Why Bath and Body Works (BBWI) Stock Is Nosediving
What Happened:
Shares of personal care and home fragrance retailer Bath & Body Works (NYSE:BBWI) fell 7% in the pre-market session after the company reported second-quarter earnings results. Its revenue and full-year earnings forecast missed Wall Street's estimates. Notably, full year revenue is expected to decline year on year by -4% to -2% (down from previous guidance of -2% to flat). The weak outlook was attributed to a "choppier macroeconomic environment" and first-half sales trends, which were likely not encouraging. Overall , this quarter could have been better.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Bath and Body Works? Access our full analysis report here, it’s free.
What is the market telling us:
Bath and Body Works’s shares are somewhat volatile and over the last year have had 10 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 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 down 26.6% since the beginning of the year, and at $32.84 per share it is trading 36.8% 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 $1,970.
When a company has more cash than it knows what to do with, buying back its own shares can make a lot of sense–as long as the price is right. Luckily, we’ve found one, a low-priced stock that is gushing free cash flow AND buying back shares. Click here to claim your Special Free Report on a fallen angel growth story that is already recovering from a setback.
