What Happened:
Shares of personal care and home fragrance retailer Bath & Body Works (NYSE:BBWI) fell 10.7% in the morning session after the company reported first-quarter earnings results and provided earnings forecasts for the next quarter and the full year, which missed analysts' expectations. Management primarily blamed weaker-than-expected performance in the international markets for the weak sales results.
On the other hand, Bath and Body Works blew past analysts' EPS expectations this quarter. Its revenue also outperformed Wall Street's estimates. Zooming out, this was a mixed but weaker quarter, as the market was likely discouraged by its underwhelming outlook.
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What is the market telling us:
Bath and Body Works's shares are somewhat volatile and over the last year have had 6 moves greater than 5%. But moves this big are very rare even for Bath and Body Works and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 11.8% on the news that the company reported fourth-quarter results and provided a weak earnings forecast for the next quarter and full year. The sales outlook was also underwhelming as BBWI expects first-quarter revenue to decline 4.5% to 2.0% (vs. expectations for flat growth). Similarly, full-year revenue is expected to range between a decline of 3.0% to flat year-on-year growth.
On the other hand, revenue and EPS exceeded expectations during the quarter. However, the topline growth remained weak. To drive more shareholder value, the Board of Directors approved a new share repurchase program authorizing the company to repurchase up to $500 million of the company's common stock. Overall, this was a mixed but weaker quarter for the company.
Bath and Body Works is up 1.9% since the beginning of the year, but at $45.62 per share it is still trading 12.2% below its 52-week high of $51.94 from May 2024. Investors who bought $1,000 worth of Bath and Body Works's shares 5 years ago would now be looking at an investment worth $1,897.
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