Why Bath & Body Works Stock Could See Further Upside In The Long Run?

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].