Bath & Body Works Cuts Annual Sales Forecast, Shares Tumble Over 6%

Bath & Body Works (NYSE:BBWI) saw its shares soar over 15% intra-day today after delivering third-quarter earnings that exceeded analyst expectations and raising its full-year guidance.

The company reported adjusted earnings per share of $0.49, outperforming the analyst estimate of $0.47. Revenue for the quarter reached $1.61 billion, surpassing the Street consensus forecast of $1.58 billion and marking a 3% year-over-year increase. This strong performance was driven by successful product innovation and strategic investments in marketing and technology.

Following the better-than-expected results, Bath & Body Works revised its full-year 2024 guidance. The company now anticipates a smaller decline in net sales, projecting a decrease of 2.5% to 1.7% compared to fiscal 2023, an improvement over its prior forecast. Full-year adjusted earnings per share are now expected to range from $3.15 to $3.28.

For the fourth quarter, the company forecasted a net sales decline of 6.5% to 4.5% year-over-year, reflecting a 500-basis-point headwind caused by a shifted fiscal calendar. Fourth-quarter earnings per share are projected between $1.94 and $2.07. The guidance also includes the expected impact of $400 million in share repurchases for the fiscal year.

Bath & Body Works, Inc. (NYSE: BBWI) is a well-known retailer specializing in personal care and home fragrance products. The company is set to release its third-quarter earnings on Monday, November 25, 2024. Analysts on Wall Street estimate the earnings per share (EPS) to be $0.47, with projected revenue of approximately $1.58 billion. This release is highly anticipated by investors and stakeholders.

The upcoming earnings report has led to recent forecast changes from some of Wall Street's most accurate analysts, as highlighted by Benzinga. Analysts project an EPS of $0.47, marking a 4.2% decline from the same period last year. Despite this, revenues are expected to rise slightly by 1.1%, reaching $1.58 billion. The stability in the consensus EPS estimate over the past 30 days suggests that analysts have not significantly altered their forecasts.

BBWI's financial metrics provide insight into its market valuation. The company has a price-to-earnings (P/E) ratio of approximately 7.29, indicating how the market values its earnings. The price-to-sales ratio is about 0.91, suggesting that investors are paying less than a dollar for each dollar of sales. These ratios help investors understand the company's valuation relative to its earnings and sales.

The enterprise value to sales ratio stands at around 1.57, reflecting BBWI's total valuation relative to its sales. Additionally, the enterprise value to operating cash flow ratio is approximately 12.78, providing insight into the company's cash flow generation relative to its valuation. These metrics are crucial for investors assessing the company's financial health and performance.

BBWI's financial stability is further highlighted by its earnings yield of about 13.73%, offering a relatively high return on its earnings. However, the debt-to-equity ratio is approximately -2.55, indicating a higher level of debt compared to equity. The current ratio is around 1.11, suggesting that BBWI has a slightly higher level of current assets compared to its current liabilities, which is important for meeting short-term obligations.

Bath & Body Works (NYSE:BBWI) revised its full-year profit outlook downward, significantly falling short of Wall Street expectations, and anticipates a decline in annual sales.

The company’s shares dropped more than 12% intra-day today following the announcement. The company now projects net sales for 2024 to decrease by 2.5% to remain flat, a slight improvement from its previous forecast of a 3% decline to flat, but still below analysts' expectations of a 0.37% drop.

Despite efforts to boost sales through promotions, increased marketing, and new product launches, the company is grappling with subdued demand for its scented candles and body care products amid persistent inflation. Consumers, facing budget constraints, are reluctant to spend on non-essential luxury items.

The company expects Q2 diluted EPS to range between 31 cents and 36 cents, below the anticipated 39 cents, with net sales expected to decline by 2% to remain flat, slightly better than the projected 1.41% drop.

In Q1, the company reported a 0.9% decline in net sales to $1.38 billion, slightly above the $1.37 billion forecast. Earnings per share stood at $0.38, surpassing the Wall Street estimate of $0.33.

UBS analysts increased their price target for Bath & Body Works (NYSE:BBWI) to $52 from $46 while keeping their Neutral rating unchanged. The analysts noted that Bath & Body Works' modest guidance for fiscal 2024 sales growth indicates a slower-than-expected recovery to pre-pandemic sales growth rates. This adjustment dampens confidence in the company's long-term revenue projections and suggests a slim chance of its price-to-earnings ratio improving.

Moreover, the company's forecast hints at a return to positive sales growth in the second half of the year, introducing additional risk. Investor discussions reveal expectations of surpassing the company's fiscal year 2024 earnings per share guidance of $3.00-$3.35, with projections leaning towards $3.50-$3.80. Consequently, even if sales growth accelerates as anticipated in the latter half, the stock may not significantly benefit since this outcome seems already anticipated.

Bath & Body Works (NYSE:BBWI) released its second-quarter results, which surpassed expectations. However, a less favorable outlook for the company's performance than initially anticipated caused a slight decline in shares pre-market today.

The company's adjusted earnings per share (EPS) of 40 cents came in better than the Street estimate of 33 cents. While revenue experienced a 3.6% decrease year-over-year, amounting to $1.56 billion, this figure aligns with what analysts had predicted.

For the current quarter, BBWI's projected EPS to fall within the range of 30 cents to 40 cents, slightly below the Street estimate of 38 cents. The company anticipates a drop in net sales of 2.5%-4.0% year-over-year.

Regarding its outlook for the full 2024 year, Bath & Body Works predicts an adjusted EPS between $2.80 and $3.10, compared to the consensus projection of $3.10. The company expects a decline in net sales of 1.5% to 3.5% year-over-year.

Bath & Body Works, Inc. (NYSE:BBWI) shares rose more than 25% today after the company reported better-than-expected Q3 results. EPS came in at $0.40, better than the Street estimate of $0.20. Revenue was $1.6 billion, beating the Street estimate of $1.56 billion.

Results were driven by improving category mix and lower-than-expected transportation costs (resulting in a gross margin beat) along with SG&A favorability, which has been a recurring trend as the company cuts overhead costs and streamlines operations.

The company expects Q4 /2023 EPS to be in the range of $1.45-$1.65, compared to the Street estimate of $1.55.