Bath and Body Works (NYSE:BBWI) Beats Q1 Sales Targets But Stock Drops

Kayode Omotosho /
2024/06/04 7:04 am EDT

Personal care and home fragrance retailer Bath & Body Works (NYSE:BBWI) beat analysts' expectations in Q1 CY2024, with revenue flat year on year at $1.38 billion. It made a GAAP profit of $0.38 per share, improving from its profit of $0.35 per share in the same quarter last year.

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Bath and Body Works (BBWI) Q1 CY2024 Highlights:

  • Revenue: $1.38 billion vs analyst estimates of $1.37 billion (1.3% beat)
  • EPS (non-GAAP): $0.38 vs analyst estimates of $0.33 (14.6% beat)
  • Gross Margin (GAAP): 43.8%, up from 42.7% in the same quarter last year
  • Free Cash Flow of $30 million is up from -$49 million in the same quarter last year
  • Locations: 2,341 at quarter end, up from 2,246 in the same quarter last year
  • Market Capitalization: $11.59 billion

Gina Boswell, CEO of Bath & Body Works, commented, “We delivered a better-than-expected start to the year with net sales and earnings per share above the high-end of our guidance range. We are particularly excited with the success of our product introductions and newness, which drove the performance of both our core business and new adjacencies. Our focus on building strong brand awareness and engagement is delivering greater customer retention and loyalty. With our strong start to the year, we are pleased to narrow our full-year guidance range while raising the midpoint for both the top- and bottom-lines. I am proud of the way our team is executing on our strategic initiatives, and looking ahead, we remain confident in our ability to deliver long-term profitable growth.”

Spun off from L Brands in 2020, Bath & Body Works (NYSE:BBWI) is a personal care and home fragrance retailer where consumers can find specialty shower gels, scented candles for the home, and lotions.

Beauty and Cosmetics Retailer

Beauty and cosmetics retailers understand that beauty is in the eye of the beholder, but a little lipstick, nail polish, and glowing skin also help the cause. These stores—which mostly cater to consumers but can also garner the attention of salon pros—aim to be a one-stop personal care and beauty products shop with many brands across many categories. E-commerce is changing how consumers buy cosmetics, so these retailers are constantly evolving to meet the customer where and how they want to shop.

Sales Growth

Bath and Body Works is larger than most consumer retail companies and benefits from economies of scale, giving it an edge over its competitors.

As you can see below, the company's annualized revenue growth rate of 8.3% over the last five years was mediocre as it opened new stores and expanded its reach.

Bath and Body Works Total Revenue

This quarter, Bath and Body Works's revenue fell 0.9% year on year to $1.38 billion but beat Wall Street's estimates by 1.3%. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.

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Same-Store Sales

Same-store sales growth is an important metric that tracks demand for a retailer's established brick-and-mortar stores and e-commerce platform.

Bath and Body Works's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 5.8% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.

Bath and Body Works Year On Year Same Store Sales Growth

Key Takeaways from Bath and Body Works's Q1 Results

We were impressed by how significantly Bath and Body Works blew past analysts' EPS expectations this quarter. We were also excited its revenue and gross margin outperformed Wall Street's estimates. On the other hand, its quarterly and full-year earnings guidance missed analysts' projections. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The market was discouraged by its weak outlook, however, and the stock is down 7.1% after reporting. It currently trades at $48.11 per share.

So should you invest in Bath and Body Works right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.