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Limited Brand Consolida La Administración De Su Cadena De Suministro

Dear Shareholder, 2008 was a year of sweeping changes and economic crisis . . . everyone was touched by it. Our year started out well. In fact, through the first three quarters of 2008, we were making steady progress and were pleased with our bottom-line result. But by October, the collective impact of the economic downturn affected everyone. Consumers reacted by severely reducing spending across all categories, significantly impacting our fourth quarter, the year and our view of 2009. There are times to play offense – and times to play defense. As the world changed, we shifted to defense . . . safety and security. We always put the “safety” of the enterprise first – it is my overarching concern . . . all stakeholders must have confidence in the stability and security of the enterprise in the present and future. Defense means managing the financial aspects of our business even more conservatively than before. Our inventory is more tightly managed. Inventory per square foot has been down for 19 consecutive months and, on a two-year basis, is down 35 percent. We continue to look for ways to improve speed and replenishment, making sure our assortment is fresh and appealing. We’ve taken the same conservative approach to expenses, and the aggregate savings are significant: • • • Over the past 18 months, we reduced our expense base by $150 million, and we reduced home office headcount by 20 percent. We’re also targeting further non-customer-facing expense reductions across the enterprise, everything from smarter travel and more efficient marketing, to cutting administrative spending. We expect these actions to result in additional annualized expense savings of $200 to $250 million.

At the same time, we have significantly reduced our capital spending, from a high of $749 million in 2007, to $479 million in 2008, to roughly $200 million in 2009. Importantly, our real estate is in very good shape, with almost every location cash-flow positive. We’re diligent about...