Bath & Body Works Stock To Likely Trade Higher Post Q4

BBWI: Bath & Body Works logo
Bath & Body Works

Bath & Body Works stock (NYSE: BBWI), the largest specialty home fragrance & body care product retailer in the U.S., formerly known as L Brands, is scheduled to report its fiscal fourth-quarter results on Thursday, February 23. We expect BBWI stock to likely trade higher with revenues and earnings both beating expectations in its fourth-quarter results. The company saw declining foot traffic and uncertainties from a high inflationary environment in the first three quarters of FY 2022. Still, BBWI saw increased company-operated stores, which are 1,787 now (as of October 2022), up from 1,755 at the end of FY 2021. Management plans to open new stores, remodel existing ones, and invest in technology and the supply chain, with a $400 million capital expenditure budget for FY2022 (compared to $270 million CAPEX in FY2021 and $228 million in FY2020). BBWI has no material debt due for the next two fiscal years, and its operations may still be able to fund its $400 million CAPEX budget. The company offers a variety of products, including men’s deodorant and fragrance products, where management believes an $8 billion market exists. To add to this, BBWI also has an advantage with its loyalty program, which now has over 21 million members, comprising more than a third of the customer base. This is valuable in the current environment to drive repeat sales

Our forecast indicates that BBWI’s valuation is $45 per share, which is almost 5% higher than the current market price. Look at our interactive dashboard analysis on BBWI Earnings Preview: What To Expect in Fiscal Q4? for more details.

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(1) Revenues expected to come slightly ahead of consensus estimates

Trefis estimates BBWI’s Q4 2022 revenues to be around $2.8 Bil, slightly ahead of the consensus estimate. In Q3, the company’s sales declined by 5% year-over-year (y-o-y). Total inventories were up 10% y-o-y, which was better than expected. BBWI management is able to make investments in new products to support customer demand while keeping costs under control to deliver profits. For the full-year 2022, we expect Bath & Body Works Revenues to fall 5% y-o-y to $7.5 billion.

2) EPS is also likely to beat consensus estimates

BBWI’s Q4 2022 earnings per share (EPS) is expected to come in at $1.70 per Trefis analysis, 6% higher than the consensus estimate. In Q3, the company saw a 40% drop in earnings per share from continuing operations to $0.40. BBWI struggled to control its operating margins due to inflated input costs, which resulted in its operating margins declining to 15.5% in the first nine months of 2022 as compared to 23.3% in the corresponding period of the previous year. Going forward, the company’s management has raised full-year guidance and now expects earnings per share to come in between $3.00 to $3.20, compared to its prior full-year forecast of $2.70 to $3.00.

(3) Stock price estimate is higher than the current market price

Our Bath & Body Works Valuation expects a earnings per share (EPS) estimate of around $3.16 and a P/E multiple of 14.3x in fiscal 2022, translating into a price of $45, which is almost 5% higher than the current market price.

It is helpful to see how its peers stack up. BBWI Peers shows how Bath & Body Works’ stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Feb 2023
MTD [1]
YTD [1]
Total [2]
 BBWI Return -7% 2% -35%
 S&P 500 Return 0% 6% 82%
 Trefis Multi-Strategy Portfolio 0% 11% 250%

[1] Month-to-date and year-to-date as of 2/20/2023
[2] Cumulative total returns since the end of 2016

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