Bath & Body Works’ Stock Jumps As It Raises Earnings Guidance
The business is launching into hair care, and planning laundry products.
Bath & Body Works' stock surged more than 10 percent Thursday after it beat Wall Street forecasts on the bottom line in its first quarter and upgraded its outlook.
Net income was $81 million for the first quarter ended April 29, down from $155 million, the company said. Adjusted earnings per diluted share came in at 33 cents for the first quarter, down from 64 cents a year ago, but beating analyst forecasts of 26 cents.
The company reported net sales of nearly $1.4 billion, a decrease of 4 percent compared to the same period a year earlier, but roughly in line with analysts' expectations.
Bath & Body Works updated its full-year forecast to reflect better-than-expected bottom line results and the impact of the gain on the early extinguishment of debt in the first quarter. It now expects full-year earnings per diluted share to be between $2.70 and $3.10, compared to $3.40 in
2022. It had previously forecast $2.50 to $3.
“We saw benefits from our work to improve merchandise margin as well as early benefits from our cost- optimization initiatives,” Gina Boswell, chief executive officer of Bath & Body Works, said in a statement.
“Looking ahead, we are moving with purpose, focused on taking actions and building the capabilities that will drive profitable growth. Despite the current macroeconomic pressures, I continue to be confident in our ability to reach our $10 billion sales target and deliver industry-leading operating margins of 20 percent, over time,” she added during a call with analysts.
A breakdown of the sales numbers by president Julie Rosen showed that men's body and wellness posted positive growth for the quarter, but sales of its broader body care category declined, as did home fragrance.
Rosen said the team is building on the success of its men's business to include grooming, initially focusing on face and beard care and later this year, introducing men's hair and shaving. In addition, in July, it will launch hair care in approximately 560 stores and online with shampoo, conditioner and a dry shampoo. The company is also gearing up to launch a laundry line. More launches in the wellness category are also in the works.
Of the numbers, Ike Boruchow, a retail analyst at Wells Fargo, said: "Bath & Body Works is clearly in transition (sales are contracting, margins are under pressure and the company is investing after its separation from Victoria's Secret). That said, they seem to have rebased numbers to an achievable level."
The company was formed in August
2021, when the former L Brands split into two entities: Victoria's Secret and Bath & Body Works. Each company trades individually on the New York Stock Exchange. Bath & Body Works was number 11 on WWD Beauty Inc's most recent Top 100 Beauty Manufacturers list, with $4.6 billion in sales for calendar 2022.
Most recently, it faced a proxy challenge from activist investor Third Point, but the two parties quickly reached an agreement. To appease Third Point, Bath & Body Works said that Thomas J. Kuhn, a lawyer, finance executive and board member, had been appointed as a new independent member of its board of directors.
The company's stock closed up 10.8 percent Thursday, at $37.69.