Company Overview - Bath & Body Works (NYSE: BBWI) is a specialty retailer focused on selling soaps, lotions, and fragrances [1] Industry Challenges - The company is currently facing scrutiny due to operating in a challenging industry environment [1] - The ongoing trade war between the United States and China poses additional risks for the retailer [1]

Core Viewpoint - Goldman Sachs analyst Kate McShane maintains a Buy rating on Bath & Body Works Inc (BBWI) with a price target of $49.00, indicating confidence in the company's growth strategies and market positioning [1][5]. Group 1: Customer Engagement and Collaborations - BBWI is enhancing customer traffic during off-peak periods through collaborations, such as the Disney Princess collection, which has led to increased app downloads and search interest [1]. - The Disney collection has shown strong market impact, with peak search interest shortly after its launch [1][2]. Group 2: App Performance Metrics - In February 2025, BBWI's app downloads reached 349,000, marking a 42% year-over-year increase during the Disney Princess collaboration [2][3]. - Despite a slight 2% decline in downloads from February 2024, BBWI's app performance has improved significantly, with downloads up 52% from July 2022 and 214% from February 2019 [3]. Group 3: Pricing and Promotions - A study on BBWI's 3-wick candle pricing revealed a slight increase in prices for January and February 2025 compared to the previous year, while March 2025 prices dropped 13.6% year-over-year [4]. - In-store promotions for the first quarter align with averages since the fourth quarter of 2022, with the company focusing on higher Average Unit Retail (AUR) and continued market innovation [4]. Group 4: Valuation and Market Position - The price target of $49 is based on relative P/E multiples of 45%/55%/65% for downside/base/upside cases, with the stock currently trading at 8.9x NTM P/E, indicating an attractive valuation [5]. - The analyst's bullish rating reflects BBWI's ability to provide value through affordable luxuries and various growth initiatives [5].

Part I [Business](index=3&type=section&id=Item%201.%20Business) Bath & Body Works is a global leader in personal care and home fragrance, focusing on growth, efficiency, and financial strength - The company's strategic priorities are focused on accelerating top-line growth through product innovation and international expansion, enhancing operational excellence via cost management, and strengthening its financial position through strong cash flow and disciplined capital allocation[16](index=16&type=chunk)[19](index=19&type=chunk) - The company's loyalty program is a significant driver of sales, with approximately **39 million active members** who accounted for nearly **80% of U.S. sales** in fiscal 2024[25](index=25&type=chunk) - A key real estate strategy is the transition to off-mall locations, which comprised **57% of the North American store fleet** as of February 1, 2025, with a long-term target of **75%**[32](index=32&type=chunk) - The business is highly seasonal, with the fourth quarter, including the holiday season, typically accounting for about **40% of annual Net Sales**[42](index=42&type=chunk) Company-operated Store Count (as of Feb 1, 2025) | Region | Company-operated Stores | Partner-operated Stores | | :--- | :--- | :--- | | U.S. & Canada | 1,895 | N/A | | International | N/A | 529 | Workforce Demographics (as of Feb 1, 2025) | Work Status | Number of Associates | | :--- | :--- | | Full-time | 8,975 | | Part-time | 50,235 | | **Total** | **59,210** | [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces numerous business, operational, technological, financial, and legal risks that could materially affect its performance - **Business Risks:** The company's performance is sensitive to general economic conditions, inflation, and consumer spending patterns, with high seasonality in the fourth quarter[67](index=67&type=chunk)[68](index=68&type=chunk) - **Operational Risks:** The business depends on store traffic, international expansion, its direct-to-consumer channel, and a limited number of key vendors and concentrated facilities[75](index=75&type=chunk)[80](index=80&type=chunk)[83](index=83&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - **Technology & Security Risks:** A multi-year IT Transformation Project carries implementation risks, and the company faces significant threats from cybersecurity incidents[114](index=114&type=chunk)[118](index=118&type=chunk) - **Financial Risks:** The stock price may be volatile, dividend payments are not guaranteed, and the company must comply with restrictive debt covenants[123](index=123&type=chunk)[125](index=125&type=chunk)[128](index=128&type=chunk) - **Legal & Regulatory Risks:** The company is subject to a complex and evolving landscape of laws, particularly regarding data privacy and cybersecurity like CCPA and GDPR[130](index=130&type=chunk)[131](index=131&type=chunk)[135](index=135&type=chunk)[137](index=137&type=chunk) [Unresolved Staff Comments](index=24&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the U.S. Securities and Exchange Commission - There are no unresolved staff comments[146](index=146&type=chunk) [Cybersecurity](index=24&type=section&id=Item%201C.%20Cybersecurity) The company maintains an information security program integrated into its enterprise risk management, overseen by the Audit Committee - The company's cybersecurity program includes risk assessments, endpoint threat detection, identity and access management, multi-factor authentication, and vulnerability management[147](index=147&type=chunk)[148](index=148&type=chunk) - Governance is managed by the Chief Information Security Officer (CISO), with oversight from the Audit Committee of the Board, which receives reports at least three times per year[155](index=155&type=chunk) - The company has not identified any cybersecurity threats or incidents to date that have materially affected or are reasonably likely to materially affect its business[154](index=154&type=chunk) [Properties](index=26&type=section&id=Item%202.%20Properties) The company owns and leases significant office, distribution, and retail facilities, primarily concentrated in the Columbus, Ohio area - As of February 1, 2025, the company operated 1,782 stores in the U.S. and 113 in Canada, all in leased facilities with typical initial terms of five to ten years[160](index=160&type=chunk) Company-operated Facilities (as of Feb 1, 2025) | Location | Use | Approx. Square Footage (thousands) | | :--- | :--- | :--- | | Columbus, Ohio area | Office, distribution, fulfillment | 5,000 | | Other North America | Office, product development | 70 | [Legal Proceedings](index=26&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various routine lawsuits but does not expect them to have a material adverse effect on its financials - The company is involved in various lawsuits from the ordinary course of business but does not believe the outcome will have a material adverse effect on its financials[164](index=164&type=chunk) [Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[165](index=165&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=27&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE under "BBWI," with quarterly dividends paid and shares repurchased in fiscal 2024 - The company's common stock is traded on the NYSE under the symbol "BBWI"[167](index=167&type=chunk) - A quarterly dividend of **$0.20 per share** was paid in each quarter of 2024[168](index=168&type=chunk) Common Stock Repurchases (Q4 2024) | Fiscal Period | Total Shares Purchased (thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | November 2024 | 516 | $32.02 | | December 2024 | 552 | $38.26 | | January 2025 | 412 | $37.12 | | **Total** | **1,480** | | [[Reserved]](index=28&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2024 saw a slight decrease in Net Sales and Operating Income, offset by significant cost savings and strong cash flow - The company delivered approximately **$155 million of cost reductions** in 2024, bringing the two-year total to over **$300 million**[177](index=177&type=chunk) - Free cash flow remained stable at **$660 million** in 2024 compared to $656 million in 2023[212](index=212&type=chunk) - In 2024, the company repurchased **10.425 million shares for $400 million** and paid **$177 million in dividends**[207](index=207&type=chunk)[219](index=219&type=chunk) Fiscal 2024 Financial Highlights vs. 2023 | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $7.307 billion | $7.429 billion | (1.6%) | | Operating Income | $1.266 billion | $1.285 billion | (1.0%) | | Operating Income Rate | 17.3% | 17.3% | 0.0% | Adjusted vs. Reported Net Income Per Diluted Share | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Reported Net Income Per Diluted Share | $3.61 | $3.84 | | Adjusted Net Income Per Diluted Share | $3.29 | $3.27 | Key Financial Ratios | Metric | Feb 1, 2025 | Feb 3, 2024 | | :--- | :--- | :--- | | Debt Leverage Ratio | 2.5 | 2.8 | [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from foreign currency exchange rates, while interest rate risk is considered low - The company is exposed to foreign currency exchange rate risk from its Canadian operations and international royalty arrangements[272](index=272&type=chunk)[273](index=273&type=chunk) - Interest rate risk is considered low, as all long-term debt carries fixed interest rates and the investment portfolio is composed of short-term, high-quality instruments[274](index=274&type=chunk)[275](index=275&type=chunk) [Financial Statements and Supplementary Data](index=44&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the consolidated financial statements, which received an unqualified opinion from the independent auditor - The independent auditor, Ernst & Young LLP, issued an **unqualified opinion** on the consolidated financial statements and the effectiveness of internal controls[290](index=290&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk) Consolidated Statements of Income (in millions) | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net Sales | $7,307 | $7,429 | $7,560 | | Gross Profit | $3,234 | $3,236 | $3,255 | | Operating Income | $1,266 | $1,285 | $1,376 | | Net Income | $798 | $878 | $800 | Consolidated Balance Sheets (in millions) | Metric | Feb 1, 2025 | Feb 3, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,823 | $2,115 | | Total Assets | $4,872 | $5,463 | | Total Current Liabilities | $1,231 | $1,289 | | Long-term Debt | $3,884 | $4,388 | | Total Equity (Deficit) | $(1,383) | $(1,626) | Consolidated Statements of Cash Flows (in millions) | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $886 | $954 | $1,144 | | Net Cash Used for Investing Activities | $(162) | $(286) | $(328) | | Net Cash Used for Financing Activities | $(1,132) | $(815) | $(1,562) | | Net Decrease in Cash | $(410) | $(148) | $(747) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=69&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - None reported[426](index=426&type=chunk) [Controls and Procedures](index=69&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of the end of the fiscal year - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the fiscal year[427](index=427&type=chunk) - No material changes in internal control over financial reporting occurred during the fourth quarter of 2024[429](index=429&type=chunk) [Other Information](index=69&type=section&id=Item%209B.%20Other%20Information) No directors or executive officers adopted or terminated Rule 10b5-1 trading arrangements during the fourth quarter of 2024 - No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the fourth quarter of 2024[430](index=430&type=chunk) [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=69&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20That%20Prevent%20Inspections) This item is not applicable to the company - None[431](index=431&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=70&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement[434](index=434&type=chunk) [Executive Compensation](index=70&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement[437](index=437&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=70&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement[438](index=438&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=70&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information regarding related transactions and director independence is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement[440](index=440&type=chunk) [Principal Accountant Fees and Services](index=70&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding accountant fees and services is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement[441](index=441&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=71&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and all exhibits filed as part of the report - This section contains a list of all financial statements, schedules, and exhibits filed with the Form 10-K[443](index=443&type=chunk)[444](index=444&type=chunk) [Form 10-K Summary](index=76&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary under this item - None[453](index=453&type=chunk)

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Core Insights - Bath & Body Works (BBWI) reported fourth-quarter fiscal 2024 results with revenues and earnings surpassing Zacks Consensus Estimates, although revenues declined year over year [1][2][3] Financial Performance - Adjusted earnings per share for the fourth quarter were $2.09, beating the Zacks Consensus Estimate of $2.04, and increased by 1.5% from $2.06 in the same quarter last year [3] - Revenues decreased by 4.3% year over year to $2,788 million, exceeding the Zacks Consensus Estimate of $2,772 million, impacted by a shifted fiscal calendar [4] - U.S. and Canada store revenues fell by 2.4% to $2.11 billion, surpassing the consensus estimate of $2.07 billion, while direct revenues tumbled 9.4% to $595 million, missing the estimate [5] Operational Metrics - Gross profit decreased by 2.7% year over year to $1.30 billion, but gross margin expanded by 80 basis points to 46.7% due to cost savings and distribution productivity [7] - Operating income was reported at $678 million, down 2.6% from the previous year, with an operating margin increase of 40 basis points to 24.3% [8] Store and Market Presence - The company ended the quarter with 1,895 stores, including 1,782 in the U.S. and 113 in Canada, having opened 106 stores and closed 61 during fiscal 2024 [9] Financial Health - Cash and cash equivalents stood at $674 million, with long-term debt of $3.88 billion and long-term operating lease liabilities of $883 million [12] Fiscal 2025 Outlook - For fiscal 2025, net sales growth is projected between 1% and 3%, with North American square footage expanding by 2-3% and international net sales expected to return to growth [13] - The gross margin is anticipated at 44%, with SG&A expenses expected to be 27% [14] - Full-year earnings per share are projected to be between $3.25 and $3.60, with adjusted earnings expected at $3.29 [15] - Free cash flow is projected between $750 million and $850 million, with an annual dividend of 80 cents per share and $300 million planned for share repurchases [16] Q1 Guidance - For the first quarter of fiscal 2025, net sales growth is expected between 1% and 3%, with international retail sales increasing in the high-single digits [17] - Earnings per share for the first quarter are anticipated to be between 36 and 43 cents, compared to 38 cents in the same quarter of fiscal 2024 [18]

Key TakeawaysBath & Body Works warned that tariffs on Chinese goods would negatively affect its full-year results.CEO Gina Boswell also noted that the retail industry faced "complex challenges."The company's guidance offset better-than-expected fourth-quarter profit and sales. Bath & Body Works (BBWI) shares tumbled 10% Thursday as the personal care and home fragrance retailer warned that new tariffs and soft consumer spending would hurt future results. The company sees full-year earnings per share (EPS) be ...

Bath & Body Works, Inc. (NYSE:BBWI) Q4 2024 Earnings Conference Call February 27, 2025 8:30 AM ET Company Participants Luke Long - Vice President, Investor Relations Gina Boswell - Chief Executive Officer Eva Boratto - Chief Financial Officer Conference Call Participants Ike Boruchow - Wells Fargo Matthew Boss - J.P. Morgan Lorraine Hutchinson - Bank of America Kate McShane - Goldman Sachs Alex Straton - Morgan Stanley Mark Altschwager - Baird Paul Lejuez - Citi Krisztina Katai - Deutsche Bank Dana Telsey - ...

Core Insights - Bath & Body Works (BBWI) reported revenue of $2.79 billion for the quarter ended January 2025, a year-over-year decline of 4.3% [1] - The company's EPS for the same period was $2.09, slightly up from $2.06 a year ago, with an EPS surprise of +2.45% compared to the consensus estimate of $2.04 [1] Financial Performance - The reported revenue exceeded the Zacks Consensus Estimate of $2.77 billion, resulting in a surprise of +0.57% [1] - Year-over-year changes in key metrics provide better insights into the company's underlying performance, which is crucial for projecting stock price performance [2] Stock Performance - Bath & Body Works shares have returned +9.3% over the past month, outperforming the Zacks S&P 500 composite, which declined by -2.2% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for near-term outperformance against the broader market [3] Store Metrics - Total company-operated stores reached 1,895, slightly above the five-analyst average estimate of 1,893 [4] - Geographic net sales in the U.S. and Canada were $2.11 billion, exceeding the average estimate of $2.07 billion, but reflecting a -2.5% change year-over-year [4] - International geographic net sales were reported at $84 million, below the average estimate of $87.21 million, marking a -10.6% change year-over-year [4]

Core Insights - Bath & Body Works (BBWI) reported quarterly earnings of $2.09 per share, exceeding the Zacks Consensus Estimate of $2.04 per share, and showing a slight decrease from $2.06 per share a year ago [1] - The company achieved revenues of $2.79 billion for the quarter ended January 2025, surpassing the Zacks Consensus Estimate by 0.57%, but down from $2.91 billion year-over-year [3] - The stock has gained approximately 6% since the beginning of the year, outperforming the S&P 500's gain of 1.3% [4] Earnings Performance - The earnings surprise for the recent quarter was 2.45%, following a previous surprise of 6.52% when earnings were $0.49 per share against an expectation of $0.46 [2] - Over the last four quarters, Bath & Body Works has consistently surpassed consensus EPS estimates [2] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.44 on revenues of $1.42 billion, and for the current fiscal year, it is $3.66 on revenues of $7.5 billion [8] - The estimate revisions trend for Bath & Body Works is favorable, leading to a Zacks Rank 2 (Buy), indicating expected outperformance in the near future [7] Industry Context - Bath & Body Works operates within the Zacks Retail - Miscellaneous industry, which is currently ranked in the top 12% of over 250 Zacks industries [9] - The performance of Bath & Body Works may be influenced by the overall industry outlook, as top-ranked industries tend to outperform lower-ranked ones significantly [9]