Bullish indicating open at $55-$60, IPO prices at $37
On Tuesday, Citi analyst Paul Lejuez increased the price target for Bath & Body Works Inc. (NYSE: BBWI) to $42 from $36, while maintaining a Buy rating on the stock. The revision follows the company’s pre-announcement of first-quarter earnings per share (EPS) of $0.49, which is ahead of the consensus estimate of $0.45. The strong performance is attributed to a 3% increase in sales, which is at the higher end of the company’s guidance, and improved gross margins.
The company also announced a significant leadership change, with CEO Gina Boswell stepping down and Daniel Heaf taking over the role effective immediately. Heaf, who brings a wealth of experience from his time at companies like Nike (NYSE:NKE) and Burberry (LON:BRBY), will be tasked with accelerating growth and expanding margins. His focus will be on fostering innovation at a faster pace, building on existing initiatives, and emphasizing global expansion. InvestingPro analysis shows the company maintains strong financial health with a current ratio of 1.48, indicating sufficient liquidity to support new initiatives.
Bath & Body Works reiterated its future guidance for fiscal year 2025, projecting an EPS range of $3.25 to $3.60, which aligns with the consensus of $3.51. This forecast is particularly noteworthy as the company expects to maintain this guidance despite the increase in China tariffs from 10% to 30%. The company’s strong vertical supply chain, which is primarily based domestically, along with its flexible business model, are seen as key factors in its ability to adapt to the higher tariff rate.
Lejuez views the appointment of the new CEO and his mandate to drive growth, while continuing the strategies of the previous management, as a significant positive for the company. The analyst believes that the risk/reward profile for Bath & Body Works is attractive as investors look ahead to the company’s first-quarter earnings report.
In other recent news, Bath & Body Works has announced the appointment of Daniel Heaf as its new CEO, a move that coincides with the release of preliminary first-quarter financial results. The company reported net sales of $1.4 billion and earnings per diluted share of $0.49, surpassing expectations. Analysts from TD Cowen, BofA Securities, BMO Capital Markets, and Piper Sandler have maintained their positive outlook on the stock, with price targets ranging from $39 to $50. TD Cowen and BofA Securities both reiterated their Buy ratings, highlighting the potential for growth under Heaf’s leadership and the company’s strong fundamentals.
BMO Capital Markets also expressed confidence, maintaining an Outperform rating and noting the company’s significant opportunity to build on its current momentum. Piper Sandler reaffirmed its Overweight rating, citing satisfaction with the company’s performance and the potential for future expansion. The new CEO, Daniel Heaf, previously held key roles at Nike and is expected to drive innovation and sales growth at Bath & Body Works. His strategy includes focusing on evolving marketing approaches and leveraging the company’s supply chain to enhance margins.
The company’s reaffirmation of its full-year guidance, with expected net sales growth of 1% to 3% and earnings per share between $3.25 and $3.60, indicates a robust operational foundation. Analysts remain optimistic about Bath & Body Works’ potential to navigate market challenges and capitalize on opportunities for international expansion. The leadership transition is seen as a strategic move to propel the company into its next phase of growth.
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