Bath and Body Works stock soars after it lifts guidance, and beats earnings

Bath and Body WorksThe stock jumped more than 10% in pre-market trading Thursday after it beat forecasts for fiscal first-quarter earnings and raised guidance.

While sales and net income declined year over year, the retailer now expects earnings per share for the full year 2023 to be in the range of $2.70 to $3.10, compared to a range of $2.50 to $3.00 during the previous quarter. It expects adjusted earnings per share to be between $2.68 and $3.08 for the year.

The old mall store, known for its lotions, sanitizers and soaps, attributed the more optimistic guidance to “better-than-expected” earnings and the impact of early debt repayments in the first quarter.

“We delivered first quarter sales in line with our expectations while earnings per share were better than expected as we saw benefits from our work to improve merchandise margin as well as early benefits from our cost optimization initiatives,” CEO Gina Boswell said in a statement.

The company added that fiscal year 2023 will include a third week and its forecast will include that additional week, which it estimates will affect earnings by 7 cents per share.

Here’s how Bath and Body Works performed in its first fiscal quarter compared to what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Earnings per share: 33 cents, adjusted for. 26 cents expected
• Revenue: $1.40 billion vs. $1.40 billion expected

The company’s net income for the three months ended April 29 was $81 million, or 35 cents per share, nearly half of the $155 million, or 64 cents per share, it reported in the year-ago quarter.

Sales fell to $1.40 billion, down 4% from $1.45 billion a year earlier.

The retailer expects earnings per share of 27 to 32 cents in the coming quarter, compared to an estimate of 32 cents per share. It expects sales to fall from low to mid single digits, compared to an estimate of a 3% decline.

It reaffirmed the full-year sales forecast for flat net sales to a mid-single-digit decline.

As consumers became more cautious and retail discounts and promotions increased against a difficult macroeconomic backdrop, Bath & Body Works margins declined. It fell by about three and a half percentage points to 42.7%, compared to 46.1% in the year-ago quarter.

It’s not clear why margins were lower, but they were better than analysts expected by 41.2%, according to a research note from Simeon Siegel, retail analyst at BMO Capital Markets. Siegel noted that margins also topped out at pre-Covid levels.