Bath and Body Works's (NYSE:BBWI) Posts Q3 Sales In Line With Estimates

Adam Hejl /
2023/11/16 6:06 am EST

Personal care and home fragrance retailer Bath & Body Works (NYSE:BBWI) reported results in line with analysts' expectations in Q3 FY2023, with revenue down 2.6% year on year to $1.56 billion. Turning to EPS, Bath and Body Works made a GAAP profit of $0.52 per share, improving from its profit of $0.40 per share in the same quarter last year.

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Bath and Body Works (BBWI) Q3 FY2023 Highlights:

  • Revenue: $1.56 billion vs analyst estimates of $1.56 billion (small beat)
  • EPS: $0.52 vs analyst estimates of $0.34 (51.8% beat)
  • Raised full year 2023 adjusted EPS guidance ($3.00 at the midpoints vs. $2.95 prior)
  • Free Cash Flow was -$121 million compared to -$105 million in the same quarter last year
  • Gross Margin (GAAP): 43.7%, up from 42.3% in the same quarter last year
  • Store Locations: 2,301 at quarter end, increasing by 120 over the last 12 months

Gina Boswell, CEO of Bath & Body Works, commented, “The team delivered third quarter net sales in line with the high end of our expectations and earnings that exceeded our plans. Our performance in the quarter was marked by strong merchandise margin improvement and the ongoing benefits of our cost optimization initiatives. As we close out the year, our team remains focused on delivering a great Holiday assortment and omnichannel experience for customers while leveraging our agility to chase demand. Amidst the ongoing macroeconomic pressures affecting consumers, we continue to execute against our strategic initiatives to drive growth and create long-term value.”

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 revenue has declined over the last four years, dropping 13.2% annually despite opening new stores and expanding its reach.

Bath and Body Works Total Revenue

This quarter, Bath and Body Works reported a rather uninspiring 2.6% year-on-year revenue decline, in line with Wall Street's expectations. Looking ahead, analysts expect sales to grow 2.6% over the next 12 months.

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Key Takeaways from Bath and Body Works's Q3 Results

With a market capitalization of $7.39 billion, Bath and Body Works is among smaller companies, but its $412 million cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.

Despite only a small beat on the revenue line, Bath and Body Works blew past analysts' EPS expectations this quarter. The company also raised its full year 2023 EPS guidance. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is flat after reporting and currently trades at $32.5 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.

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The author has no position in any of the stocks mentioned in this report.