Beat of the Week: Bath & Body Works Posts Biggest Weekly Gain Since November

Bath & Body Works (BBWI) shares posted their biggest weekly gain since November, advancing 12% to a two-month high, after the retailer known for its soaps, lotions, and fragrances beat earnings estimates and raised its full-year guidance.

The company reported net income (NI) of $81 million, or 35 cents a share, almost half what it earned a year earlier yet above consensus estimates of $60.1 million, or 26 cents a share. Revenue totaled almost $1.4 billion, down 4% from $1.45 billion in the year-ago quarter and in line with expectations.

The company said it expects full-year diluted earnings per share (EPS) of $2.68 to $3.08, compared with previous estimates of $2.50 to $3.00. Full-year sales are forecast to decline by mid-single-digit percentages from last year’s $7.56 billion.

"We saw benefits from our work to improve merchandise margin as well as early benefits from our cost optimization initiatives," CEO Gina Boswell said in the company’s earnings statement.

The latest figures reflect a slowdown from the sales boom the company enjoyed during COVID-19 lockdowns. Consumers are spending less on non-essential goods amid persistently high inflation and recession fears.

Margins at Bath & Body Works have also been squeezed by discounts and promotions offered to counteract consumers' caution. The company’s gross profit margin fell to 42.7% in the latest fiscal quarter, down from 46.1% in the same quarter last year, but better than expectations of 41.2%.

Despite their double-digit gain this week, Bath & Body Works shares are down 12% year-to-date, far underperforming the broader consumer discretionary sector, which is up 18% over the same period.