Bath and Body Works (NYSE:BBWI) Misses Q2 Sales Targets
Personal care and home fragrance retailer Bath & Body Works (NYSE:BBWI) fell short of analysts’ expectations in Q2 CY2024, with revenue down 2.1% year on year to $1.53 billion. It made a non-GAAP profit of $0.37 per share, down from its profit of $0.40 per share in the same quarter last year.
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Bath and Body Works (BBWI) Q2 CY2024 Highlights:
- Revenue: $1.53 billion vs analyst estimates of $1.54 billion (1% miss)
- EPS (non-GAAP): $0.37 vs analyst estimates of $0.36 (3.6% beat)
- EPS (non-GAAP) guidance for the full year is $3.16 at the midpoint, missing analyst estimates by 2.6%
- Gross Margin (GAAP): 41%, up from 39.9% in the same quarter last year
- Free Cash Flow was -$101 million compared to -$52 million in the same quarter last year
- Locations: 2,369 at quarter end, up from 2,267 in the same quarter last year
- Market Capitalization: $7.75 billion
Gina Boswell, CEO of Bath & Body Works, commented, “We delivered net sales in line with our guidance range while adjusted earnings per diluted share exceeded our expectations, as we improved gross margins and executed on our Fuel for Growth initiatives. As we look forward to the rest of the year, we are taking a prudent approach to our outlook and adjusting our full-year guidance given the choppier macroeconomic environment and first half sales trends."
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 7.7% over the last five years was mediocre as it opened new stores and expanded its reach.
This quarter, Bath and Body Works missed Wall Street’s estimates and reported a rather uninspiring 2.1% year-on-year revenue decline, generating $1.53 billion in revenue. Looking ahead, Wall Street expects sales to grow 1.2% over the next 12 months, an acceleration from this quarter.
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Same-Store Sales
A company’s same-store sales growth shows the year-on-year change in sales for its brick-and-mortar stores that have been open for at least a year, give or take, and e-commerce platform. This is a key performance indicator for retailers because it measures organic growth and demand.
Bath and Body Works’s demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 5.2% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.
Key Takeaways from Bath and Body Works’s Q2 Results
It was good to see Bath and Body Works beat analysts’ gross margin and EPS expectations this quarter. On the other hand, its revenue and full-year earnings forecast missed Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 3% to $33.67 immediately after reporting.
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.
