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On Monday, Barclays (LON:BARC) upgraded Bath & Body Works Inc. (NYSE:BBWI) stock rating from Underweight to Equalweight, setting a price target of $43.00. The revision by Barclays analysts comes as they observe a reduced risk to merchandise margins and note an improvement in the company’s promotional strategy. The analysts have detected a positive trend in the first quarter to date of 2025 (1QTD25), with fewer promotions needed to drive business, indicating a shift to better performance.
The upgrade is further supported by the successful introduction of new product categories, which has significantly reduced clearance inventory levels. According to the analysts, this development, along with Bath & Body Works’ merchandise margins still trailing behind historical averages, suggests a potential for margin recovery alongside positive sales projections for 2025.
Barclays highlights several factors that contribute to the more favorable outlook for Bath & Body Works. These include the company’s attractive next twelve months (NTM) price-to-earnings (PE) ratio of 11x, the anticipated reduction of debt leading to lower interest expenses, and the possibility of increased share repurchases. These elements underpin the decision to upgrade the stock’s rating.
Despite the upgrade, Barclays remains cautious due to the uncertain consumer macro environment and the fact that a significant portion of the first quarter is yet to unfold. The firm emphasizes the need for additional data points to confirm a long-term acceleration in market share for Bath & Body Works. The analysts will continue to monitor the company’s performance for signs that substantiate a sustained improvement in its market position.
In other recent news, Bath & Body Works has been the subject of several notable developments. The company is expected to surpass fourth-quarter earnings per share expectations, with Citi projecting a result of $2.07, slightly above the consensus estimate of $2.04. This anticipated performance is attributed to stronger sales and effective marketing strategies. Meanwhile, JPMorgan has upgraded Bath & Body Works’ stock rating from Neutral to Overweight, raising the price target to $47.00, citing a "fundamental inflection" in revenue and earnings.
Additionally, Bath & Body Works announced a change in its executive team, with Chief Human Resources Officer Deon Riley set to depart by early March 2025. The company has also disclosed plans to redeem all remaining 9.375% Senior Notes due 2025 as part of its debt management strategy. Goldman Sachs has reiterated a Buy rating on the company’s stock, maintaining a price target of $52.00, based on expectations of stabilized sales trends and strategic initiatives aimed at driving growth.
These recent developments highlight the company’s proactive steps in financial management and strategic planning, which have drawn attention from multiple analyst firms. Investors will be closely monitoring how these actions impact Bath & Body Works’ financial performance and market position in the coming quarters.
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