Dollar rebounds despite Fed independence worries; euro slips
On Thursday, JPMorgan revised its price target for Bath & Body Works Inc. (NYSE:BBWI) shares, dropping it to $39.00 from the previous $42.00, while maintaining a Neutral rating on the company's stock.
The adjustment follows Bath & Body Works' second quarter fiscal year 2024 earnings report, which revealed adjusted earnings per share (EPS) of $0.37, slightly above the consensus estimate of $0.36. The company's performance was bolstered by a 0.6% year-over-year increase in gross profit, exceeding analyst expectations for flat growth.
Despite the positive earnings surprise, Bath & Body Works experienced a 2.1% year-over-year decline in sales, which was more than the anticipated 1.0% decrease.
This drop in revenue was attributed to several factors including reduced consumer traffic, underperformance in semi-annual sales, and a slower rate of new customer acquisition. The reported sales figures were at the lower end of the company's own guidance range of a 2.0% decrease to flat growth.
Looking forward, Bath & Body Works has revised its full-year 2024 revenue outlook to a decline of 4% to 2%, which is below the initial guidance range of a 2.5% decrease to flat growth and analyst expectations of a 0.9% decline.
The company now anticipates an adjusted EPS for the fiscal year to be between $3.06 and $3.26, compared to the earlier forecast of $3.05 to $3.35 and the consensus estimate of $3.25.
The updated guidance also includes an anticipated gross margin of approximately 44.0%, which is higher than both the previous guidance of 43.7% and the analyst projections of 43.8%.
Additionally, Bath & Body Works has raised its cost optimization savings target to $130 million from $100 million, which is expected to positively impact both gross profit margin (GPM) and selling, general, and administrative (SG&A) expenses in a 60/40 split.
Management at Bath & Body Works provided commentary on the revised outlook, stating that based on the sales performance in the first half of the year and the unpredictable macroeconomic environment, a sales acceleration that had been initially planned is no longer expected. The company has adjusted its guidance to reflect these conditions.
InvestingPro Insights
As Bath & Body Works Inc. (NYSE:BBWI) navigates a challenging retail landscape, InvestingPro data provides a deeper look into the company's financial health. With a market capitalization of $7.75 billion and a compelling P/E ratio of 8.38, the company presents an interesting value proposition. Notably, the adjusted P/E ratio for the last twelve months as of Q2 2025 is even lower at 7.76, suggesting that the stock may be undervalued relative to its near-term earnings potential. This is supported by a PEG ratio of 0.22, indicating potential for earnings growth that is not yet priced into the stock.
In terms of shareholder returns, Bath & Body Works has a track record of maintaining dividend payments for 52 consecutive years, with a dividend yield of 2.48% as of the last payout. InvestingPro Tips highlight that management has been actively buying back shares, signaling confidence in the company’s future. Moreover, despite recent price declines, analysts predict the company will be profitable this year, having been profitable over the last twelve months.
For investors considering Bath & Body Works as part of their portfolio, additional InvestingPro Tips reveal insights such as the company's high shareholder yield and trading at a low earnings multiple. There are a total of 11 InvestingPro Tips available, which can be further explored at https://www.investing.com/pro/BBWI, offering a comprehensive analysis for an informed investment decision.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.