’ Equity:
Preferred Stock - $1.00 par value; 10 shares authorized; none issued		0			0			0
Common Stock - $0.50 par value; 1,000 shares authorized; 326, 323 and 524 shares issued; 323, 323, 322 shares outstanding, respectively		163			161			262
Paid-in Capital		63			0			1,541
Accumulated Other Comprehensive Income (Loss)		9			(15	)		(22	)
Retained Earnings		1,906			2,037			4,757
Less: Treasury Stock, at Average Cost; 3, 0 and 202 shares, respectively		(68	)		0			(4,662	)
Total Limited Brands, Inc. Shareholders’ Equity		2,073			2,183			1,876
Noncontrolling Interest		0			1			0
Total Equity		2,073			2,184			1,876
Total Liabilities and Equity	$	6,722		$	7,173		$	7,185

The accompanying Notes are an integral part of these Consolidated Financial Statements.

4

LIMITED BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

	Year-to-Date
	2010			2009
Operating Activities:
Net Income	$	291		$	77
Adjustments to Reconcile Net Income to Net Cash Provided by (Used for) Operating Activities:
Depreciation and Amortization of Long-lived Assets		194			191
Amortization of Landlord Allowances		(17	)		(18	)
Deferred Income Taxes		2			4
Share-based Compensation Expense		23			22
Excess Tax Benefits from Share-based Compensation		(10	)		0
Net Gain on Joint Venture		0			(9	)
Gain on Distribution from Express		(49	)		0
Gain on Express Initial Public Offering		(52	)		0
Gain on Divestiture of Limited Stores		(20	)		0
Loss on Extinguishment of Debt		25			0
Changes in Assets and Liabilities:
Accounts Receivable		10			9
Inventories		(44	)		102
Accounts Payable, Accrued Expenses and Other		(9	)		(107	)
Income Taxes Payable		(128	)		(61	)
Other Assets and Liabilities		(32	)		34
Net Cash Provided by Operating Activities		184			244
Investing Activities:
Capital Expenditures		(110	)		(97	)
Return of Capital from Express		49			0
Return of Capital from Limited Stores		7			0
Proceeds from Divestiture of Limited Stores		32			0
Proceeds from Express Initial Public Offering		20			0
Other Investing Activities		(1	)		0
Net Cash Used for Investing Activities		(3	)		(97	)
Financing Activities:
Proceeds from Long-term Debt, Net of Issuance Costs		390			473
Payments of Long-term Debt		(621	)		(130	)
Dividends Paid		(422	)		(96	)
Financing Costs		(14	)		(19	)
Repurchase of Common Stock		(68	)		0
Excess Tax Benefits from Share-based Compensation		10			0
Proceeds From Exercise of Stock Options and Other		38			0
Net Cash Provided by (Used for) Financing Activities		(687	)		228
Effects of Exchange Rate Changes on Cash and Cash Equivalents		2			2
Net Increase (Decrease) in Cash and Cash Equivalents		(504	)		377
Cash and Cash Equivalents, Beginning of Period		1,804			1,173
Cash and Cash Equivalents, End of Period	$	1,300		$	1,550

The accompanying Notes are an integral part of these Consolidated Financial Statements.

5

LIMITED BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business and Basis of Presentation

Description of Business

Limited Brands, Inc. (the Company) operates in the highly competitive specialty retail business. The Company is a specialty retailer of women’s intimate and other apparel, beauty and personal care products and accessories. The Company sells its merchandise through specialty retail stores in the United States and Canada, which are primarily mall-based, and through its websites, catalogue and other channels. The Company currently operates the following retail brands:

• Victoria’s Secret

• Victoria’s Secret Pink

• La Senza

• Bath & Body Works

• C.O. Bigelow

• The White Barn Candle Company

• Henri Bendel

Fiscal Year

The Company’s fiscal year ends on the Saturday nearest to January 31. As used herein, “second quarter of 2010” and “second quarter of 2009” refer to the thirteen week periods ending July 31, 2010 and August 1, 2009, respectively. “Year-to-date 2010” and “year-to-date 2009” refer to the twenty-six week periods ending July 31, 2010 and August 1, 2009, respectively.

Basis of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company accounts for investments in unconsolidated entities where it exercises significant influence, but does not have control, using the equity method. Under the equity method of accounting, the Company recognizes its share of the investee net income or loss. Losses are only recognized to the extent the Company has positive carrying value related to the investee. Carrying values are only reduced below zero if the Company has an obligation to provide funding to the investee. The Company’s share of net income or loss of unconsolidated entities from which the Company purchases merchandise or merchandise components is included in Cost of Goods Sold, Buying and Occupancy on the Consolidated Statements of Income. The Company’s share of net income or loss of all other unconsolidated entities is included in Other Income (Loss) on the Consolidated Statements of Income. The Company’s equity investments are required to be tested for impairment when it is determined there may be an other than temporary loss in value.

Express

Through May 12, 2010, the Company had a 25% ownership interest in Express and accounted for this investment under the equity method of accounting. On May 13, 2010, Express completed an initial public offering (“IPO”). Additionally, the Company sold a portion of its shares of common stock in Express in conjunction with the IPO. As a result, the Company’s ownership interest was diluted from 25% to 18%. The Company eliminated in consolidation 25% of merchandise sourcing sales to Express through May 12, 2010 and eliminated 18% from May 13, 2010 through the end of the second quarter of 2010.

Based on the Company’s reduced ownership in Express, the resulting loss of contractual rights and the resignation of the Company’s seats on Express’ Board of Directors in August 2010, the Company has determined that it is appropriate to account for Express using the available-for-sale method of accounting beginning in the third quarter of 2010. As a result of the accounting change, the Company will no longer record equity income (loss) from Express in Other Income (Loss) on the Consolidated Statement of Income. The Company will also recognize 100% of merchandise sourcing sales to Express. Furthermore, under the available-for-sale method, the Company’s investment in Express will be valued based on the market price of Express’ common stock.

6

Limited Stores

Through June 9, 2010, the Company had a 25% ownership interest in Limited Stores. The Company accounted for this investment under the equity method of accounting and eliminated in consolidation 25% of merchandise sourcing sales to Limited Stores equal to the Company’s ownership percentage. On June 10, 2010, the Company divested its remaining 25% ownership percentage in Limited Stores and resigned its seats on Limited Stores’ Board of Directors. Beginning June 10, 2010, the Company no longer records equity income (loss) from Limited Stores and also began recognizing 100% of merchandise sourcing sales to Limited Stores.

Interim Financial Statements

The Consolidated Financial Statements as of and for the quarter and year-to-date periods ended July 31, 2010 and August 1, 2009 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in the Company’s 2009 Annual Report on Form 10-K.

In the opinion of management, the accompanying Consolidated Financial Statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods.

Seasonality of Business

Due to seasonal variations in the retail industry, the results of operations for any interim period are not necessarily indicative of the results expected for the full fiscal year.

Concentration of Credit Risk

The Company maintains cash and cash equivalents with various major financial institutions. Currently, the Company’s investment portfolio is comprised of U.S. and Canadian government obligations, U.S. Treasury and AAA-rated money market funds, bank time deposits and highly-rated commercial paper.

The Company monitors the relative credit standing of financial institutions and other entities with whom the Company transacts and limits the amount of credit exposure with any one entity. The Company also monitors the creditworthiness of entities to which the Company grants credit terms in the normal course of business and counterparties to derivative instruments.

2. New Accounting Pronouncements

Fair Value Measurements

In January 2010, the Financial Accounting Standards Board issued Accounting Standard Update 2010-06, which amends Accounting Standards Codification (“ASC 820”), Fair Value Measurement and Disclosures. This guidance requires new disclosures and provides amendments to clarify existing disclosures. The new requirements include disclosing transfers in and out of Levels 1 and 2 fair value measurements and the reasons for the transfers and further disaggregating activity in Level 3 fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the new disclosure regarding the activity in Level 3 measurements, which will be effective for fiscal years and interim periods beginning after December 15, 2010. The Company adopted this guidance for the fiscal period beginning January 31, 2010, except for the new disclosure regarding the activity in Level 3 measurements, which the Company will adopt for the fiscal period beginning January 30, 2011.

3. Earnings Per Share and Shareholders’ Equity

Earnings Per Share

Earnings per basic share are computed based on the weighted-average number of outstanding common shares. Earnings per diluted share include the weighted-average effect of dilutive options and restricted stock on the weighted-average shares outstanding.

7

The following table provides shares utilized for the calculation of basic and diluted earnings per share for the second quarter and year-to-date of 2010 and 2009:

	Second Quarter				Year-to-Date
	2010		2009		2010	2009
	(in millions)
Weighted-average Common Shares:
Issued Shares (a)	326		524		324	524
Treasury Shares (a)	(1	)	(202	)	0	(203	)
Basic Shares	325		322		324	321
Effect of Dilutive Options and Restricted Stock	9		4		9	3
Diluted Shares	334		326		333	324
Anti-dilutive Options and Awards (b)	3		12		3	16

(a) In January 2010, the Company retired 201 million shares of its Treasury Stock.

(b) These options and awards were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

Shareholders’ Equity

In March 2010, the Company’s Board of Directors declared a special dividend of $1 per share. The special dividend, totaling $325 million, was distributed on April 19, 2010 to shareholders of record at the close of business on April 5, 2010. In accordance with the anti-dilutive provisions of the 1993 Stock Option and Performance Incentive Plan, the Company adjusted both the exercise price and the number of share-based awards outstanding as of the record date of the special dividend. The aggregate fair value, the aggregate intrinsic value and the ratio of the exercise price to the market price were approximately equal immediately before and after the adjustment, therefore, no compensation expense was recognized.

In March 2010, the Company’s Board of Directors also approved a new share repurchase program of $200 million and cancelled its previous $250 million share repurchase program, which had $31 million remaining. Through the second quarter of 2010, the Company repurchased 2.8 million shares of common stock for $68 million under the new program. Through August 27, 2010, the Company repurchased 0.5 million additional shares of common stock for $12 million under the new program.

In January 2010, the Company retired 201 million shares of its Treasury Stock. The retirement resulted in a reduction of $4.641 billion in Treasury Stock, $101 million in the par value of Common Stock, $1.545 billion in Paid-in Capital and $2.995 billion in Retained Earnings. Beginning in 2010, the Company adopted a policy of issuing new shares to satisfy award exercises or conversions.

4. Inventories

The following table provides details of inventories as of July 31, 2010, January 30, 2010 and August 1, 2009:

	July 31, 2010		January 30, 2010		August 1, 2009
	(in millions)
Finished Goods Merchandise	$	984	$	973	$	1,009
Raw Materials and Merchandise Components		99		64		82
Total Inventories	$	1,083	$	1,037	$	1,091

Inventories are principally valued at the lower of cost, as determined by the weighted-average cost method, or market.

8

5. Property and Equipment, Net

The following table provides details of property and equipment, net as of July 31, 2010, January 30, 2010 and August 1, 2009:

	July 31, 2010			January 30, 2010			August 1, 2009
	(in millions)
Property and Equipment, at Cost	$	4,082		$	4,058		$	4,080
Accumulated Depreciation and Amortization		(2,441	)		(2,335	)		(2,230	)
Property and Equipment, Net	$	1,641		$	1,723		$	1,850

Depreciation expense was $96 million for both the second quarter of 2010 and 2009. Depreciation expense was $191 million and $189 million for year-to-date 2010 and 2009, respectively.

6. Goodwill, Trade Names and Other Intangible Assets, Net

Goodwill

The following table provides the rollforward of goodwill for year-to-date 2010:

	Victoria’s Secret		Bath & Body Works		Total
			(in millions)
Balance as of January 30, 2010	$	814	$	628	$	1,442
Foreign Currency Translation		5		0		5
Balance as of July 31, 2010	$	819	$	628	$	1,447

The following table provides the rollforward of goodwill for year-to-date 2009:

	Victoria’s Secret		Bath & Body Works		Total
			(in millions)
Balance as of January 31, 2009	$	798	$	628	$	1,426
Foreign Currency Translation		15		0		15
Balance as of August 1, 2009	$	813	$	628	$	1,441

Intangible Assets – Indefinite Lives

Intangible assets, not subject to amortization, represent the Victoria’s Secret, Bath & Body Works and La Senza trade names. These assets totaled $571 million as of July 31, 2010, $566 million as of January 30, 2010 and $568 million as of August 1, 2009. These intangible assets are included in Trade Names and Other Intangible Assets, Net on the Consolidated Balance Sheets.

Intangible Assets – Finite Lives

The following table provides intangible assets with finite lives as of July 31, 2010, January 30, 2010 and August 1, 2009:

	July 31, 2010			January 30, 2010			August 1, 2009
				(in millions)
Intellectual Property	$	41		$	41		$	41
Trademarks/Brands		19			19			19
Licensing Agreements and Customer Relationships		24			23			23
Favorable Operating Leases		19			19			19
Total		103			102			102
Accumulated Amortization		(78	)		(74	)		(71	)
Intangible Assets, Net	$	25		$	28		$	31

9

Amortization expense was $1 million for both the second quarter of 2010 and 2009. Amortization expense was $3 million and $2 million for year-to-date 2010 and 2009, respectively. Estimated future annual amortization expense will be approximately $4 million for the remainder of 2010, $7 million in 2011, $5 million in 2012, $4 million in 2013, $3 million in 2014 and $2 million in the aggregate thereafter.

7. Equity Investments and Other

Express

In July 2007, the Company completed the divestiture of 75% of its ownership interest in Express. In conjunction with the transaction, the Company and Express entered into transition services agreements whereby the Company provided support to Express in various operational areas including logistics, technology and merchandise sourcing. The terms of these transition services arrangements varied and ranged from 3 months to 3 years.

In October 2009, the Company entered into new agreements with Express whereby the Company will continue to provide logistics services and lease office space. The Company also continues to provide merchandise sourcing services to Express.

The Company recognized merchandise sourcing revenue from Express of $81 million and $86 million in the second quarter of 2010 and 2009, respectively. The Company recognized merchandise sourcing revenue from Express of $145 million and $153 million for year-to-date 2010 and 2009, respectively. These amounts are net of the elimination of merchandise sourcing revenue equal to the Company’s ownership percentage. The Company’s accounts receivable from Express for merchandise sourcing and other services provided totaled $85 million as of July 31, 2010, $80 million as of January 30, 2010 and $100 million as of August 1, 2009.

In March 2010, Express completed a cash distribution to its owners and the Company received $57 million. The Company’s portion representing a return on capital is $8 million and is included in Other Assets and Liabilities within the Operating Activities section of the 2010 Consolidated Statement of Cash Flows. The remaining portion representing a return of capital is $49 million and is included in Return of Capital from Express within the Investing Activities section of the 2010 Consolidated Statement of Cash Flows. The proceeds received from the cash distribution were in excess of the Company’s carrying value of the investment in Express. As a result, the carrying value was reduced to zero as of the date of the cash distribution and a pre-tax gain of approximately $49 million was recorded. The pre-tax gain is included in Other Income (Loss) on the year-to-date 2010 Consolidated Statement of Income.

On May 13, 2010, Express completed an IPO. Additionally, the Company sold 1.3 million shares of its common stock in Express in the IPO. As a result, the Company’s ownership interest was diluted from 25% to 18% and the carrying value of the Company’s remaining investment was increased to reflect the proportional impact of the IPO. As a result of these events, the Company recognized a pre-tax gain of $52 million, which is included in Other Income (Loss) on the 2010 Consolidated Statements of Income.

Based on the Company’s reduced ownership in Express, the resulting loss of contractual rights and the resignation of the Company’s seats on Express’ Board of Directors in August 2010, the Company has determined that it is appropriate to account for Express using the available-for-sale method of accounting beginning in the third quarter of 2010. As a result of the accounting change, the Company will no longer record equity income (loss) from Express in Other Income (Loss) on the Consolidated Statement of Income. The Company will also recognize 100% of merchandise sourcing sales to Express. Furthermore, under the available-for-sale method, the Company’s investment in Express will be valued based on the market price of Express’ common stock.

The Company’s investment carrying value for Express was $37 million as of July 31, 2010, $5 million as of January 30, 2010 and zero as of August 1, 2009. These amounts are included in Other Assets on the Consolidated Balance Sheets. As of July 31, 2010, the market value of the Company’s investment in Express based on the closing price of Express’ common stock was $286 million.

Limited Stores

In August 2007, the Company completed the divestiture of 75% of its ownership interest in Limited Stores. In conjunction with the transaction, the Company and Limited Stores entered into transition services agreements whereby the Company provided support to Limited Stores in various operational areas including logistics, technology and merchandise sourcing. The terms of these transition services arrangements varied and ranged from 3 months to 3 years.

In June 2010, the Company entered into a new agreement with Limited Stores whereby the Company will continue to provide logistics services. The Company also continues to provide merchandise sourcing services to Limited Stores.

10

The Company recognized merchandise sourcing revenue from Limited Stores of $7 million and $12 million in the second quarter of 2010 and 2009, respectively. The Company recognized merchandise sourcing revenue from Limited Stores of $22 million and $26 million for year-to-date 2010 and 2009, respectively. These amounts are net of the elimination of merchandise sourcing revenue equal to the Company’s ownership percentage. The Company’s accounts receivable from Limited Stores for merchandise sourcing and other services provided totaled $13 million as of July 31, 2010, $10 million as of January 30, 2010 and $11 million as of August 1, 2009.

In February 2010, Limited Stores completed a cash distribution to its owners and the Company received $7 million. The proceeds received from the cash dividend reduced the Company’s carrying value of the investment in Limited Stores. The distribution represented a return of capital and is included in Return of Capital from Limited Stores within the Investing Activities section on the 2010 Consolidated Statement of Cash Flows.

In June 2010, the Company completed the divestiture of its remaining 25% ownership interest in Limited Stores and resigned its seats on Limited Stores’ Board of Directors. The Company received pre-tax net cash proceeds of $32 million from the divestiture which are included in Proceeds from Divestiture of Limited Stores within the Investing Activities section on the 2010 Consolidated Statement of Cash Flows. The Company recorded a pre-tax gain on the divestiture of $20 million ($42 million net of related tax benefits). The pre-tax gain is included in Other Income (Loss) on the 2010 Consolidated Statements of Income. The Company will no longer record equity income (loss) from Limited Stores in Other Income (Loss) on the Consolidated Statement of Income. The Company also began recognizing 100% of merchandise sourcing sales to Limited Stores following the divestiture. The Company’s investment carrying value for Limited Stores was zero as of July 31, 2010, $13 million as of January 30, 2010 and $11 million as of August 1, 2009. These amounts are included in Other Assets on the Consolidated Balance Sheets.

Easton Investment

The Company has land and other investments in Easton, a 1,300 acre planned community in Columbus, Ohio that integrates office, hotel, retail, residential and recreational space. These investments, at cost, totaled $68 million as of July 31, 2010, $66 million as of January 30, 2010 and $64 million as of August 1, 2009 and are recorded in Other Assets on the Consolidated Balance Sheets.

Included in the Company’s Easton investments is an equity interest in Easton Town Center, LLC (“ETC”), an entity that owns and has developed a commercial entertainment and shopping center. The Company’s investment in ETC is accounted for using the equity method of accounting. The Company has a majority financial interest in ETC, but another unaffiliated member manages ETC. Certain significant decisions regarding ETC require the consent of unaffiliated members in addition to the Company.

Other

In April 2008, the Company recorded a pre-tax impairment charge of $19 million related to an unconsolidated joint venture accounted for under the equity method of accounting. The charge consisted of writing down the investment balance, reserving certain accounts and notes receivable and accruing a contractual liability. In July 2009, the Company recognized a pre-tax gain of $9 million ($14 million net of related tax benefits) associated with the reversal of the accrued contractual liability as a result of the divestiture of the joint venture. The pre-tax gain is included in Net Gain on Joint Venture on the 2009 Consolidated Statements of Income.

8. Income Taxes

The provision for income taxes is based on the current estimate of the annual effective tax rate and is adjusted as necessary for quarterly events. The Company’s quarterly effective tax rate does not reflect a benefit associated with losses related to certain foreign subsidiaries. The Company’s effective tax rate has historically reflected a provision related to the undistributed earnings of foreign affiliates, but the related taxes are not paid until the earnings are deemed repatriated to the United States. The Company has historically recorded a deferred tax liability for those undistributed earnings. Currently, no deferred tax liability is recorded on foreign affiliated earnings as the tax basis is greater than the carrying value.

For the second quarter of 2010 and year-to-date 2010, the Company’s effective tax rate was 26.8% and 32.4%, respectively. The Company’s effective tax rate for 2010 was favorably impacted by the divestiture of the Company’s remaining 25% ownership in Limited Stores, which resulted in the recognition of the capital loss associated with the 2007 divestiture of 75% of the Company’s ownership in Limited Stores.

For the second quarter of 2009 and year-to-date 2009, the Company’s effective tax rate was 25.1% and 24.9%, respectively. The Company’s effective tax rate for 2009 was favorably impacted by the resolution of certain tax matters.

Income taxes paid were approximately $99 million and $8 million for the second quarter of 2010 and 2009, respectively. Income taxes paid approximated $268 million and $82 million for year-to-date 2010 and 2009, respectively. The current income tax liability included net current deferred tax liabilities of $2 million as of July 31, 2010, January 30, 2010 and August 1, 2009.

11

9. Long-term Debt

The following table provides the Company’s long-term debt balance as of July 31, 2010, January 30, 2010 and August 1, 2009:

	July 31, 2010			January 30, 2010			August 1, 2009
	(in millions)
Senior Secured Debt
Term Loan due August 2012	$	0		$	200		$	625
5.30% Mortgage due August 2010		2			2			2
Total Senior Secured Debt		2			202			627
Senior Unsecured Debt with Subsidiary Guarantee
$500 million, 8.50% Fixed Interest Rate Notes due June 2019, Less Unamortized Discount (“2019 Notes”)		485			485			484
$400 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”)		400			0			0
Total Senior Unsecured Debt with Subsidiary Guarantee		885			485			484
Senior Unsecured Debt
$700 million, 6.90% Fixed Interest Rate Notes due July 2017, Less Unamortized Discount (“2017 Notes”)(a)		703			699			698
5.25% Fixed Interest Rate Notes due November 2014, Less Unamortized Discount (“2014 Notes”)(b)		237			499			499
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033, Less Unamortized Discount (“2033 Notes”)		350			350			350
$300 million, 7.60% Fixed Interest Rate Notes due July 2037, Less Unamortized Discount (“2037 Notes”)		299			299			299
6.125% Fixed Interest Rate Notes due December 2012, Less Unamortized Discount (“2012 Notes”)(c)		58			191			294
Total Senior Unsecured Debt		1,647			2,038			2,140
Total		2,534			2,725			3,251
Current Portion of Long-term Debt		(2	)		(2	)		0
Total Long-term Debt, Net of Current Portion	$	2,532		$	2,723		$	3,251

(a) The July 31, 2010 balance includes a fair value interest rate hedge adjustment of $4 million.

(b) The principal balance outstanding was $234 million as of July 31, 2010, $500 million as of January 30, 2010 and $500 million as of August 1, 2009. The July 31, 2010 balance also includes a fair value interest rate hedge adjustment of $4 million.

(c) The principal balance outstanding was $58 million as of July 31, 2010, $191 million as of January 30, 2010 and $295 million as of August 1, 2009. The July 31, 2010 balance includes a fair value interest rate hedge adjustment of $1 million.

Issuance of Notes

In June 2009, the Company issued $500 million of 8.50% notes due in June 2019. The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by certain of the Company’s wholly-owned subsidiaries (the “guarantors”). The net proceeds from the issuance were $473 million, which included an issuance discount of $16 million and transaction costs of $11 million. These transaction costs are being amortized through the maturity date of June 2019 and are included within Other Assets on the Consolidated Balance Sheets.

In May 2010, the Company issued $400 million of 7.00% notes due in May 2020 utilizing an existing shelf registration under which up to $1 billion of debt securities, common and preferred stock and other securities can be issued. The 2020 Notes are jointly and severally guaranteed on a full and unconditional basis by the guarantors. The net proceeds from the issuance were $390 million, which included transaction costs of $10 million. These transaction costs are being amortized through the maturity date of May 2020 and are included within Other Assets on the July 31, 2010 Consolidated Balance Sheet.

Repurchase of Notes

In June 2009, the Company repurchased $5 million of the 2012 Notes through open market transactions. In August 2009, the Company repurchased $103 million of the 2012 Notes through a tender offer for $101 million. The gain on extinguishment of this debt of $2 million is included in Other Income (Loss) on the third quarter 2009 Consolidated Statement of Income.

12

In May 2010, the Company used a portion of the proceeds from the 2020 Notes to repurchase $134 million of the Company’s 2012 Notes for $144 million. The Company used the remaining portion of the proceeds from the 2020 Notes to repurchase $266 million of the 2014 Notes for $277 million. The loss on extinguishment of this debt of $25 million is included in Other Income (Loss) on the 2010 Consolidated Statements of Income.

Subsequent to July 31, 2010, the Company repurchased $20 million and $1 million of 2014 Notes and 2012 Notes, respectively, through open market transactions.

Credit Facility and Term Loan

2009

On February 19, 2009, the Company amended its $1 billion unsecured revolving credit facility expiring in August 2012 (the “5-Year Facility”), amended its Term Loan for $750 million maturing in August 2012 and canceled its $300 million, 364-day unsecured revolving credit facility. The Company incurred fees related to the amendment of the 5-Year Facility and the Term Loan of $19 million. The fees associated with the 5-Year Facility amendment of $11 million were capitalized. The remaining cost is being amortized through the maturity date of the 5-Year Facility and is included within Other Assets on the Consolidated Balance Sheets. The fees associated with the Term Loan amendment of $8 million were expensed in addition to unamortized fees related to the original agreement of $2 million. These charges are included within Interest Expense on the year-to-date 2009 Consolidated Statement of Income.

The Company prepaid $550 million of the Term Loan throughout 2009.

2010

In March 2010, the Company prepaid the remaining $200 million of the Term Loan with cash on hand and also entered into an amendment and restatement (the “Amendment”) of its 5-Year Facility. The Amendment established two classes of loans under the 5-Year Facility: Class A loans to be made by lenders who consent to the Amendment and Class B loans to be made by non-consenting lenders. The Amendment extended the termination date of the 5-Year Facility from August 3, 2012 to August 1, 2014 on Class A loans. The Amendment also reduced the aggregate amount of the commitments of the lenders under the 5-Year Facility from $1 billion to $927 million. The loan commitments were $800 million and $127 million for Class A and Class B, respectively. The Company is permitted to borrow and prepay separately under either class of loans.

In July 2010, the Company terminated the $127 million of commitments for Class B loans related to the 5-Year Facility.

Additionally, the Amendment modified the covenants limiting investments and restricted payments to provide that investments and restricted payments may be made, without limitation on amount, if (a) at the time of and after giving effect to such investment or restricted payment the ratio of consolidated debt to consolidated EBITDA for the most recent four-quarter period is less than 3.0 to 1.0 and (b) no default or event of default exists. The Company was in compliance with all of its covenant requirements as of July 31, 2010.

The Company incurred fees related to the amendment of the 5-Year Facility of $13 million which were capitalized and are being amortized through the maturity date of the 5-Year Facility.

The 5-Year Facility has several interest rate options, which are based in part on the Company’s long-term credit ratings. Fees payable under the 5-Year Facility are based on the Company’s long-term credit ratings and are currently 0.75% of the committed and unutilized amounts per year and 3.50% on any outstanding borrowings or letters of credit. As of July 31, 2010, there were no borrowings outstanding under the 5-Year Facility.

Letters of Credit

The 5-Year Facility supports the Company’s letter of credit program. The Company had $76 million of outstanding letters of credit as of July 31, 2010 that reduce its remaining availability under its amended credit agreements.

Participating Interest Rate Swap Arrangements

In January 2008, the Company entered into participating interest rate swap arrangements designated as cash flow hedges to mitigate exposure to interest rate fluctuations related to the Term Loan. In March 2010, the Company terminated the remaining portion of the participating interest rate swap arrangement totaling $200 million in conjunction with the remaining $200 million Term Loan prepayment. For additional information, see Note 10, “Derivative Instruments.”

13

Fair Value Interest Rate Swap Arrangements

In June 2010, the Company entered into multiple fair value interest rate swap arrangements to effectively convert all of the outstanding 2012 Notes, all of the outstanding 2014 Notes and $175 million of the outstanding 2017 Notes from a fixed interest rate to a variable interest rate. For additional information, see Note 10, “Derivative Instruments.”

Subsequent to July 31, 2010, the Company terminated interest rate designated fair value hedges with a notional amount of $21 million in conjunction with the repurchase of $20 million and $1 million of 2014 Notes and 2012 Notes, respectively.

10. Derivative Instruments

Foreign Exchange Risk

In January 2007, the Company entered into a series of cross-currency swaps related to approximately $470 million of Canadian dollar denominated intercompany loans. These cross-currency swaps mitigate the exposure to fluctuations in the U.S. dollar-Canadian dollar exchange rate related to the Company’s La Senza operations. The cross-currency swaps require the periodic exchange of fixed rate Canadian dollar interest payments for fixed rate U.S. dollar interest payments as well as exchange of Canadian dollar and U.S. dollar principal payments upon maturity. The cross-currency swaps mature between 2015 and 2018 at the same time as the related loans and are designated as cash flow hedges of foreign currency exchange risk. Changes in the U.S. dollar-Canadian dollar exchange rate and the related swap settlements result in reclassification of amounts from accumulated other comprehensive income (loss) to earnings to completely offset foreign currency transaction gains and losses recognized on the intercompany loans.

The following table provides a summary of the fair value and balance sheet classification of the derivative financial instruments designated as foreign exchange cash flow hedges as of July 31, 2010, January 30, 2010, and August 1, 2009:

	July 31, 2010		January 30, 2010		August 1, 2009
	(in millions)
Other Long-term Liabilities	$	34	$	34	$	30

The following table provides a summary of the pre-tax financial statement effect of the gains and losses on the Company’s derivative instruments designated as foreign exchange cash flow hedges for the second quarter and year-to-date 2010 and 2009:

		Second Quarter						Year-to-Date
	Location	2010			2009			2010		2009
		(in millions)
Gain (Loss) Recognized in Other Comprehensive Income (Loss)	Other Comprehensive Income (Loss)	$	13		$	(37	)	$	0	$	(56	)
(Gain) Loss Reclassified from Accumulated Other Comprehensive Income (Loss) into Other Income (Loss) (a)	Other Income (Loss)		(5	)		40			18		54

(a) Represents reclassification of amounts from accumulated other comprehensive income (loss) to earnings to completely offset foreign currency transaction gains and losses recognized on the intercompany loans. No ineffectiveness was associated with these foreign exchange cash flow hedges.

Interest Rate Risk

Interest Rate Designated Fair Value Hedges

In June 2010, the Company entered into multiple interest rate swap arrangements related to all of the outstanding 2012 Notes, all of the outstanding 2014 Notes and $175 million of the outstanding 2017 Notes. The interest rate swap arrangements effectively convert the fixed interest rate on the related debt to a variable interest rate based on a three-month London Interbank Offered Rate (“LIBOR”) plus a fixed interest rate. The swap arrangements are designated as fair value hedges. The changes in the fair value of the interest rate swaps have an equal and offsetting impact to the carrying value of the debt on the balance sheet. The differential to be paid or received on the interest rate swap arrangements is accrued and recognized as an adjustment to interest expense.

14

The following table provides a summary of the fair value and balance sheet classification of the derivative financial instruments designated as interest rate fair value hedges as of July 31, 2010:

	July 31, 2010
	(in millions)
Other Assets	$	9

Subsequent to July 31, 2010, the Company terminated interest rate designated fair value hedges with a notional amount of $21 million in conjunction with the repurchase of $20 million and $1 million of 2014 Notes and 2012 Notes, respectively.

Interest Rate Designated Cash Flow Hedges

In January 2008, the Company entered into participating interest rate swap arrangements to mitigate exposure to interest rate fluctuations related to the Term Loan. The participating interest rate swap arrangements effectively converted the Term Loan to a fixed interest rate. The swap arrangements were designated as cash flow hedges of interest rate risk and expired in 2012, at the same time as the related debt. Amounts were reclassified from accumulated other comprehensive income (loss) to earnings as interest expense was recognized on the Term Loan.

In June 2009, the Company prepaid $392 million of the Term Loan. In conjunction with the Term Loan prepayment, the Company de-designated portions of the participating interest rate swap arrangements totaling $392 million. As a result, hedge accounting was discontinued prospectively on the de-designated portions of the arrangements. Immediately following de-designation, the Company terminated $292 million of the arrangements which resulted in realized losses of $12 million. To offset the impact of the remaining $100 million portion of the de-designated arrangements, the Company entered into a non-designated derivative instrument.

In December 2009, the Company prepaid an additional $158 million of the Term Loan. In conjunction with the Term Loan prepayment, the Company terminated an equal portion of the participating interest rate swap arrangements which resulted in a realized loss of $8 million in the fourth quarter of 2009. This realized loss was expensed as there are no future cash flows associated with these terminated swap arrangements.

In March 2010, the Company prepaid the remaining $200 million of the Term Loan. In conjunction with the Term Loan prepayment, the Company terminated the remaining portion of the participating interest rate swap arrangements totaling $200 million resulting in a realized loss of $10 million. This realized loss was expensed as there are no future cash flows associated with these terminated swap arrangements. This realized loss was recognized in Interest Expense on the year-to-date 2010 Consolidated Statement of Income.

The following table provides a summary of the fair value and balance sheet classification of the derivative financial instruments designated as interest rate cash flow hedges as of July 31, 2010, January 30, 2010 and August 1, 2009:

	July 31, 2010		January 30, 2010		August 1, 2009
	(in millions)
Other Long-term Liabilities	$	0	$	10	$	27

The following table provides a summary of the pre-tax financial statement effect of gains and losses on the Company’s derivative financial instruments designated as interest rate cash flow hedges for the second quarter and year-to-date 2010 and 2009:

		Second Quarter					Year-to-Date
	Location	2010		2009			2010		2009
		(in millions)
Gain (Loss) Recognized in Other Comprehensive Income (Loss)	Other Comprehensive Income (Loss)	$	0	$	(5	)	$	0	$	(11	)
Loss Reclassified from Accumulated Other Comprehensive Income (Loss) into Interest Expense (a)	Interest Expense		1		3			12		7

(a) Represents reclassification of amounts from accumulated other comprehensive income (loss) to earnings as related interest expense is recognized.

15

11. Fair Value Measurements

The following table provides a summary of the carrying value and fair value of long-term debt as of July 31, 2010, January 30, 2010 and August 1, 2009:

	July 31, 2010		January 30, 2010		August 1, 2009
	(in millions)
Carrying Value	$	2,534	$	2,725	$	3,251
Fair Value (a)		2,583		2,690		2,947

(a) The estimated fair value of the Company’s publicly traded debt is based on quoted market prices. The estimated fair value of the Term Loan is equal to its carrying value. The estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

The following table provides a summary of assets and liabilities measured in the consolidated financial statements at fair value on a recurring basis as of July 31, 2010, January 30, 2010 and August 1, 2009:

	Level 1		Level 2		Level 3		Total
	(in millions)
As of July 31, 2010
Assets:
Cash and Cash Equivalents	$	1,300	$	0	$	0	$	1,300
Interest Rate Designated Fair Value Hedges		0		9		0		9
Liabilities:
Cross-currency Cash Flow Hedges		0		34		0		34
Lease Guarantees		0		0		7		7
As of January 30, 2010
Assets:
Cash and Cash Equivalents	$	1,804	$	0	$	0	$	1,804
Liabilities:
Cross-currency Cash Flow Hedges		0		34		0		34
Interest Rate Designated Cash Flow Hedges		0		10		0		10
Lease Guarantees		0		0		9		9
As of August 1, 2009
Assets:
Cash and Cash Equivalents	$	1,550	$	0	$	0	$	1,550
Liabilities:
Cross-currency Cash Flow Hedges		0		30		0		30
Interest Rate Designated Cash Flow Hedges		0		27		0		27
Lease Guarantees		0		0		16		16

The Company’s Level 2 fair value measurements are measured using market approach valuation techniques. The primary inputs to these techniques include benchmark interest rates and foreign currency exchange rates, as applicable to the underlying instruments.

The Company’s Level 3 fair value measurements are measured using income approach valuation techniques. The primary inputs to these techniques include the Company’s assessment of the risk of default on guaranteed leases and discount rates.

Management believes that the carrying values of accounts receivable, accounts payable and accrued expenses approximate fair value because of their short maturity.

16

The following table provides a reconciliation of the Company’s lease guarantees measured at fair value on a recurring basis using unobservable inputs (Level 3) for the second quarter and year-to-date 2010 and 2009:

	Second Quarter					Year-to-Date
	2010			2009		2010			2009
	(in millions)
Beginning Balance	$	8		$	15	$	9		$	15
Change in Estimated Fair Value Reported in Earnings		(1	)		1		(2	)		1
Ending Balance	$	7		$	16	$	7		$	16

The Company’s lease guarantees include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate to leases that commenced prior to the disposition of certain businesses. The fair value of these lease guarantees is impacted by economic conditions, probability of rent obligation payments, period of remaining obligation as well as the discount rate utilized. For additional information, see Note 13, “Commitments and Contingencies.”

12. Comprehensive Income (Loss)

The following table provides detail for other comprehensive income for second quarter and year-to-date 2010 and 2009:

	Second Quarter						Year-to-Date
	2010			2009			2010			2009
	(in millions)
Net Income	$	178		$	74		$	291		$	77
Other Comprehensive Income (Loss):
Foreign Currency Translation		2			(2	)		0			(2	)
Gain (Loss) on Cash Flow Hedges		13			(42	)		0			(67	)
Reclassification of Cash Flow Hedges to Earnings		(4	)		43			30			61
Income Tax Benefit (Provision) (a)		(1	)		1			(5	)		14
Total Comprehensive Income	$	188		$	74		$	316		$	83

(a) The income tax benefit (provision) primarily relates to the interest rate cash flow hedges.

The following table provides additional detail regarding the composition of accumulated other comprehensive income (loss) as of July 31, 2010, January 30, 2010 and August 1, 2009:

	July 31, 2010			January 30, 2010			August 1, 2009
	(in millions)
Foreign Currency Translation	$	(6	)	$	(6	)	$	(7	)
Cash Flow Hedges		15			(9	)		(15	)
Total Accumulated Other Comprehensive Income (Loss)	$	9		$	(15	)	$	(22	)

13. Commitments and Contingencies

The Company is subject to various claims and contingencies related to lawsuits, taxes, insurance, regulatory and other matters arising out of the normal course of business. Actions filed against the Company from time to time include commercial, tort, intellectual property, customer, employment, data privacy, securities and other claims, including purported class action lawsuits. Management believes that the ultimate liability arising from such claims and contingencies, if any, is not likely to have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

On November 6, 2009, a class action (International Brotherhood of Electrical Workers Local 697 Pension Fund v. Limited Brands, Inc. et al.) was filed against the Company and certain of its officers in the United States District Court for the Southern District of Ohio on behalf of a purported class of all persons who purchased or acquired shares of Limited Brands common stock between August 22, 2007 and February 28, 2008. The Company believes the complaint is without merit and that the Company has substantial factual and legal defenses to the claims at issue. The Company intends to vigorously defend against this action. The Company cannot reasonably estimate the possible loss or range of loss that may result from this lawsuit.

17

Guarantees

In connection with the disposition of certain businesses, the Company has remaining guarantees of approximately $114 million related to lease payments of Express, Limited Stores, Abercrombie & Fitch, Dick’s Sporting Goods (formerly Galyan’s), Lane Bryant, New York & Company and Anne.x under the current terms of noncancelable leases expiring at various dates through 2017. These guarantees include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate to leases that commenced prior to the disposition of the businesses. In certain instances, the Company’s guarantee may remain in effect if the term of a lease is extended.

In April 2008, the Company received an irrevocable standby letter of credit from Express of $34 million issued by a third-party bank to mitigate a portion of the Company’s contingent liability for guaranteed future lease payments of Express. The Company can draw from the irrevocable standby letter of credit if Express were to default on any of the guaranteed leases. The irrevocable standby letter of credit is reduced through the November 1, 2010 expiration date consistent with the overall reduction in guaranteed lease payments. The outstanding balance of the irrevocable standby letter of credit from Express was $2 million as of July 31, 2010, $6 million as of January 30, 2010 and $12 million as of August 1, 2009.

The Company’s guarantees related to Express, Limited Stores and New York & Company require fair value accounting in accordance with U.S. GAAP in effect at the time of these divestitures. The guaranteed lease payments related to Express (net of the irrevocable standby letter of credit), Limited Stores and New York & Company totaled $75 million as of July 31, 2010, $84 million as of January 30, 2010 and $92 million as of August 1, 2009. The estimated fair value of these guarantee obligations was $7 million as of July 31, 2010, $9 million as of January 30, 2010 and $16 million as of August 1, 2009, and is included in Other Long-term Liabilities on the Consolidated Balance Sheets.

The Company’s guarantees related to Abercrombie & Fitch, Dick’s Sporting Goods (formerly Galyan’s), Lane Bryant and Anne.x are not subject to fair value accounting, but require that a loss be accrued when probable and reasonably estimable based on U.S. GAAP in effect at the time of these divestitures. The Company had no liability recorded with respect to any of the guarantee obligations as it concluded that payments under these guarantees were not probable as of July 31, 2010, January 30, 2010 and August 1, 2009.

14. Retirement Benefits

The Company sponsors a tax-qualified defined contribution retirement plan and a non-qualified supplemental retirement plan for substantially all of its associates within the United States of America. Participation in the tax-qualified plan is available to associates who meet certain age and service requirements. Participation in the non-qualified plan is made available to associates who meet certain age, service, job level and compensation requirements.

The qualified plan permits participating associates to elect contributions up to the maximum limits allowable under the Internal Revenue Code. The Company matches associate contributions according to a predetermined formula and contributes additional amounts based on a percentage of the associates’ eligible annual compensation and years of service. Associate contributions and Company matching contributions vest immediately. Additional Company contributions and the related investment earnings are subject to vesting based on years of service. Total expense recognized related to the qualified plan was $12 million and $11 million for the second quarter of 2010 and 2009, respectively. Total expense recognized related to the qualified plan was $25 million and $22 million for year-to-date 2010 and 2009, respectively.

The non-qualified plan is an unfunded plan which provides benefits beyond the Internal Revenue Code limits for qualified defined contribution plans. The plan permits participating associates to elect contributions up to a maximum percentage of eligible compensation. The Company matches associate contributions according to a predetermined formula and contributes additional amounts based on a percentage of the associates’ eligible compensation and years of service. The plan also permits participating associates to defer additional compensation up to a maximum amount which the Company does not match. Associates’ accounts are credited with interest using a rate determined by the Company. Associate contributions and the related interest vest immediately. Company contributions, along with related interest, are subject to vesting based on years of service. Associates may elect in-service distributions for the unmatched additional deferred compensation component only. The remaining vested portion of associates’ accounts in the plan will be distributed upon termination of employment in either a lump sum or in equal annual installments over a specified period of up to 10 years. Total expense recognized related to the non-qualified plan was $6 million and $4 million for the second quarter of 2010 and 2009, respectively. Total expense recognized related to the non-qualified plan was $12 million and $9 million for the year-to-date 2010 and 2009, respectively.

18

15. Segment Information

The Company has two reportable segments: Victoria’s Secret and Bath & Body Works.

The Victoria’s Secret segment sells women’s intimate and other apparel, personal care and beauty products and accessories under the Victoria’s Secret, Victoria’s Secret Pink and La Senza brand names. Victoria’s Secret merchandise is sold through retail stores, its website, www.VictoriasSecret.com, and its catalogue. Through its website and catalogue, certain Victoria’s Secret’s merchandise may be purchased worldwide. La Senza sells merchandise through retail stores located throughout Canada and licensed stores in 48 other countries. La Senza products may also be purchased through its website, www.LaSenza.com.

The Bath & Body Works segment sells personal care, beauty and home fragrance products under the Bath & Body Works, C.O. Bigelow, White Barn Candle Company and other brand names. Bath & Body Works merchandise is sold at retail stores and through its website, www.bathandbodyworks.com.

Other consists of the following:

• Henri Bendel, operator of eleven specialty stores, which features accessories and personal care products;

• Mast, an apparel merchandise sourcing and production function serving Victoria’s Secret, La Senza and third-party customers;

• Beauty Avenues, a personal care sourcing and production function serving Victoria’s Secret, La Senza and Bath & Body Works;

• International retail and wholesale operations (excluding La Senza), which include the Company’s Bath & Body Works and Victoria’s Secret stores in Canada; and

• Corporate functions including non-core real estate, equity investments and other governance functions such as treasury and tax.

The following table provides the Company’s segment information for second quarter and year-to-date 2010 and 2009:

	Victoria’s Secret		Bath & Body  Works		Other			Total
	(in millions)
2010
Second Quarter:
Net Sales	$	1,448	$	537	$	257		$	2,242
Operating Income (Loss)		192		64		(20	)		236
Year-to-Date:
Net Sales	$	2,712	$	967	$	495		$	4,174
Operating Income (Loss)		359		102		(40	)		421
2009
Second Quarter:
Net Sales	$	1,306	$	534	$	227		$	2,067
Operating Income (Loss)		126		44		(12	)		158
Year-to-Date:
Net Sales	$	2,431	$	936	$	425		$	3,792
Operating Income (Loss)		213		48		(38	)		223

The Company’s international sales, including La Senza, Bath & Body Works Canada, Victoria’s Secret Canada and direct sales shipped internationally, totaled $175 million and $155 million for second quarter of 2010 and 2009, respectively. The Company’s international sales totaled $321 million and $268 million for year-to-date 2010 and 2009, respectively.

16. Subsequent Events

Subsequent to July 31, 2010, the Company repurchased $20 million and $1 million of 2014 Notes and 2012 Notes, respectively, through open market transactions. The Company also terminated interest rate designated fair value hedges with a notional amount of $21 million in conjunction with the repurchase of these notes.

19

17. Supplemental Guarantor Financial Information

The Company’s 8.50% notes due in June 2019 and the Company’s 7.00% notes due in May 2020 are jointly and severally guaranteed on a full and unconditional basis by certain of the Company’s wholly-owned subsidiaries. The Company is a holding company and its most significant assets are the stock of its subsidiaries. The guarantors represent (a) substantially all of the sales of the Company’s domestic subsidiaries, (b) more than 90% of the assets owned by the Company’s domestic subsidiaries, other than real property, certain other assets and intercompany investments and balances and (c) more than 95% of the accounts receivable and inventory directly owned by the Company’s domestic subsidiaries.

The following supplemental financial information sets forth for the Company and its guarantor and non-guarantor subsidiaries: the Condensed Consolidating Balance Sheets as of July 31, 2010, January 30, 2010 and August 1, 2009 and the Condensed Consolidating Statements of Income and Cash Flows for the periods ended July 31, 2010 and August 1, 2009.

20

LIMITED BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(in millions)

(Unaudited)

	July 31, 2010
	Limited Brands, Inc.			Guarantor Subsidiaries		Non-guarantor Subsidiaries			Eliminations			Consolidated Limited Brands, Inc.
ASSETS
Current Assets:
Cash and Cash Equivalents	$	0		$	876	$	424		$	0		$	1,300
Accounts Receivable, Net		1			172		36			0			209
Inventories		0			923		160			0			1,083
Deferred Income Taxes		0			35		(3	)		0			32
Other		1			77		103			0			181
Total Current Assets		2			2,083		720			0			2,805
Property and Equipment, Net		0			997		644			0			1,641
Goodwill		0			1,318		129			0			1,447
Trade Names and Other Intangible Assets, Net		0			418		178			0			596
Net Investments in and Advances to/from Consolidated Affiliates		11,996			12,754		6,315			(31,065	)		0
Other Assets		64			90		785			(706	)		233
Total Assets	$	12,062		$	17,660	$	8,771		$	(31,771	)	$	6,722
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable	$	2		$	366	$	191		$	0		$	559
Accrued Expenses and Other		30			337		248			0			615
Income Taxes		0			0		6			0			6
Total Current Liabilities		32			703		445			0			1,180
Deferred Income Taxes		(9	)		35		198			0			224
Long-term Debt		2,532			608		82			(690	)		2,532
Other Long-term Liabilities		13			555		159			(14	)		713
Total Equity		9,494			15,759		7,887			(31,067	)		2,073
Total Liabilities and Equity	$	12,062		$	17,660	$	8,771		$	(31,771	)	$	6,722

21

LIMITED BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(in millions)

	January 30, 2010
	Limited Brands, Inc.			Guarantor Subsidiaries		Non-guarantor Subsidiaries			Eliminations			Consolidated Limited Brands, Inc.
ASSETS
Current Assets:
Cash and Cash Equivalents	$	0		$	1,441	$	363		$	0		$	1,804
Accounts Receivable, Net		0			191		28			0			219
Inventories		0			883		154			0			1,037
Deferred Income Taxes		0			34		(4	)		0			30
Other		0			107		54			(1	)		160
Total Current Assets		0			2,656		595			(1	)		3,250
Property and Equipment, Net		0			1,049		674			0			1,723
Goodwill		0			1,318		124			0			1,442
Trade Names and Other Intangible Assets, Net		0			420		174			0			594
Net Investments in and Advances to/from Consolidated Affiliates		12,746			11,997		6,511			(31,254	)		0
Other Assets		38			60		771			(705	)		164
Total Assets	$	12,784		$	17,500	$	8,849		$	(31,960	)	$	7,173
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable	$	0		$	309	$	179		$	0		$	488
Accrued Expenses and Other		30			389		274			0			693
Income Taxes		4			121		16			0			141
Total Current Liabilities		34			819		469			0			1,322
Deferred Income Taxes		(9	)		30		192			0			213
Long-term Debt		2,723			608		81			(689	)		2,723
Other Long-term Liabilities		25			551		170			(15	)		731
Total Equity		10,011			15,492		7,937			(31,256	)		2,184
Total Liabilities and Equity	$	12,784		$	17,500	$	8,849		$	(31,960	)	$	7,173

22

LIMITED BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(in millions)

(Unaudited)

	August 1, 2009
	Limited Brands, Inc.			Guarantor Subsidiaries		Non-guarantor Subsidiaries		Eliminations			Consolidated Limited Brands, Inc.
ASSETS
Current Assets:
Cash and Cash Equivalents	$	0		$	1,237	$	313	$	0		$	1,550
Accounts Receivable, Net		0			202		28		0			230
Inventories		0			926		168		(3	)		1,091
Deferred Income Taxes		0			62		12		0			74
Other		0			124		64		0			188
Total Current Assets		0			2,551		585		(3	)		3,133
Property and Equipment, Net		0			1,108		742		0			1,850
Goodwill		0			1,318		123		0			1,441
Trade Names and Other Intangible Assets, Net		0			420		179		0			599
Net Investments in and Advances to/from Consolidated Affiliates		12,865			11,021		8,271		(32,157	)		0
Other Assets		36			96		745		(715	)		162
Total Assets	$	12,901		$	16,514	$	10,645	$	(32,875	)	$	7,185
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable	$	0		$	322	$	186	$	0		$	508
Accrued Expenses and Other		38			324		195		0			557
Income Taxes		(1	)		11		23		0			33
Total Current Liabilities		37			657		404		0			1,098
Deferred Income Taxes		(3	)		22		201		0			220
Long-term Debt		3,249			609		95		(702	)		3,251
Other Long-term Liabilities		46			549		159		(14	)		740
Total Equity		9,572			14,677		9,786		(32,159	)		1,876
Total Liabilities and Equity	$	12,901		$	16,514	$	10,645	$	(32,875	)	$	7,185

23

LIMITED BRANDS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions)

(Unaudited)

	Second Quarter 2010
	Limited Brands, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Limited Brands, Inc.
Net Sales	$	0		$	2,106		$	599		$	(463	)	$	2,242
Costs of Goods Sold, Buying and Occupancy		0			(1,384	)		(520	)		440			(1,464	)
Gross Profit		0			722			79			(23	)		778
General, Administrative and Store Operating Expenses		(1	)		(512	)		(58	)		29			(542	)
Operating Income (Loss)		(1	)		210			21			6			236
Interest Expense		(51	)		0			(3	)		3			(51	)
Interest Income		0			3			0			(3	)		0
Other Income (Loss)		(25	)		0			83			1			59
Income (Loss) Before Income Taxes		(77	)		213			101			7			244
Provision (Benefit) for Income Taxes		(9	)		66			9			0			66
Equity in Earnings, Net of Tax		246			119			(53	)		(312	)		0
Net Income (Loss)	$	178		$	266		$	39		$	(305	)	$	178
	Second Quarter 2009
	Limited Brands, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Limited Brands, Inc.
Net Sales	$	0		$	1,957		$	525		$	(415	)	$	2,067
Costs of Goods Sold, Buying and Occupancy		0			(1,372	)		(413	)		386			(1,399	)
Gross Profit		0			585			112			(29	)		668
General, Administrative and Store Operating Expenses		(3	)		(493	)		(57	)		34			(519	)
Net Gain on Joint Venture		9			0			0			0			9
Operating Income (Loss)		6			92			55			5			158
Interest Expense		(56	)		0			(5	)		3			(58	)
Interest Income		0			4			0			(3	)		1
Other Income (Loss)		0			0			(2	)		0			(2	)
Income (Loss) Before Income Taxes		(50	)		96			48			5			99
Provision (Benefit) for Income Taxes		0			(15	)		40			0			25
Equity in Earnings, Net of Tax		124			(17	)		(16	)		(91	)		0
Net Income (Loss)	$	74		$	94		$	(8	)	$	(86	)	$	74

24

LIMITED BRANDS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions)

(Unaudited)

	Year-to-Date 2010
	Limited Brands, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Limited Brands, Inc.
Net Sales	$	0		$	3,945		$	1,127		$	(898	)	$	4,174
Costs of Goods Sold, Buying and Occupancy		0			(2,597	)		(946	)		841			(2,702	)
Gross Profit		0			1,348			181			(57	)		1,472
General, Administrative and Store Operating Expenses		(2	)		(993	)		(123	)		67			(1,051	)
Operating Income (Loss)		(2	)		355			58			10			421
Interest Expense		(111	)		0			(6	)		5			(112	)
Interest Income		0			6			0			(5	)		1
Other Income (Expense)		(25	)		0			145			1			121
Income (Loss) Before Income Taxes		(138	)		361			197			11			431
Provision (Benefit) for Income Taxes		(9	)		97			52			0			140
Equity in Earnings, Net of Tax		420			261			(31	)		(650	)		0
Net Income (Loss)	$	291		$	525		$	114		$	(639	)	$	291
	Year-to-Date 2009
	Limited Brands, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Limited Brands, Inc.
Net Sales	$	0		$	3,612		$	1,048		$	(868	)	$	3,792
Costs of Goods Sold, Buying and Occupancy		0			(2,526	)		(871	)		821			(2,576	)
Gross Profit		0			1,086			177			(47	)		1,216
General, Administrative and Store Operating Expenses		(5	)		(939	)		(109	)		51			(1,002	)
Net Gain on Joint Ventures		9			0			0			0			9
Operating Income (Loss)		4			147			68			4			223
Interest Expense		(118	)		0			(7	)		5			(120	)
Interest Income		0			7			0			(5	)		2
Other Income (Expense)		0			0			(3	)		0			(3	)
Income (Loss) Before Income Taxes		(114	)		154			58			4			102
Provision (Benefit) for Income Taxes		0			(10	)		35			0			25
Equity in Earnings, Net of Tax		191			191			165			(547	)		0
Net Income (Loss)	$	77		$	355		$	188		$	(543	)	$	77

25

LIMITED BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

	Year-to-Date 2010
	Limited Brands, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations		Consolidated Limited Brands, Inc.
Net Cash Provided by (Used for) Operating Activities	$	(123	)	$	277		$	30		$	0	$	184
Investing Activities:
Capital Expenditures		0			(71	)		(39	)		0		(110	)
Return of Capital from Express		0			0			49			0		49
Return of Capital from Limited Stores		0			0			7			0		7
Proceeds from Divestiture of Limited Stores		0			0			32			0		32
Proceeds from Express Initial Public Offering		0			0			20			0		20
Net Investments in Consolidated Affiliates		0			0			0			0		0
Other Investing Activities		0			0			(1	)		0		(1	)
Net Cash Provided by (Used for) Investing Activities		0			(71	)		68			0		(3	)
Financing Activities:
Proceeds from Long-term Debt, Net of Issuance Costs		390			0			0			0		390
Payment of Long-term Debt		(621	)		0			0			0		(621	)
Dividends Paid		(422	)		0			0			0		(422	)
Financing Costs		(14	)		0			0			0		(14	)
Repurchase of Common Stock		(68	)		0			0			0		(68	)
Excess Tax Benefits from Share-based Compensation		0			8			2			0		10
Net Financing Activities and Advances to/from Consolidated Affiliates		820			(779	)		(41	)		0		0
Proceeds from Exercise of Stock Options and Other		38			0			0			0		38
Net Cash Provided by (Used for) Financing Activities		123			(771	)		(39	)		0		(687	)
Effects of Exchange Rate Changes on Cash and Cash Equivalents		0			0			2			0		2
Net Increase (Decrease) in Cash and Cash Equivalents		0			(565	)		61			0		(504	)
Cash and Cash Equivalents, Beginning of Period		0			1,441			363			0		1,804
Cash and Cash Equivalents, End of Period	$	0		$	876		$	424		$	0	$	1,300

26

LIMITED BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

	Year-to-Date 2009
	Limited Brands, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations		Consolidated Limited Brands, Inc.
Net Cash Provided by (Used for) Operating Activities	$	(116	)	$	265		$	95		$	0	$	244
Investing Activities:
Capital Expenditures		0			(62	)		(35	)		0		(97	)
Net Cash Provided by (Used for) Investing Activities		0			(62	)		(35	)		0		(97	)
Financing Activities:
Proceeds from Long-term Debt, Net of Issuance Costs		473			0			0			0		473
Payments of Long-term Debt		(130	)		0			0			0		(130	)
Financing Costs		(19	)		0			0			0		(19	)
Dividends Paid		(96	)		0			0			0		(96	)
Net Financing Activities and Advances to/from Consolidated Affiliates		(112	)		96			16			0		0
Net Cash Provided by (Used for) Financing Activities		116			96			16			0		228
Effects of Exchange Rate Changes on Cash		0			0			2			0		2
Net Increase (Decrease) in Cash and Cash Equivalents		0			299			78			0		377
Cash and Cash Equivalents, Beginning of Period		0			938			235			0		1,173
Cash and Cash Equivalents, End of Period	$	0		$	1,237		$	313		$	0	$	1,550

27

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

of Limited Brands, Inc.:

We have reviewed the consolidated balance sheets of Limited Brands, Inc. and subsidiaries (the “Company”) as of July 31, 2010 and August 1, 2009, and the related consolidated statements of income for the thirteen and twenty-six week periods ended July 31, 2010 and August 1, 2009, and the consolidated statements of cash flows for the twenty-six week periods ended July 31, 2010 and August 1, 2009. These financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Limited Brands, Inc. and subsidiaries as of January 30, 2010, and the related consolidated statements of income, total equity, and cash flows for the year then ended (not presented herein), and in our report dated March 26, 2010, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of January 30, 2010, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Columbus, Ohio

September 7, 2010

28

SAFE HARBOR STATEMENT UNDER THE PRIVATE

SECURITIES LITIGATION ACT OF 1995

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Limited Brands, Inc. cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this report 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 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 report or otherwise made by our company or our management:

• general economic conditions, consumer confidence and consumer spending patterns;

• the global economic crisis and its impact on our suppliers, customers and other counterparties;

• the impact of the global economic crisis on our liquidity and capital resources;

• the dependence on a high volume of mall traffic and the possible lack of availability of suitable store locations on appropriate terms;

• the seasonality of our business;

• our ability to grow through new store openings and existing store remodels and expansions;

• our ability to expand into international markets;

• independent licensees and franchisees;

• our direct channel business;

• our failure to protect our reputation and our brand images;

• our failure to protect our trade names, trademarks and patents;

• market disruptions including severe weather conditions, natural disasters, health hazards, terrorist activities, financial crises, political crises or other major events, or the prospect of these events;

• stock price volatility;

• our failure to maintain our credit rating;

• our ability to service our debt;

• the highly competitive nature of the retail industry generally and the segments in which we operate particularly;

• consumer acceptance of our products and our ability to keep up with fashion trends, develop new merchandise, launch new product lines successfully, offer products at the appropriate price points and enhance our brand image;

• our ability to retain key personnel;

• our ability to attract, develop and retain qualified employees and manage labor costs;

• our reliance on foreign sources of production, including risks related to:

• political instability;

• duties, taxes, other charges on imports;

• legal and regulatory matters;

• volatility in currency and exchange rates;

• local business practices and political issues;

• potential delays or disruptions in shipping and related pricing impacts;

• the disruption of imports by labor disputes; and

• changing expectations regarding product safety due to new legislation.

29

• the possible inability of our manufacturers to deliver products in a timely manner or meet quality standards;

• fluctuations in energy costs;

• increases in the costs of mailing, paper and printing;

• self-insured risks;

• our ability to implement and sustain information technology systems;

• our failure to comply with regulatory requirements;

• tax matters; and

• legal and compliance 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 report to reflect circumstances existing after the date of this report 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. Additional information regarding these and other factors can be found in “Item 1A. Risk Factors” in our 2009 Annual Report on Form 10-K.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The following information should be read in conjunction with our consolidated financial statements and the related notes included in Item 1. Financial Statements.

Executive Overview

Description of Business

We operate in the highly competitive specialty retail business. We are a specialty retailer of women’s intimate and other apparel, beauty and personal care products and accessories. We sell our merchandise through specialty retail stores in the United States and Canada, which are primarily mall-based, and through our websites, catalogue and other channels. We currently operate the following retail brands:

• Victoria’s Secret

• Victoria’s Secret Pink

• La Senza

• Bath & Body Works

• C. O. Bigelow

• The White Barn Candle Company

• Henri Bendel

Second Quarter 2010 Overview

Our performance in the second quarter of 2010 improved significantly in comparison to the second quarter of 2009. Our net sales increased $175 million to $2.242 billion driven by a comparable store sales increase of 7%. Our operating income increased $78 million to $236 million and our operating income rate improved significantly to 10.5% from 7.6%. In addition, our second quarter net income included a pre-tax gain of $52 million related to the Express IPO, a pre-tax gain of $20 million related to the divestiture of our remaining 25% ownership interest in Limited Stores and a pre-tax loss of $25 million related to the repurchase of a portion of our 2012 and 2014 Notes. For additional information related to our 2010 financial performance, see “Results of Operations.”

The global retail sector and our business continue to face a very uncertain environment and, as a result, we continue to take a conservative stance in terms of inventory, expenses and capital expenditures. We will continue to manage our business conservatively and we remain focused on the execution of retail fundamentals. At the same time, we are committed to bringing compelling merchandise assortments, marketing and store and website experiences to our customers. We will look for, and capitalize on, those opportunities available to us in this uncertain environment.

30

Store Data

The following table compares second quarter of 2010 store data to the comparable periods for second quarter of 2009 and year-to-date 2010 store data to the comparable periods for year-to-date 2009:

	Second Quarter						Year-to-Date
Sales Per Average Selling Square Foot	2010		2009		% Change		2010		2009		% Change
Victoria’s Secret Stores (a)	$	157	$	140	12	%	$	294	$	261	13	%
Bath & Body Works (a)		132		131	1	%		238		230	4	%
La Senza (b) (c) (d)		103		104	(1	%)		188		188	0	%
Sales Per Average Store (in thousands)
Victoria’s Secret Stores (a)	$	920	$	803	14	%	$	1,716	$	1,498	15	%
Bath & Body Works (a)		312		311	0	%		563		545	3	%
La Senza (b) (c) (d)		347		318	9	%		632		575	10	%
Average Store Size (selling square feet)
Victoria’s Secret Stores (a)		5,855		5,755	2	%
Bath & Body Works (a)		2,368		2,374	0	%
La Senza (c) (d)		3,360		3,087	9	%
Total Selling Square Feet (in thousands)
Victoria’s Secret Stores (a)		6,084		6,020	1	%
Bath & Body Works (a)		3,834		3,886	(1	%)
La Senza (c) (d)		857		945	(9	%)

(a) Metric relates to company-owned stores in the United States.

(b) Metric is presented in Canadian dollars to eliminate the impact of foreign currency fluctuations.

(c) Metric excludes independently owned La Senza stores operated by licensees.

(d) 2009 includes La Senza Girl stores. In the fourth quarter of 2009, we closed all 53 remaining La Senza Girl stores.

31

The following table compares second quarter of 2010 store data to the comparable periods for second quarter of 2009 and year-to-date 2010 store data to the comparable periods for year-to-date 2009:

	Second Quarter				Year-to-Date
	2010		2009		2010		2009
Number of Stores (a)
Victoria’s Secret
Beginning of Period	1,040		1,040		1,040		1,043
Opened	1		6		4		10
Closed	(2	)	0		(5	)	(7	)
End of Period	1,039		1,046		1,039		1,046
Bath & Body Works
Beginning of Period	1,621		1,638		1,627		1,638
Opened	0		1		2		7
Closed	(2	)	(2	)	(10	)	(8	)
End of Period	1,619		1,637		1,619		1,637
La Senza (b)
Beginning of Period	257		318		258		322
Opened	0		2		0		2
Closed	(2	)	(14	)	(3	)	(18	)
End of Period	255		306		255		306
Bath & Body Works Canada
Beginning of Period	36		7		31		6
Opened	3		7		8		8
Closed	0		0		0		0
End of Period	39		14		39		14
Victoria’s Secret Canada
Beginning of Period	4		0		4		0
Opened	2		0		2		0
Closed	0		0		0		0
End of Period	6		0		6		0
Henri Bendel
Beginning of Period	11		5		11		5
Opened	0		1		0		1
Closed	0		0		0		0
End of Period	11		6		11		6
Total
Beginning of Period	2,969		3,008		2,971		3,014
Opened	6		17		16		28
Closed	(6	)	(16	)	(18	)	(33	)
End of Period	2,969		3,009		2,969		3,009

(a) Number of stores excludes independently owned stores operated by licensees and franchisees.

(b) In the fourth quarter of 2009, we closed all 53 remaining La Senza Girl stores.

32

Results of Operations

Second Quarter of 2010 Compared to Second Quarter of 2009

Operating Income

The following table provides our segment operating income (loss) and operating income rates (expressed as a percentage of net sales) for 2010 in comparison to 2009:

							Operating Income Rate
	2010			2009			2010		2009
Second Quarter	(in millions)
Victoria’s Secret	$	192		$	126		13.2	%	9.7	%
Bath & Body Works		64			44		12.0	%	8.3	%
Other (a)		(20	)		(12	)	(7.6	%)	(5.5	%)
Total Operating Income	$	236		$	158		10.5	%	7.6	%

(a) Includes Corporate, Mast, Henri Bendel and our international operations excluding La Senza.

For the second quarter of 2010, operating income increased $78 million to $236 million and the operating income rate increased to 10.5% from 7.6%. The drivers of the operating income results are discussed in the following sections.

Net Sales

The following table provides net sales for the second quarter of 2010 in comparison to the second quarter of 2009:

	2010		2009		% Change
Second Quarter	(in millions)
Victoria’s Secret Stores	$	956	$	838	14	%
La Senza		101		109	(7	%)
Victoria’s Secret Direct		391		359	9	%
Total Victoria’s Secret		1,448		1,306	11	%
Bath & Body Works		537		534	1	%
Other (a)		257		227	13	%
Total Net Sales	$	2,242	$	2,067	8	%

(a) Includes Mast, Henri Bendel and our international operations excluding La Senza.

The following table provides a reconciliation of net sales for the second quarter of 2010 to the second quarter of 2009:

	Victoria’s Secret		Bath & Body  Works			Other			Total
Second Quarter	(in millions)
2009 Net Sales	$	1,306	$	534		$	227		$	2,067
Comparable Store Sales		99		(1	)		(1	)		97
Sales Associated With New, Closed, Divested and Non-comparable Remodeled Stores, Net		3		(3	)		16			16
Foreign Currency Translation		8		0			2			10
Direct Channels		32		7			0			39
Mast Third-party Sales and Other		0		0			13			13
2010 Net Sales	$	1,448	$	537		$	257		$	2,242

33

The following table compares second quarter of 2010 comparable store sales to second quarter of 2009:

Second Quarter	2010		2009
Victoria Secret Stores	13	%	(12	%)
La Senza	0	%	(11	%)
Total Victoria’s Secret	12	%	(12	%)
Bath & Body Works	0	%	(5	%)
Total Comparable Store Sales (a)	7	%	(9	%)

(a) Includes Bath & Body Works Canada and Henri Bendel.

For the second quarter of 2010, our net sales increased $175 million to $2.242 billion and comparable store sales increased 7%. The increase in our net sales was primarily driven by the following:

Victoria’s Secret

For the second quarter of 2010, net sales increased $142 million to $1.448 billion and comparable store sales increased 12%. The increase in net sales was primarily driven by:

• At Victoria’s Secret Stores, net sales increased across most categories including core lingerie, Pink and beauty driven by an improved merchandise assortment that incorporated newness, innovation and fashion; and

• At Victoria’s Secret Direct, net sales increased 9% with increases across most categories including intimates and swimwear driven by an improved merchandise assortment.

Partially offset by:

• At La Senza, net sales decreased primarily due to the closure of the La Senza Girl freestanding store business and a decline in the international business partially offset by favorable currency fluctuations.

The increase in comparable store sales was driven by a significant increase in total transactions and higher average dollar sales.

Bath & Body Works

For the second quarter of 2010, net sales increased $3 million to $537 million and comparable store sales were flat. From a merchandise category perspective, net sales were driven by growth in home fragrance and the Signature Collection partially offset by decreases in other categories. The flat comparable store sales were driven by higher average dollar sales offset by a decrease in total transactions.

Other

For the second quarter of 2010, net sales increased $30 million to $257 million primarily related to new Bath & Body Works stores in Canada and the introduction of Victoria’s Secret stores to Canada.

Gross Profit

For the second quarter of 2010, our gross profit increased $110 million to $778 million and our gross profit rate (expressed as a percentage of net sales) increased to 34.7% from 32.3%, primarily driven by the following:

Victoria’s Secret

For the second quarter of 2010, the increase in gross profit was primarily driven by:

• At Victoria’s Secret Stores, gross profit increased driven by higher merchandise margin dollars as a result of the increase in net sales and decreased promotional activity. The increase in gross profit was partially offset by an increase in buying and occupancy expenses primarily related to real estate investment activity;

• At Victoria’s Secret Direct, gross profit increased driven by higher merchandise margin dollars as a result of the increase in net sales and decreased promotional activity. The increase in merchandise margin dollars was partially offset by an increase in buying and occupancy expenses primarily related to higher catalogue, website and fulfillment costs; and

• At La Senza, gross profit increased due to an increase in merchandise margin dollars primarily driven by decreased promotional activity and favorable currency fluctuations.

The increase in the gross profit rate was driven primarily by an increase in the merchandise margin rate due to the factors cited above. In addition, the buying and occupancy expense rate decreased due to leverage associated with the increase in net sales.

34

Bath & Body Works

For the second quarter of 2010, the increase in gross profit was driven by an increase in merchandise margin dollars related to the increase in net sales and a decrease in promotional activity. Buying and occupancy expenses were consistent with the same period in the prior year.

The increase in the gross profit rate was driven by an increase in the merchandise margin rate due to the factors cited above. In addition, the buying and occupancy expense rate remained consistent with the prior period.

Other

For the second quarter of 2010, the decrease in gross profit was driven by an increase in buying and occupancy expenses primarily related to the expansion of our Canadian Bath & Body Works and Victoria’s Secret stores partially offset by higher merchandise margin dollars related to the aforementioned stores. The gross profit rate decreased due to the factors cited above.

General, Administrative and Store Operating Expenses

For the second quarter of 2010, our general, administrative and store operating expenses increased $23 million to $542 million primarily driven by an increase in store selling expenses related to higher sales, higher incentive compensation costs due to improved performance and an increase in marketing expenses partially offset by lower home office expenses.

The general, administrative and store operating expense rate decreased to 24.1% from 25.1% due to leverage associated with the increase in net sales.

Other Income and Expense

Interest Expense

The following table provides the average daily borrowings and average borrowing rates for the second quarter of 2010 and 2009:

Second Quarter	2010			2009
Average daily borrowings (in millions)	$	2,624		$	3,123
Average borrowing rate (in percentages)		6.87	%		6.62	%

For the second quarter of 2010, our interest expense decreased $7 million to $51 million driven by a decrease in the average borrowings and favorable impact of our interest rate fair value hedges partially offset by an increase in the average borrowing rate.

Other Income (Loss)

For the second quarter of 2010, our other income (loss) increased from expense of $2 million to income of $59 million primarily due to:

• a $52 million pre-tax gain related to the Express IPO;

• a $20 million pre-tax gain related to the divestiture of the remaining 25% ownership in Limited Stores; and

• higher income from our equity investment in Express.

Partially offset by:

• a $25 million pre-tax loss on extinguishment of a portion of our 2012 and 2014 Notes.

Provision for Income Taxes

For the second quarter of 2010, our effective tax rate was 26.8% as compared to 25.1% in the second quarter of 2009. Our effective tax rate for 2010 was favorably impacted by the divestiture of our remaining 25% ownership in Limited Stores, which resulted in the recognition of the capital loss associated with the 2007 divestiture of 75% of our ownership in Limited Stores. Our effective tax rate for 2009 was favorably impacted by the resolution of certain tax matters.

35

Results of Operations

Year-to-Date 2010 Compared to Year-to-Date 2009

Operating Income

The following table provides our segment operating income (loss) and operating income rates (expressed as a percentage of net sales) for year-to-date 2010 in comparison to year-to-date 2009:

							Operating Income Rate
	2010			2009			2010		2009
Year-to-Date	(in millions)
Victoria’s Secret	$	359		$	213		13.2	%	8.8	%
Bath & Body Works		102			48		10.6	%	5.1	%
Other (a)		(40	)		(38	)	(8.0	)%	(9.1	%)
Total Operating Income	$	421		$	223		10.1	%	5.9	%

(a) Includes Corporate, Mast, Henri Bendel and our international operations excluding La Senza.

For year-to-date 2010, operating income increased $198 million to $421 million and the operating income rate increased to 10.1% from 5.9%. The drivers of the operating income results are discussed in the following sections.

Net Sales

The following table provides net sales for year-to-date 2010 in comparison to year-to-date 2009:

	2010		2009		% Change
Year-to-Date	(in millions)
Victoria’s Secret Stores	$	1,784	$	1,565	14	%
La Senza		187		190	(2	%)
Victoria’s Secret Direct		741		676	10	%
Total Victoria’s Secret		2,712		2,431	12	%
Bath & Body Works		967		936	3	%
Other (a)		495		425	16	%
Total Net Sales	$	4,174	$	3,792	10	%

(a) Includes Mast, Henri Bendel and our international operations excluding La Senza.

The following table provides a reconciliation of net sales for year-to-date 2010 to year-to-date 2009:

	Victoria’s Secret		Bath & Body  Works			Other			Total
Year-to-Date	(in millions)
2009 Net Sales	$	2,431	$	936		$	425		$	3,792
Comparable Store Sales		185		26			(2	)		209
Sales Associated With New, Closed, Divested and Non-comparable Remodeled Stores, Net		8		(5	)		28			31
Foreign Currency Translation		23		0			5			28
Direct Channels		65		10			0			75
Mast Third-party Sales and Other		0		0			39			39
2010 Net Sales	$	2,712	$	967		$	495		$	4,174

36

The following table compares year-to-date 2010 comparable store sales to year-to-date 2009:

Year-to-Date	2010		2009
Victoria’s Secret Stores	12	%	(11	%)
La Senza	1	%	(12	%)
Total Victoria’s Secret	12	%	(11	%)
Bath & Body Works	3	%	(4	%)
Total Comparable Store Sales (a)	8	%	(9	%)

(a) Includes Bath & Body Works Canada and Henri Bendel.

For year-to-date 2010, our net sales increased $382 million to $4.174 billion and comparable store sales increased 8%. The increase in our net sales was primarily driven by the following:

Victoria’s Secret

For year-to-date 2010, net sales increased $281 million to $2.712 billion and comparable store sales increased 12%. The increase in net sales was primarily driven by:

• At Victoria’s Secret Stores, net sales increased across most categories including core lingerie, Pink and beauty driven by an improved merchandise assortment that incorporated newness, innovation and fashion; and

• At Victoria’s Secret Direct, net sales increased 10% with increases across most categories including intimates, swimwear and apparel driven by an improved merchandise assortment.

Partially offset by:

• At La Senza, net sales decreased primarily due to closure of the La Senza Girl freestanding store business and a decline in the international business partially offset by favorable currency fluctuations.

The increase in comparable store sales was driven by a significant increase in total transactions and higher average dollar sales.

Bath & Body Works

For year-to-date 2010, net sales increased $31 million to $967 million and comparable store sales increased 3%. From a merchandise category perspective, net sales were driven by growth in the Signature Collection, home fragrance and antibacterial categories partially offset by decreases in other categories. The increase in comparable store sales was primarily driven by higher average dollar sales and a slight increase in total transactions.

Other

For year-to-date 2010, net sales increased $70 million to $495 million primarily related to new Bath & Body Works stores in Canada, the introduction of Victoria’s Secret stores to Canada and an increase in third-party sales at Mast.

Gross Profit

For year-to-date 2010, our gross profit increased $256 million to $1.472 billion and our gross profit rate (expressed as a percentage of net sales) increased to 35.3% from 32.1% primarily driven by the following:

Victoria’s Secret

For year-to-date 2010, the increase in gross profit was primarily driven by:

• At Victoria’s Secret Stores, gross profit increased driven by higher merchandise margin dollars as a result of the increase in net sales and decreased promotional activity. The increase in gross profit was partially offset by an increase in buying and occupancy expenses primarily related to real estate investment activity;

• At Victoria’s Secret Direct, gross profit increased driven by higher merchandise margin dollars as a result of the increase in net sales and decreased promotional activity. The increase in gross profit was partially offset by an increase in buying and occupancy expenses primarily related to higher catalogue, website and fulfillment costs; and

• At La Senza, gross profit increased due to an increase in merchandise margin dollars primarily driven by decreased promotional activity and currency fluctuations partially offset by an increase in buying and occupancy expenses primarily driven by currency fluctuations.

37

The increase in the gross profit rate was driven primarily by an increase in the merchandise margin rate due to the factors cited above. In addition, the buying and occupancy expense rate decreased due to leverage associated with higher net sales.

Bath & Body Works

For year-to-date 2010, the increase in gross profit was driven primarily by the increase in merchandise margin dollars as a result of the increase in net sales and decreased promotional activity. The increase in the gross profit rate was driven primarily by an increase in the merchandise margin rate. In addition, the buying and occupancy expense rate decreased due to leverage associated with higher net sales.

Other

For year-to-date 2010, gross profit remained consistent with the prior period. The gross profit rate decreased primarily as a result of an increase in buying and occupancy costs.

General, Administrative and Store Operating Expenses

For year-to-date 2010, our general, administrative and store operating expenses increased $49 million to $1.051 billion primarily driven by an increase in store selling expenses related to higher sales, higher incentive compensation costs due to improved performance and an increase in marketing expenses.

The general, administrative and store operating expense rate decreased from 26.4% to 25.2% due to leverage associated with higher net sales.

Net Gain on Joint Venture

In July 2009, we recognized a pre-tax gain of $9 million ($14 million net of related tax benefits) associated with the reversal of the accrued contractual liability as a result of the divestiture of the joint venture. The pre-tax gain is included in Net Gain on Joint Venture on the 2009 Consolidated Statements of Income.

Other Income and Expense

Interest Expense

The following table provides the average daily borrowings and average borrowing rates for year-to-date 2010 and 2009:

Year-to-Date	2010			2009
Average daily borrowings (in millions)	$	2,642		$	3,011
Average borrowing rate (in percentages)		6.81	%		6.55	%

For year-to-date 2010, our interest expense decreased $8 million to $112 million. The decrease was partially driven by a decrease in the average daily borrowings and favorable impact of our interest rate fair value hedges partially offset by the increase in average borrowing rates. For year-to-date 2010, our interest expense included $10 million of expense associated with terminating our remaining participating interest rate swap arrangements. For year-to-date 2009, our interest expense included $10 million in fees which were expensed associated with the amendment of our 5-Year Facility and Term Loan.

Other Income (Loss)

For year-to-date 2010, our other income (loss) increased from expense of $3 million to income of $121 million primarily due to:

• a $49 million pre-tax gain related to a $57 million cash distribution from Express;

• a $52 million pre-tax gain related to the Express IPO;

• a $20 million pre-tax gain related to the divestiture of the remaining 25% ownership in Limited Stores; and

• higher income from our equity investments in Express and Limited Stores.

Partially offset by:

• a $25 million pre-tax loss on extinguishment of a portion of our 2012 and 2014 Notes.

38

Provision for Income Taxes

For year-to-date 2010, our effective tax rate was 32.4% as compared to 24.9% in 2009. Our effective tax rate for 2010 was favorably impacted by the divestiture of our remaining 25% ownership in Limited Stores, which resulted in the recognition of the capital loss associated with the 2007 divestiture of 75% of our ownership in Limited Stores. Our effective tax rate for 2009 was favorably impacted by the resolution of certain tax matters.

FINANCIAL CONDITION

Liquidity and Capital Resources

Liquidity, or access to cash, is an important factor in determining our financial stability. We are committed to maintaining adequate liquidity. Cash generated from our operating activities provides the primary resources to support current operations, growth initiatives, seasonal funding requirements and capital expenditures. Our cash provided from operations is impacted by our net income and working capital changes. Our net income is impacted by, among other things, sales volume, seasonal sales patterns, timing of new product introductions and profit margins. Historically, sales are higher during the fourth quarter of the fiscal year due to seasonal and holiday-related sales patterns. Generally, our need for working capital peaks during the summer and fall months as inventory builds in anticipation of the holiday period.

The following table provides our long-term debt balance as of July 31, 2010, January 30, 2010 and August 1, 2009:

	July 31, 2010			January 30, 2010			August 1, 2009
	(in millions)
Senior Secured Debt
Term Loan due August 2012	$	0		$	200		$	625
5.30% Mortgage due August 2010		2			2			2
Total Senior Secured Debt		2			202			627
Senior Unsecured Debt with Subsidiary Guarantee
$500 million, 8.50% Fixed Interest Rate Notes due June 2019, Less Unamortized Discount (“2019 Notes”)		485			485			484
$400 million, 7.00% Fixed Interest Rate Notes due May 2020 (“2020 Notes”)		400			0			0
Total Senior Unsecured Debt with Subsidiary Guarantee		885			485			484
Senior Unsecured Debt
$700 million, 6.90% Fixed Interest Rate Notes due July 2017, Less Unamortized Discount (“2017 Notes”)(a)		703			699			698
5.25% Fixed Interest Rate Notes due November 2014, Less Unamortized Discount (“2014 Notes”)(b)		237			499			499
$350 million, 6.95% Fixed Interest Rate Debentures due March 2033, Less Unamortized Discount (“2033 Notes”)		350			350			350
$300 million, 7.60% Fixed Interest Rate Notes due July 2037, Less Unamortized Discount (“2037 Notes”)		299			299			299
6.125% Fixed Interest Rate Notes due December 2012, Less Unamortized Discount (“2012 Notes”)(c)		58			191			294
Total Senior Unsecured Debt		1,647			2,038			2,140
Total		2,534			2,725			3,251
Current Portion of Long-term Debt		(2	)		(2	)		0
Total Long-term Debt, Net of Current Portion	$	2,532		$	2,723		$	3,251

(a) The July 31, 2010 balance includes a fair value interest rate hedge adjustment of $4 million.

(b) The principal balance outstanding was $234 million as of July 31, 2010, $500 million as of January 30, 2010 and $500 million as of August 1, 2009. The July 31, 2010 balance includes a fair value interest rate hedge adjustment of $4 million.

(c) The principal balance outstanding was $58 million as of July 31, 2010, $191 million as of January 30, 2010 and $295 million as of August 1, 2009. The July 31, 2010 balance includes a fair value interest rate hedge adjustment of $1 million.

39

Issuance of Notes

In June 2009, we issued $500 million of 8.50% notes due in June 2019. The obligation to pay principal and interest on these notes is jointly and severally guaranteed on a full and unconditional basis by certain of our wholly-owned subsidiaries (the “guarantors”). The net proceeds from the issuance were $473 million, which included an issuance discount of $16 million and transaction costs of $11 million. These transaction costs are being amortized through the maturity date of June 2019 and are included within Other Assets on the Consolidated Balance Sheets.

In May 2010, we issued $400 million of 7.00% notes due in May 2020 utilizing an existing shelf registration under which up to $1 billion of debt securities, common and preferred stock and other securities can be issued. The 2020 Notes are jointly and severally guaranteed on a full and unconditional basis by the guarantors. The net proceeds from the issuance were $390 million, which included transaction costs of $10 million. These transaction costs are being amortized through the maturity date of May 2020 and are included within Other Assets on the July 31, 2010 Consolidated Balance Sheet.

Repurchase of Notes

In June 2009, we repurchased $5 million of the 2012 Notes through open market transactions. In August 2009, we repurchased $103 million of the 2012 Notes through a tender offer for $101 million. The gain on extinguishment of this debt of $2 million is included in Other Income (Loss) on the third quarter 2009 Consolidated Statement of Income.

In May 2010, we used a portion of the proceeds from the 2020 Notes to repurchase $134 million of our 2012 Notes for $144 million. We used the remaining portion of the proceeds from the 2020 Notes to repurchase $266 million of our 2014 Notes for $277 million. The loss on extinguishment of this debt of $25 million is included in Other Income (Loss) on the 2010 Consolidated Statements of Income.

Subsequent to July 31, 2010, we repurchased $20 million and $1 million of 2014 Notes and 2012 Notes, respectively, through open market transactions.

Credit Facility and Term Loan

2009

On February 19, 2009, we amended our 5-Year Facility and Term Loan and we canceled our 364-Day Facility after determining it was no longer required. We incurred fees related to the amendment of the 5-Year Facility and the Term Loan of $19 million. The fees associated with the 5-Year Facility amendment of $11 million were capitalized. The remaining cost is being amortized through the maturity date of the 5-Year Facility and is included within Other Assets on the Consolidated Balance Sheets. The fees associated with the Term Loan amendment of $8 million were expensed in addition to unamortized fees related to the original agreement of $2 million. These charges are included within Interest Expense on the year-to-date 2009 Consolidated Statement of Income.

We prepaid $550 million of the Term Loan throughout 2009.

2010

In March 2010, we prepaid the remaining $200 million of the Term Loan with cash on hand and also entered into an amendment and restatement (the “Amendment”) of our 5-Year Facility. The Amendment established two classes of loans under the 5-Year Facility: Class A loans to be made by lenders who consent to the Amendment and Class B loans to be made by non-consenting lenders. The Amendment extended the termination date of the 5-Year Facility from August 3, 2012 to August 1, 2014 on Class A loans. The Amendment also reduced the aggregate amount of the commitments of the lenders under the 5-Year Facility from $1 billion to $927 million. The loan commitments were $800 million and $127 million for Class A and Class B, respectively. We are permitted to borrow and prepay separately under either class of loans.

In July 2010, we terminated the $127 million of commitments for Class B loans related to the 5-Year Facility.

Additionally, the Amendment modified the covenants limiting investments and restricted payments to provide that investments and restricted payments may be made, without limitation on amount, if (a) at the time of and after giving effect to such investment or restricted payment the ratio of consolidated debt to consolidated EBITDA for the most recent four-quarter period is less than 3.0 to 1.0 and (b) no default or event of default exists. We were in compliance with all of our covenant requirements as of July 31, 2010.

40

We incurred fees related to the amendment of the 5-Year Facility of $13 million which were capitalized and are being amortized through the maturity date of the 5-Year Facility.

The 5-Year Facility has several interest rate options, which are based in part on our long-term credit ratings. Fees payable under the 5-Year Facility are based on our long-term credit ratings and are currently 0.75% of the committed and unutilized amounts per year and 3.50% on any outstanding borrowings or letters of credit. As of July 31, 2010, there were no borrowings outstanding under the 5-Year Facility.

Letters of Credit

The 5-Year Facility supports our letter of credit program. We had $76 million of outstanding letters of credit as of July 31, 2010 that reduce our remaining availability under our amended credit agreements.

Participating Interest Rate Swap Arrangements

In January 2008, we entered into participating interest rate swap arrangements designated as cash flow hedges to mitigate exposure to interest rate fluctuations related to the Term Loan. In March 2010, we terminated the remaining portion of the participating interest rate swap arrangement totaling $200 million in conjunction with the remaining $200 million Term Loan prepayment. For additional information, see Note 10, “Derivative Instruments.”

Fair Value Interest Rate Swap Arrangements

In June 2010, we entered into multiple fair value interest rate swap arrangements to effectively convert all of our outstanding 2012 Notes, all of our outstanding 2014 Notes and $175 million of our outstanding 2017 Notes from a fixed interest rate to a variable interest rate. For additional information, see Note 10, “Derivative Instruments.”

Subsequent to July 31, 2010, we terminated interest rate designated fair value hedges with a notional amount of $21 million in conjunction with the repurchase of $20 million and $1 million of 2014 Notes and 2012 Notes, respectively.

Working Capital and Capitalization

We believe that available short-term and long-term capital resources are sufficient to fund foreseeable requirements.

The following table provides a summary of our working capital position and capitalization as of July 31, 2010, January 30, 2010 and August 1, 2009:

	July 31, 2010		January 30, 2010		August 1, 2009
	(in millions)
Cash Provided by Operating Activities (a)	$	184	$	1,174	$	244
Capital Expenditures (a)		110		202		97
Working Capital		1,625		1,928		2,035
Capitalization:
Long-term Debt		2,532		2,723		3,251
Shareholders’ Equity		2,073		2,183		1,876
Total Capitalization		4,605		4,906		5,127
Additional Amounts Available Under Credit Agreements (b)		724		935		900

(a) The January 30, 2010 amounts represent a twelve-month period and the July 31, 2010 and August 1, 2009 amounts represent six-month periods.

(b) Letters of credit reduce our remaining availability under the 5-Year Facility.

41

Credit Ratings

The following table provides our credit ratings as of July 31, 2010:

	Moody’s	S&P	Fitch
Corporate	Ba2	BB	BB+
Senior Unsecured Debt with Subsidiary Guarantee	Ba1	BB	BB+
Senior Unsecured Debt	Ba3	BB	BB
Outlook	Positive	Stable	Stable

Our borrowing costs and certain other provisions under our 5-Year Facility are linked to our credit ratings. If we receive an additional downgrade to our corporate credit ratings by S&P or Moody’s, the availability of additional credit could be negatively affected and our borrowing costs could increase. Credit rating downgrades by any of the agencies do not accelerate the repayment of any of our debt.

Common Stock Share Repurchases

In March 2010, our Board of Directors approved a new share repurchase program of $200 million and cancelled our previous $250 million share repurchase program, which had $31 million remaining. Through the second quarter of 2010, we repurchased 2.8 million shares of common stock for $68 million under the new program. Through August 27, 2010, we repurchased an additional 0.5 million shares of common stock for $12 million under the new program.

Dividend Policy and Procedures

We currently pay a common stock dividend of $0.15 per share in cash each quarter. Our Board of Directors will determine future dividends after giving consideration to our levels of profit and cash flow, capital requirements, current and forecasted liquidity, any restrictions placed upon us by our borrowing arrangements as well as financial and other conditions existing at the time.

In March 2010, our Board of Directors declared a special dividend of $1 per share. The special dividend, which totaled $325 million, was distributed on April 19, 2010 to shareholders of record at the close of business on April 5, 2010.

Cash Flow

The following table provides a summary of our cash flow activity for year-to-date 2010 and 2009:

	Year-to-Date
	2010			2009
	(in millions)
Cash and Cash Equivalents, Beginning of Period	$	1,804		$	1,173
Net Cash Flows Provided by Operating Activities		184			244
Net Cash Flows Used for Investing Activities		(3	)		(97	)
Net Cash Flows Provided by (Used for) Financing Activities		(687	)		228
Effect of Exchange Rate Changes on Cash and Cash Equivalents		2			2
Net Increase (Decrease) in Cash and Cash Equivalents		(504	)		377
Cash and Cash Equivalents, End of Period	$	1,300		$	1,550

Operating Activities

Net cash provided by operating activities in 2010 was $184 million, including net income of $291 million. Net income included Depreciation and Amortization of $194 million, Gain on Express Initial Public Offering of $52 million, Gain on Distribution from Express of $49 million and Gain on Divestiture of Limited Stores of $20 million. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. The most significant item in working capital was a decrease in Income Taxes Payable due to seasonal decreases.

Net cash provided by operating activities in 2009 was $244 million, including net income of $77 million. Net income included Depreciation and Amortization of $191 million. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. The most significant item in working capital was seasonal decreases in Accounts Payable, Accrued Expenses and Other and Income Taxes Payable. In addition, inventory levels decreased $102 million due to a concerted effort to control and reduce inventory levels across the enterprise.

42

Investing Activities

Net cash used for investing activities in 2010 was $3 million consisting primarily of capital expenditures of $110 million partially offset by a return of capital from both Express and Limited Stores of $49 million and $7 million, respectively, Proceeds from the Divestiture of Limited Stores of $32 million and Proceeds from the Express Initial Public Offering of $20 million. The capital expenditures included $62 million for opening new stores and remodeling and improving existing stores. Remaining capital expenditures were primarily related to spending on technology and infrastructure to support growth.

Net cash used for investing activities in 2009 was $97 million consisting entirely of capital expenditures. The capital expenditures included $61 million for opening new stores and remodeling and improving existing stores. Remaining capital expenditures were primarily related to spending on technology and infrastructure to support growth.

Financing Activities

Net cash used for financing activities in 2010 was $687 million consisting primarily of Payment of Long-term Debt of $621 million, quarterly and special dividend payments aggregating to $1.30 per share, or $422 million, and Repurchase of Common Stock of $68 million, partially offset by Proceeds from Issuance of Long-term Debt of $390 million.

Net cash provided by financing activities in 2009 was $228 million consisting primarily from the net proceeds of $473 million from the issuance of $500 million of notes partially offset by the prepayment of $125 million of our Term Loan, quarterly dividend payments of $0.15 per share, or $96 million, and $19 million of costs related to the amendment of our 5-Year Facility and Term Loan in February 2009.

Contingent Liabilities and Contractual Obligations

In connection with the disposition of certain businesses, we have remaining guarantees of approximately $114 million related to lease payments of Express, Limited Stores, Abercrombie & Fitch, Dick’s Sporting Goods (formerly Galyan’s), Lane Bryant, New York & Company and Anne.x under the current terms of noncancelable leases expiring at various dates through 2017. These guarantees include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate to leases that commenced prior to the disposition of the businesses. In certain instances, our guarantee may remain in effect if the term of a lease is extended.

In April 2008, we received an irrevocable standby letter of credit from Express of $34 million issued by a third-party bank to mitigate a portion of our liability for guaranteed future lease payments of Express. We can draw from the irrevocable standby letter of credit if Express were to default on any of the guaranteed leases. The irrevocable standby letter of credit is reduced through the November 1, 2010 expiration date consistent with the overall reduction in guaranteed lease payments. The outstanding balance of the irrevocable standby letter of credit from Express was $2 million as of July 31, 2010, $6 million as of January 30, 2010 and $12 million as of August 1, 2009.

Our guarantees related to Express, Limited Stores and New York & Company require fair value accounting in accordance with U.S. GAAP in effect at the time of these divestitures. The guaranteed lease payments related to Express (net of the irrevocable standby letter of credit), Limited Stores and New York & Company totaled $75 million as of July 31, 2010, $84 million as of January 30, 2010 and $92 million as of August 1, 2009. The estimated fair value of these guarantee obligations was $7 million as of July 31, 2010, $9 million as of January 30, 2010 and $16 million as of August 1, 2009 and is included in Other Long-term Liabilities on our Consolidated Balance Sheets.

Our guarantees related to Abercrombie & Fitch, Dick’s Sporting Goods (formerly Galyan’s), Lane Bryant and Anne.x are not subject to fair value accounting, but require that a loss be accrued when probable and reasonably estimable based on U.S. GAAP in effect at the time of these divestitures. We had no liability recorded with respect to any of the guarantee obligations as we concluded that payments under these guarantees were not probable as of July 31, 2010, January 30, 2010 and August 1, 2009.

Our contractual obligations primarily consist of long-term debt and the related interest payments, operating leases, purchase orders for merchandise inventory and other agreements to purchase goods and services that are legally binding and that require minimum quantities to be purchased. These contractual obligations impact our short and long-term liquidity and capital resource needs. There have been no other material changes in our contractual obligations since January 30, 2010, other than those which occur in the normal course of business (primarily changes in our merchandise inventory-related purchase obligations which fluctuate throughout the year as a result of the seasonal nature of our operations).

43

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Fair Value Measurements

In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update 2010-06, which amends Accounting Standards Codification (“ASC 820”), Fair Value Measurement and Disclosures. This guidance requires new disclosures and provides amendments to clarify existing disclosures. The new requirements include disclosing transfers in and out of Levels 1 and 2 fair value measurements and the reasons for the transfers and further disaggregating activity in Level 3 fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the new disclosure regarding the activity in Level 3 measurements, which will be effective for fiscal years and interim periods beginning after December 15, 2010. We adopted this guidance for the fiscal period beginning January 31, 2010, except for the new disclosure regarding the activity in Level 3 measurements, which we will adopt for the fiscal period beginning January 30, 2011.

IMPACT OF INFLATION

While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on the results of operations and financial condition have been minor.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to adopt accounting policies related to estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, management evaluates our accounting policies, estimates and judgments, including those related to inventories, long-lived assets, claims and contingencies, income taxes and revenue recognition. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

There have been no material changes to the critical accounting policies and estimates disclosed in our 2009 Annual Report on Form 10-K.

44

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

The market risk inherent in our financial instruments represents the potential loss in fair value, earnings or cash flows arising from adverse changes in foreign currency exchange rates or interest rates. We use derivative financial instruments like the cross-currency swaps and the participating interest rate swap arrangement to manage exposure to market risks. We do not use derivative financial instruments for trading purposes.

Foreign Exchange Rate Risk

Our foreign exchange rate translation exposure is primarily the result of the January 2007 acquisition of La Senza Corporation, whose operations are conducted primarily in Canada. To mitigate the translation risk to our earnings and the fair value of our investment in La Senza associated with fluctuations in the U.S. dollar-Canadian dollar exchange rate, we entered into a series of cross-currency swaps related to Canadian dollar denominated intercompany loans. These cross-currency swaps require the periodic exchange of fixed rate Canadian dollar interest payments for fixed rate U.S. dollar interest payments as well as exchange of Canadian dollar and U.S. dollar principal payments upon maturity. The swap arrangements mature between 2015 and 2018 at the same time as the related loans. As a result of the Canadian dollar denominated intercompany loans and the related cross-currency swaps, we do not believe there is any material translation risk to La Senza’s net earnings associated with fluctuations in the U.S. dollar-Canadian dollar exchange rate.

In addition, our Canadian dollar denominated earnings are subject to U.S. dollar-Canadian dollar exchange rate risk as a majority of our merchandise sold in Canada is sourced through U.S. dollar transactions.

Interest Rate Risk

Our investment portfolio primarily consists of interest-bearing instruments that are classified as cash and cash equivalents based on their original maturities. Our investment portfolio is maintained in accordance with our investment policy, which specifies permitted types of investments, specifies credit quality standards and maturity profiles and limits credit exposure to any single issuer. The primary objective of our investment activities are the preservation of principal, the maintenance of liquidity and the maximization of interest income while minimizing risk. Currently, our investment portfolio is comprised of U.S. and Canadian government obligations, U.S. Treasury and AAA-rated money market funds, bank time deposits, and highly-rated commercial paper. Given the short-term nature and quality of investments in our portfolio, we do not believe there is any material risk to principal associated with increases or decreases in interest rates.

All of our long-term debt as of July 31, 2010 has fixed interest rates. In June 2010, we entered into a series of interest rate swap arrangements related to all of our outstanding 2012 Notes, all of our outstanding 2014 Notes and $175 million of our outstanding 2017 Notes. The effect of the interest rate swap arrangements is to convert the respective amount of debt from a fixed interest rate to a variable interest rate. The variable interest rate associated with these swap arrangements fluctuates based on changes in the three-month London Interbank Offered Rate (“LIBOR”).

For the balance of our long-term debt that is not subject to the interest rate swap arrangements, our exposure to interest rate changes is limited to the fair value of the debt issued, which would not have a material impact on our earnings or cash flows.

45

Fair Value of Financial Instruments

As of July 31, 2010, management believes that the carrying values of cash and cash equivalents, receivables and payables approximate fair value because of the short maturity of these financial instruments.

The following table provides a summary of long-term debt and swap arrangements as of July 31, 2010, January 30, 2010 and August 1, 2009:

	July 31, 2010			January 30, 2010		August 1, 2009
	(in millions)
Long-term Debt:
Carrying Value	$	2,534		$	2,725	$	3,251
Fair Value, Estimated (a)		2,583			2,690		2,947
Fair Value of Cross-currency Swap Arrangements (b)		34			34		30
Fair Value of Participating Interest Rate Swap Arrangements (b) (c)		0			10		27
Fair Value of Interest Rate Swap Arrangements (b)		(9	)		0		0

(a) The estimated fair value of our publicly traded debt is based on quoted market prices. The estimated fair value of the Term Loan is equal to its carrying value. The estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange.

(b) Swap arrangements are in an (asset) liability position.

(c) In March 2010, we terminated our remaining participating interest rate swap arrangements in conjunction with the prepayment of our remaining outstanding portion of our Term Loan.

We maintain cash and cash equivalents with various major financial institutions, as well as a 5-Year Facility that supports our letter of credit program. We monitor the relative credit standing of these financial institutions and other entities and limit the amount of credit exposure with any one entity. We also monitor the creditworthiness of entities to which we grant credit terms in the normal course of business and counterparties to derivative instruments.

Item 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were adequate and effective and designed to ensure that material information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred in the second quarter 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

46

PART II—OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

We are a defendant in a variety of lawsuits arising in the ordinary course of business. Actions filed against the Company from time to time include commercial, tort, intellectual property, customer, employment, data privacy, securities and other claims, including purported class action lawsuits. Although it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, our legal proceedings are not expected to have a material adverse effect on our financial position or results of operations.

On November 6, 2009, a class action (International Brotherhood of Electrical Workers Local 697 Pension Fund v. Limited Brands, Inc. et al.) was filed against the Company and certain of its officers in the United States District Court for the Southern District of Ohio on behalf of a purported class of all persons who purchased or acquired shares of Limited Brands common stock between August 22, 2007 and February 28, 2008. The Company believes the complaint is without merit and that the Company has substantial factual and legal defenses to the claims at issue. The Company intends to vigorously defend against this action. The Company cannot reasonably estimate the possible loss or range of loss that may result from this lawsuit.

Item 1A. RISK FACTORS

The risk factors that affect our business and financial results are discussed in “Item 1A: Risk Factors” in the 2009 Annual Report on Form 10-K. We wish to caution the reader that the risk factors discussed in “Item 1A: Risk Factors” in our 2009 Annual Report on Form 10-K, and those described elsewhere in this report or other Securities and Exchange Commission filings, could cause actual results to differ materially from those stated in any forward-looking statements.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides our repurchases of our common stock during the second quarter of 2010:

Period	Total Number of Shares Purchased (a)	Average Price Paid Per Share (b)		Total Number of Shares Purchased as Part of  Publicly Announced Programs (c)	Maximum Number of Shares (or Approximate Dollar Value) that  May Yet be Purchased Under the Programs (c)
	(in thousands)			(in thousands)
May 2010	291	$	24.83	276	$	191,061
June 2010	1,091		24.04	1,075		165,237
July 2010	1,400		24.44	1,381		131,502
Total	2,782		24.32	2,732

(a) The total number of shares repurchased includes shares repurchased as part of publicly announced programs, with the remainder relating to shares repurchased in connection with (i) tax payments due upon vesting of employee restricted stock awards, (ii) the use of our stock to pay the exercise price on employee stock options, and (iii) our small shareholder repurchase program.

(b) The average price paid per share includes any broker commissions.

(c) For additional share repurchase program information, see Note 3 to the Consolidated Financial Statements included in Item 1. Financial Statements.

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. RESERVED

Item 5. OTHER INFORMATION

Not applicable.

47

Item 6. EXHIBITS

Exhibits
15	Letter re: Unaudited Interim Financial Information re: Incorporation of Report of Independent Registered Public Accounting Firm.
31.1	Section 302 Certification of CEO.
31.2	Section 302 Certification of CFO.
32	Section 906 Certification (by CEO and CFO).
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

48

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LIMITED BRANDS, INC.
(Registrant)
By:	/s/ STUART B. BURGDOERFER
	Stuart B. Burgdoerfer
	Executive Vice President and Chief Financial Officer *

Date: September 7, 2010

* Mr. Burgdoerfer is the principal financial officer and the principal accounting officer and has been duly authorized to sign on behalf of the Registrant.

49

EX-15

Exhibit 15

September 7, 2010

To the Board of Directors and Shareholders

of Limited Brands, Inc.:

We are aware of the incorporation by reference in the following Registration Statements of Limited Brands, Inc. and, with respect to the Registration Statement on Form S-3, in the related Prospectus:

Registration Statement (Form S-3 POSASR No. 333-146420)

Registration Statement (Form S-4 No. 333-163026)

Registration Statement (Form S-8 No. 33-49871)

Registration Statement (Form S-8 No. 333-110465)

Registration Statement (Form S-8 No. 333-04927)

Registration Statement (Form S-8 No. 333-04941)

Registration Statement (Form S-8 No. 333-118407)

Registration Statement (Form S-8 No. 333-161841);

of Limited Brands, Inc. of our report dated September 7, 2010 relating to the unaudited consolidated interim financial statements of Limited Brands, Inc. and its subsidiaries that are included in its Form 10-Q for the quarter ended July 31, 2010.

/s/ Ernst & Young LLP

Columbus, Ohio

EX-31.1

Exhibit 31.1

Section 302 Certification

I, Leslie H. Wexner, certify that:

1. I have reviewed this report on Form 10-Q of Limited Brands, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ LESLIE H. WEXNER

Leslie H. Wexner

Chairman and Chief Executive Officer

Date: September 7, 2010

EX-31.2

Exhibit 31.2

Section 302 Certification

I, Stuart B. Burgdoerfer, certify that:

1. I have reviewed this report on Form 10-Q of Limited Brands, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ STUART B. BURGDOERFER

Stuart B. Burgdoerfer

Executive Vice President and

Chief Financial Officer

Date: September 7, 2010

EX-32

Exhibit 32

Section 906 Certification

Leslie H. Wexner, the Chairman and Chief Executive Officer, and Stuart B. Burgdoerfer, the Executive Vice President and Chief Financial Officer, of Limited Brands, Inc. (the “Company”), each certifies that, to the best of his knowledge:

(i) the Quarterly Report of the Company on Form 10-Q dated September 7, 2010 for the period ending July 31, 2010 (the “Form 10-Q”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ LESLIE H. WEXNER

Leslie H. Wexner

Chairman and Chief Executive Officer

/s/ STUART B. BURGDOERFER

Stuart B. Burgdoerfer

Executive Vice President and Chief Financial Officer

Date: September 7, 2010