Core Insights - Barington Companies Management, LLC initiated a new position in Bath & Body Works, acquiring 125,000 shares valued at $3.22 million, representing 2.42% of its total reportable assets of $133.17 million as of September 30, 2025 [2][3] Company Overview - Bath & Body Works, Inc. operates 1,755 company-owned retail stores and has a significant online presence, focusing on strong brand recognition and a robust product pipeline to maintain customer loyalty [5] - The company generates revenue primarily from direct retail sales in the U.S. and Canada, supplemented by international licensing and wholesale arrangements [8] - As of November 12, 2025, Bath & Body Works reported a revenue of $7.37 billion and a net income of $699 million, with a dividend yield of 3.57% [3] Investment Position - Barington's investment in Bath & Body Works is relatively small at 2.42% of its assets under management, which is notable given the fund's concentrated portfolio of only 12 stocks [9][10] - The stock has experienced a one-year total return of -27.15%, significantly underperforming the S&P 500 by 41.22 percentage points [7] - The P/E ratio of Bath & Body Works was 7 at the time of the filing, which may have attracted Barington to this investment [11] Market Performance - As of November 12, 2025, Bath & Body Works shares were priced at $22.40, with a market cap of $4 billion [12] - The stock has been on a downward trajectory since February, and it may take time for Barington to see positive returns on this investment [10][13]

Financial Data and Key Metrics Changes - In Q3, the company reported net sales of $1.6 billion, a decrease of 1% compared to the prior year, and adjusted earnings per diluted share of 35 cents, both below expectations [21][22] - The gross profit rate was 41.3%, down 220 basis points year-over-year, primarily due to a 260 basis point decrease in merchandise margin impacted by tariffs [23] - Operating income for Q3 was $161 million, down 26% from the previous year [24] - For Q4, the company expects sales to decline by high single digits and a gross profit rate of approximately 44.5% [25][26] - Full-year net sales guidance has been lowered from a growth of 1.5%-2.7% to a decline of low single digits, with adjusted earnings per diluted share guidance reduced from $3.35-$3.60 to at least $2.87 [27] Business Line Data and Key Metrics Changes - All core categories experienced low single-digit declines in Q3, indicating a need for focused investment in these areas [22] - U.S. and Canadian store net sales were flat at $1.2 billion, while direct net sales decreased by 7% to $299 million [22] - International net sales increased by 6% to $73 million, with system-wide retail sales growing by 16% [23] Market Data and Key Metrics Changes - Consumer sentiment is negatively impacting purchase intent, with recent data showing a decline in consumer confidence due to job loss concerns and affordability issues [25] - The competitive retail marketplace is highly challenging, with customers waiting for deeper discounts before making purchases [25] Company Strategy and Development Direction - The company is focusing on a consumer-first strategy with four pillars: creating innovative products, reigniting the brand, winning in the marketplace, and operating with speed and efficiency [20][10] - Plans include reducing SKU complexity, exiting non-core categories, and investing in core product categories to attract new consumers [12][68] - The company aims to launch on Amazon in early 2026 to reach new consumers and enhance brand visibility [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that the current consumer environment is challenging and that the brand is not fulfilling its potential [5][34] - The company is committed to making necessary changes to return to growth, with a focus on long-term sustainable growth [18][51] - Management expects that the initiatives will take time to impact financial performance, with more visible results anticipated in the second half of 2026 [38][47] Other Important Information - The company plans to deliver $250 million in cost savings over the next two years, with over half identified for 2026 [17] - Capital expenditures for the year are projected at approximately $240 million, down from previous guidance [27] - Free cash flow expectation for the full year is approximately $650 million, reflecting current performance trends [28] Q&A Session Summary Question: What changed between when the CEO first joined and current expectations? - The CEO noted that the brand is not fulfilling its potential and that the focus on adjacencies has resulted in underinvestment in core categories [34][35] Question: What are the key KPIs for the new strategy? - The CEO highlighted total active consumers and growth in core categories as key metrics, along with improvements in digital traffic and dwell time [45][46] Question: How will the company balance investments and margins in 2026? - The CEO indicated that 2026 will focus on investing behind the brand while also unlocking $250 million in savings to fund these investments [51] Question: What is the plan for the Amazon partnership? - The CEO explained that the initial product assortment will include evergreen products, with plans to expand thoughtfully over time [62] Question: How will the company exit non-go-forward categories? - The CEO stated that SKU rationalization will begin in Q1 2026, focusing on consumer feedback to simplify the product offering [80][81]