Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of Dana Telsey - Telsey Advisory Group.
Dana Telsey - Telsey Advisory Group
Can you talk a little bit about the real estate side of the business? What are you seeing for both businesses in terms of renegotiation of existing leases and potentially is there a store closing that would be evaluated too? Then you talk about margins for both businesses and promotional level. How are you planning price points and the impact on gross margin?
Martyn Redgrave
It is an interesting situation on the real estate front. Because we are such a strong presence in the mall and we are a very successful part of that presence we are approaching our conversations with landlords in a very respectful and confidential way. We are leading with our emphasis on strengthening our relationship with the landlords rather than simply asking them for concessions.
Obviously when we have lease renewals or repositioning within the mall going on we are looking for the right kind of market rate on those lease renewals but we are not seeking to do more than that at this stage of our discussions with our landlords.
Dian Neil
At Bath and Body Works we have actually done a lot of testing throughout the fourth quarter and continue to test a lot of different buy ins to most of our collections. Our AUR’s are basically flat to last year but as I mentioned earlier our overall ABS or average basket is actually below last year. So we started selling fewer units but the AUR’s are pretty well flat.
Sharen Turney
At Victoria’s Secret as we see the deterioration of traffic within the malls we are positioned to take action with promotion, if necessary. We have a very conservative plan within our gross margin strategy. We are not looking to over promote Victoria’s Secret but actually pulse throughout the [weekend] very specific targeted promotions. For example as we have one that started this week with Pink giving away a free lip gloss with a purchase. So it is all strategized. It is within the budget. We will only pull the trigger if necessary.
Operator
The next question comes from Brian Tunick - J.P. Morgan.
Brian Tunick - J.P. Morgan
I was wondering if Sharen and Dian maybe could just talk about why they think maybe February, the month, is trending significantly better than your original expectations? Then Stuart on the free cash flow guidance other than inventories what are the other buckets of working capital improvements?
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