Telsey cuts Bath & Body Works price target to $38, keeps Outperform

On Friday, Telsey Advisory Group adjusted its price target on Bath & Body Works Inc. (NYSE:BBWI) shares, reducing it to $38 from the previous $43, while maintaining an Outperform rating. The adjustment follows the company’s preannouncement of first quarter sales and earnings per share (EPS) last week, along with its decision to maintain its full-year sales and EPS guidance.

Bath & Body Works’ first quarter performance showed benefits from dual-channel traffic and growth across all three core categories. The company’s outlook for fiscal year 2025 remains unchanged, which Telsey finds encouraging given the current difficult operating conditions that have led many retail competitors to either withdraw or avoid issuing annual guidance.

Management at Bath & Body Works has indicated that if tariffs remain at current levels, earnings may be at the lower end of the guidance range. The guidance for the second quarter, while slightly below previous consensus forecasts, is considered to be within the range of expectations and prudently conservative given the uncertain macroeconomic environment.

Telsey highlights Bath & Body Works as a well-established brand with a loyal customer base in a consumer space characterized by high purchase frequency of consumable products. The company’s introduction of new products, innovations, and collaborations has been met with positive customer response. Additionally, the traction of its loyalty program, increased investments in infrastructure and systems, and efforts to streamline operations are seen as steps towards building a stronger foundation for growth and profitability in the long term.

The revised price target of $38 is based on a 9.7x multiple on Telsey’s two-year forward EPS estimate of $3.92. This multiple is compared to the one-year average next twelve months (NTM) multiple of 9.9x and the recent NTM multiple of 8.3x. With current EPS at $3.75 and a strong financial health score from InvestingPro, the company demonstrates solid fundamentals despite its stock price declining 42.4% over the past year.

In other recent news, Bath & Body Works Inc. reported first-quarter earnings per share (EPS) of $0.49, surpassing the forecasted $0.42, although revenue slightly missed expectations at $1.4 billion compared to the anticipated $1.42 billion. The company maintained its full-year guidance of 1-3% net sales growth and an EPS range of $3.25 to $3.60. Goldman Sachs reaffirmed a Buy rating with a $43 price target, citing the company’s strategic growth initiatives and attractive valuation. Raymond (NSE:RYMD) James also maintained an Outperform rating with a $37 price target, noting the company’s strong first-quarter performance and strategic focus under new CEO Daniel Heaf. Morgan Stanley (NYSE:MS) adjusted its price target to $41, maintaining an Overweight rating despite concerns over second-quarter guidance and tariff impacts. Piper Sandler lowered its price target to $37 while maintaining an Overweight rating, expressing optimism about the company’s leadership change and product innovation. These developments reflect a mix of positive earnings performance and cautious outlooks due to tariff impacts and second-quarter projections.

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