Core Viewpoint - Bath & Body Works (BBWI) stock has seen a significant increase of 20% in the last month, currently trading at around $38 per share, with expectations for long-term growth due to strong demand and strategic investments [1][5]. Financial Performance - BBWI reported a 3% year-over-year sales growth in Q3, reaching $1.6 billion, driven by new store openings and increased online orders [4]. - The company achieved a gross profit of $700 million in Q3, up from $682 million the previous year, while operating income slightly decreased to $218 million from $221 million [4]. - Earnings per share for the quarter were $0.49, reflecting a 6% decline year-over-year [4]. Market Position and Strategy - BBWI has a strong loyalty program with over 38 million active members, contributing to approximately 80% of U.S. sales, which is advantageous for driving repeat purchases [2]. - The company plans to invest around $250 million in capital expenditures for FY 2024, focusing on opening new off-mall stores, remodeling existing locations, and enhancing technology and supply chain [1]. Future Projections - For fiscal year 2024, BBWI forecasts revenues of $7.3 billion, a 2% decline year-over-year, with adjusted earnings per share projected between $3.15 and $3.28 [5][6]. - The company raised its guidance for fiscal 2024, now expecting a net sales decline of -2.5% to -1.7%, an improvement from the previous forecast of -4% to -2% [6]. Valuation - BBWI is currently trading at nearly a 9x P/E multiple, which is below its historical average, indicating potential for multiple re-rating if growth exceeds expectations [2]. - The revised valuation for BBWI is set at $41 per share, based on an expected EPS of $3.27 and a 12.5x P/E multiple for FY 2024, suggesting the stock is undervalued at current levels [5].

It has almost been two years since I published my last article about Bath & Body Works (NYSE: BBWI ) (or “L Brands” as the company was previously known before spinning off Victoria’s Secret in 2021). In the article, I wroteMy analysis is focused on high-quality companies, that can outperform the market over the long-run due to a competitive advantage (economic moat) and high levels of defensibility. Focused on European and North American companies, but without constraints regarding market capitalization (fr ...

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20Financial%20Information) Presents the company's unaudited consolidated financial statements, notes, auditor's report, and management's discussion and analysis [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including statements of income, comprehensive income, balance sheets, statements of total equity (deficit), and cash flows, along with detailed notes explaining accounting policies, revenue recognition, equity changes, debt, and commitments; it also includes the independent auditor's review report and a safe harbor statement [Consolidated Statements of Income (Unaudited)](index=3&type=section&id=Consolidated%20Statements%20of%20Income%20(Unaudited)) Details the company's revenues, costs, and net income for the current and prior quarter and year-to-date periods Consolidated Statements of Income (in millions, except per share amounts) | Metric | Q3 2024 (Unaudited) | Q3 2023 (Unaudited) | YTD 2024 (Unaudited) | YTD 2023 (Unaudited) | | :--------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Net Sales | $1,610 | $1,562 | $4,520 | $4,517 | | Gross Profit | $700 | $682 | $1,933 | $1,899 | | Operating Income | $218 | $221 | $588 | $589 |\ | Net Income | $106 | $119 | $345 | $299 | | Net Income per Basic Share | $0.49 | $0.52 | $1.56 | $1.31 | | Net Income per Diluted Share | $0.49 | $0.52 | $1.55 | $1.31 | [Consolidated Statements of Comprehensive Income (Unaudited)](index=3&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) Outlines net income and other comprehensive income components, reflecting total comprehensive income for the periods presented Consolidated Statements of Comprehensive Income (in millions) | Metric | Q3 2024 (Unaudited) | Q3 2023 (Unaudited) | YTD 2024 (Unaudited) | YTD 2023 (Unaudited) | | :--------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Net Income | $106 | $119 | $345 | $299 | | Total Other Comprehensive Loss, Net of Tax | $(1) | $(2) | $(2) | $(3) | | Total Comprehensive Income | $105 | $117 | $343 | $296 | [Consolidated Balance Sheets as of November 2, 2024 (Unaudited), February 3, 2024 and October 28, 2023 (Unaudited)](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20November%202%2C%202024%20(Unaudited)%2C%20February%203%2C%202024%20and%20October%2028%2C%202023%20(Unaudited)) Provides a snapshot of the company's assets, liabilities, and equity at specific fiscal year-end and interim dates Consolidated Balance Sheets (in millions) | Asset/Liability/Equity | Nov 2, 2024 (Unaudited) | Feb 3, 2024 | Oct 28, 2023 (Unaudited) | | :--------------------------- | :---------------------- | :------------------ | :----------------------- | | **ASSETS** | | | | | Cash and Cash Equivalents | $191 | $1,084 | $412 | | Inventories | $1,178 | $710 | $1,205 | | Total Current Assets | $1,720 | $2,115 | $1,959 | | Property and Equipment, Net | $1,158 | $1,220 | $1,244 | | Total Assets | $4,984 | $5,463 | $5,243 | | **LIABILITIES AND EQUITY (DEFICIT)** | | | | | Accounts Payable | $510 | $380 | $627 | | Current Debt | $314 | $— | $— | | Total Current Liabilities | $1,575 | $1,289 | $1,409 | | Long-term Debt | $3,883 | $4,388 | $4,497 | | Total Equity (Deficit) | $(1,748) | $(1,626) | $(2,124) | [Consolidated Statements of Total Equity (Deficit) (Unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Total%20Equity%20(Deficit)%20(Unaudited)) Shows changes in shareholders' equity, including net income, dividends, and stock repurchases, over the reporting periods Changes in Total Equity (Deficit) (in millions) | Metric | Q3 2024 (Unaudited) | Q3 2023 (Unaudited) | YTD 2024 (Unaudited) | YTD 2023 (Unaudited) | | :--------------------------- | :------------------ | :------------------ | :------------------- | :------------------- |\ | Balance, Beginning of Period | $(1,718) | $(2,154) | $(1,626) | $(2,205) | | Net Income | $106 | $119 | $345 | $299 | | Total Comprehensive Income | $105 | $117 | $343 | $296 | | Cash Dividends | $(44) | $(45) | $(134) | $(137) | | Repurchases of Common Stock | $(99) | $(50) | $(348) | $(100) | | Balance, End of Period | $(1,748) | $(2,124) | $(1,748) | $(2,124) | [Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Summarizes cash inflows and outflows from operating, investing, and financing activities for the year-to-date periods Consolidated Statements of Cash Flows (in millions) | Activity | YTD 2024 (Unaudited) | YTD 2023 (Unaudited) | | :----------------------------------------- | :------------------- | :------------------- | | Net Cash (Used for) Provided by Operating Activities | $(69) | $28 | | Net Cash Used for Investing Activities | $(114) | $(239) | | Net Cash Used for Financing Activities | $(710) | $(609) | | Net Decrease in Cash and Cash Equivalents | $(893) | $(820) | | Cash and Cash Equivalents, End of Period | $191 | $412 | [Notes to Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) Provides detailed explanations of the company's accounting policies, financial statement line items, and significant transactions [1. Description of Business and Basis of Presentation](index=8&type=section&id=1.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) Describes the company's business, fiscal year, and the basis for preparing the consolidated financial statements - Bath & Body Works, Inc. is a global omnichannel retailer focused on personal care and home fragrance, operating as a single segment[24](index=24&type=chunk) - The company's fiscal year ends on the Saturday nearest to January 31, with operations being seasonal and sales highest in the fourth quarter[25](index=25&type=chunk)[28](index=28&type=chunk) - Sold entire interests in Easton Town Center and Easton Gateway in May and August 2024, respectively, for **$50 million cash proceeds** and a **$39 million pre-tax gain**. Remaining Easton investments of approximately **$100 million** will be presented as held for sale in Q4 2024[33](index=33&type=chunk) [2. Revenue Recognition](index=9&type=section&id=2.%20Revenue%20Recognition) Explains the company's policies for recognizing revenue, including details on accounts receivable and deferred revenue - Accounts receivable, net from revenue-generating activities were **$94 million** as of November 2, 2024, primarily from franchise, license, and wholesale partners[36](index=36&type=chunk) - Deferred revenue, primarily from gift cards and loyalty points, was **$170 million** as of November 2, 2024. The company recognized **$116 million** as revenue year-to-date 2024 from amounts previously deferred[36](index=36&type=chunk) Net Sales Disaggregation (in millions) | Category | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :----------------------- | :------ | :------ | :------- | :------- | | Stores - U.S. and Canada | $1,220 | $1,168 | $3,425 | $3,345 | | Direct - U.S. and Canada | $321 | $317 | $879 | $926 | | International | $69 | $77 | $216 | $246 | | **Total Net Sales** | **$1,610**| **$1,562**| **$4,520** | **$4,517** | [3. Net Income Per Share and Shareholders' Equity (Deficit)](index=10&type=section&id=3.%20Net%20Income%20Per%20Share%20and%20Shareholders'%20Equity%20(Deficit)) Details the calculation of net income per share, share repurchase programs, and dividend payments Weighted-Average Shares for EPS Calculation (in millions) | Share Type | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :------------ | :------ | :------ | :------- | :------- | | Basic Shares | 218 | 227 | 222 | 227 | | Diluted Shares| 219 | 228 | 223 | 228 | - Under the February 2022 Program, **842 thousand shares** were repurchased for **$39 million** (average price **$46.08**) year-to-date 2024. This program had no remaining authority as of May 4, 2024[40](index=40&type=chunk) - Under the January 2024 Program, **8.121 million shares** were repurchased for **$309 million** (average price **$38.05**) year-to-date 2024, with **$191 million** of remaining authority as of November 2, 2024[41](index=41&type=chunk)[42](index=42&type=chunk) - Year-to-date 2024, **8.963 million repurchased shares** were retired, resulting in reductions of **$5 million** in Common Stock par value, **$28 million** in Paid-in Capital, and **$315 million** in Retained Earnings[42](index=42&type=chunk) Dividends Paid (in millions) | Period | Ordinary Dividends (per share) | Total Paid (in millions) | | :----- | :----------------------------- | :----------------------- | | YTD 2024 | $0.60 | $134 | | YTD 2023 | $0.60 | $137 | [4. Inventories](index=11&type=section&id=4.%20Inventories) Provides a breakdown of inventory components and the valuation methods used by the company Inventories (in millions) | Category | Nov 2, 2024 | Feb 3, 2024 | Oct 28, 2023 | | :------------------------------- | :---------- | :---------- | :----------- | | Finished Goods Merchandise | $1,003 | $558 | $1,035 | | Raw Materials and Merchandise Components | $175 | $152 | $170 | | **Total Inventories** | **$1,178** | **$710** | **$1,205** | - Inventories are principally valued at the lower of cost or net realizable value, on an average cost basis[42](index=42&type=chunk) [5. Long-lived Assets](index=11&type=section&id=5.%20Long-lived%20Assets) Presents the net book value of property and equipment and details depreciation expenses for the reporting periods Property and Equipment, Net (in millions) | Category | Nov 2, 2024 | Feb 3, 2024 | Oct 28, 2023 | | :------------------------------------- | :---------- | :---------- | :----------- | | Property and Equipment, at Cost | $3,197 | $3,123 | $3,121 | | Accumulated Depreciation and Amortization | $(2,039) | $(1,903) | $(1,877) | | **Property and Equipment, Net** | **$1,158** | **$1,220** | **$1,244** | - Depreciation expense was **$69 million** for Q3 2024 (vs **$70 million** in Q3 2023) and **$211 million** for YTD 2024 (vs **$199 million** in YTD 2023)[45](index=45&type=chunk) [6. Income Taxes](index=12&type=section&id=6.%20Income%20Taxes) Discusses the effective tax rates, their drivers, and income taxes paid for the current and prior periods - The effective tax rate for Q3 2024 was **26.7%** (vs **25.3%** in Q3 2023), higher due to accrued interest expense related to unrecognized tax benefits[46](index=46&type=chunk) - The effective tax rate for YTD 2024 was **17.2%** (vs **24.9%** in YTD 2023), lower due to the release of a valuation allowance on a deferred tax asset from Easton investment sales[46](index=46&type=chunk) - Income taxes paid were **$285 million** for YTD 2024 (vs **$213 million** for YTD 2023)[46](index=46&type=chunk) [7. Long-term Debt and Borrowing Facility](index=12&type=section&id=7.%20Long-term%20Debt%20and%20Borrowing%20Facility) Outlines the company's outstanding debt balances, debt repurchases, and available credit facilities Outstanding Debt Balances (in millions) | Debt Type | Nov 2, 2024 | Feb 3, 2024 | Oct 28, 2023 | | :-------------------------------------- | :---------- | :---------- | :----------- | | Total Senior Debt with Subsidiary Guarantee | $3,

Goldman Sachs analyst Kate McShane reiterated the Buy rating on Bath & Body Works, Inc. BBWI, with a price forecast of $52.The company’s third-quarter adjusted earnings per share of 49 cents beat the analyst consensus of 47 cents. Quarterly sales of $1.610 billion, a growth of 3.1% year-over-year, came above the street view of $1.579 billion.The gross margin was 43.5%, down 20 bps YoY, and the operating margin was 13.5% compared to 14.2% YoY.The analyst projects the company well-positioned to offer affordab ...

Bath & Body Works, Inc. BBWI reported better-than-expected third-quarter results and raised its 2024 outlook on Monday.BBWI’s third-quarter adjusted earnings per share of 49 cents, beating the analyst consensus of 47 cents. Quarterly sales of $1.610 billion, a growth of 3.1% year-over-year, above the street view of $1.579 billion.Gina Boswell, CEO of Bath & Body Works, commented, “Our strong results exceeded the high end of our net sales and earnings per diluted share guidance. As a result, we are raising o ...

As the United States gross domestic product (GDP) figures for the quarter recently suggested that the American consumer was mostly responsible for carrying economic growth, investors might wonder whether it is still worth it to look into buying some retail stocks in the cyclical space, or whether the wave is toward its last inning and might roll over soon. Well, the answer can only be found in the fundamentals and price action, where companies report their quarterly results, and markets react by either puni ...

Bath & Body Works (BBWI) reported $1.61 billion in revenue for the quarter ended October 2024, representing a year-over-year increase of 3.1%. EPS of $0.49 for the same period compares to $0.48 a year ago.The reported revenue represents a surprise of +1.99% over the Zacks Consensus Estimate of $1.58 billion. With the consensus EPS estimate being $0.46, the EPS surprise was +6.52%.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall ...

Stocks jumped at Monday's open and bond yields retreated as markets welcomed President-elect Donald Trump's nomination of Scott Bessent to be his Treasury secretary. The Dow Jones Industrial Average closed at a new all-time high and the S&P 500 hit a new intraday high early in the opening session of a holiday-shortened week highlighted by a packed economic calendar.In a Friday evening post on Truth Social, Trump described Bessent, the former chief investment strategist of Soros Fund Management, as "one of t ...

The Pioneer Of Seeking Alpha's BAD BEAT Investing, Quad 7 Capital is a team of 7 analysts with a wide range of experience sharing investment opportunities for nearly 12 years. They are best known for their February 2020 call to sell everything & go short, & have been on average 95% long 5% short since May 2020. The broader company has expertise in business, policy, economics, mathematics, game theory, & the sciences. They share both long & short trades & invest personally in equities they discuss within the ...

Financial Data and Key Metrics Changes - Net sales for Q3 2024 were $1.6 billion, an increase of 3% compared to the prior year, with earnings per diluted share at $0.49, exceeding guidance [8][34] - Gross profit rate was 43.5%, a decline of 10 basis points year-over-year, while SG&A as a percentage of net sales was 30%, better than expectations [38][39] - Total operating income decreased by 1.3% to $218 million, representing 13.5% of net sales [41] Business Line Data and Key Metrics Changes - Each category, including Body Care, Home Fragrance, and Soaps & Sanitizers, grew low-single digits year-over-year [11] - Body Care saw double-digit growth in Fine Fragrance Mist, driven by the Everyday Luxuries rollout [15] - Home Fragrance performance was boosted by growth in the candle business, aided by targeted marketing investments [13] Market Data and Key Metrics Changes - In U.S. and Canadian stores, net sales totaled $1.2 billion, up 4.4% year-over-year, while international net sales were $69 million, down 11.1% due to war-affected markets [36][37] - System-wide retail sales grew double-digits in regions not affected by the war, but declined in impacted areas [24][37] Company Strategy and Development Direction - The company is focused on its 5E strategy: elevating the brand, extending reach, engaging customers, enabling omnichannel experiences, and enhancing operational excellence [12] - Strategic investments are being made in adjacent categories, which now represent approximately 10% of the business, with potential for growth [20][21] - The company is reshaping its real estate portfolio, with 55% of North American stores in off-mall locations [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to sustainable profitable growth, emphasizing strong demand during the holiday season [31][55] - The company does not expect normalization in the candle market to materially impact business in 2025 and beyond [14][60] - Management highlighted the importance of product innovation and customer engagement in driving future growth [10][26] Other Important Information - The company plans to repurchase $400 million in shares and has paid out $134 million in dividends year-to-date [50][49] - The loyalty program has approximately 38 million active members, representing over 80% of U.S. sales [27][117] - The company is leveraging TikTok Shop to reach younger demographics, with plans for further engagement during the holiday season [28][124] Q&A Session Summary Question: Impact of candle normalization on business - Management stated that they do not expect candle normalization to have a material impact beyond 2024, citing market leadership and successful collaborations [58][60] Question: Gross margin performance - Management explained that gross margin met expectations, with strategic promotions impacting results, and they aim for a target gross margin of 45% [64][66] Question: Category trends and traffic cadence - Management noted positive customer response to seasonal merchandise and strong traffic throughout the quarter, driven by new product launches [69][73] Question: Revenue growth expectations - Management indicated that they are pleased with growth performance and expect continued momentum, despite calendar shifts impacting Q4 [78][80] Question: Marketing as a percentage of sales - Marketing accounted for about 3.5% of sales annually, with a 100 basis point increase year-over-year in Q3 [91] Question: Learnings from collaborations - Collaborations are driving growth in core products and enhancing brand awareness, with successful campaigns generating significant customer engagement [92][93] Question: International sales expectations - Management expects mid-single-digit declines in international sales for Q4, primarily due to war-affected regions [110] Question: Loyalty program effectiveness - The loyalty program is showing strong engagement, with increased redemption rates and higher spending from active members [118] Question: TikTok Shop plans - The company plans to leverage TikTok Shop for holiday season activations, measuring success through return on ad spend and customer metrics [125]