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Bath & Body Works Inc BBWI

Morningstar Rating
$45.68 −0.02 (0.04%)
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Company Report

Bath & Body Works Earnings: Investments Crimp Margins but Position Brand for Long-Term Success

Narrow-moat Bath & Body Works (BBW) delivered a strong fourth quarter, with sales and EPS ahead of our forecast. Fourth-quarter sales rose 1%, to $2.9 billion, a touch above our $2.8 billion estimate and more than 30% over 2019, despite the ongoing normalization of demand in certain categories. EPS of $2.06 exceeded our $1.76 projection, aided by a gross margin of 45.9% (versus our 44% estimate) that benefited from a 290-basis-point uptick in merchandise margin stemming from higher average unit retail and cost deflation. However, the initial sales and EPS outlook for 2024 sent shares lower by a mid-single-digit rate. With 2024 facing a 100-basis-point headwind from lapping an extra week in 2023, like-for-like sales are set to be down 2% to up 1%, which will still represent above-40% growth over a 5-year period. In our opinion, a stalled operating margin at 17% was the real surprise, as it was well below our 19% forecast.

Price vs Fair Value

BBWI is trading at a 41% discount.
Price
$45.68
Fair Value
$97.00
Uncertainty
Very High
1-Star Price
$389.20
5-Star Price
$84.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

BBW is set to renegotiate numerous leases over the next few years. Favorably updated rent agreements along with productivity gains from the White Barn format conversion could help boost profits.

Bears

A secular shift in demand around mall retailing could slow footfall, tempering demand. Mall locations still represented about half of the fleet at year-end 2022 (versus 61% in 2016).

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News

Trading Information

Previous Close Price
$45.70
Day Range
$45.1047.21
52-Week Range
$27.3048.43
Bid/Ask
$45.00 / $46.00
Market Cap
$10.32 Bil
Volume/Avg
4.1 Mil / 3.2 Mil

Key Statistics

Price/Earnings (Normalized)
14.88
Price/Sales
1.41
Dividend Yield (Trailing)
1.75%
Dividend Yield (Forward)
1.75%
Total Yield
3.19%

Company Profile

Bath & Body Works is a specialty home fragrance and fragrant body care retailer operating under the Bath & Body Works, C.O. Bigelow, and White Barn brands. The company generates most of its business in North America, with less than 5% of sales from international markets in fiscal 2022. For fiscal 2022, 72% of sales stemmed from the brick-and-mortar network (which was composed of more than 1,800 retail stores), similar to 2021 levels, as consumer shopping patterns remained to normal. Future growth is expected from store reformatting, digital and international channels, as well as adjacent category expansion.
Sector
Consumer Cyclical
Industry
Specialty Retail
Stock Style Box
Mid Value
Total Number of Employees
57,200

Competitors

Valuation

Metric
BBWI
EL
ULTA
Price/Earnings (Normalized)
14.8897.1022.33
Price/Book Value
9.3413.19
Price/Sales
1.413.542.54
Price/Cash Flow
10.1040.2914.82
Price/Earnings
BBWI
EL
ULTA

Financial Strength

Metric
BBWI
EL
ULTA
Quick Ratio
0.430.870.18
Current Ratio
1.391.361.52
Interest Coverage
3.822.79
Quick Ratio
BBWI
EL
ULTA

Profitability

Metric
BBWI
EL
ULTA
Return on Assets (Normalized)
13.36%3.09%23.84%
Return on Equity (Normalized)
12.28%64.30%
Return on Invested Capital (Normalized)
26.12%5.04%32.28%
Return on Assets
BBWI
EL
ULTA
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