Bath & Body Works, Inc. (BBWI) is a global omnichannel retailer focused on personal care and home fragrance products. The company operates a network of retail stores in the United States and Canada, as well as an e-commerce platform, selling merchandise under the Bath & Body Works, White Barn, and other brand names. The company also has an international business conducted through franchise, license, and wholesale partners.

Financials

In the fiscal year 2023, Bath & Body Works reported annual net income of $878 million, annual revenue of $7.429 billion, annual operating cash flow of $954 million, and annual free cash flow of $656 million. The company's strong financial performance has been driven by its focus on strategic initiatives to enhance its brand, expand its product offerings, and improve operational efficiency.

During the first quarter of fiscal 2024, Bath & Body Works reported net sales of $1.384 billion, a decrease of 0.9% compared to the first quarter of fiscal 2023. The company's net income for the quarter was $87 million, with earnings per diluted share of $0.38, up 15% from the prior year's adjusted earnings per share. The company's performance was driven by strong execution, effective management of profitability, and progress on its strategic priorities.

Recent Developments

Bath & Body Works' first quarter results were better than expected, with the company citing strong customer response to new product introductions and marketing activities that built brand awareness and engagement. The company's newer product categories, such as men's, hair, lip, and laundry, continued to contribute to the business, and the company is excited about the potential for further growth in these areas.

The home fragrance category performed in line with the company's expectations, with a decline in candle sales due to continued normalization in the category. The company maintained its market leadership in the category and saw growth in its air freshener products. The soap and sanitizer category also declined, with the company's decision to exit the full-size sanitizer form due to continued normalization in the category.

International Performance

Internationally, Bath & Body Works faced pressure due to the war in the Middle East, which negatively impacted wholesale shipments to the company's franchise partners in the region. However, the company remains committed to its international expansion plans and expects to add at least 35 net new stores in international markets this year.

Strategic Initiatives

The company's focus on driving customership, or the demand generated among current and potential customers, has been a key priority. The company's marketing initiatives, including its full-funnel approach and collaborations with partners like Netflix, have been successful in improving brand awareness and engagement, as well as increasing customer retention and attracting new customers.

Bath & Body Works' loyalty program has also been a key driver of the company's success, with active loyalty members now accounting for approximately 80% of the company's U.S. sales. The company plans to further enhance the program in 2024 by offering more loyalty-exclusive and early-access events, as well as point accelerators, to drive increased engagement and customer lifetime value.

The company's technology initiatives are also on track, with investments in foundational tools and systems to support future growth and enhance the digital experience for customers. Bath & Body Works remains focused on driving sustainable, long-term, profitable growth through investments in the business, including in brick-and-mortar stores and technology.

Outlook

For the full fiscal year 2024, Bath & Body Works has narrowed its guidance ranges for both the top and bottom lines, raising the midpoint while maintaining the high end for each. The company now expects net sales to range between down 2.5% and flat year-over-year, with the high end of the range reflecting a return to growth in the second half of the year. The company expects gross profit rate to be approximately 43.7% and the SG&A rate to be approximately 26.7% for the full year.

In the second quarter of fiscal 2024, Bath & Body Works expects net sales to range between down 2% and flat compared to the prior year, with the high end of the range reflecting a sequential improvement over the prior quarter. The company expects the second quarter gross profit rate to be approximately 40%, in line with the second quarter of fiscal 2023, and the SG&A rate to be approximately 29% of net sales.

Conclusion

Bath & Body Works' strong financial performance, strategic initiatives, and focus on driving customership and operational excellence position the company well to navigate the current macroeconomic environment and continue its growth trajectory. The company's investments in new product categories, international expansion, and technology are expected to drive long-term value for shareholders.