Bullish indicating open at $55-$60, IPO prices at $37
On Monday, Bath & Body Works Inc. (NYSE:BBWI) maintained its Buy rating and a $48.00 price target from TD Cowen analysts following the announcement of preliminary results for the first quarter of 2025 and the immediate appointment of Daniel Heaf as the new CEO. The company’s pre-announced earnings per share (EPS) for 1Q25 surpassed consensus expectations, and the full-year guidance was reiterated.
The appointment of Daniel Heaf, previously Nike (NYSE:NKE)’s Chief Strategy and Transformative Officer, is seen as a strategic move to propel Bath & Body Works into its next phase of growth. Analysts believe his experience will be instrumental in making the brand more relevant to younger consumers, enhancing the company’s fragrance and beauty segments, and capitalizing on the potential for international expansion, which currently accounts for approximately 4% of the company’s sales in FY24.
Heaf’s strategy includes a focus on the fragrance and beauty categories, modernizing the in-store experience to foster a sense of community, and improving communication around product innovations. These initiatives are expected to strengthen the company’s position and drive ongoing engagement with a younger demographic.
Despite the fragrance category growing at a rate of 7% year to date and 13% in 2024 according to Nielsen data, Bath & Body Works’ growth in the body care and fragrance category has been modest in recent quarters. However, analysts at TD Cowen see significant opportunities for the company to dominate these categories and secure repeat business from younger customers.
The analysts concluded by expressing continued support for Bath & Body Works’ unique product offerings. They also highlighted the stock’s attractive valuation at approximately 9 times forward year two price-to-earnings (P/E), which they consider compelling given the company’s margin profile of around 17% EBIT and its growth prospects.
In other recent news, Bath & Body Works Inc. announced the appointment of Daniel Heaf as the new CEO, succeeding Gina Boswell. This leadership change is accompanied by preliminary first-quarter results that exceeded expectations, with net sales reaching $1.4 billion and earnings per share surpassing forecasts at $0.49. The company has maintained its full-year guidance, projecting net sales growth between 1% and 3% and earnings per share ranging from $3.25 to $3.60 for 2025. Analysts at BofA Securities have reiterated a Buy rating with a $45 price target, while BMO Capital Markets continues to rate the stock as Outperform, setting a $50 target. Piper Sandler also maintains an Overweight rating with a $39 target, noting satisfaction with the company’s performance and potential for future growth under new leadership.
Additionally, Bath & Body Works’ credit rating was upgraded to ’BB+’ by S&P Global Ratings, reflecting the company’s strong performance, favorable growth prospects, and significant debt reduction. The upgrade is attributed to consistent operating execution and product innovation, leading to better-than-expected financial results. S&P Global Ratings anticipates low-single-digit percent revenue growth and expects the company to sustain adjusted leverage of mid-2x over the next 12 months. The company’s commitment to strategic initiatives and cost optimization has further bolstered its financial position, as evidenced by a $155 million cost savings in fiscal 2024.
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